Personal Finance

Money Is Becoming Unmanageable:

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Posted by SuperAdmin

on Thursday, 03 December 2015 07:27

Hedge Funds Post Losses, Face Outflows. Some of the money managers who made names (and billions of dollars) for themselves in the past decade are suddenly failing:

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Personal Finance

Market Buzz - Cash is King

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Posted by Ryan Irvine - KeyStone Financial

on Monday, 30 November 2015 11:49

imagesThe adage, “cash is king” could be a whole lot more appropriate in today's market than in recent years. For equity investors, after a strong three and five year bull runs in Canada and the U.S. respectively, recent market volatility have caused a higher degree of uncertainty about keeping your entire nest-egg in the market.

The sentiment is understandable against the backdrop of recent events including the August 24th market “mini-crash” that Fortune Magazine referred to as “one of the biggest one-day declines in recent memory.” In one trading day, the market fell more than 1,000 points intraday. 

While the resource laden TSX Composite Index remains down significantly on the year, it is important to point out that in the U.S., the S&P 500 and Dow have already gained back all their losses from that short-term crash. The volatility is a concern, but there should be no panic in the streets.

Holding a portion of your overall portfolio in cash, with broader valuations relatively high and global growth a challenge, is prudent. But given the measly rates of return currently offered by “cash and cash equivalent” investments there are alternatives. 

Before we get to one savvy alternative, we will scare you a bit by pointing out a few issues that could weigh on the markets in the near term. 



Personal Finance

Be Careful Out There

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Posted by Michael Lewitt via John Mauldin - Outside The Boxside The Box

on Thursday, 26 November 2015 09:50

“The high recent valuations in the stock market have come about for no good reasons. The market level does not, as so many imagine, represent the consensus judgment of experts who have carefully weighed the long-term evidence. The market is high because of the combined effect of indifferent thinking by millions of people, very few of whom feel the need to perform careful research on the long- term investment value of the aggregate stock market, and who are motivated substantially by their own emotions, random attentions, and perceptions of conventional wisdom.”

– Robert Shiller, Irrational Exuberance, Princeton, NJ, Princeton University Press (2000), p. 203

Commodity prices are plunging, the dollar is powering higher, the yield curve is flattening, ObamaCare is collapsing, global trade is plummeting and terrorism is spreading across the globe. The high yield credit markets are sending distress signals and 10-year swap spreads are negative. Energy companies are going out of business faster than you can say “frack” and trillions of dollars of European bonds are again trading at negative interest rates. The world is drowning in more than $200 trillion of debt that can never be repaid while European and Japanese central bankers promise to print more money and the Federal Reserve is being dragged kicking-and-screaming into raising interest rates by a paltry 25 basis points. Accurate pricing signals in the markets are distorted by overregulation, monetary policy overreach and group think. Hedge funds are hemorrhaging and investors, desperate to generate any kind of nominal return on their capital, continue to igno re the concept of risk-adjusted returns. Some market strategists believe this is a positive environment for risk assets; I am not among them.

Investors continue to bid the prices of a select group of mega-stocks to unsustainable levels while most of the market experiences a stealth bear market. Market internals are terrible. The same is true in the credit markets where CCC-rated bonds are badly underperforming BB-rated bonds on a trailing 12-month total return basis (by 700 basis points overall and 460 basis points ex-energy). This has only occurred three times before – twice coinciding with developing credit crises in early 2000 and early 2008 and once in 2011 when the Fed kept markets afloat by announcing QE2. High yield is now underperforming equities and investment grade debt simultaneously, which is highly unusual considering that the asset class sits between these two asset classes on the risk spectrum. The last time this happened was early 2000 and late 2007 – periods that preceded credit crises. Deutsche Bank remarks that, “Last week [the week of November 16] was the best week for the S&P 500 since December 2014 but US HY continued to under-perform virtually all major comparable asset classes... The big question within credit and to the wider global markets community is whether this can be contained or whether it is reflecting a turning and deteriorating credit cycle that is going to be tough to stand in the way of.” (http://www.zerohedge.com/news/2015-11-23/how-possible-deutsche-bank-asks-noting-canary-junk-bond-mine)

While some argue that high yield market weakness is primarily liquidity driven, careful analysis of company and industry data suggest that poor fundamentals are at work. While early in the year these problems were largely confined to energy and energy-related companies, weakness has since spread to the media and retail sectors. The media sector sold off over the summer and retail followed in the fall. Highly leveraged companies in all industries are unable to amortize the debts they have accumulated in the years after the financial crisis. While their high debt levels were disguised by record low interest rates arranged by the Fed, investors are finally waking up to the fact that corporate balance sheets are more leveraged than they were before the financial crisis in 2007. In an economy that struggles to grow at 2%, leveraged companies find it difficult to grow rapidly enough to service their debts. They rely on the complacency of lenders who are tired of eating at a restaurant that offers them small portions and lousy food. After years of mid-single digit returns that do not compensate them for such lousy fare, investors are starting to demand more, eating elsewhere, or going on diets.

The Real Story About Corporate Debt

Goldman Sachs recently caught up to the excellent work done by Andrew Lapthorne at Societe Generale regarding the releveraging of Corporate America. Mr. Lapthorne has been warning for more than a year that corporate debt is significantly higher than it was on the cusp of the financial crisis in 2007. (Andrew Lapthorne, Societe Generale Global Quantitative Research, “Quant Quickie: As US corporates pile on debt, leverage should now concern the market,” June 12, 2014.) These higher debt levels have been disguised by the low interest rates engineered by the Fed. Now Goldman Sachs has confirmed Mr. Lapthorne’s findings, writing: “Companies in the United States have taken advantage of low interest rates to issue record levels of debt over the past few years to fund buybacks and M&A. This has driven the total amount of debt on balance sheets to more than double pre-crisis levels. However, cash flows have not kept pace, resulting in leverage metr ics that are the highest in 10 years.” (Goldman Sachs, Equity Research, “What’s Eating Corporate America? Leverage, Goodwill and FX,” November 10, 2015.)

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Goldman refutes the argument that low rates render these higher debt levels innocuous: “Now, the counter-argument one hears is that



Personal Finance

Retirement Lifestyle Planning

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Posted by Brent Woyat - Canaccord Genuity

on Tuesday, 24 November 2015 05:40

imagesRetirement planning decisions inevitably surround the issue of money: How to save it, invest it, keep it from the government, use it more productively and efficiently, pass it on to heirs, and spend it in retirement.

When the topic of retirement comes up, most people tend to focus on the questions of “when can I retire?” “How much money will I need to retire?” “How much should I save for retirement?”


Personal Finance

The elusive definition of financial independence

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Posted by via Brent Woyat of Canaccord Genuity

on Tuesday, 10 November 2015 08:29

Has Wikipedia nailed it or do we need a better, more all-encompassing definition?

This Financial Independence column at MoneySense (online and in the physical magazine) has been running a few years now. Since it also spawned November’s launch of the Financial Independence Hub, I thought it would be appropriate to look at the formal definitions of financial independence (which of course I like to shorten to Findependence).

Usually, I just point readers to the Wikipedia definition, since it’s at the top of the Google search engine when you enter the phrase. The key part is “the state of having sufficient personal wealth to live, without having to work actively for basic necessities.” I’ve written about this before and you can go to the above link for the full definition, but for this particular blog, I wanted to explore other definitions.

.....continue reading HERE


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