in for another credit squeeze?

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in for another credit squeeze?

Postby Wallace » 11 Apr 2012 19:30

Despite optimistic indicators in Canada and the US, stocks have been sliding for the last few weeks. Investors' increasing concerns about Spain, forcing the rise in interest on its bonds to 6%, indicate that the problems in Europe are a long way from over. The same dark financial hobgoblins that haunted Greece a year ago are now returning to claim Spain, a far bigger economy, and the repercussions could be far worse for the global market.

Could this be the start of another slow, painful descent into negative territory for the TSX and other world indices? Are banks cowering in the corners again, afraid to lend their cash because they fear not having the capital to survive a Spanish default? Now we have to worry about our banks' exposure to Spain?

The cauldron that started with massive US debt>>manipulative lowering of US interest rates>>mortgage housing boom>>>subprime manipulations>> banking overleverage >> sovereign bailouts >> sovereign debt >> currency devaluation is bubbling to the sovereign surface, and currency devaluation and/or recession/depression is the only logical conclusion. It seems to be a global phenomenon, with almost every index in the world going down again yesterday. But how severe will it be?

I must admit I am torn between investing more at this stage (a buying opportunity? :shock: ), when the TSX is once again below 12,000, or selling in anticipation of another slow, painful sell-off reminiscent of 2008.

We live in difficult times for investors. A penny (well, its a nickel now) for your thoughts.....
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Re: in for another credit squeeze?

Postby flywaysuzy » 11 Apr 2012 20:59

You can still give a penny, it's just nobody is making them anymore. I would think Canada would get a little run up over the next European debt crisis. I see all the debt becoming like spreading quack grass, popping up here and then there via their long-reaching underground rhizomes. ( how can you tell I was out gardening today? :D )
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Re: in for another credit squeeze?

Postby j831robert » 11 Apr 2012 22:27

Welcome back - Sunny South wasn't it ? Similar mental exercise - to acquire more at firesale prices and thereby stip the cash account or simply sit back and re-enforce the cash account against hard times. Made easier by the fact that we really don't need to acquire more income.
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Re: in for another credit squeeze?

Postby Shurville » 12 Apr 2012 12:24

After reading the book "End Game" in Florida I was convinced that things are not going to improve much in the near term. So today I pushed the "Sell" button on a lot of equity investments I have held for 10 to 15 years. Only survivors are bonds and pref's in both RRSP's.I just don't want any more roller coaster rides at my age!
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Re: in for another credit squeeze?

Postby freedom_2008 » 12 Apr 2012 13:41

Sold most play stocks/fund (IXC, MFC, and Chou) in Feb/March. Have about 10% in equity (another 5% in pref) now, all for dividend purpose only. Most holding stocks are half filled based on our target plan (like 400 shares HSE bought on april 10th), so we will wait for bad times to fill more, to ~15% max equity in our total investment. Might still do a bit play (<5%) on the side as well then, for fun.

Have a plan, be cautious and patient, stay away from fear and greed, is our own policy moving forward.
Last edited by freedom_2008 on 12 Apr 2012 16:09, edited 1 time in total.
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Re: in for another credit squeeze?

Postby Wallace » 12 Apr 2012 16:07

j831robert wrote:Welcome back - Sunny South wasn't it ? Similar mental exercise - to acquire more at firesale prices and thereby stip the cash account or simply sit back and re-enforce the cash account against hard times. Made easier by the fact that we really don't need to acquire more income.


Hi JR. Yes, back from Anna Maria Island Florida, thanks. Now I know what all those snowbirds were talking about. :thumbsup:

At the moment I'm dealing with the volatility simply by not dealing with it. I think I've decided just to ride the rollercoaster, hoping the market has already priced in the European situation.
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Re: in for another credit squeeze?

Postby ghariton » 12 Apr 2012 17:16

Credit squeeze is certainly possible:

The number of risk-free financial assets is in decline, according to an International Monetary Fund (IMF) study.

This could make the global financial system more unstable by threatening runs on sovereign debt and increasing herding behaviour by investors. In recent decades, bonds issued by stable, rich countries were considered risk-free. However, the onset of the financial crisis in 2008 and the sovereign debt crisis has "reinforced the notion that no asset can be viewed as truly safe", the study states.

Some formerly highly rated governments have had their credit ratings downgraded and the supply of "safe" assets is falling meanwhile and could be cut by $9 trillion ([euro]6.87 trillion) globally in coming years, or 16 per cent of the total, according to IMF staff estimates.

The supply of safe assets by the private sector has also declined, IMF economists say.

The reasons for this include the failure of "securitisation" in the US, which involved low-quality mortgages being bundled and sold as high quality financial assets, many of which became worthless after the US property market crashed.

The contraction in the supply of safe assets has coincided with an increase in demand for such assets, driven by "heightened uncertainty, regulatory reforms and crisis-related responses by central banks".

The tightening of supply and the increase in demand could lead to greater volatility in global financial markets, the report concludes

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Re: in for another credit squeeze?

Postby AltaRed » 12 Apr 2012 20:22

Consumer staples are the answer. Steady eddies. People cannot live without them. I can see a rush on them happening as soon as investors realize the rush of the last 5 months is over.
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Re: in for another credit squeeze?

Postby Mike Schimek » 12 Apr 2012 22:28

I sold a lot of stuff into today's rally and have gone defensive. The indicators I look at shows that the U.S. economy has gone back into recession and it's getting worse. Canada has started to slide too, though not as bad (thanks to a pro business Harper). Sell in April and run away before those in May try to.
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Re: in for another credit squeeze?

Postby kcowan » 13 Apr 2012 07:59

Mike Schimek wrote:I sold a lot of stuff into today's rally and have gone defensive. The indicators I look at shows that the U.S. economy has gone back into recession and it's getting worse. Canada has started to slide too, though not as bad (thanks to a pro business Harper). Sell in April and run away before those in May try to.

Even the growth is China is moderating, declining to 8.2% from 8.9%. And the US is in for 2% rather than the hoped for 3% perhaps.
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Re: in for another credit squeeze?

Postby blonde » 13 Apr 2012 15:11

The Real-Opportunity/s in this day and age are better than ever before.

The New-Global-Economy is very successful with the implementation of the Rules to the Game. The Cycle-Time for 'Change' is efficient and effective.

as an aside...take a peek at my 5 + 3 GP's...designed to meet the challenges moving forward. Guarante Galore.

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as an aside...stick with the 'Winners'.
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Re: in for another credit squeeze?

Postby adrian2 » 13 Apr 2012 15:22

blonde wrote:as an aside...stick with the 'Winners'

Yes, you can find some amazing stuff if you look hard enough! :P
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Re: in for another credit squeeze?

Postby Mike Schimek » 18 May 2012 23:58

Swung back from defensive to offensive, the recent decline over the past several weeks has made a lot of things cheap + the politicians will crank up the presses to address the decline for political reasons.
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Re: in for another credit squeeze?

Postby schmuck » 19 May 2012 01:14

Mike Schimek wrote:Swung back from defensive to offensive, the recent decline over the past several weeks has made a lot of things cheap


What's the rush? The recent decline has only lasted 2 1/2 weeks so far. I'm talking market leaders like the DOW and the S&P500...wouldn't expect the TSX to lead the pack out of anything.

The go away in May thing lasted 6 weeks in 2011 and bottomed on June 10th. Of course things really went nuts in August with the US debt ceiling, but that was an anomaly.

In 2010 it lasted 8 weeks and bpttomed on June 7th.

Not that history really means anything (especially in an election year), but 2 1/2 weeks doesn't seem long enough to tell which way the wind is blowing, never mind letting the dust settle.
It would be a shame to miss the bottom though. :(
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