Friday, 18 January 2008

New Survey: Your Reaction to Market Drop

Well, the TSX is down 900 points in three days and if you are internationally diversified and watching other stock markets, you are seeing that in times of crisis, positive correlation reigns, with the S&P 500 down, the FTSE down, the DAX down, the Hang Seng down and so on. The only positive note is that the Canadian dollar has been sliding too so the foreign holdings are not dropping quite as much in C$ terms as they would have with a constant exchange rate. That's a diversification value.

Along with the slide there is the predictable article that accompanies all bear markets - a piece on the CBC website that tells small retail investors like you and me not to panic and sell out. Hmm, most of my friends and family are too busy going to work, watching hockey games, helping kids with homework etc to do more than watch in puzzlement and helplessness as the indexes plummet. Could it possibly be someone else who is doing all the selling, possibly the big boys of the investment houses, the hedge funds, the pension plans who have the vast majority of the money in the market? In order to test this hypothesis I am launching another mini survey for my blog readers to see how many of us small investors are bailing out and how many are hanging tough. If you are reading this and have $100 million or more under your control, please don't answer as the survey results will get skewed and unscientific.


Four Pillars said...

I've been buying Cdn banks. Most of my portfolio is ETFs but my leveraged plan is dividend stocks so I drool a bit more every time they go down.

Of course it goes without saying that once I finish buying, they will start going back up...


Frog of Finance said...

When the markets are down like that, I get the itch to go shopping for good companies! I just need to be careful to keep some cash reserves in case it keeps going down.

As Four Pillars says, canadian banks are attractive right now (BNS is my favourite, although I also like BMO for the yield; but I wouldn't touch CIBC). REITs are also quite attractive right now (H&R is now below $18, while Riocan is at $19).

My hope is that the market will remain that low for a couple of months, to give me a chance to load up on those companies!


CanadianInvestor said...

Though I am no longer an individual stock investor, Canadian banks seem to be such an interesting possibility these days, not much exposed to sub-prime directly, well capitalized and possibly ready to acquire weakened US banks, high dividends, market beating growth for the past 15 years ... are they really better or have we just not yet seen their downfall? Maybe those pension funds/ mutual funds/ other big investors bailing out of the banks are providing a rare opportunity?

Still, I am into banks in good measure through XIU (iShares TSX 60 ETF). If they recover I will share in part of the recovery. Similarly, my XRE (iShares REIT ETF) is my REIT bet.

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