The Transparent RRSP: Market Fears

The Week of August 8
  • I left the RRSP account alone. I wanted to buy shares of Bombardier (BBD.B.TO), but I couldn’t find an entry. There might be an entry on Monday or Tuesday.

 

BBD vs XIC

Price charts: BBD.B vs. XIC on freestockcharts.com

As you can see in the top two charts, BBD.B has been more positive than the market (the two lower charts of XIC). If the market continues to head lower, I’ll either abandon the plan to buy shares of BBD.B or just wait until the market settles down.


Last Thursday, the markets collectively demonstrated anxiety over North Korea. There was a big market sell-off and most gold stocks went up. It’s hard to say at this point if this is a reaction temporary in nature, or if it will signify the beginning of more and more selling due to fear. I’m going to make it a point to pay closer attention to the news and to how the market trades over the next couple of weeks.

Last week, I put together a big watch list of stocks that had promising charts. After last Thursday, only a few of them still look okay:

  • L.TO (Wait another few weeks to a month for this to properly set up)
  • H.TO (I own shares of this stock already.)
  • EXE.TO (I own shares of this stock already.)
  • TCW.TO
  • D.UN.TO (This is a REIT.)
  • CNE.TO (Needs a better setup unless you’re into aggressive, riskier entries.)
  • LIF.TO

Until you know what’s going on with the market, I don’t recommend buying anything. These stocks would be worth looking at while also observing the market. Watch how these perform against the market or their sector. If resilient stocks start to show weakness, then it’s usually a good sign that a weaker market will become even weaker.

There are different ways to play defensive during uncertain times. You can buy gold or shares of gold stocks. You can also buy consumer staples stocks. You can buy nothing or you can sell all your stocks. Whatever you do, don’t lose sight of what you want for your portfolio long term and think strategically.

Since the late spring, I’ve been unloading shares of stock. I’m either selling portions of my positions or all of them to either collect profits or reduce my exposure to the market. I have still been buying shares here and there, but not as actively as I used to. This has nothing to do with North Korea. Rather, it’s more about the market, which has been pulling back since the end of April. Maybe eventually, it will have everything to do with a conflict with North Korea. Regardless of what happens, I’ll let the charts guide me, not my fear.

 

 

 

 

 

The Transparent RRSP: Post #13

No action was taken the week of March 20

This week felt like my own personal spring break. I’ve just been waiting for the market to pull back. When the market is uninspiring, I’m uninspired to do much in that department. When this happens, most stock charts look unpromising to me. Being patient can be boring; it is, however, a necessary virtue for a trader to have.

In my freed up time, I managed to catch up on some of my reading. JP and I typically have a number of books, magazines, and articles littered around our house. Depending on where I end up sitting, I pick up and read whatever happens to be right next to me. 

The last couple of weeks, I found myself focussing on three of the twenty or so items within my lazy reach. I’ve been reading Felix Martin’s Money: The Unauthorized Biography, Michael Lewis’ first hit book, Liar’s Poker, and Joseph Nocera’s, “The Ga-Ga Years,” an old article that was published in Esquire magazine in 1988. Interestingly, at one point this week, I found the subject matter of all three works intersecting at the topics of bonds, money market funds, and beating the market. To boot, they were all referencing the same point in financial history’s timeline: the years leading up to the stock market crash of 1987. I am not a fast reader, but by golly do I wish I could just read it all in one sitting right now. I just find people’s different experiences and ideas on money fascinating.

I have a very loosely formed concept of money that’s been evolving since I started working and saving it. While I can’t say that my understanding is advanced by any stretch, I can say that it’s deepening the more I learn about it and invest it. Money is one of those human inventions – a “social technology” as Martin calls it – that is fluid instead of concrete in its nature. Different forms of it, whether as a currency, a security, a financial product, or a means of exchange, can and will go up and down in value. As I spent more time watching the markets, it became increasingly apparent to me that these fluctuations are created by us. We get optimistic about the promise of growth or the next big opportunity. People pump money towards potential. As more people buy in, prices go up, cash runs low, and perceptions start shifting; as people start to cash out, fear of losing runs high. It’s amazing to think how the general agreement of our feelings about something has the power to change the market value of our investment accounts.

Beating the market is what every investor or fund manager wants to achieve. I’ve done it. I’ve also been horribly beaten by it. I learned that the best way to not get beaten by it is to sit patiently and wait out any fear or pessimism until optimism sets in again. Until then, I’ll just keep reading about the rise and fall of others instead of letting history repeat itself with me. 

 

 

Some More on Sectors

Rack

My closet, the retail sector.

How I Stumbled Upon Sectors

With investing, I try to think in terms of the big picture. I find it useful to be aware of the moving parts within this picture. When I started to learn about stocks, I was clueless. I couldn’t read a financial column. JP was reading the Wall Street Journal and he had to translate everything for me. At that point, I only understood how a stock worked and what a brokerage account was, but that was it. I had taken courses in business, accounting, and investing, but so much of it went over my head. I just had a lot of different information floating about and not enough experience to apply this information as a novice trader.

I decided to take the Canadian Securities Course to get a better idea about the financial industry, investments, how they work, what professionals do, and what investors need to know. It was great because I could go at my own pace and get more into the stuff on equities. I honestly can’t say studying for the exam was loads of fun, but I was happy enough to pass. I loved that I ended up with a better idea about the workings of the financial world and Canada’s economy.

The more I learned about investments, markets, and the economy, the more fascinating money was to me. I became more aware of the psychological component with money, spending, saving, and investing. There is nothing static about the markets, the spending trends that drive the economy, the saving spells that slow it down, and particularly the movement of money between the different sectors and industries.The market is constantly in flux because it’s made of many different components that drive these fluctuations. Money is always being made somewhere.

One of the most important things I learned is that getting a good read on the economy will help you make better investment decisions. Having even just a basic understanding of the economy can make the difference between a novice investor and a savvy one. I found that watching sectors has helped me make money in the short term and longer term. Sector watching can also give you some idea where the overall markets might be headed towards. Sector movement can help determine why a market is up or down. Understanding sectors is important enough to me that I discuss them along with the economy in my book, Loonie to Toonie.

One of my readers seems to share my interest in sectors and has been asking me about where to find more information on them. I’m happy that she’s recognized the importance of understanding sectors and wants to do her own sector research.


Some Places to Look Up Sector Performance

Click here for a great list of sector indexes that track TSX stocks. If you click under “Symbol,” you will be taken to the index’s chart. You can select the time frame at the bottom of the chart. I suggest looking at the 1-year chart, or even longer. I find that longer time frames provide better insight on overall sector performance. For U.S. indexes, you can find a handy sector list here.

I’m often stalking stocks and looking for new ones that might possibly make a move in the near future. As I mentioned in a previous blog, “Stock Picking – Part 3: Factoring in Sectors and the Market,” I look at stocks, their respective sectors, and the market. It’s easier for me to just type in a sector index’s ETF symbol when I’m on my charting screens.

One thing to note: ETFs don’t always move in sync with their corresponding indexes because ETFs are actively traded on the exchanges. Sometimes ETFs will move more or less than their index as it depends on the trading volume and demand, or lack thereof. Having said this, looking at the sector or market indexes will provide a more accurate picture than the ETF. I’m super lazy, so it’s easier for me to just type in a sector ETF that I’m familiar with if I’m just looking on my phone and I’m not on my trading platform at my desk.

Reports on Sectors and the Economy

Economic reports happen every day. Some get more attention than others. The more important the report, the more effect it’ll have on the markets. Some of these reports are sector-focussed. Some sectors give big clues as to where the market could be headed. For example, a strong economic report on new home sales could indicate an optimistic economy and stronger retail sales. I always look at the US economic calendar to see where there might be a lot of action or potential change in the markets. To know what these reports mean and their significance, click on “Event Definitions.” Here is the Canadian economic calendar and here is the international economic calendar. Many different financial websites have economic calendars, so find ones with formats and reports more suitable to you and your interests.

Media

I sometimes watch CNBC and BNN because I like to listen to industry folks. I could watch that stuff all day (especially CNBC’s Fast Money as they’re traders who sometimes have highly entertaining arguments!). There are always so many different points of view on stocks, sectors, and the economy. There are a lot of opinions out there, many of which are conflicting, but these provide additional context to the charts.

If you read any financial paper, newsreel, website, or blog, you’ll also find a lot of up-to-date reporting on micro and macroeconomic stuff. The news often discusses the employment situation in certain industries or businesses. Consider your own job and the industry you’re working in. You might be able to see where you can be headed career-wise if it’s a growing or steady industry. Look at your bills and see where you’re paying the most. Maybe it’s in a sector that you should invest in. Sectors are out there and also are very much a part of our everyday lives. We know more about them than we might be aware of.


I’m sure my rudimentary research methods would make any financial professional shake his or her head!

As important as it is to know about sectors, there is no exact science in applying this information. It’s just one aspect of financial understanding. Some of your best investments will be so long-term that they will endure decades of economic fluctuations and sector cycles.

In the spirit of being financially literate, understanding sectors and their relationship with the economy will make you more financially fluent. That is how more of us can engage in the important conversation on financial matters.