Is the stock market going to crash? On Weekend Reads.

It’s the million dollar question. Because you could make a million and more if you knew which way the stock market was heading. But as they say, predictions are hard to make – especially about the future. Is the stock market going to crash? We have no idea. But yet, it’s a common question according to Fritz at The Retirement Manifesto. In a recent blog post Fritz answers that reader question in eloquent fashion.

Here’s the link to the Retirement Manifesto post …

The post is a response to/for a nervous reader. And as per usual, the reader is reacting to a doomsday video. At times it can be an article or a blog post or Tweet that raises the blood pressure.

Be prepared. Be aware.

Now there’s certainly nothing wrong with being aware and prepared. We should know that stock markets can ‘crash’ or correct with regularity. We should be ready. And there’s no harm done in understanding why a correction might happen. But it’s certainly hard to predict the when’s and the why’s. But we should not let fear run the show. Fear is our enemy. That’s why I feel that being aware and prepared can be important. If you’re the type of investor that can tune out all of the noise; good on ya. But that’s a rare breed.

 Be careful getting wound up by watching Doomsday Videos, but don’t ignore the very real risk that stocks will go down.  At some point in our retirement stocks will retreat, potentially for years on end. 

Fritz, Retirement Manifesto

Some simple words of Wisdom from Fritz in that post .

 While I agree with the general premise of market cycles, I urge caution in trying to “time the market”.  I’ve never met anyone who is successful in combining a “sell at the top” with a “buy at the bottom”.  If you only get one leg right, you’ll have regrets.  Better to have a strategy that doesn’t involve successfully timing the tops and bottoms.

Fritz, Retirement Manifesto.

Yes, once again, as our friends at Mawer suggest – you don’t fix a ship in a hurricane.

Always be prepared.

The Big Short?

And certainly many ‘investors’ are preparing for the markets to go down. As was reported by Scott Barlow in the Globe and Mail the short on the TSX 60 XIU is at record levels

The shift in sentiment is highlighted by the jump in the short position in the iShares S&P/TSX 60 Index ETF (XIU-T). The number of XIU’s shares sold short climbed sharply in recent weeks to stand at 119.1 million as of June 22. This reading surpasses the peak established three months ago near the height of the COVID-19 scare. It also means that 32.9 per cent of XIU’s float is sold short, an historic high.

Globe and Mail

And that certainly does not mean that the shorts are right. It has been a difficult challenge to win at guessing when the markets will go down. These days we have the great disconnect. We have depression-like numbers and a stock market rally. I think and guess that the stock markets will learn to count again one day, but I’m certainly not going to place a bet (short) on that.

Here’s a good primer on what is short selling. Those events certainly do have an effect on market direction. From RBC …

What is short selling and how does it work?

Essentially – With short selling, investors borrow shares from a brokerage and sell them immediately, in the hopes of buying them back later a lower price. If the short is successful, the shares are purchased at that lower price, returned to the brokerage, and the investor keeps the difference in price (minus costs, of course).

More on the new normal for businesses.

Scott Barlow had also reported that the tech industry is not heading back to the office.

“Almost half of companies expect to reduce office space. Nearly half (47%) of organizations with office space say they expect to reduce their physical office footprint as a result of the coronavirus outbreak. More than 20% expect to reduce it by more than 25%.”

Obviously that’s not good news for office REITs.

And we’re discovering that the economic restart will have its challenges as I’ve long suggested. Kingston Ontario saw a COVID-19 outbreak thanks to Binh’s nail salon.

I certainly had no plans to get my nails done. But I’m also not heading in to get my hair cut either. Back to the 70’s I go. The Summer of COVID means no haircut. I’ll drop by the shop though to tip those who normally shape my head.

We were planning to head to Portugal, but a certain pandemic got in the way. Hopefully, there’s next year for travel.

The Beach Is Closed.

Wasaga Beach is open, but they’re closing up sand and shop in Florida.

Mayor Giminez offered …

“Everyone should wear masks inside public establishments and outside if they cannot practice social distancing of at least 6 feet,” Gimenez said in a statement. “I have been seeing too many businesses and people ignoring these lifesaving rules. If people are not going to be responsible and protect themselves and others from this pandemic, then the government is forced to step in and restore common sense to save lives.”

Several weeks ago on the topic of the lessening of restrictions and economic restart I asked folks to not kill Summer. But here we are.

Get ready for the economic restart.

That said Canadians are doing a wonderful job of getting out there and taking important measures. Of course remember to wear a mask when needed. You know the drill.

FiPhysician blogs on why we might reach herd immunity at a 40% infection rate. The big question here might be – do we actually build meaningful immunity.

More on that economic recovery.

I found a new resource this week thanks to Twitter. On FiveThirtyEight what economists fear most about this recovery. These days an economist making a peace sign is a rare bird. No -V-shaped economic recovery.

They’re catching on. I played armchair economist on Seeking Alpha five weeks ago. Of course that doesn’t mean that you should necessarily invest based on this guesswork. But it can be beneficial to be aware. Investors may be in for a long and tough fight. Get your battle helmet ready, just in case.

And while we’re on the topic of Seeking Alpha, here’s my latest –

The lower volatility sectors do it again in the COVID-19 stock market correction.

I had previously looked at the least volatile sectors in the dot-com crash and the financial crisis. The ‘winners’ from past corrections were once again up to the task.

Reads on Boomer and myownadvisor.

Robb Engen has done a wonderful roundup of posts and podcasts. The podcast linked to was with Frederick Vettese.

I had previously covered Retirement Income For Life.

On myownadvisor Mark looked at his May dividend update.

And on Findependencehub Mark suggested why the 4% rule is (still) a decent rule of thumb.

Mike The Dividend Guy offers 3 Fundamental Elements Of Portfolio Management.

This question was asked and answered a few times on Twitter this week. On MoneySense Jason Heath covers investment account beneficiaries. It’s very important to check that you’re set up correctly.

Also on MoneySense RRSP vs TFSA.

On The Evidence Based Investor 92% of Canadian funds underperformed the index in 2019.

And if you really have a lot of time on your hands, here’s an incredible list of Sunday reads on The Big Picture.

Thanks for reading. Don’t forget to follow Cut The Crap Investing.

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