Individual Investors ...the love in equities plummeted in the most recent period to 35.1% - down almost 10 points.

The chase by Frances Horodelski:

Yo! A fast growing app that just received a million-dollar infusion and lit up Twitter yesterday as everyone was saying “Yo” because that’s all it does. Another thing I don’t understand?

Looking for a melt-up? David Rosenberg notes that at previous market highs, mutual and ETF fund flows on a five-year average basis were running at $20 billion in 2000 and $15 billion in 2007. Today, flows are closer to $8 billion underscoring the lack of individual investor involvement in this bull market and as they return, a melt-up is possible. On the other hand, according to Walter Murphy, a former Merrill Lynch technician, the ratio of household financial assets (read: investments) to total assets is 70.4%. Previous secular peaks (1960s and 2000s) the ratio was 70.3% and 70%, respectively. Mr. Murphy suggests that in his view, investors are already “all-in”. And while new highs are likely in the coming months it might be a grind rather than a melt-up. Meanwhile, the American Association of Individual Investors are seeing thelove in equities as bullishness plummeted in the most recent period to 35.1% - down almost 10 points.

Toronto has finally joined the “all-time high” camp surpassing the June 18, 2008 high by 36 points to close yesterday at 15,109.20 (although still below its intra-day high of 15,154.77 achieved also in June of 2008). The winners since 2008: Valeant, Catamaran, Alimentation Couche-Tard and Linamar. Losers: Nortel, YPG Financing, Niko Resources and Mercator Resources and BlackBerry. And despite this year’s 20% return in the energy sector, patient investors are still waiting to achieve the June 2008 levels – energy is still down 16% from six years ago. And remember, for those who invested in an index ETF on June 18, 2008 are now – flat on six years (excluding dividends).

Speaking of BlackBerry, it is the company’s annual general meeting and fourth quarterly report day. Amber Kanwar is in Waterloo covering the story for BNN and will interview John Chen. The results show a beat on the bottom line (a smaller loss than expected), revenues slightly above expectations, a cash build although net of a tax refund and real estate proceeds, there was a cash burn of $255 million in the quarter but better than the burn of $784 million in the last quarter. Stock is up 10% in the pre-market.

What do courgettes and peas have in common with gold? According to the World Council in its report released today - confusion! Courgettes (zucchini) and peas are fruits but are used as vegetables. Gold suffers from a “similar kind of category confusion” – it features in commodity indices but responds to different economic factors, it is less volatile and has a lower correlation to the business cycle. The council believes it is the ideal “alternative investment”.

Calendar watch including the weekly jobless claims, U.S. Philadelphia Fed Index, earnings from Oracle, a couple of major consumer conferences (Deutsche Bank in Paris and Jefferies in Nantucket), and a lot of annual meetings including Quebecor, Martinrea, H&R Reit, and Great Canadian Gaming. We’ll continues to watch VRX/AGN as well asGE/Alstom/Siemens/Mitsubishi.

Finally, the world is a happy place today. Mrs. Yellen did not mis-step yesterday. Markets responded to the lower for longer implications of the “dots” despite a slight shift upwards in expectations for 2015 and 2016. Equity market valuations are within “normal” ranges according to the chair of the FOMC. We’re getting the follow through from new highs on the S&P 500 yesterday as pretty much every equity market around the world is in the green (Italy +1%) with the exception of Chinese equities which have an tendency to get their own way. All the major currencies are higher and most bond markets have prices up, yields down.

Enjoy.

Market Outlook

Market Outlook:

The market bears are looking at thinning values and are expecting another 2008-like outcome. The VIX Index is bumping along its very long term average lows, which did lead to the market rout of 2008-09, however, we still do not see the sort of excesses that started that whole bear market off. There are expensive pockets here and there (the recent collapse of the social media stocks), but not the kind of overall excess that necessarily leads to a wholesale rout of stock prices and a major economic setback. While there is no doubt that the excessive monetary expansion does constitute an “excess” from which any serious pulling back will be very, very painful, as far as we can see, the Chair of the Fed, Janet Yellen, has no intention of allowing such an event to occur on her watch and in an election year.

We pay a good deal of attention to what Stephen Poloz says about the outlook, and does in practice. His actions remain bullish for the asset markets and we continue to look for opportunities to take advantage of the central bank actions.

www.bnn.ca

Don't sell your stocks if you’re worried about a market decline

"investors are acting as if the market is perched on a knife’s edge. A recent report from the Center for Applied Research at asset management giant State Street Corp. found that investors in 16 countries around the world have increased their cash holdings over the past two years to 40 per cent, on average, from 31 per cent. Canadians were a little more adventurous than most, with a recent average cash position of 34 per cent. Considering how low returns on cash are, that’s still an exceptionally high level.

Sheryl Purdy, vice-president at Leede Financial Markets in Calgary, says she began hearing a year or so ago about brokers, who, in dealing with nervous clients, were keeping substantial parts of their portfolios in cash. This prompted her to do her own analysis of the market’s vulnerability to a pullback. Her conclusion is that anxiety about soaring stocks is driven more by jittery investors than by market fundamentals.

“I don’t think we’re in for another serious crash,” Ms. Purdy said. “I think what we’re dealing with is shell shock for a lot of clients.”

The last time the stock markets were this strong, a crash for the ages lay dead ahead.

Parallels such as this are hard to ignore, but they’re of little use in managing an investment portfolio. So stay in stocks, or at least make only modest changes to your portfolio. The market will fall at some point, but it’s pointless for most investors to try and predict when.

http://www.theglobeandmail.com/globe-investor/investment-ideas/should-you-sell-your-stocks-if-youre-worried-about-a-market-decline/article19165282/

 

Sell And May And Go Away? Maybe Not Read This...

If you didn't sell in May, stick around

42 minutes ago by Gordon Pape

Perhaps this was the year to sell in May and go away. And even though it’s June, there’s still time if that idea appeals to you.

Despite everything you’ve been reading about some indexes hitting record highs, the reality is that stock markets lack conviction and investors are confused. Many economists believe that stocks have become too expensive and that a major correction is long overdue.

But where else are you going to put your money? Government bond yields are barely outpacing inflation with the benchmark 10-year Canada paying a paltry 2.33 per cent. So-called “high interest” savings accounts aren’t even coming close to matching the 2 per cent inflation rate. As for gold, its price movements have become completely unpredictable. It goes up when it should go down and vice versa.

We’re consistently told that the global economy is gradually recovering but the evidence is hard to find. Exports continue to lag (Canada actually ran a surprise trade deficit last month), China’s financial and real estate woes are a growing concern, and in Europe fears of deflation have prompted the central back to go negative on its overnight rate.

The result is a rudderless ship with us as passengers wondering whether to hit the lifeboats or hang on and pray.

The performance of world stock markets so far this year reflects all this uncertainty. As of June 5, the closely watched Dow Jones Industrial Average was showing a year-to-date gain of only 1.6 per cent. European markets are showing the same lack of direction with the German Dow up only 1.3 per cent and the London FTSE 100 ahead about the same.

In Asia, Japan’s Nikkei Index, last year’s world leader, is down 7.4 per cent while Hong Kong’s Hang Seng is off 0.6 per cent. The Shanghai Composite is in the red by 3.5 per cent. Only India bucked the pattern with a convincing gain of 18.6 per cent for the year, fuelled largely by the election of a pro-business government there.

Canada is one of the few exceptions to the global market malaise. The S&P/TSX Composite is ahead 8.7 per cent for the year, led by a strong performance from the energy sector (+17.2 per cent) and a respectable 8.2 per cent gain by metals and mining, which last year was a black hole. But the TSX didn’t experience the explosive growth of the major U.S. indexes in recent years and we’re still a long way from catching up. Over the three years to June 5, the TSX gained only 11.1 per cent according to GlobeinvestorGold.com. The S&P 500, by contrast, was up 50.9 per cent.

At the start of the year, I believed we would see a significant correction of 10 per cent+ before summer, followed by a rebound in the fall as the economic outlook for 2015 and beyond improved. But here we are only a couple of weeks away from the summer solstice and the correction has yet to happen.

What now appears more likely is that the ship will continue to wallow for the next few months as investors wait for some clearer direction on where the global economy is going. We could still see that 10 per cent correction but barring some major geopolitical development a return to a bear market (a drop of 20 per cent or more) looks unlikely. Equally unlikely is a surge in stock prices such as we enjoyed in 2013. That optimism was premature and the stagnant markets we are now experiencing is the price we are paying.

So do you sell or stay? If your portfolio is mainly composed of sound, dividend-paying stocks, my advice is to stick it out. Go to the cottage, collect your quarterly dividends, and relax. The markets aren’t likely to do anything dramatic while you’re sipping your beer by the lake.

Gordon Pape’s new book, RRSPs: The Ultimate Wealth Builder, is now available in both paperback and Kindle editions.

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