take a break

Testing Google Docs

This is just a test to see if I can get a Google Docs spreadsheet embedded into this post... Let's see if this works:

I'm thinking that it isn't going to work...

Wow it does! Ok, that makes my next series of posts much easier...
category: General posted on Monday February 25, 2008 at 09:18:28 by: 0xCC

Surveying The Damage

We have now made it though the first month of 2008. The last two weeks have been a real roller coaster ride in the markets. But how bad has it really been? It is easy to get sucked into the media hype over the decline in the markets but if you take a step back and look calmly at the behaviour of the markets you can see that it hasn't been all that rational. So let's do that.

Let's take a look at the TSX. On December 31, 2007 it closed at 13833.05. By the close on January 3 it had climbed to 13978.20, a little bit more than a 1% gain. The real trouble didn't start until January 15. On January 14 the TSX closed at 13698.23 or just under 1% lower than the December 31 close. Over the week from the close on January 14 to the close on January 21 the TSX lost a total of 1566.11 (the January 21 close was 12132.12) a whopping 11.4% decline over 5 trading days.

That's the bad news. On January 22 the US Federal Reserve made a surprise 0.75% cut to the overnight rate before the US markets opened (the US markets were closed on January 21) and the Bank of Canada cut rates 0.25% in a scheduled policy announcement. The markets responded. On January 22 the TSX closed at 12640.87 a 4.19% climb in one day (the increase was over 5% if you looked at the low of the day on January 22). The TSX continued to climb over the few days after January 21 closing the week out at 12894.83, a 5.86% decline from the January 14 close but a nice 6.28% gain from the January 21 close.

There were numerous opportunities in the market if you could see past the irrational market. A lot of the Canadian banks were trading at extremely low levels. If you had the stomach to buy almost any Canadian bank on January 21 by now you could easily be sitting on a 5-7% gain. It is true that there is a good chance the the US economy is headed at the very least for a slowdown, if not an all-out recession. The Canadian economy could follow suit but we don't have quite the same issues that the US economy does. The sub-prime mess is a US problem for the most part (at least from a Canadian consumer standpoint, some Canadian companies decided it was a good idea to take on some of that sub-prime risk and reap the short-term rewards that came from that).

I'm not saying that we have seen the bottom of this market, in fact I think we have a pretty good chance of seeing close to 12,000 on the TSX in the next couple of years but if we do I think that will provide more opportunities for investors with a long-term time horizon.
category: Personal Finance posted on Saturday February 02, 2008 at 16:29:51 by: 0xCC