So what did I do with my money?
Well I am working under the assumption that governments and central banks will not add additional fiscal or monetary stimulus into the economy. In fact, I believe with the end of the current round of stimulus there will perhaps some additional contraction. I do not believe there will be more inflation in the economy, as there will be little pressure from increasing demand.
I think this reduction in demand will mean that emerging markets will not grow as fast as they used to. I can't be sure if they will regress though. (If they start booming again I will feel really stupid for taking my money out of emerging markets after a month) Emerging markets are a big question mark for me.
Since I don't expect much inflation or much growth, I suspect that current bond yields and stock prices are higher than they will be. I suspect my yields are not as high as they could have been when the economy was at it's peak, but I'm sure that the stock market is overvalued right now. I have invested in fixed income securities.
My bond holding include strip bonds and regular bonds. The issuers are all Canadian, and include one corporation, (Bell) two provincial issues, and one municipal issue. All are long term bonds, to maximize yields, which also expresses my confidence in the lack of inflation and reliability of the government issuers. Presumably, I'll have to watch out for signals that governments may change their fiscal policies. If they go full on Keynesian, I may want to get into equity markets.
My yields range about 4 to 7%, which barring defaults, are now locked in. I don't think the extra safety of GICs are necessary and if the economy turns around, I'd like the chance to change my investments.
Previous to this I was investing in ETFs for Canadian banks and emerging markets, (Symbols GAF, ADRE, XTF) as well as some Latin American oriented mutual funds and strip bonds. I liked ETFs because I wanted lessor management fees and didn't feel there was much value in (most) heavily managed funds. But since I'm not confident in equities, I've bailed on them...at some minor expense.
I love how in the Globe today they noted that job figures were really good and so this will allow interest rates to rise.
ReplyDeleteIts just like a month ago when they were pushing interest rate hikes again. Forget that Europe seems on the brink and that there is not inflation whatsoever, any excuse to push for raised rates. Why?
Well, it is job figures and interest rates in Canada not Europe or the United States. (Unless they were out to lunch) It may not be right for the BOC to continue loose monetary policy until we actually see everyone else start to face contraction.
ReplyDeleteThough I guess Canada is too small to destabilize anyone with competitive currency devaluations and isn't likely to face inflation, so maybe we shouldn't bother.
But if Banks just increase their cash reserves, continuing monetary stimulus, (As opposed to financial stimulus) wouldn't be advisable anyway.