This article in the Globe and Mail asks ‘where is the smart money going‘?
Is a drop in oil prices good for the Canadian economy? Will interest rates stay low forever? Nobody knows, but that doesn’t keep us from asking.
Today’s situation amounts to a near total inversion of the markets of a generation ago. “If you look back to, say, 1981, stocks, bonds and real estate were all cheap,” says Jim Giles, chief investment officer at Foresters, a Toronto-based financial services provider with more than $20-billion in assets under management. “Now, the exact opposite is true.”
For investors, this poses a daunting challenge: What do you buy when there’s nothing left to buy – or at least nothing that appears to be a bargain?
For somepeople cash is trash, for others it’s king:
Tim McElvaine, one of Canada’s best-known value investors, has a similar viewpoint. The head of McElvaine Investment Management Ltd. in Victoria is holding about 25 per cent of his fund’s assets in cash, considerably higher than the normal level, as he awaits buying opportunities.
“People will tell you they don’t want to hold cash because it doesn’t yield anything,” he said in an interview. “But the real value of cash is its ability to buy things when prices become attractive.”
Among the reasons to worry about today’s market is that near-zero interest rates have failed to spark any widespread global recovery. The Organization for Economic Co-operation and Development trimmed its global growth forecast this week to 3.3 per cent for this year, reflecting the euro zone’s continuing woes and a slowing Chinese economy.
Read the full article here.