"Food For Thought", for those of us who still invest in Stocks . . . | Investing | Discussion forum

I was going to pick up some BCE and CIBC stock on the dip, but after listening to this video, Im going to hold off, and wait for Q2 numbers

Thanks Dean, that was an excellent and realistic video.

In terms of alternatives, not just US Treasuries, but simply our own focus here, deposit rates vs. dividend yields and risk. The gap was so wide for years, nobody ever thought much about it. HISA and GICs weren't in the ball park, but now they are.

His reference to US Treasuries reminded me that at some point in the next year or two, there might be great rates on long govt bonds. That would lock in the high rates for a long time. I did very well with those during the last rate inflation period. If rates fall and you need cash, you'd sell them at a premium. At some point, we should be looking beyond five year GICs, but we're not there yet.

COIN said
Do higher interest rates benefit banks and insurance companies?
https://www.federalreserve.gov/econresdata/notes/ifdp-notes/2016/low-for-long-interest-rates-and-net-interest-margins-of-banks-in-advanced-foreign-economies-20160411.html#:~:text=Low%20short-term%20interest%20rates%20can%20depress%20bank%20margins,pass%20on%20negative%20policy%20rates%20to%20retail%20depositors%29.  

FI’s treasury department calc something called DV01, which is delta value of 1bp. It shows how their profit ( dumb down / generalized explanation) of how sensitive they are to 1bp change in rate.

If you look at the annual report, it will be in there some where. For a big 5, that number will be 7 figure I believe.

I was concerned that the higher rates will adversely affect mortgagors but I think the stress test should show they can handle higher rates. Yes?

The return from life annuities has always been lousy.

There was likely a time the internal rate of return from them was over 7%. Challenge then was that GIC's were yielding over 10%.

Mature some of the RRSP to a life annuity because you want to offload some of the risk of outliving your savings to the life insurance company. Don't consider it because you are looking for an investment.

One can glimpse how much that longevity insurance in a life annuity costs in a previous discussion. That $24,000/year life annuity was going to cost $400,000+. A ladder of bonds, producing $24,000/year for 20 years, costs around $332,000. The $68,000+ difference is the cost of the longevity insurance.

At some high(er) interest level, also less loan demand and/or people accelerating repayment. That is another reason why we are seeing bank stocks falling so much these days. Less equity offering underwriting fees too.

If that's your yield on blue chips then it's likely you haven't held them for long, so maybe it does make sense to sell and buy gics instead if you suffer little or no capital losses. But long-term holders of blue chips are getting far higher yields due to dividend increases over time so current gic yields might still need to go a fair bit for them to be considered an attractive alternative.

Bill said
If that's your yield on blue chips then it's likely you haven't held them for long, so maybe it does make sense to sell and buy gics instead if you suffer little or no capital losses. But long-term holders of blue chips are getting far higher yields due to dividend increases over time so current gic yields might still need to go a fair bit for them to be considered an attractive alternative.  

Yield on Cost is just a mathematical calculation which has no practical use beyond bragging rights. It is only what your current capital is returning you that matters because there might be a better option with the yield on an alternative investment.

Example: Stock A in 2010 was $100 with a 4% yield of $4. Stock A in 2022 is now $200 with a 4% yield of $8. YOC is now 8% but that is meaningless. You might be better putting that $200 into Stock B today with a yield of 5% = $10. I don't and wouldn't consider tracking it.

Everything in one's portfolio is 'current money'. There is no such thing as old money (assets/investments) and new money (available for investment).... with the exception 'old' money may have unrealized capital gain/loss tax consequences in taxable accounts that does need to be taken into consideration in 'sell' decisions.

Ultimately it is important to not love one set of $$ over another set of $$ in order to be objective about the performance of each asset today, making judgement on what that asset is intended to do for you today, and how it may continue to be "fit for purpose" going forward. Those are decisions everyone on this site makes on this site today for each of their HISA and GIC accounts. It is a similar decision process for stocks, bonds, RE or whatever, albeit with different degrees of certainty.