Thursday, May 08, 2008

Canadian Investors Hoarding Cash, Investment Professionals Unhappy About It

You've got to get up pretty early in the morning to be a bigger cheerleader than the apparatchiks for the various real estate organizations, with their endless twitterpating about how "NOW is the time to sell! NOW is the time to buy!" But to be fair, we know where they're coming from: It's hard to make money as a realtor if people sit on the sidelines.

That's why it's not too surprising to see Benjamin Tal, senior economist at CIBC World Markets take a stab at rallying the troops in the equities markets. Risk averse Canadians are allegedly sitting on an estimated $45 billion in cash and cash equivalents, and that really makes investment advisers feel unloved.

Yahoo!: Nervous Canadian investors sitting on excess $45 billion in cash while waiting out market volatility: CIBC World Markets

A highly volatile stock market has nervous Canadian investors pulling back on their investments and sitting on record amounts of cash, finds a new CIBC World Markets consumer watch report.
The report finds that Canadians are holding onto a record $45 billion in extra cash they normally would invest in the markets - a decision that could cost them billions of dollars in lost investment opportunities.

By his calculations, sitting too long on the sidelines after the 2001 market correction, cost Canadian investors more than $30 billion - a pattern he sees emerging again in 2008. "Fast forward to today's situation and it appears that history is repeating itself. Investors are sacrificing billions of dollars in potential investment gains," Mr. Tal adds.

God, I love forward-looking statements, especially ones that use the words "opportunity" and "potential."

Let me be clear here, I enjoy volatility, even welcome it. It adds some excitement to my day, but it's not for everyone.

More importantly, let's not forget two crucial maxims. Firstly: Never assume that anyone is telling you anything with the sole altruistic desire to help you make money. After all, a stockbroker is someone who transforms his experience and your money into your experience and his money. Second: contrary to what big-talkers would have you believe, risk and return are not correlated at 1:1. Outsized risk does not always coexist with potential outsized reward. If you can't get your head around that, then carry on.

Sphere: Related Content

No comments: