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The headline that set me off was the Financial Times’ (paywalled) "Emerging market currencies at ‘multi-decade lows’ " even though the level of developing world currencies is of little or no interest to most Canadian investors.

The inference from ‘multi-decade lows’ is that emerging market assets must be an attractive investment at this point but I’m really not sure that’s the case. The issue is that the asset price excesses caused by a decade of ultra-loose monetary policy will not be corrected quickly.

Canadians will definitely care about this topic because emerging markets currencies are only one example of the benefits of low interest rates – domestic housing prices and household debt levels are another. Dividend stocks are another. Debt-heavy corporate balance sheets in the energy sector are another. Absurdly expensive valuation levels in high-growth technology stocks were also an outgrowth of low rates and monetary stimulus.

Not even the world’s best money managers have been able to consistently call market tops so I’m not saying we are now at the point where everything is set to go in reverse. But for many of the market dislocations created in the past decade, it’s only a matter of time.

The most obvious relevant candidate for reversion to the historical mean is the record level of Canadian household debt. The ratio of debt to disposable income stands near 170 per cent currently, thanks primarily to low mortgage rates that allowed homeowners to easily make monthly payments. As interest rates rise, debt will almost certainly fall close to the 20-year average of 142 per cent of disposable income in the coming years.

At some point in the next three to five years, it is likely investors will look back and realize that most or all of the asset classes that generated the best returns in the 2008 to 2018 time period have been underperforming badly. There will be ample warnings of trend changes, and investor success will depend on openness to new market leadership and the intellectual flexibility to make portfolio changes despite ingrained habits.

-- Scott Barlow, Globe and Mail market strategist

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Stocks to ponder

General Electric (GE-N). General Electric Co., once a staple holding for dividend investors, slashed its payout to almost nothing, the latest sign that the industrial giant’s problems run deep. The dramatic move to cut the quarterly dividend to just 1 US cent per share, which will save the company US$3.9-billion as it embarks on a daunting turnaround effort under new chief executive Larry Culp, is remarkable not only for its size, but because it is the third time that GE has cut its dividend in the past nine years. Yet, it represents only an initial step in Mr. Culp’s plan to pull GE back from the brink – a process that will require, as a priority, fixing the troubled power business that is at the heart of GE’s woes. John Heinzl takes a look at the latest moves by GE (for subscribers).

The Rundown

The TSX’s worst performing stocks and sectors in a month investors wish they could forget

Even though the S&P/TSX Composite Index ended October on a high note with a nice rally on Wednesday, it nonetheless suffered its worst monthly decline in more than seven years. Canada’s benchmark index for stocks fell 6.5 per cent in October, marking its biggest setback since September, 2011, and taking it back to where it was about a decade ago. All the broad sectors fell, led by economically sensitive areas of the market such as energy, consumer discretionary, financials and industrials. Even relatively safe, dividend-generating sectors such as utilities, telecommunications and real estate investment trusts sputtered. David Berman reports (for subscribers).

What if the stock market busts just as you retire?

A stock market correction is the parting gift from hell if you’re about to retire from your job. You put money away diligently for decades, only to have stocks plunge just as you’re about to leave the work force and start drawing on your savings. After the rottenest month we’ve seen in ages for stocks, anyone with a retirement date in late 2018 or early 2019 has to be worried about what’s to come. There are ways to arrange your retirement investments so they withstand stock market corrections – declines of 10 per cent or more – such as the one we’re seeing right now. But let’s acknowledge that there is no perfect way to cut the anxiety of seeing your wealth shrink on paper. Where there’s exposure to stocks, there’s investing stress from time to time. Rob Carrick reports (for subscribers).

‘Magic bullet’ market indicator says reduce portfolio risk now

Merrill Lynch quantitative strategist Savita Subramanian is predicting continued market volatility using a chart I’ve called “the most interesting in finance.” The apparent ability of the yield curve to predict market volatility is a potential magic bullet for investors that signals they should start de-risking their portfolios immediately to protect themselves from a downturn. Scott Barlow takes a look at this chart and what it means. (For subscribers).

Canadian hedge fund managers offer their top investment ideas in a troubled market

In a rotten month for the stock market as a whole, the oil and gas sector’s problems still stood out. Canadian energy stocks were among the biggest losers in October, which saw the S&P/TSX Composite Index enter correction territory. Pipeline politics and transportation limitations have put the domestic energy sector on the outside of what has been the most bullish period for global crude oil in several years. Tim Shufelt reports on where Canada’s top hedge fund managers are seeing value. (for subscribers).

Vanguard Canada shakes up executive ranks, names new country head

Vanguard Canada is shaking up its executive ranks, appointing Kathy Bock as its new country head effective next year. Ms. Bock, who currently serves as principal and head of the Americas region, will replace Atul Tiwari in her new role as head of Vanguard Investments Canada on Jan. 1. Mr. Tiwari, who is the current managing director of Vanguard Investments Canada, will remain with the firm for a transition period until the end of 2018. Clare O’Hara reports (for subscribers).

‘Is now a good time to have a five-year GIC ladder?’

A 74-year-old reader with a chunk of GIC money coming due has a question that anybody investing in guaranteed investment certificates these days has to be asking. Go with a five-year GIC and get the highest rate possible, or use a five-year ladder that allows you to capitalize on higher rates in the next few years? Rob Carrick takes a look (for subscribers).

Looking ahead: The Retirementality

Listen to Rob Carrick’s new podcast on retirement, listen to here or download on iTunes or on Spotify. There are three episodes, one aimed at millennials, one at Gen X and one at baby boomers.

Need a Facelift?

Are you self-employed, an artist, freelancer, contract worker or small business owner? The Globe’s Financial Facelift wants to hear from you. Get some FREE advice from The Globe and Mail about your unique financial situation by requesting to be part of our Financial Facelift series. We want people of all ages, stripes and financial situations to benefit from our FREE financial advice. You can even choose your own false name. Better yet, you get to work with our photographers to obscure your identity in one of our trademark Financial Facelift photos. Learn how to make sure your financial future is secure, e-mail your situation to today.

Others (for subscribers)

Playing defence: Five TSX stocks that survived the crash of ’08, then thrived

Which of these 18 U.S. bank stocks satisfy our safety-and-value screen?

Thursday’s analyst upgrades and downgrades

When markets return to normal and it’s terrible

Thursday’s Insider Report: Four stocks insiders are accumulating on price weakness

Vitol sees oil prices falling as demand growth falters

Others (for everyone)

What the looming bear market might look like

Fear of 7: The number that could make China’s currency a trade-war weapon

Ask Globe Investor

Question: I have maxed out my TFSA every year, contributing a total of $57,500 since the TFSA was launched in 2009. After doing some trading in my spare time, I have increased the value of my TFSA to more than $300,000. Earlier this year, I withdrew $100,000 for a down payment. After calling Canada Revenue Agency, they told me I could refill the TFSA to my previous balance of $300K without penalty. Is this accurate?

Answer: A couple of observations: First, I’ve also maxed out my TFSA contributions, but my TFSA isn’t worth nearly as much as yours; second, something was apparently garbled in the translation when you were speaking to the CRA.

Here’s the way withdrawals and recontributions work. When you take money out of your TFSA, you are permitted to recontribute, without penalty, up to the same amount you withdrew – but not until Jan. 1 of the following year. This assumes you have no other unused TFSA contribution room available from previous years. So, in your case, assuming you haven’t made any other withdrawals, you could recontribute $100,000 as of Jan. 1, plus whatever the contribution limit is for 2019.

This, by the way, is not the same as being able to contribute an amount that brings your TFSA up to its previous balance of $300,000. Your account has almost certainly changed in value since you made the withdrawal. It’s not the previous balance that matters, but how much you withdrew.

--John Heinzl

Do you have a question for Globe Investor? Send it our way via this form. Questions and answers will be edited for length.

What’s up in the days ahead

Goldman Sachs has a compelling idea for how to navigate the current bout of stock market volatility: Focus on high-quality companies that can protect their profit margins as the economic cycle matures. David Berman will tell us about their top stock pick for accomplishing just that.

Click here to see the Globe Investor earnings and economic news calendar.

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Compiled by Gillian Livingston

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