Investment Q&A

Q: Peter Shiff was recently on USA Watchdog.com. He basically recommends that investors switch to gold as he feels the US (fiat based) currency will become devalued as bond investors demand higher rates given the huge US deficits.

What is your opinion of gold, and gold stocks, as an investment? Should investors allocate a percentage of their portfolio to gold as protection to a possible collapse in the bond and equity markets?

Thank you again for your insightful advice.

Q: Hi
I know you are NOT momentum investors!
But I know from your answers you watch for the trends and repeatedly point to the lack of traction in the Energy sector.

What are the momentum factors/ trend changing indicators that you do consider when you answer your subscribers' questions?
Are there any newsletters/blogs/that you respect/follow?

Thanks!
Mano

Q: I continue to struggle to find the right level of diversification, especially fixed income in my portfolio. One of the strong reasons for my struggle is the recent very strong bond performance and concerns that I am too late.

The standard rule of thumb 60/40 blend is challenged here. I am wondering if you saw this article on the Globe’s website. Could you take a look at the article and share your thoughts on Merrill Lynch’s thesis ? As well as the suggestion of using dividend paying stocks as, at least, a particle substitute.

Thanks.

.... from the Globe and Mail Investor website ( a partial excerpt...)

The 60-per-cent fixed income, 40-per-cent equity portfolio has been an important benchmark for balanced funds and overall asset allocation for decades.

Merrill Lynch analyst Jared Woodard, however, believes the 60/40 portfolio is now far less relevant because of the rising risks in bond markets.

In The End of 60/40, Mr. Woodard cites three reasons that bonds may no longer provide the portfolio stability and consistency they once did.

The first reason is that bond portfolios have not been providing diversification. He writes, “The core premise of every 60/40 portfolio is that bonds can hedge against risks to growth and equities can hedge against inflation; their returns are negatively correlated."

The problem in recent years is that periods of major market weakness have seen both bonds and equities fall.

In the U.S., longer duration government bonds have generated terrible risk-adjusted returns over the past three years - lower than junk bonds and emerging market equities. This means that investors who bought Treasury bonds for steady returns and lower portfolio volatility have seen volatility actually increase.

The data is U.S. based, but the performance of U.S. and Canadian long-term bonds has been virtually identical, as this chart posted to social media underscores.

Mr. Woodard’s final warning about bonds concerns overcrowding. He notes that globally, the fund manager allocation to U.S. Treasury debt is close to a 20 year high. So far in 2019, investors worldwide have sold US$208-billion from equity funds and bought $339-billion worth of bond funds.

With government bonds so popular, the analyst is concerned that “Crowded positioning means that natural swings in bond prices may be exacerbated as active investors rebalance their holdings.”

To the extent that Canadian investors have made the same switch to fixed income – and the 38 per cent increase in the market capitalization of the iShares Core Canadian Universe Bond Index ETF suggests fixed income has been popular domestically - these risks are also present here.

Q: I have to cash out 2/3s of my portfolio over the next 6 weeks to buy a house. Would you cash out everything at once today on strength or average out specific holdings based on technicals, earnings reports, and dividend dates. if the latter, What other criteria would you consider. Thank you.

Q: A PSA for all. I finally achieved my first double as a member of the 5i fan club. The stock is...... drum roll.... CSU. Bought in 2017 at the low low price of $650.00.

My next double would seem to be BYD. Bought in at $96.00. So for those out there who think that stocks like the one mentioned are too expensive, take heed. Not all work out, but the doubles help.

Q: I saw this news release and would be grateful for an interpretation.
http://investors.algonquinpower.com/File/Index?KeyFile=400290864

If shares are only offered to the public, I suppose that includes institutional investors? Also, I'd be interested to know how the market works in this situation. ie, if supply of shares exceeds demand, will the price keep dropping until they're all sold? It is about 4.6% of their market cap.
I would like to purchase shares and would appreciate guidance on when you would suggest this could be done.
Many thanks.
ps. I very much appreciated your frank article 2 days ago on the financialpost.com

Q: Hello team,

Would you know of a financial inststution that would buy and sell gold coins in American funds?

Thanks
Stephen

Q: Could you give me a list of Canadian listed companies that pay dividends in USD. Thanks

Q: Since TMTD US has no trading commissions now. Would it be better to open up a trading account for US stocks? Thus, switch or cancel my TD Waterhouse (Canadian) account in US dollars with $9.99 trading commissions on US stocks?

Q: I currently have about 10% of my portfolio in money market funds or cash. For a while this seemed like a good idea and I have seen other portfolios with cash. but its over a year now and the cash just gets more and is earning very little. I see from some other questions-answers that you do not recommend holding much cash. what do you think I should do? Reduce the cash? and to what extent? I have no need for cash now and have a moderately sized line of credit if there were an emergency. thanks

Q: Hello, I have a conservative portfolio consisting of dividend-paying Canadian Stocks, Bonds, and some private Real Estate and Mortage Funds.

It has been suggested to me that adding some of the 3iQ Cryptocurrency Asset Fund would provide some needed diversity to my account and also provide some hedging to lower interest rates. Would you recommend adding this fund to my portfolio for these purposes?
Do you have any other t ype of assets that you would recommend to achieve added diversification and hedging to the portfolio? Thank you Alan

Q: Do you have any idea what the price will be on the new shares and when will it be set?

Thanks

Q: In these turbulent times I'm wondering about trailing stop strategies. Haven't used a stop before, any suggestions.

Q: Hello to all!!

There was a question asked about peleton. In your reply you said you prefer using zwift. Having said, wouldn't it be fun if 5i created a group ride every now and then.
Just a thought! Depending if there would be interest with other members.

Thanks

Q: I notice that both companies have only a few directors that own minimal shares in the company. Generally speaking, is this significant in terms of due diligence prior to buying a stock? How would you interpret this?

Q: Hello team,

Just a follow up on 5i answer on Sam's inquiry about buying exchange traded US pay
PSU.U. The list you provided of possible brokers that will allow you to buy the product included TD. I use TD Webbroker for online trading, and they have conflicting offerings and won't let me purchase. The TD previous trade you saw yesterday was most likely Institutional.

Stephen

Q: I have a question about asset allocation. I'm 70 and don't need income from my portfolio. Currently I have 75% in equities fairly well diversified and 15% in fixed income, mostly bond ETFs (rest cash). You recommend having 25-33% in fixed income depending on how I answer your asset allocator questions. why do I need any fixed income at all if I do not need the income now or for the next few years. When I do need this income, could I not convert to bonds ? The bond funds that I have have been about neutral over the past couple of years; some have gained and some have lost value. they have paid out interest but then so have the equities to a considerable extent. thanks

Q: My friend inherited a number of CN stocks. He does no trading and has only mutual funds. What are your suggestions for his selling of these stocks. This is a one time thing and any suggestions are much appreciated! thanks Gord

Q: Here is a very relevant chart showing why investing in sound Co.'s for the long term is the way to win. There are draw down's
every year that really are insignificant in the big picture.
https://ritholtz.com/2019/10/sp-500-intra-year-declines-3/

Q: Just wanted to express my appreciation for the wonderful service you provide to investors like myself. I have been a member for many years and always look forward each morning and evening to viewing the website. I really don't think I could do without 5I. Bill