Investment Q&A

Q: Good afternoon 5i. I am currently sitting with 25% cash on the side lines. I know that's much too high. I have avoided gold/silver sector as well as oil sector(I do have enb, trp, fts)I've also avoided consumer goods sector. I'm light in industrials (dow & cbi) and property sectors (tcn). All other sectors are represented fully and equally ie health/financials/tech. I have a 65/35% split between US/CDN market respectively. With the stock market correction today and yesterday would it be a good buying opportunity and what sectors should I focus on going forward and if you can offer some stock suggestions in each sector. Much appreciated.

Robert

Q: If I wanted to hedge my U.S. currency going forward, would buying DLR.TO be a good way to do it?

Q: The recent decline in CAD/US exchange rates has me somewhat concerned for my US investments. If you believe,as I do, that the CAD has reached its low point and may move up slowly from here, should you buy US shares in CAD funds? Or is it best to convert now and hold these in US dollars? In general do you believe it is best to have a mix of US shares in an even split of US and CAD currency? What should the factors be to determine how this is handled individually? Or does it even matter?

Q: Could you recommend an ETF that trades in Canada with Canadian funds that.
A. Invests in US savings accounts and pays some interest
B. Is unhedged
Would this be an effective way to play a possible drop in the Canadian dollar. Is there another way that this could be achieved without the cost of converting dollars?

Q: Dear 5i
I am 62 and plan on retiring in 2 years . I am open to positioning myself for 2 more years of some growth but preservation of capital is also important .
I have about 1M in RRSP`s and and close to shifting this amt to my brokerage co. to invest .
I`m thinking the following
1-$300,000 into Income portfolio including 10 good stocks from the Balanced Equity.
2-$300,000 into two different Bond ETF`s (fixed income )
3-$400,000 into 4 different ETF`s.
Does this setup look good to you and if so what ETF`s might you recommend given the current economic climate and my age ?
I don`t need income from the investments currently but think its important to have good dividend growth along with some capital gains .
I`m like most and prefer not to pay high MER`s as well.
Please deduct more than one question for this .
Thanks and looking forward to your response .
Bill C.

Q: I don't usually like market timing and don't really believe in this "sell in may..." stuff, but this year is a little different. What are your thoughts if the Trump administration is unable to come up with a concrete tax reform plan by may/june? Would they have time given congress goes into break shortly after? I would expect there would be volatility ahead, but have you experienced similar events like this in the past where there's been bets on policy changes that don't materialize?

Q: Hi 5i, As one who remembers double digit interest rates, I've been wondering if and when the worm will turn again. It sounds like expectations are becoming pretty entrenched for higher rates in the US, and if that turns out to be true would expect Canada to follow with a year or two lag. Is there a typical pattern or approach that suggests which sectors and investment types benefit in a rising rate environment?

Thx for your excellent service!

Q: Hi,

I have cash after some bonds came due and am considering either ZWC or a rate reset preferred such as RY.PR.R. I am risk averse and hate to lose money! I feel that there will be some sort of correction soon. Your views much appreciated...

Thank you

Q: Can you please explain he correlation between bonds, stocks, reits and gold?

id like 30% of my portfolio to move differently than the markets in case of market correction but dont want it all in bond funds due to rising interest rates. how would something like this look over the long term or do you have a better suggestion?

10% bond fund
10% REITs
10% Gold half xgd, half bullion
70% equities (CND, US and ITL)

Q: The Canadian and US markets were DOWN SHARPLY this morning. The Cdn (XIU) currently down almost 0.5% and the US (SPY) almost 0.8%, although they now (1230) seem to be recovering a bit. Do you know WHY? What impact do you see over the next few days and months?

Thank you!

Q: I am concerned about a correction in the market (both USA and Canada) and am wondering if I should take some profit given the great run over the last 4 months and hold some cash for better buying opportunities should the correction occur later this year. Recent analysts on BNN are also calling for a defensive position with holding cash. What do you think about this strategy and what percent of a portfolio would you suggest to have in cash? Does 10 to 15% make sense? Thank you for your great service.
Deborah

Q: In my overall portfolio (RSP, RIF, Unregistered & TFSA) my low weighted sectors are:
2.5% in Telecom (BCE & T);
3% in Consumer Staples (WPK & ATD),
3% in energy (RRX, SPB, WCP, VET);
5% in Materials (SJ, SLW/FR, RUS);
6% in Health (GUD, SIS, ECI, CRH, CSH.un)
With the sale of RDM, I have some cash in my RSP which is mostly 'Balanced' equities. Which one or two of my underweight sectors would you consider the first place to deploy the cash in my RSP at this time? And what would your top stock selections be - of either my existing stocks, or new ones ? As always, thank you for your help.

Q: Please accept my apologies for what could be a request for a long-winded answer. You welcome to debit my 5i bankroll for 5 question credits in effort to better compensate you for your time.
---------------------

If possible, please provide your opinion on something I wish to term "Peak Credit" in Canada. We are all aware that Canadians are spending themselves into a life-long love affair with mortgages, lines of credit and credit cards. With Canadian interest rates at 35 year lows, the availability of loans and credit climb while region-specific real estate prices inflate to valuations that seem to defy logic. Young families in their 30's commonly have mortgage debt over $500k and barely earn the income to cover payments at today's rates.

In general, what is the mix of insured/un-insured mortgage debt on the books of Canadian banks? If wages are not keeping pace with inflation and the cost of living, how are Canadians ever going to own their own home? Are we doomed to a life of the English, where the concept of home ownership is more of a dream than it is a reality?

Do you feel banks in Canada are prepared for higher rates in the next 3yrs?

Is Canada showing the early signs of a credit bubble?

Do bank common stock investors have anything for fear?

Am I a coyote howling at the credit moon?


Thank you for your guidance. This topic should be on the minds of many Canadians.

Q: Do Canadian stocks get more appealing to foreign investors as our dollar falls? What other factors would weigh in: Canadian and world economy, oil, etc.

Thanks, cathy

Q: Markets in general. Andrew McCreath is stating that markets are over priced and "agrees with the OECD that the valuation accorded stocks has gotten ahead of the fundamentals". Is it time to sell or at least be extremely cautious at this point?

Q: Hello, my question is about an article I read in CMS. Bill Gross says investors need to watch only one number in 2017 to figure out what returns are going to look like across the various markets, and that’s whether the 10-year Treasury yield crosses the 2.6% mark. As of today the 10-year yield is 2.48%. "If 2.6% is broken on the upside...a secular bear bond market has begun," Gross said. "Watch the 2.6% level. Much more important than Dow 20,000. Much more important than $60-a-barrel oil. Much more important than dollar/euro parity at 1.00. It is the key to interest rate levels and perhaps stock prices in 2017."
So my questions are, what will happen if it crosses the 2.6% mark? Does this mean that the yield on bond ETFs such as XBB and VSB will increase? Does this mean that this will be good for the stoch market in general? What is a secular bear bond market?Regards, Gervais

Q: Place(s) to park some cash in Cdn funds (50K) for a short term hold to ride out potential volatility & recently talked about possible market correction?
Ted

Q: I noticed on your macroeconomic card that inflation rate is higher than gdp growth. What causes this and is it something that can continue over the long term ? Thank you.

Q: Hello 5i team,
Your article on hedging for a market downturn is quite timely; thank you.
A 5% or 10% correction is not too worrisome as it could be recovered in a relatively short period of time.
I do not foresee a "black swan" event; do you? In my opinion, the current steepness of the yield curve does not signal the eventuality of such an event.
Regards,
Antoine

Q: I have been considering moving to a larger percentage of cash (60-70%)
My concern is that with the proposed tax plan due from Trump next week that the market is thinking one thing and if it does not line up with what is proposed that we will see a dramatic fall.
Can I get your thoughts please.

Thanks