Investment Q&A

Q: Further to some news commentaries today, do you have any thoughts on market reaction if Trump discontinues trade negotiations with Canada and just imposes a flat tarriff? If that does happens can you suggest some income stocks that are potentially less at risk? Thank you

Q: It seems that Japan's economy is in trouble and that we should all be taking note. The Japanese are the largest foreign holder of US Treasuries . If they start selling those Treasuries what impact would that have on the US economy and on the rest of the world ? There is an article in the Financial Post this morning entitled "Japan's Bond Market is flashing Red" Why investors should pay attention. Your comments would be most appreciated.

Q: I understand it is impossible to predict, but do YOU feel it’s wiser holding cash at these All time highs? Wait for a drop and pounce? Or buy at these numbers as All time highs indicate excellent businesses, assuming a long term hold.

I am about 25% cash. Too much in this market ? Thanks

Q: Re: Stablecoin

If this has been answered elsewhere, please provide a link for me --- as I couldn't seem to find an answer in the archives.

What in the world is stablecoin?

Like Vinnie Barbarino, "I'm so confused".... !

and have absolutely no confidence in how to invest in it, if I don't know what it is and how it works.

Treat this as a private, or public question, as you wish, if you think others might benefit from the answer.

Thank you!

Q: In the Globe and Mail, July 16, there was an article by Scott Barlow called "Valuations and market concentration are reasons for concern." He likens the current Technology sector to mirror many of the same realities as the 2000's- before the dot com bust. What is your opinion?
As always, Thank you for the fantastic service too and helpful guidance. Ric

Q: Over the very long term, say 50 years or 100 years, longer if you know, what is the average return on the US and Canadian stock market including dividends? Say for the S&P 500 and the TSX Index. How have more recent returns, say over the last 10 or 20 years, compared to the very long term average? Do you expect the long term average to be a reasonable expectation for the next several decades or are there market forces at work that would tend to increase or decrease those expectations? I understand the last question requires a bit of guesswork.

Q: I am a senior and have been a member of 5I since you started. Between us "we" have been very successful!
I want to give back in the form of an endowment to our local Church to continue providing funds for a couple of local charities that feed and provide to those less fortunate! I will be allocating shares to Canada Helps to provide the seed funds, probably 100-200K.
I know stocks would be very difficult to administer, but ETF's less so. Also, maybe they can only do Mutual Funds.
If mutual funds do you suggest MAWER?
If ETF's and using some of your previous correspondence do you continue to to suggest ZSP, XIC, VIU, and CDZ.
Any help you provide would be greatly appreciated as we meet with the Church Staff.
Warmest Regards Gordo

Q: Hello 5i,
largely thanks to you, I have made a fair bit of money over the past few years. Certainly, more than I would have made on my own. Thank you. But, I am thinking that in my mid 70's I should start thinking about preserving it in order to pass it on. I know that stocks are you're forte, but i noticiced that you have been generous enough to give advise on other matters, as well. I will try to make this question not too close to portfolio planning advice and so hope you can advise me. In reviewing literature I notice that people say at this stage in life, we should not be looking out too far. Therefore shortterm bond etf's are best. AGG, which I own, for instance, is discouraged because it goes out to six years and there could be a downturn at just the wrong time. They also mention holding tips, corporate bonds and a GI C ladder. I didn't think that I would need these latter assets. Just bond etf's in US and CDN. I also thought government would be better than corporate, as well, because they would be more secure. Anyway, I hope that at this point in the game you can also dsirect me to the right choices, as you have in the past. Here is a list of assets suggested:

short-term Canadian bonds XSB or VSB Core stable income
Short-term corporates ZCS Slightly higher yield
Laddered GICs (1–5 yrs) GICs from brokerage Guaranteed principal
U.S. short Treasuries VGSH Safe USD diversification
U.S. short TIPS VTIP Inflation hedge
High-interest savings ETF CASH.TO or PSA Liquidity buffer

Q: Sir: What 2 US and Canadian stocks or ETFs do you see most unfairly punished now, and most likely to reward , down the road. Also could you suggest one non US value ETF or stock that cheers you a lot? Thanks-JP

Q: How does the BBB affect Canada?

Sheldon

Q: The US is on the verge of approving the BBBill which, according to the CBO and other analysts, will add massively to the US debt. and commensurate debt service questions.I know that we have fretted for decades about US indebtedness and it's been an ongoing nothing burger as the US keeps chugging along, leaving Canada and other markets in its wake. However, this time, the debt charts forecast skyrocketing debt, not a gradual increase at all. If, or when, interest rates climb, is this not a disaster waiting to happen or Is this time different? How can we tell if/when it's time to reduce our US exposure? Is the bond market our only reliable barometer? What are your thoughts on this unprecedented development? What should small retail investors be watching out for and what moves, if any should we be considering? Many thanks.

Q: Hello, I have been thinking about initiating a long-term position (6-10yrs) in Costco for a while now.

My long-held view of the US dollar remaining strong and stable has changed; I have resolved to continue holding my US dollar securities through whatever this is but not buy more US currency at this time.

The issue is whether to initiate a new position in:
1)COST using existing $US or
2)the Costco CDR in Canadian $

Which option, in your opinion, represents the best risk-adjusted return over the next:
A)6-10 years?
B)1-5 years?

Does your response for A) change for beyond 10 years?

I know there are way too many variables here for any ‘correct’ answers but it is still interesting to have 5i’s perspective.
Thank you. This is an awesome service!
-Trevor

Q: There is a lot of rhetoric coming out of Ottawa about going all in to boost the canadian economy with major growth projects, reduce internal trade barriers, and mitigate tariff impact. If this in fact all comes to fruition, do you think this would positively affect canadian ETF values and would this be a good time to buy into those? VDY for example.

Q: This is a general question to try and clarify many of your answers. Often when someone asks an opinion between to similar stocks the response comes down to both for diversification. I totally agree with diversification, however you also often comment that more than 20-30 positions is not necessary or manageable. I have struggled trying to have a balanced portfolio, including some income as well as growth and including all sectors. It doesn't seem possible. But your answers do make me consider other possibilities.

Thanks, Lyle

Q: Hello Team,
What do you think of the Canadian material sector going forward? Could I have your top two recommendations please.
Thanks!

Q: Peter, could you comment a little about yesterday’s piece of Scott Barlow in G&M about the 11 market aberrations - citing BMO chief economist Doug Porter? Thks

Q: Are there any theories related to the VIX at a very low level?

Thanks

Q: BNN's Keith Richards says this: "Stocks rising and bond yields rising are not compatible. Rising yields push bond prices lower. While bond and stock prices are not perfectly correlated, they normally keep a reasonably close pace. Currently we are seeing huge negative divergence.

Picture an alligator about to clamp its jaws down after opening wide. I call the divergence “Gator Jaws,” meaning that the price of stocks and price of bonds are moving in opposite directions. That will change by a falling stock market, or rising bond market (falling yields), or both – but it will change."

What does he mean by this? Do you agree with him?

Q: The BNN Guest today had the following to say - do you agree, and if so, can you suggest a way to mitigate this if an investor needs growth for retirement funding?

"Three of the largest stock market peaks over the last 60 years were in 1968, 2000, and early this year. Each of these peaks have also coincided with peaks in U.S. household equity holdings as a percentage of total financial assets. In 1968, the percentage reached 28 per cent and in 2000 it was 25 per cent. Today, it is around a record 30 per cent, surpassing prior peaks in 1968 and 2000.

Foreign investors also hold more U.S. equities as a percentage of their total financial assets than ever before. All this crowding by both foreign and domestic investors into the U.S. stock market has contributed to a rich valuation for the U.S. market. At the same time, as U.S. stocks have reached peak popularity, historical evidence suggests that whenever the valuation of the S&P 500 has reached its current level, the forward 10-year annualized return has averaged around zero. And if you think you can't do worse than zero per cent over 10 years, after the booming 1990s, the S&P 500 declined 23 per cent over the next decade."

Q: What are your top 3 sectors (ex tech) to invest in the US right now for the next 3 years ? I am looking to hold 3-5 years.

Please name your top 3 ideas (ranked if possible) in each of your preferred sectors for an investor with moderate to high risk appetite, regardless of market cap.

Thank you