Investment Q&A

Q: What are the chances of the current economic turmoil leading to Debt Crisis and / Mortgage crisis.

Q: The VIX is below 40 this morning. Is that a sign that the worst is over or are investors becoming dangerously complacent. How does 5I interpret the recent movements of markets.?
Thank You

Q: Negativity re Covid 19 seems to be decreasing and attention may be switching to the economy, beginning with this weeks reports. Everything I'm reading suggests that the massive testing required to safely open the economy just isn't there, and a vaccine is far away. Meaning a later rather than sooner scenario for business as usual. Today's retail numbers and bank earnings have moved the market lower and only reflect March's partial shutdown.Do you see the markets recent Covid 19 optimism, being replaced by economic negativity, with markets deteriorating further towards Q2 numbers. I have a large cash position and cognizant of your buy slowly strategy, but can't help thinking the worse is yet to come.
Thanks Peter.

Q: What instruments do you use to determine an inverted bond yield curve?
Do you think we had one last year?
If an inverted yield curve [bear argument] occurred, what would signal it's reversal [bull argument].

Q: In your update, you say that "if an investor is not an optimist and does not fundamentally believe that the future will be better than the past, it might require a rethink on why one would bother to invest in equities at all.". I am an optimism by nature, but since 2 weeks, I am struggling with the apparent need for the Federal Reserve liquidity. It seems that once again, if central banks had not injected trillions of liquidity, many companies would have gone bankrupt. We could say that this is a "special world event", but, still, you start to wonder if one's optimism for growth is not instead optimism for government support. We just got a glimpse of what corporate high debt levels can do to stocks, small businesses, and even canadian renters. Interesting times!

Q: Good Evening
Two of Canada’s largest private debt funds, Bridging Finance Inc. and Romspen Investment Corp., froze investor redemptions today, the latest sign of COVID-19-related stress in a sector popular with wealthy, income-seeking investors.

Do you see a similar action followed by mutual fund/ ETF companies freezing redemptions if things get worse with respect to COVID -19 ?

Thanks

Q: Hi there, this 2 week rally is starting to look look and feel a V while many market commentators on BNN/Bloomberg/CNBC seem to say we will retest the lows and possibly even go lower - more of like a U or W or L. Obviously the situation we are in as a society and economy is out of the ordinary, but as professional investors, what is your opinion on where we go from here? Is this rally the real deal, or is it a prolonged dead cat bounce? How do we interpret these moves and what are some general signals to watch out for?

Thanks for your guidance!

Q: As the market starts to recover, can you please give your opinion on what sectors do you expect to recover faster than others. Thanks

Q: One of today's questions was about the impending rise of inflation after all this government printing of money and historical government debt. I like to look at history to see similar situations and the outcomes. We only need to look as far a Trudeau Senior to see the last time historical levels of debt were reached. As history shows its usually the next term(s) that has to deal with the repercussions of the spenders reign. So in 1981 under Clark (and then P.Trudeau again after that) inflation went over 10% and prime rate was increased to an all time record of 22.75% to try to bring down inflation. I'm sure everyone remembers either their parents or themselves having mortgages on their homes with rates in the high teens to mid 20% range. So my question is what will be different this time around? After Covid is over we will be sitting with the biggest deficit in Canada's history by miles, massive unemployment so a very slow recovery is likely (more stimulus likely needed). Were there any lessons learned around increasing interest rates to record levels to correct massive inflation or is that the likely path government will take again when this inevitably happens in the next few years? Thx

Q: This is a kind of crystal ball question. I have had trouble getting through to BMO yesterday and today. When I finally got through, the agent told me that one of the reasons for the slowness is that everyone is trying to rig their accounts for option selling. I wonder if this is a signal that the end of options season is getting close. I have made quite a bit of money on options myself in the last couple of months and would like to keep it up. But, I have a nagging worry that although I might make some money on options, if an upturn comes , I may miss out on getting some good companies for the long term. I read an adviser recently, for instance, who predicted that we may not have as long to buy as we think. Things could be turning up in just a few weeks. From your experience, can you give any advice on how to look at this situation and best handle it? What signs to look for when things begin to turn, and how much time will there be to leave one strategy behind and jump on the other. I realise this is a bit like crystal ball gazing. Bu,t, you have more experience that I do in the markets and probably can foresee the future better than I can.
thanks

Q: With China starting to ramp up and the sudden rise in markets over the past week, do you believe the market will stay, drop, or rise? and can you please explain your answer?
Thanks

Q: Someday soon the sun will rise and shine brightly. This new day we will see inflation arrive at our front door with a loud bang. Inflation will arrive quicker than we think due to a significant increase in money being printed from all countries. During inflationary times what sectors are good investments and what companies would excel.
Clayton

Q: Do you think this rally is sustainable? The markets have really rallied lately and was wondering if a guy should lighten up a bit.

Q: Good Morning

The goverments are doing the right thing by adding a huge amount of liquidity in the system.I agree with this, but..
at one point in time, you have to pay the piper

what are your thoughts on this

Q: RE: Asked by Terence on March 30, 2020 - $1.3 million in stocks presently sitting with $800K (90 % cash).

Hi. I'm (60 & retired) in similar situation; understand everyone's different. Planning a similar strategy to what 5i suggested, but starting with a more conservative ETF (i.e. VCNS or even VCIP) for a period (i.e. 3 months), transitioning (on a strict schedule or market declines %) to VBAL once market volatility declines. I used to be a VGRO-type investor, but after -15% YTD, I've seen the light & am now a converted VBAL-type.
>> What is 5i's opinion of this transition strategy? <<

Also plan to add some Gold [PHYS] soon, and carefully/slowly add a few choice solid stocks (i.e. CSU, BAM.A, MSFT),
maintaining asset mix, over next 6 months.
>> What to do you thing of this Hybrid (ETFs + Stocks) approach? <<
>> My schedule was over 6 months; 5i is suggesting 12 months; can you explain rational of 5i's 'extend' period? <<

As always, thank you for your sound advice.

Q: Thank you ALL 5i staff for your continuing, excellent service in these most unusual times. Hopefully, everyone will be able to"deleverage" some of the virus related stress sooner than later.
As for deleveraging, do you think enough of that was done in the past few weeks to alleviate that uncertainty from the markets currently?
Cheers, Joe

Q: Good morning,
My grand childrens' (8 years old) in trust accounts each have $60K in CASH and would appreciate your thoughts and comment on the merits of my following investment plan:
Q1. Investing $20K in each of these funds (HXS, HXT and HXQ) and not selling any of them until the children are 18 years old at which time they would each open a TFSA account and start transferring each year the maximum annual TFSA contribution allowable from their non registered account to their newly opened TFSA account; and
Q2. Assuming that you are ok with the above plan and given that there may well be still a further sell off in all three sectors, when would you recommend initiating a full or partial position in all three sectors? Thank you.
Francesco

Q: Just read an article about the 3 Rs. Retreat, recovery and retest. We had a retreat of over 30% a recovery or bounce of the bottom of 20%. How about retest is it usually swift or a slow drift down or may not happen ?
Thanks for your insight!

Q: One would think that taxes will go up in a big way to pay for the stimulus. In that sense, richer canadians are effectively paying more for this, with their future income. It is a transfer of wealth from the richer to those who are leveraged, from landlord who has 3 properties on maximum leverage, to the new grad who bought that 600k condo and lost income.
This is still what I think will happen, but I'm curious if there is an economic mecanism that could make this not happen. If all developed countries are coordinated in their stimulus (they seem to be) and all spend about 10% of their GDP on their system, could government bond credit remain UNCHANGED? This would mean that the cost to service government debt would effectively not change (since credit is a relative metric), and taxes would not need to go higher. What do you think?

Q: I understand that the market is forward-looking. What has been difficult for me to ascertain, especially in these tumultuous times, is how forward-looking they are. I realize no one knows the future so we all have to decide for ourselves how long we think COVID19 will continue to roil the markets. But is there any way to know (guestimate) how far out the market currently thinks this will last? For example, I am writing this question on Sunday and wondering how the markets will react come Monday. Personally, I feel the increase in cases and apparent disarray in the leadership in the US is unfolding as I anticipated it would. Would a steep downturn in the markets Monday morning suggest analysts had it wrong or would it not really tell us much regarding the anticipated future? I guess I am looking for an indicator like the percentage chance that is assigned as to whether or not the Fed will change interest rates. Don't know where that percentage comes from but it always seems rather accurate.

Appreciate your insight and for your wisdom. It's helping me to keep off the proverbial ledge!

Paul F.