Investment Q&A

Q: Hi 5i team,
With the maximum pessimism prevailing in the market, it is the ideal time to invest now at the beaten down price. My question is how an average Joe with limited resources can take advantage of this stock sale. Unless one had sold all holdings to raise cash prior to the big drop, now is too late to cash in and bet the stock market to drop further. So what will you do without going into debt to raise cash to buy? What steps would be advisable?
Let’s take the Growth and Balance portfolios, and let’s ignore the tax consequences and tax loss selling. If I hold most of these two portfolios, should I sell those names that drop the least and buy those that drop the most? Should I sell those that drop the most? Should I sell those that are unlikely to advance in the next half year, and buy the stocks that will most likely have a big rebound? Which are the candidates from the two portfolios that will fit the last approach for sell and for buy? Thanks and merry Xmas to your team.

Q: Thank you for the thousands of questions you've answered this past year on hundreds of different companies. You have been most helpful in providing sound advice and guidance.
My question is of a general nature and so feel free to deduct as many points as necessary.
In your recent 'Market Update Report' you make reference to the recent chatter about a pending bear market, which may or may not occur.
I'm rather confused. With the S&P down approx. 18%, the DOW down 17%, and the TSX down 15%, aren't we pretty much in a bear market right now? If we do go into a bear market/recession does that mean we can expect to go down another 15-20%? As is, I'm down an average of 22%. I don't want to bail at this point, but if going into a bear market means going down another 15+%, then I will be in a bad position. There are those who say, "It's too late to sell at this stage", but surely it's not if going into a bear market means going down another 15-20%.
Some guidance at this point would be appreciated. Thanks,
Jake

Q: Hi there, it seems like the VIX is creeping up over the last few weeks. At one point in the VIX do you think will signal a reversal? Thanks!

Q: Hi 5i Team and Season's Greetings.
Do you have any words of advice for someone who feels like they are the only person holding stocks in this market? Why is everyone selling (although there must be buyers)? This does not seem like volatility anymore and many are saying we are in a bear market, but I cannot see a good reason for that at this point in time. If the stock market is a 6 month to 1 year leading indicator, are we really going to be in this much trouble next year?

Q: On the losing end of these 3 - V down 12%, SQ down 35% and TEAM down 6% - thinking of selling before year end to capture the tax losses and then re-purchasing after the 30 days - question - is this a good idea ? OR should I just cut my losses on these 3 and look for something else that might be more in line with a possible "recession" on the horizon.
thanks

Q: As an experienced portfolio manager and you see :

1)The worst monthly performance on the markets since 1929 (December).
2)Brexit problems.
3)Fed perceived raising interest rate problems.
4)Escalating tensions in the Far East and the Middle East
5)Trade wars with a very uncertain but potentially lethal impact.
6)An economy which is projected to be slowing
7)Slowing corporate earnings with probably revised downward forward looking estimates
8)Very successful investors like Tepper and Cooperman saying cash will outperform over the next year or two.
9)Corporations are leveraged up to the hilt with debt and many are in danger of being downgraded or worse.

What would you do? To be transparent I am currently in 25% cash and fully hedged on the balance of my portfolio.

Please share your thoughts/strategies.

Sheldon

Q: there was an interesting fast money halftime on cnbc today which i watch daily, mike wilson chief equity strategist was on and he was the only analyst period of all of them out there he predicted this correction back in january and he said now is not the time to be selling, we are bottoming but this process could take 3-4 months not weeks because of the damage done,furthermore he likes energy and banks and then they had a segment with lee cooperman and a guy from the sec talking about quants algorithms and computors causing this extreme volatility, and some feel until the vix hits at least 30 maybe even 40 this is not over, and there is tons of value in the market now but you still have to pick your spots slowly.i think you agree with some of this, just wondering your opinion which i value because lets be honest we all missed the severity of this. i think this is as bad as 2008. and everyone was in complete agreement that jerome powell was and is an idiot who cannot communicate properly. and how much is etf selling which causes the underlying stocks to be sold sonething we never had to contend with in 2008 or not as much. dave

Q: Continuation of my previous question.

After reading your response my understanding is that 5i portfolios will not build the cash position higher for any major downside risks that the market may have in next few years. What about any new money available for investing Do we hold on to buying any stocks in this kind of unpredictable volatile markets until a clear bottom or direction is indicated by the markets ? MLP are not a good option for canadians because of tax implications. What is your opinion about US CEF (closed end funds) and do they have similar tax impact like MLPs ?

Thanks
Ninad

Q: Regarding your answer to Chris on Dec 19 re the market pessimism is not all that justified: I agree with your comments re all the current positives. However, what bugs me is Quantitative Easing with its subsequent Quantitative Tightening. This was and is huge. And unprecedented. I'll admit I don't understand all its in and outs. But the unwinding of QE 'spooks' me a bit. Could we get your thoughts on the consequences of QE and QT? Thanks.

Q: Jeffery Gundlach ... in an interview Monday made a couple of key points: ( and might have been promoting his own business at the same time).
1. (In his opinion) A recession is coming and it will likely be "longer" ... did not say how long.

2. 2019 #1 priority should be capital preservation.

3. The key to capital preservation is to build a high quality bond portfolio.

I f one subscribes to his position/suggestion, what would the components of such a portfolio contain?

Thanks.

Q: Internal Damage?

When companies go through a major drop from their 52 week high (TSGI -60%, SIS -41%, GRUB-51%, NVDA-53%, KXS-35%) What kind of internal damage is created? I'm thinking employee moral, to stock options, to the ability to finance future growth? Other items? It's very tempting to continue to average down (although my dry powder is getting low) but when a company loses 40%-50% of it's value is it the same company anymore? Or is buying something like a Microsoft (down only 11%) a more prudent investment? (i.e. it hasn't breached a point of internal damage)

My holding period is very long, but I'm wondering if the current steep discounts currently are somewhat false illusions...

Q: Do you think stock market action has become decoupled from the world economic reality? I note that unemployment in the US and Canada remains very low, GDP continues to grow and interest rates are still low (and it appears increases are less likely). Furthermore, a reduction in oil prices should put money back into the pockets of consumers. I feel that markets have been possessed by a wave of pessimism that borders on irrationality. I would value your opinion.

Q: It appears more and more likely that there will be a 2nd referendum on Brexit. I predict the Brits will cancel their exit. I also think a deal with China will be had. Finally the Fed may signal no more rate hikes until stronger signs of inflation etc. This week may prove to be a great time to deploy cash to buy the bargains.

Q: Everyone is feeling the pain nowadays ,some more than others. With no where to run to and keep holding on to our holdings, can you please give us three levels on the downside that we should look for?...best.medium.worse case scenarios please and thanks....pertains to the level of the Dow on a technical basis

Q: Hi peter
5 months ago I went to 50% cash I am. Ow regretting I did not go all cash .
This market appears not to have a bottom this are probably the worst I have seen ,
Do you see any catlysts out there that can cause this to bottom?
Eg I sold vet ar 36 and am looking to grit back in only to see it fall daily
Kind regards
Stan

Q: Market was doing OK till Noon and all of a sudden
started going down.Warren B SAID BE GREEDY WHEN EVERY ONE IS IN FEAR AND BE FEARFUL WHEN EVERY ONE IS GREEDY,Is this overreaction under fear or wise move to get out?.

Q: Is Canada out of favor by International Investors. WE Can't get anything done. No Pipelines. International Oil Companies have pulled their funds out of Oil Sands. I listen to BNN Market Call and the majority of Fund Managers say that 2019 will be good year for stocks with a 10 % upward move in earnings. Are we ( retail Investors ) getting suckered in by these slick Portfolio Managers ?
Are you expecting a good rally in early 2019 after all the tax loss selling is over. What will turn International investors on to Canada. The Conservative Party winning next years Election or something else / RAK

Q: The market is again very vicious today,hitting all,including the above 5 darlings (& RAY.A)of 5I,Any reasons? Buy/add or hold or sell.Please rank them starting with best for buy Txs for u usual great services & views

Q: I've been trying to understand these markets and failing. Much of the wild swings of volatility seem to be associated with fears of China and trade woes. I understand why companies which do a lot of business with China, or source products from there would plunge on such fears. But I haven't been able to figure out why trade fears would cause grocers, REITs and utilities to plunge 2%-3%, as they did today. I mean, how is China or trade going to affect the profits of Chartwell Retirement Residences, or Loblaw, or Algonquin Power? The TSX is down around 1% but these are all down 2%-3%, as are most of the utilities and REITs. Are people just panicking and selling everything in sight?

Q: Hi I’ve read that markets are fairly valued based on forward PE of 15 or so. I’d like to look at this from a bigger picture, the total market cap to GDP ratio, the so-called Buffet Indicator. In the past 100 years, this is showing extreme over-evaluation currently 151% exceeded only by the 2001 Tech bubble, 161p. If rates continue to creep higher I can’t see how this will end very well. Then again, if the they peak and then fall, the over evaluation is at least buffered, Your thoughts ?