Investment Q&A

Q: Can you clarify what the effects are and what you expect they will be on a mostly Canadian portfolio given that the U.S. interest rate is expected to increase soon and that the Canadian rates have just been decreased. I was expecting Canadian dividend stocks to strengthen given a lower interest rate here, but that doesn't seem to be the case. Certainly utilities like IPL and ENB are weakening (but perhaps that's more to do with the perception of them as energy stocks). Other Canadian dividend paying companies also seem to be weaker, such as banks. Does the U.S. interest rate always have the strongest effect on Canadian stocks, no matter that the Can interest rate goes in the opposite direction ?

Q: Hello Peter & Co,
My RRIF portfolio in entirely denominated in Cdn$. In order to invest in US stocks, the wise thing would have been to convert a portion of the portfolio to US$ when both currencies were at par; but I did not.
To convert now would cost me some 30% in exchange rate; I would not mind that if our loonie would remain at current levels. But that would be an irresponsible assumption because, even though there could be some additional downside in the short term, our currency would eventually move up (say by 10-15%).
So, the return from the US investments would have to be reduced accordingly.
But I am generating for the past 6 years a 17% compound return per annum from my Canadian holdings (when 7% pa would have been sufficient to meet my "wants"). The math here does not seem compelling to me with a hurdle of 17+(10 to 15)%.
So, unless I'm missing something, is this all worth the hassle?
Thanks,
Antoine

Q: Hello, my question is about the "Macroeconomic report card". What is the definition of "TSX Comp.Yield"? On the macroeconomic report card of June 15th, you report a yield of 3.30%, is this the dividend yield only? I am asking because it seems to me a little bit high. (same question apply to the S&P500 yield). Thanks, Gervais

Q: IF A GREXIT COMES ABOUT I THINK THERE COULD BE SOME SHORT TERM BUYING AND SELLING OPPORTUNITIES AS WELL AS ON OPPORTUNITY TO REBALANCE YOUR PORTFOLIO IF YOU HAVE SOME CASH. I WOULD APPRECIATE IT IF YOU COULD LET ME KNOW YOUR THOUGHTS ON WHAT WILL HAPPEN TO INVSESTMENTS IN THE FOLLOWING AREA IMMEDIATELY AFTER GREXIT HAPPENS (I KNOW THIS DATE IS OBVIOUSLY A PERSONAL DECISSION):
GOLD
CANADIAN MID-CAP COMPANIES
CANADIAN SMALL CAP COMPANIES
TECHNOLOGY COMPANIES
FINANCIAL INSTITUTIONS
THANKS FOR ALL YOUR GREAT ADVICE IN THE PAST.
MIKE

Q: You have recently commented on a number of stocks which have declined "on interest rate fears". Why aren't rate increases already be reflected in stock prices ? Markets have known for ages that interest rates are likely to go up - though only slightly, and probably before year end. Is stock price volatility due to interest rate fears a reflection of speculative action ?

Q: It seems every time I turn on BNN, I hear some pundit spouting baseball analogies: as consensus goes, we are apparently in the 9th inning of a bull market, maybe even the bottom of the 9th. A few managers have commented that we're batting into extra innings and that a correction is long overdue. What does all this mean, in real terms?

It seemed to me we had a correction in October -- my portfolio took a good 10% hit, and although I've recovered nicely, and have even outstripped what my "pre-correction" gains were, it seems I can't differentiate from a "correction" (with a small "c") as opposed to THE CORRECTION, (all caps). Pardon the cheekiness, but ... really ... !? they leave themselves open to such interpretation.

I would dearly love to hear from Peter what his take is on all this correcting that's going to be happening. Should I shore myself up now, before the flood hits?

In 2008-09, I was not fully invested, and so never took the hit that many of my colleagues and friends did, simply because I had a lot in cash, so I have no personal experience on what it feels like to be corrected.

Thanks, as always, for your advice.

Q: I'm wondering if you could share your opinion on the reported rumblings in the bond markets and the speculation that equity market trouble is sure to follow. The reference is to the U.S. Markets as far as I can tell. Do you think there's a clear and present danger to Canadian equities?
Thanks very much.

Q: Hi there,

I worked in the government for 15 years and I am 41 years old. I am eligible to get a transfer value for my service which would be roughly 250k within RRSP limits and 250K outside RRSP limits (or) I can collect an indexed pension pension of approx $2600 (todays value) at age 60. I did the calculation and I find that if I make about 7% I am better off than the pension plan taking the transfer value..Please give your opinion on this. Is this doable? If I do end up taking the transfer value can you suggest how I should invest it? I have a period of 20 years before I can withdraw from it. Would it be appropriate if I invest a portion of it by mirroring your model and divident portfolio? What should I do for international allocation? US allocation? Are there some investments which I can make which are not very market dependant? This is very important for me and I value your opinions. I realise this is more than one question so fell free to use more than one question credit as appropriate to respond. Thanks very much.

Q: What % range would you consider acceptable ( min to max ) for financial stocks for a middle aged dividend investor with 7 years to work and a goal of building up a portfolio that will pay dividend income upon retirement. I invest in all sectors with ETFs, individual stocks and a small number of mutual funds ( Chow etc ). My portfolio includes small mid cap and large cap, both in Canada and worldwide. I find even non industry specific ETFs are on average 20% in financial stocks. Tough to keep under 20% when you start buying PWF, BMO, BNS, SLF etc.

Many thanks

Paul

Q: Keith Richards at Value Trend Wealth Management who appeared on BNN Market Call Tonight is of the view that S&P500 could see a 20% plus correction this summer. His reasoning was primarily based on Technical Analysis. He also mentioned that at present, retail investors (dumb money) are twice as much bullish as sophisticated investors like pension fund managers (smart money). What are your thoughts on this prediction for an imminent market correction?

Q: With all the bubbles building up around us – bonds with negative yields, unbelievable levels of debt, USD artificially overvalued and its reserve status under attack from the Chinese – do you ever consider going into some sort of defensive shell to shelter from the coming storm? If so, what kind of a shell would that be? Do you think the CAD might escape some of the turmoil, due to less sovereign debt? How do you feel about gold?
I’ve been trying to play defense for some time now, by investing mostly (but not entirely) in small cap dividend paying Canadian stocks that can’t easily be shorted, or accessed by large US investors, avoiding financial services stocks, and having some gold stocks. I have thereby missed out on the huge rise in US stocks and bank stocks, but I think in the long run my strategy will probably still pay off. What do you think?
The top ten holdings (in decreasing value) that my wife and I have are KEG.UN, PPL, BPF.UN, CHE.UN, CGX, FCR, BXE, FNV, AW.UN, and GIL, out of a total of about 25 holdings.

Q: Can you please comment on negative bond yield we see, i believe, mostly in europe. I think i understand the concept of deflation but why would an investor accept negative ytm ? (Too much risk perceived elsewhere ...) Are those investors mostly gov't entities ? If i am not mistaken i saw the 30 year german bond yield at 1%. I really have hard time to see the appeal. Thank you for your thoughts.

Q: Good Morning,
I rode through the October down swing and recovered. Now, fully invested and diversified, I am getting nervous that this drop isn't going to recover soon.
I bought into the Canadian ETF for Japan, after listening to Bill Carrigan at the 5i event in Toronto. Otherwise, most of my portfolio is paying dividends and in the 5i portfolio with the exception of MU, GILD and PHM.
Do you still believe the economic data coming out of the US is generally positive?
Any advice or comments you have would be very much appreciated by me and probably the other nervous Nellie's out there. I am trying to be an investor rather than a trader, Peter, but watching money disappear so quickly over a few days is tricky.

Gail

Q: Hello Peter & Co,
People were talking about impending increase in interest rates for quite a few years now. Friday's US employment statistics were encouraging and yet the stock market dropped like a rock; it seems that investors are so "hooked" on low interest rates that they are willing to put the prospect of a "good economy" in the proverbial "back seat".
I fear that when the rates will start rising, the stock market will take a licking.
How do you explain this paradox...what is your take on this?
Thanks,
Antoine

Q: I was put onto Garth Turner's bog "Greater Fool" and found his views interesting. For those who don't know, Garth Turner predicts a U.S. style economic crash in Canada based on the fact that Canadian's today save very little and have an larger appetite for debt. He reports that as a population, Canadians are second only to Greece in the rate we are increasing our debt and that Canadians as a whole now carry over 1.82 Trillion in debt; an amount that eclipses the countries GDP. My question is this, if Garth is right and we are on the brink of another financial collapse, what sectors/ stocks would be most likely to be 'safe' or benefit? What stocks do you recommend in this environment? I would appreciate your view and insight into Mr. Turner's positions.

Thanks in advance.

DON

Q: Hello Peter & Co

I’m paraphrasing here a synopsis of a couple of articles presented by Christine Hughes of Otterwood Capital. In 2007, Christine had forewarned her clients about the impending onset of the last financial crisis; and right she was.

“Since the 2nd half of 2014, coincidental with the collapse of oil prices, the US$ index started to breakout; and after a multi-week sideways consolidation, it has resumed its seemingly vertical ascent thanks to the release of the Eurozone QE plan.
Furthermore, the Bank of International Settlements had reported earlier that US denominated cross-border debt had reached $9 trillion ($7 trillion of which was non-US resident); many of these countries, who do not have a steady revenue stream denominated in US$, will now have to buy more US$ to make interest payments and pay back their debt. This demand drives the US$ further up.
What would add fuel to the fire would be a consistently strong US job market indicating a good economy. If and when the US raises interest rates, it will breathe fresh air into the already long-dollar trade.
It is impossible to tell ahead of time when the inevitable bust begins but begin it will; we are keeping our eyes open for any signs of stress in the system. For now, things are calm”.

What could a retail investor do to preserve the gains made so far in this 6-year old bull market?
Do you agree with this analysis? If you agree, what would you do?
Thanks as always
Antoine

Q: I've never seen this kind of question asked: If I want to earn 7% on my money by investing in about 15 great, solid companies and selling shares in order to achieve the 7% return, what might such a portfolio look like? Would the 5i Model Portfolio, as it is, fit the bill? How might it be tweaked? I know there are a lot of questions and considerations around the question, but just looking for a general reply and any thoughts on this approach. Thank you.

Q: PREM WATSA of Fairfax Financial issued a report saying he is wary of the market which has no downside protection. Should we be worried? Thanks.

Q: Just a general question. I'm I wrong in thinking that this time of the year where allot of people are making last minute investments in RRSPs and TFSAs seems to give some extra momentum in the stock market? It just seems that even though we had a bit of a panic in the oil sector and an unexpected rate drop, there still seems to be allot of areas which are pushing above or hanging around yearly highs.

Q: Given that the markets (except for Canada) are near all time highs and appear to be quite stretched, do you feel that it is wise to enter any long positions, even 5i's picks? My instinct tells me that I should be hedging my portfolio and search for short opportunities rather than go long? Any thoughts on this? Thanks so much.