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Investment Q&A

Not investment advice or solicitation to buy/sell securities. Do your own due diligence and/or consult an advisor.

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.
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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.
Read Answer Asked by malcolm on March 08, 2017
Q: Is there an ETF where I can gain an unheadged exposure to the US Financial System? Is this a better plan then taking small positions in each of BAC, WFC and a smaller regional bank? Can you recommend a regional bank in the US with a decent dividend and growth potential. This question relates to my RRSP.

DON
Read Answer Asked by Donald on March 08, 2017
Q: I bought Citigroup 3 months ago for exposure to US financials and it's been a dog (flat) compared to its peers and the XLF in general (5-15% higher). I knew it was the most international compared to some of the others and thus less exposed to higher net interest margins but I felt like this was priced in given its discount to peers and thought that it might benefit most from deregulation and a tax holiday on repatriated funds. It has yet to really even break out of it's longer term trend as opposed to a Bank of America or JP morgan. Is my thesis bust? Should I switch into BAC or just continue to hold C and allow this to play out?
Read Answer Asked by Scott on March 07, 2017
Q: In a previous answer, you wrote:

"SLF cites that a 10% downturn in real estate assets would lead to a $175 million decrease in net income. With operating net income in Q2 of $474 million, while a real estate decline would 'hurt', we do not think it would be a company ending event."

The figure you cite here represents a 37% loss of net income in a 10% downturn. I've heard a number of times that a 40% downturn is possible, or worse, so wouldn't that mean SLF could find itself in very serious trouble? If so, are there any other insurance companies (Canadian & US) that you might recommend as a way of capitalizing on rising rates, which could weather a severe real estate decline more easily? The names I've been considering are POW, MFC in Canada and AIG, MET, PRU, CB of in the USA. Thanks for any thoughts on these or other companies.
Read Answer Asked by Brian on March 06, 2017
Q: Hello 5i team,
Instead of collapsing EFN into ECN as per your note,I was thinking of keeping both but on an equal weight basis. Your comments are most appreciated.
I usually follow your suggestions, except once when you exited FSV in March 2015, post split; I kept both and had an average return of 90%.
Keep up the excellent work because I count on it. I'm 74 years old and when my brain power will eventually slow down like my creaky bones, I will have no choice but to "blindly" follow your advice.
Kind regards,
Antoine
Read Answer Asked by Antoine on March 03, 2017
Q: Hi Peter and Team, In the Financial sector of our combined accounts, we hold only one stock that's down - CXI - held in my TFSA - which is down by 21%. We also hold BMO, BNS, GSY, SLF, and ZBK, which are all nicely in the black. I know you believe that CXI has long-term potential, but since it doesn't pay a dividend while 'waiting', I'm considering selling it. Which of our other holdings in this sector would you recommend adding the proceeds of a possible sale of CXI? As always, thanks in advance for your insight and advice.
Read Answer Asked by Jerry on March 03, 2017
Q: I am hunting for reliable dividend payers - companies likely to be around for the next 20years( highly safe - if not guaranteed safe) for the financial sector of an income portfolio.
These 4 have comparable yields. All are around 6%. I know there are issues with Alaris - so would not likely buy it unless you consider it buyable now.

But how about the others: would you recommend all - 1 - none?

Any guidance would be appreciated.
Read Answer Asked by Donald on March 02, 2017
Q: TD represents 6% BNS 4% and CM 2% of my portfolio with no other banks.
I am considering switching BNS and CM to RY or should I go with ZBK for direct exposure to the US. Objective is growth. Should i increase my financial exposure? Add insurance Co or stick with banks?
Read Answer Asked by JR on March 01, 2017
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