Investment Q&A

Q: Good day,
I have been considering trimming if not selling my insurance exposure out right because of falling interest rates. With more and more Central Banks experimenting with negative rates it is possible that eventually Canada and the USA try out negative rates. Would there be any merit in selling GWO,MFC,SLF to buy FFH? My rationale is I could maintain some insurance exposure but if the whole system implodes (this is why they are considering negative rates to begin with because traditional monetary stimulus isn't working), clearly there must be some risks of a black swan event out there. Like you, I don't like to go zero weight any sector so this way I could maintain insurance exposure but also have down side protection? Or should I keep it simple and simply reduce my insurance weight.. Thanks.

Q: I would like to know your opinion on FN. I saw that this stock is now at his 52 weeks high. Is there a reason for that and should I continue to keep it or do you suggest that I take profit and put the money in another stock? and if so, what could you suggest?

Thanks for your good work. I am always impressed by the quality of your answers.

Michel

Q: Between these 2 stocks, they represent about 8% of my overall portfolio. Trying to bring my allocations back inline ...would you keep both ? If you had to choose which one to sell, which would it be ? FSZ/MIC

Q: With the recent bump in Cdn Bank stocks would you add to existing positions or do you think they've moved ahead of themselves in the short term? Thanks.

Q: What can you tell about it's recent acquisition? It looks like it is trying to expand it's geograhic footprint - Ontario - perhaps open some branches at some point? How are they paying for this acquisition? I already own all five Canadian banks in my RIF and Non-registered accounts, and have for many years - added to positions in early 2009; however, I was thinking of buying this bank for the upside when oil slowly makes it's way back up again & the AB economy picks up.
Comments please & thank you ... JP

Q: What are the chances of the Dutch Auction buyback announcement shaking off some of the short sellers?

Q: Hello great team,
I own some split preferred FFN.pr.a. I am OK with 5.25% dividend and my understanding is that my principal investment and dividend are safe as long as NAV value of the unit remain above $10. Current NAV is ~$14. Are there any other risks (e.g. management) in losing my principal of $10 per preferred share other than drop in NAV value less than $10. Overall, what do you think about this preferred? DBRS rating is 4 high. The fund is managed by Qudravest Capital Management. I will appreciate any alternate suggestions to this preferred share? – I am OK with 5% return and safe principal.
Thanks

Q: Really appreciate your endorsement of BNS & the other big 5 can.banks & calming influence.So much negativety & fear mongering leading up to their 1st Q reports stated Feb 3 & ended Mar 1 with BNS,that it was unnerving.Moodys on BNN stated in a severe stress scenario ,can banks may even need to cut dividend or issue more shares to raise money.As far as I can recollect the big 6 have never cut dividend.Moodys & the other rating agencies endorsed the sub prime pakages buy US banks in the 2007-2008 financial crisis.John Aiken of Barclays Capital cut the target price of the big 6 by 20%.After graduation,he workrd for National Bank,then Dundee & since 2009 for Barclays,ranked 3123/3730 analysts & rated 1/5 with 1 being the weakest.4 of big 6 increased div(CM,TD,BNS & RY) & 4 beat convincingly( CM is the best--$2.55 eps beat $2.41 expected) & 2 were pretty closed.BNS had the biggest appreciation after release--up 5.97% @ close Mar 1.Re my Q on Feb 19,the big 6 are amongst the strongest & safest banks in the world CM leads in T1 capital @ 10.6 & BNS @ 10.1.Big 6 performed better than the US banks

Q: You recently recommended 20% financials in an income portfolio. I own BNS, TD, SLF, FFH, OCX, and BAM.A. Would you consider FFH, OCX, and BAM.A to be financials? If so would you recommend a weighting of approximately 3 % in each of these 6 stocks? I note that the OCX share price has pulled back - would you recommend adding to it now? Many thanks for your great service.

Q: Re: Banking Industry in General (with reference to Jim's post):

I also am concerned with the banking changes. I would guess the majority of Canadians aren't aware these changes took place. I've read that saving/checking accounts wouldn't be included, but they certainly were in Countries that did have bail-ins. I've put some money/investments in a local Credit Union just so I wouldn't have everything in one place. It may not make a difference, but maybe it will. Another thing some people may not be aware of is Canadian Banks got a "sort of" bailout in 2008 through the CMHC. I still don't know all the details of what took place and I think it is all paid back now, but it certainly wasn't front page news.
This would be less of a concern to me if the US had thrown some executives in jail instead of just fining the companies. There is no accountability or admitting of guilt anymore, just pay a fine and move on (or in Politician's cases, shuffle cabinet positions around).

Sorry if this rant offends anyone, I don't mean it to be that way.

Paul

Q: Hi 5i Team,

This is an unusual question and feel free to take a pass on it, as it might not fall within the definition of the service you offer, and I would fully understand. Also, feel free, if answered to post or not.

There have been bank confiscations in Cyprus. And I believe, banking problems in other jurisdictions where the depositor has taken the hit. Rare, but they happen.

We were supposedly immune from such confiscation action by the rules and regulations of the banking industry, and also having relatively strong and stable economies and banking systems.

Since the Cyprus event, and the problems of the 2008 crash, according to articles in Canadian MoneySaver (May and June, 2013), the banking rules in the US and followed by Canada have been modified to allow for the backs to take money from their depositors, during an economic crisis, rather than rely on a government bail out.

This is not something that keeps me awake nights, but it does nag me as ... How does this make sense ?

I do not understand why the regulations were changed. Changes normally happen if there is a "really big reason to do so." In other words, If our economic and banking systems are in such great shape and are expected to be for the distant future, why change the rules ? The implication is that perhaps some sort of condition could occur that to save the "systems" (government budget and banking system), the investors will take the hit. (This also raises the option that ... Hey, why not just print money and give it to the banks as in the past - there was grumbling, but it did solve the problem).

I guess I am looking for a general comment on banks, safety of deposits, and why need to change regulations.

Thanks for the great service.

Jim,

Q: Hi Peter, for a smaller bank would you prefer LB or CWB ? Does either seem reasonable to you at this time ? Thank you, Paul

Q: Hi

Could I have your opinion on The Bank of Nova Scotia 5.50% 5 Year Rate Reset Preferred Shares, Series 36

Thank you

Q: I noticed recent insider buying in OneMain Holdings. Is this stock too risky to buy?

Q: What do you think of the credit quality of Fairfax, in regards to preferred shares?
Anything to be concerned about?

As always, thanks..

Q: In a response to a recent question, you said that you could see Cannacord increasing by 50% or more in value with better capital markets. My question is this. Do capital markets usually improve before the price of oil increases (as I assume CF is largely dependent on activity in the oil patch) or after an increase or could a continued lower price also stimulate activity as the strong take out the weak? Guess I am wondering what type of catalysts to look for when deciding whether to continue to hold this.

Appreciate your insight.

Paul F.

Q: Your thoughts on the recent purchase.

Q: What do you think of this US bank. Ron

Q: Hi there - can I ask for your opinion on PRA group? Analysts seem to have mixed opinions on the company, but it looks interesting based on some of the reading I've done. It's down heavy this morning after what looks like a minor miss.

Thanks much.

Q: Do you think BNS will meet expectations when reporting this week? And would a sale make sense before or after their numbers are released??