Investment Q&A

Q: Good morning, Is it a good time to invest in US corporate bonds? What would you recommend to get through these turbulent times in the market?

Q: can you recommend any Canadian or Us corporate bonds that are safe and pay a good dividend

Q: Recently retired younger couple. Need to continue to preserve and grow portfolio, but also need to secure near term income stream.

I am looking to shift some equity to fixed income and trying to decide the best approach.

I have registered and non registered accounts. The non registered account is in dividend payers, and will leave this as is. Tax treatment is good, flexibility is good, recession proofish.

I am considering changes to the setup of my registered accounts. Two main options appear to be:

1. Move an registerd account from the current discount broker (Questrade) to somewhere like EQ bank and buy laddered GIC's. Advantage - CDIC protection, maybe very slightly higher rate of return. Disadvantage - Admin pain, loss of flexibility

2. Stay with current discount broker and simply move into CASH.TO

I am strongly leaning to option 2 - am i missing something here?
Why would i go to the trouble of option 1?
Are there other (better) options?
How big of a risk is there with something like CASH not having CDIC protection?

Thanks,


Jim

Q: What do you think of Denison Mines in terms of valuation/leverage to higher uranium prices/balance sheet/risk? Rick Rule called it a no-brainer and said if their leaching process works it could be a big home run. Curious to hear your thoughts.

Are there other names you prefer to gain exposure to rising uranium prices?

Thanks

Q: Hi With respect to Steve's question, about Series 1 debentures trading at $136-$138 currently and applying for new debentures through Rights for a price of $133, is it not true that Debentures currently trading also have an embedded additional value of $3.25, quarterly interest ( $3.25x4=$13.30 annual), payable on October 1st. Whereas, the debentures acquired through rights will be issued only on October 6 and are not eligible for that interest for quarter Jul-Sep and hence the price differential ?

Thank You

Q: Peter,

A bond fund will have a duration. I was told by a rep at the $$$ show that it can refer to the percentage change in value of the fund when interest rate changes. IE if duration was 3, then a 1% change in interest rates will create a 3% change in the value of the fund. Is this true?

If this is not true then please explain the proper meaning of duration.

Thank you

Paul

Q: As I write this the CSU.RT debenture purchase rights are trading at $.005 and the series 1 debentures are trading in the range of $136-$138. If my math is correct, for a few pennies worth of the rights one can purchase $100 face value of the debentures at $133 which is a $3-$5 discount to where they are currently trading. Is this a no brainer or am I missing something? Why are the CSU.RT rights trading so cheap?

Q: Hello 5i, common question for you but I have very little bond exposure and was looking to start building a fixed income portfolio. Can you give me your current top 5 bond picks (assuming ETF's). This can be USA or Canada bonds.

Q: Hi, We are applying to buy some Constellation Series 1 Debentures through rights, with a payment of $133.217, for family members. Where would it make most sense to hold these debentures - RRSP/RRIF, TFSA or a Non Regd Taxable account. ( Most of us being in higher Tax bracket of 40-54% Marginal tax rate ). considering the following:

1. These debentures will likely yield anywhere between 5-10% ( on a cost base of $133 ), by way of Interest income, for 17 years ( assuming we will be able to swap with warrants, if called before redemption)

2. We will incur a Capital Loss of $33 as at March 31, 2040. ( $100 Principal to be received at maturity)

3. If held in Tax sheltered accounts, would it make sense to move them to a Non-Regd Taxable account, let's say 5 years before maturity date, when the M/V of these debentures will likely start declining. So, we could use the Capital Loss in Taxable accounts.

Thank You

Q: "We don't quite match the market in good years but will lessen your losses in bad years" say many portfolio managers to clients in exchange for a 1/2 to 1% management fee.

But, over the years, since the market has had significantly more positive years than negative years, I feel this is a good argument to just purchase some very low-fee ETFs, once you've determined your asset and currency mix. Less fees, therefore more money invested and therefore little value add from the advisor! Your comments please.

Also, I am a 65 year old retiree with a high 7 figure investment portfolio who will not run out of money. I favor a balanced portfolio of 80% equity (with a slight tilt to growth) and 20% fixed income. I also favor a 50/50 split between US and CAN dollars.

While I realize you cannot provide individual advice, which low cost ETFs should I consider?

Q: Sorry but another question on CSU.db
It appears that only CSU shareholders will receive the warrants for a potential swap. I have a friend that holds the original debentures and they did not receive any warrants for exchange? Why would the shareholders receive warrants ( they don't need them) and the original debenture holders not receive warrants ( they will need them)?
Secondly on the rights , 3.03 rights are required to buy $100 face value, is it fair to say its actually 4 rights then? Fractional rights won't be allowed?
thanks

Q: Sorry for another questions about the CSU rights, warrants and debentures. I was thinking of taking a small position in the debentures and have the rights to do that. However, I believe that I would be getting the Series 1 debentures which likely means that I will someday have to buy warrants to remove the redemption feature. The cost is now starting to increase because I am not sure there will be enough warrants to cover the Series 1 debentures so the warrants could be expensive. It seems to me that if CSU wanted to remove the redemption feature they could just do it without the warrants. Will there be enough warrants to go around? And if the warrants sell for $1 that is another 1% lost. Any further comments?

Q: The four referenced cash accounts pay roughly the same rate of return. Which of these are best in terms of risk and liquidity. What would you recommend for cash portions of the portfolio and which etf if any would you avoid. Thanks

Q: I hold the Series 1 Debentures and am quite content to continue to do so, also the rights to purchase Series 2 which I intended to let expire. Should I or is it advantageous to sell Series 1 to switch?

Q: I received a copy of the debenture prospectus in the mail today and have been reading it with some interest. I think they are going to need an army of accountants to figure out how they should account for it. Although it would make an excellent CPA or CFA exam question, the arrangement seems unnecessarily (ridiculously?) complicated.

The nominal interest rate of CPI plus 6.8% until 2040 looked very interesting at first. However, the amortization of the $33 premium to the year 5 company par value redemption option would appear to almost fully negate the 6.8% (unless a warrant is held and exercised). If the warrant is exercised, effectively allowing the debenture plus its replacement debenture to go to term, the initial $33 premium amortized over 17 years still knocks off 2 to 3% per year. Nonetheless, unless I am missing something, CPI plus (say) 4% until 2040 still looks pretty good.

Having come to the CSU party late I only own 16 shares. That means I can buy $500 of debentures and so exercising or even disposing the rights seems hardly worth the effort. However, I was thinking that as the debentures will trade on the TSX, I could buy more rights or debentures but the amount I would be willing to pay would depend whether I could also acquire more warrants and at what price. It appears that the warrants will not trade on the TSX except when the company issues a redemption notice. That makes buying the debentures look more than a bit risky.

Does my analysis look right to you?

Does the 3.03 ratio of rights to $100 principal value of the debentures also apply to the warrants or is it 1 warrant for each $100 debenture? The prospectus says that CSU will try to ensure that warrants are available to all debenture holders. Do you have any idea how they will do that and will it that mean the warrants value will be suppressed somehow?

Finally, is it likely that the trading price of the debentures will assume the company will never redeem the debentures given the warrants effectively eliminate any incentive it may have to redeem the series 1 debentures early?

Thanks as always

Q: My question is about HBND, the new bond covered call ETF, which is yet to appear in your menu. It seems like a very nice alternative to a plain vanilla bond ETF, due to the high distributions, and general safety of covered call writing, but your opinion would be much valued. I realize it is new, therefore no history to track, and no doubt still quite small, but i wonder about the safety and erosion of the share price.
Thanks

Q: We have 30% allocated in our registered accounts for fixed. (currently 10% each for CBO, ZAG and XBB) Are these the best options for today and the next year(s)? Also see XLB recommended recently and wondering if we should be adding or replacing any of the above?
Appreciate your opinion
Thanks Doug

Q: I am looking at individual bonds from an investment perspective. Bank bonds for example have excellent credit ratings but still have great yields.
So: as an individual investor I don’t mind preparing to carry these to maturity given the yields. But I am also interested to know: if their value goes up in the future, how difficult is it to sell individual bonds at their market value and does it simply replicate the process of stock selling?

Q: Hi
I am sorry to have to ask another question about the recent WTS issue of CSU.
I currently own 7 * $100 Unsecured SUB FLTG RT SI with a date of Mar 31 2040 and with a cost of $765 and a MV $955. I also CSU.RT of 40 with MV @ .75 and recently received notification of WTS of 40 at no value. My question is what must I do by Sept 29 if hang onto my current debentures will they lose value ? do I have to do something with the 40 CSU.RT that I have or the 40 WTS just issued. Should I just sell the current debentures on the open market. Totally confused by this despite reading all the recent questions and answers on your website.
Thanks
Kathy

Q: For an income component, would you lean to a bond holding like PFIA at this point or more to a high interest account like HSAV?

Thanks