Investment Q&A

Q: Hi Peter,
I was wondering if you had a simple explanation for market activity on days like this. If we believe Bloomberg, it seems that some slightly better economic news has prompted this sudden plunge in the market on fears of rate hikes. I'm trying to understand why this would cause anyone to sell, and what exactly they expect to happen? Do people sell all their stocks and then decide to just wait however many months it will take for a quarter percent rate hike to get back into the market? Is there some kind of expected gain here? Its not like the likelihood of rate hikes ought to be any kind of surprise anyway, so why are people pressing sell on everything?

Q: I'm helping my retiring parents clean-up/rebalance their portfolio. This is a two-part question that's related.

i) How important is it to compare their portfolio's performance to a benchmark?
ii) If i) is important, which funds/etfs can serve as a good benchmark considering their desire to generate a 3.5% dividend in a balanced portfolio?

Q: following article discusses recent portfolio changes made by the Direxion iBillionaire Index ETF.

Please post this if you feel it is worthy...

http://www.benzinga.com/general/biotech/15/05/5532607/billionaire-tracking-etf-just-bulked-up-on-health-care

Q: Hello: I saw a web link which provided a convincing analysis of the risk of holding 1 stock vs the index. I think it would make an interesting addition to your "Weekly web sites collection"

http://blog.alphaarchitect.com/2015/05/21/the-risks-of-owning-an-individual-stock/

Ernie

Q: Hi to all at 5iResearch

I am a new member since April 2015
I have made a few buy base on your informations
but sometime I am not completly sure that i use your information the right way
for exemple the stock that you cover and rate a stock to qualify has a buy would have to be rated at minimum B

Q: Hi Peter & Ryan.. How about a limit of 5 lines per question.. I am not interested in some person who might be promoting his own agends on my time, You are the reason we joined and value your opinions.Thanks in advance for all of your efforts..Regards Cliff

Q: Hey folks,

Can we talk about holdings in "CASH"? Many investors talk about the percentage in their portfolio that they hold in cash. I sort of see this as stupid, or perhaps I'm the stupid one who needs a lesson. My point is, the majority of stocks are very liquid and if one is nimble in managing his portfolio, a portfolio can quickly be turned to cash or at least parts of it, increasing the cash percentage quickly. So given this, why are financial people so stuck on the notion of their cash percentage when it is is so easily modified depending on market conditions and whym? Thanks for taking the time to help.

Q: I'm trying to evaluate the assertion I heard that when interest rates rise, dividend-paying stocks will get hammered because they have been overbought due to the "TINA" effect ("there is no alternative" for income).

If it is a sound company that's in a good business and will have no problem paying its dividend, my understanding is that the way the yield would be brought more in line with bonds is the share price would go up, not down. Am I wrong? What reasons would there be for the price to go down?

For more info: http://www.msn.com/en-ca/money/personalfinance/a-huge-stock-decision-for-boomers-that-cant-wait/ar-BBjX43U

Q: hi, Q ratio extreme high. Market correction? your thoughts please.

thx chris

Q: Calculating Market Cap.
Could you please help me clarify how a company with multiple classes of shares is valued.
Is a corporation’s market cap derived by adding the capitalization of each of their share classes?
i.e.
[No. Shares Class A] x [Share Price of Class A]
+ [No. Shares Class B] x [Share Price of Class B]
+ [No. Shares Class C] x [Share Price of Class C]
If this is correct it messes up other derived valuations that use market cap within the formula unless you start with a sum of each class.

Q: 5i Research Answer:

We are making some improvements later this year with a server upgrade. We will be adding the ability to 'favourite' questions, and (most likely) allow for Members to sign up for emails on ANY question that is asked on a certain group of companies they would like to follow. This we expect to save us lots of time.

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Question:

Have you ever considered creating a 5I membership forum for members to discuss/debate stock holdings? There are some savvy subscribers here no doubt where it would be beneficial to hear some continued feedback on stocks bouncing ideas/thoughts etc; back n’ forth per your question/answer section, call it an added 5I advantage within your growing readership. Less experienced investors could sit back and observe taking notes/pointers – a learning forum if you may. Of course, having it closely monitored by Mr. Hodson and the 5I team to answer/clarify pertinent queries on stocks would be the main root of creating such a forum. There seems to be a short term outlook by some members on here as is evident by the barrage of questions on stocks on a weekly sometimes daily basis, there seems to be many repetitive questions on the favorite core of stocks with a short term focus which isn’t what 5i sets forth. I’m sure a forum like this might break away some of 5I’s time to give us more updated reports and perhaps blast out by mass email when a company reports on a quarterly basis/earnings etc; that you know will bombard with questions (why not hit many members with one mass email?). I’m sure there wouldn’t be a whole lot of policing to enforce on a forum with certain privileges revoked if the forum got out of hand as this seems like head and shoulders above the type of audience that plague other investing sites. I can’t be the only one to pose this question, your thoughts along this avenue would be appreciated. Thank you.

Answer:

Thank you. We have considered this extensively, and have not ruled it out. However it is not planned at this time. We are still of the view that fewer email blasts are better than many. We are striving for a long term focus, and a quarterly earnings blast may distract from the long term view.

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Above is what I wrote into 5i on March 25, 2014 and got an answer back (of course). My thoughts still have not changed today a year+ later. Having a subscriber based forum would be a great addition at 5i to allow savvy subscribers (and the novice) to interact with each other etc; I seriously hope 5i will consider going down this avenue in the future. I think it would create great value to subscribers. Evaluating the software out there in creating such a forum environment would be most beneficial in looking into striving to create “the” top notch investment site per the long term big picture. Food for thought. Regards, Evan

Q: Hello,

Is there any way Canadian investors can see dark pool trades? Especially large block trades and what price they traded at? I heard more and more large block trades are happening in the US & Canada. What are your thoughts about dark pool trades? Thanks

Q: Can I get your thoughts on PM please.
A second thought/question: If US interest rates are expected to raise this year or early next, will that not pull down the CDN $ even more, and if that is the case, would it not be a good time to move more $ into US Stocks - even with the CDN $ were it is now.

Thank you as always.
Craig

Q: Greetings, I hope you enjoyed your long weekend. I am in the enviable (LOL!) position of facing a proposed reverse split or consolidation in one of my holdings. Is it safe to assume that outstanding employee options and warrants will be similarly reduced in number? i.e. 4 to 1 The Management circular does not clearly cover this topic.
Thank you!

Q: Hi Peter, What is the best way to give exposure of stock market to my kids (9 & 13) so that by the time they pass out from university they can trade on their own or make it as a career.Appreciate your guidance.

Q: In his review of the markets this week Jeff Miller suggests that the rate rise is a spike and not the beginning of an inexorable upward move. I would appreciate your thoughts on the recent interest rate rise.( I copied his comments below)



My own investing is firmly linked to economic fundamentals. The market disparities cited this week mostly reflect trader or pundit lore. Here are the key points:
•The interest rate spike has nothing to do with the Fed and little to do with liquidity. (See Ben Carlson).
•Interest rate levels have only minor implications for stocks – at least until they move much higher. Stocks do very well in the first portion of interest rate increases, especially when stronger economic growth is reflected.

So why the bond mystery. I have offered this hypothesis in the past. It still deserves a more complete explanation, but I will share the outline.

Many players have a “carry trade” where US Treasuries are the investment, not the “funding currency” as has often been the case in the past. Some funds have put it on explicitly with leverage, maybe 15-1. Some have it without leverage. Some merely choose an “unusual” asset allocation. Some have a currency hedge, but others are “going commando.” This explains a lot.

Whenever the dollar drops, some of these players are stopped out or get a margin call. Here is some evidence from 361 Capital:

06_macro_small

Whenever US rates rise more than the funding currency, we see a similar effect. Traders are stopped out or get a margin call.

None of it really has anything to do with the strength of the US economy or the prospects for stocks, but it provides plenty of grist for the media mill

Q: I would like to suggest to Warren that he might consider Keystone, or as they are some times called Keystocks.com.They are a bit on the pricey side, but with one pick you can more than make your money back. I,ve been a happy happy member for 6 years and use them as my primary source for stock picks with 5i and BNN as my confirmation info. Profitable investing!

Q: suggestion regarding some members repeating recently asked questions - I wonder if placing the "Ask a Question -Search by Symbol, etc." at the top right side instead of at the bottom right would be a way to encourage questioners to avoid repeating recently asked enquiries - just a suggestion as I also see this point.

Q: With regard to Warren's question about other investing newsletters, I have found Eddie Elfenbein's Crossing Wall Street to be a useful source. He maintains a "buy list" of 20 US stocks that he revises once a year (and only 4 or 5 changes annually). A weekly email provides updates on the stocks and useful macroeconomic perspective and helps cut through the hysteria and noise of the market (and much of the TV commentary). There are more frequent blog updates too if you are interested. Most years, his 20 stock list beats the S&P. Over the last 9 years, it has returned a compounded 151% versus 99% for the S&P. Note that this includes the market collapse in 2008. Finally, he is not selling anything and it is free.

Q: As a member for approximately 1 year now I want to compliment your group for having what I think must be a strong stomach towards answering the same questions over and over. Often the same or very similar questions are asked by different people and often within a day or few days of each other.

Your response are consistent which is great and should provide conviction to the members.

This reinforces to me that most people do not read and/or understand what they read. Or they are so myopically focused on themselves to not see the trees or the forest presented in front of their very own eyes.

Some members appear to rarely read the earlier posts and thereby repeat a previous question.

It appears many, if not most, retail investors, which I am one, listen to the news way too much and trade too much (which I try to not do).

Have a great day.

Stan
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I agree with Stan’s previous comments. Since questions “build up” over a nightly (and weekend period) basis why wouldn’t 5i save their bullets in addressing the repetitive questions in one swoop on favorite companies via the question/answer format, or better yet, give updates in batches by way of email to subscribers? Isn’t long term investing the mantra that 5i preaches? Pretty sure the 5i team have better things to do to improve our membership than repetitive answering day in day out. Seems like a lot of repeat answering is displaced by 5i (even copy/paste in some cases) when it could be dealt with in a more efficient fashion. Good site here at 5i with Mr. Hodson at the helm but there are definitely ways to improvise....regards.