Investment Q&A

Q: thoughts on interest rates inflation timeline thanks

Q: Hi 5i team:

So today (Sept 1st) there was economic news on a slight contraction to Canadian GDP and the TSX rocketed up, presumably on assumptions about the implications for interest rates. I know you have mentioned in the past that by the time a recession is officially declared we are probably well on the way to being out of it. I’m assuming that the “smart money” probably has more subtle indicators that they watch that probably don’t necessarily make the daily mainstream headlines? Curious if anything maybe below the average investor’s radar has caught your attention of late that has caused you go “huh” with regards to the market (I have learned to appreciate your insights over the years). Thanks,

Q: Retired, dividend-income investor. I have funds available over time to invest in / top-up some of my positions to meet long term asset allocation targets. I plan on continuing to invest these funds over a number of months...as I have been over the past 8 months.

The question is = in what order do I buy the following = XST, XIT (several BNN-ers say to avoid adding to technology at this point), BCE, BNS, LIFE, ZUT.

One method is to wait for these securities to hit my price targets (based on hitting a combination of fundamental and technical targets (a little bit is kind of bottom-feeding).

A 2nd method is looking at setting the order of buying, based on where one thinks each security is relative to their historic value.

Ignore asset allocation...these are smaller amounts and the AA is reasonably good right now.

My suggested order, subject to where each security's price is at (please shoot holes in my plan):
Sept = BNS,
Oct = XST-#1 (in 2 tranches-spread out),
Nov = ZUT-#1 (ditto),
Dec = XIT-#1 (ditto),
Jan = XST-#2,
Feb = ZUT-#2,
Mar = XIT-#2,
As each hits their price target (minor adds) = BCE, LIFE.

Please state your order and why.
Thanks...much appreciated...Steve

Q: I keep seeing and hearing questions about interest rates going down. I'm in my 70's. I had my first mortgage in 1985 at somewhere between 10 and 12% after my family helped me scrap together the 25% down required at that time.
I think interest rates are just normalizing (see https://www150.statcan.gc.ca/n1/pub/11-210-x/2010000/t098-eng.htm) and I do not understand why anyone would think rates would go lower? Could you explain?

Q: The Labour Contracts being signed today at 30 % and 40 % increases Airline Pilots, UPS, Port Workers in BC and more to come by Auto Makers and Hollywood means more inflation down the road and higher rates by Powell. This could go on for years. Causing defaults on Mortgages ,personal bankrupcy , credit card defaults. It does not look good.



Then there is China and unemployment of 25 and under at 26 % . No Jobs. China is fully built. Apartments Condos High Speed Trains, Highways etc. Nothing else to build. This will cause unrest with the young. What can XI do.. Not more military. They have the largest in the world

Then there is the expansion of BRIC by adding 6 new Members like Saudi, and Iran. plus 4 more.

And what about stealing of goods from all retailers and nothing being done to stop this stealing. Even people walk in to LCBO and help themselves and staff is told not to interfere. Why because every bad guy probably has a gun,




Question Why Own Stocks Why not Just a laddered Bond Portfolio of 1 to 7 year bonds with a yield of 7 % plus for the next few years.


Sorry for such a negative outlook . Look forward to your comments.


RAK

Q: Could you please elaborate on your response to Tim today where you stated “ the odds of a recession we think are actually diminishing now.”
I have concerns on China’s messy economic future as a headwind. Thanks for your thoughts.

Q: In many of your responses you mention the scenario of interest rates peaking and then going down. However, there is also the possibility of "higher rates for longer", I've heard mention of up to a decade. I've also read that 5% is historically a very average rate. If this scenario plays out, how will it likely effect dividend blue chip stocks and the markets in general? I know this is a predictive question, but I'm looking for your knowledge based on what has typically happened in the past with sustained higher interest rates over a longer period. Thank you!

Q: I know it is uncertain but when/where do you think this rate hike cycle will end ? Do you think the U.S. 10 Year Treasury Note will reach 5-6% ?
Thanks !

Q: Assuming western governments favour financial repression to get themselves out of their respective debt mess, what does this all mean for a recent retiree like me? Are any stock sectors worth investing in? How about gold / material stocks and certain REITs ? Are utilities safe?

No government leader had any backbone over the past couple of decades and chose to continually “kick the can down the road” and now there’s no way out….and the piper will eventually be paid.

Q: Oh gosh, Keith Richards for the last 2 months in the Money Saver is raising red flags about the market.....comparing where the market is now to pass markets that have plunged downwards, like big time. And there is news out of China, the yuan falling and economy slowing down, like big time, too This makes me wonder, seriously about doing this --- should I sell all or most of the stocks held in the TFSA and LIRA accounts as there would be no tax to pay.....but hold on the those in the trade accounts What are 5iR's take of the stock market going forward and my pondering about selling??? .........Thanks for your insights.........Tom

Q: I hold VOT at a loss (not useable for tax). Many analysts are declaring they are now out-of-love with growth. Do you agree that growth will, generally speaking, struggle through ~2025? Is this a good time to sell and transfer affections to Value shares— for example switch to VTV? VTV has outpaced VOT over 5, 3 and one year(s).

When I make such switches, I often find the security I sold significantly outperforms the one I lavished love on. With my errors in mind, I ask for your thoughts on growth vs. value over the next year or so. Please add a bit of your valuable commentary— that would be very helpful.

Q: For a retirement objective + dividend investing, could you rank these sectors for more safety and stability in periods of economic uncertainities or slowdown : financial services,energy,healthcare,technology,utilities,communication services,consumer cyclical,consumer defensive,industrial,real estate.I guess that some sectors are more esssential than others ?

Q: In today's Globe and Mail article, David Rosenberg argues that stocks are overpriced and concludes that "bond yields and equity prices need to adjust lower in coming months, quarters, and maybe even years. This means asset allocators should be taking profits in the overpriced equity market and placing the proceeds in oversold Treasury notes and bonds."
Do you agree with this view?

I will appreciate your insight with respect to changing our asset mix based on Rosenberg's views.

Q: I've been expecting utilities-and-telecoms to see better price action on the prospect of stable rates, but today's reversal suggests a continuing downtrend. Likewise, I've been expecting financials to continue to look past these same fears (and there has been progress), but now wonder if we've reached a plateau.

Given that these sectors 'should' be responsive to different forces, which would you pick for a quicker and more robust upturn? More specifically, should we expect utilities to continue to suffer until rates actually go down by some significant percentage?

Q: I hold some TLT and have obviously entered into too early. But I am prepared to be patient.
My question is more about the Billionaire Ackman article last week where he states he is shorting the 30 year treasuries. Now, is he doing that simply because he feels the it will be a long time before the Feds actually start lowering rates or, is there something else out there that I do not understand about long treasuries?

Q: Hi Team,
Shop is falling again today despite earnings beats and price target increases across the board. Is it a good time to buy the shares from todays profit takers? Also in general do you see this market sell off sparked by the fitch downgrade of the US credit rating a buying opp? There has been some brutal sell offs over the last 2 days. Which names would you be looking to buy in this weakness? Thanks

Shane

Q: Hi,

This is a BIG picture question. I don't see any questions so far on 5i.

First Japan apparently makes an about turn in their interest rates? The articles that I read went above my head! And now Fitch downgrades the US credit rating. Again too much for me to understand.

What does it all mean to ordinary people like me? Many of my friends who are all seniors mostly say, cash is King!

I know you like to be fully invested.

Any words of wisdom?
Many thanks in advance.

Mano.

Q: Lost returns from listening to esteemed, perennial doomsayers. Includes David Rosenberg.

https://ritholtz.com/2023/08/10-wednesday-am-reads-341/

Q: Everyone, where will the market go once the DOW breaks above the previous high and when will it break above the previous high? Clayton

Q: Hi Peter,

In a long-term account (20+ years), could you please describe what asset allocation you would choose (including %)? Would you stick to stocks and bonds and gold, or are there any other asset classes you'd want exposure to?

Thanks as always!