Investment Q&A

Q: With interest rate hikes seemingly imminent and tariffs not going away for a while, which 3 categories of the 10 following in the Canadian market make the most sense for new money today, especially for immediate short term 1-2 years gratification?
Materials, Consumer Cyclical. Financial Services (includes real estate), Communication Services, Energy, Industrials, Technology, Consumer Defensive Non cyclical, Healthcare, Utilities

Q: Hi Peter, Ryan with all the tariff talks, if it ends up not working well for everyone and there is a trade war among countries how would a recession affect stocks. Thanks, Nick

Q: I’m investing for a parent who is currently 100% in cash, is nearing retirement and has never invested. They will not actually need income for another 3-5 years, but I would like to generate some dividends, so they can see actual cash coming off their investments (this may be reinvested). I think dividends will help psychologically if the equity portion declines as they will at least “be paid to wait” while the market recovers.

I am considering constructing the portfolio as follows:
30% Cash – PSA
50% Bonds – ZAG
10% Equity – International Dividend – PID
10% Equity – International Broad Index – XAW
10% Equity – Canada Growth – 5i

Can you provide 5i’s 2 or 3 highest conviction calls right now. I’m looking for growth at a reasonable price. Not looking for yield, but would like it to at least pay a modest dividend.

I would also be interested in any views you have about the suitability of the portfolio and any alternative / additional suggestions you may have.
If there is a correction in the equity markets in next few years or one of 5i’s A companies slips on a banana peel, I may look to put some of the cash to work and increase the equity potion.

My tactical views are: interest rates will rise with the US leading the way, the US broad equity markets are looking very expensive, Bonds are generally not a good investment and at low rates they will get killed by inflation over the long run (but they reduce volatility).

Also, in terms of allocating these investments between non-registered and TFSA, how should I generally be thinking about this? International stocks and bonds into the TFSA until it’s full and cash and Canadian stocks in the non-registered account? I don’t think they will be making any new contribution so perhaps there is no way to use the RRSP.

I look forward to your thoughts and apologise for asking a multi-part questions. If you start to run out of steam, don’t worry about the tax questions.

Thanks

Q: Seems likely we’re headed for a bit more inflation. Assuming this thesis plays out, which sectors do you think should benefit and which sectors should be avoided? Are there specific companies that could benefit greatly and which companies could be badly hurt?

Q: I've asked this before. Given the current situation, particularly concerning Canada's negotiations with the US on trade, what is your opinion regarding the Canadian dollar? I've invested fairly heavily over the past year in US equities and bond funds with the assumption that the Canadian dollar is headed down. I understand that calls on forex are difficult, particularly due to political considerations, but I am interested in your perspective.

Q: I like the overview that is provided there.

However, with diversification and sector blends being frequent topics of interest and sources of questions, it would be helpful, at least for me, if 5i were to provide a sector overview each month as well as a frame of reference for managing our own portfolios. For example, technology 25% of TSX in May, up 3% over 2017; etc by sector and in a simple chart format. Any chance of that happening?

In the meantime, where can I find that kind of information. I have looked at the TSX.com website as well as the RBC Direct Investing sites and been unsuccessful.

Thanks for you help and guidance here.

Q: I am wondering why we would even consider buying Canadian stocks at this time with Donald in power? He looks to kill our economy and realistically could along with many others to make America supposedly great again Thx James

Q: Aside from cash and gold, what do you recommend as defence while the current imbroglio plays out? I am not looking for inverse ETFs or anything like that, just the sort of thing that does a bit better in a potentially tumultuous environment but that can also be a longer term hold. Defensive yes, but no defence sector please. I am looking for individual stocks or general sectoral recommendations. Thank-you.

Q: Peter Schiff a commentator for Seeking Alpha and who we also know from being a speaker on the Money Show, made a comment on Seeking Alpha that we are going into a full blown trade war and Gold is getting down to resistance and if it holds, it could be a buying opportunity. Your comments. Thanks, Dennis

Q: Markets seem to be shrugging off the threat of a trade war. Do you think there is a high risk of a crash? Are Investors are not taking it seriously? Or would the impact of more and more tariffs be small enough that it’s offset by current economic growth? Thank you.

Q: Peter and His Wonder Team
My question is about this possibility of a Debt Jubilee. I have been hearing more about this lately. I am not a "doomster" but have studied history long enough to know unusual events can and do occur. So in the USA the debt load on families is extremely high, university loans over a trillion, car loans and mortgages also high and of course local, state and federal government in serious debt. All the while the middle class is shrinking as wages have lagged behind as automation and productivity has steadily increased in the past 20 years. The Republicans have moved to a strong conservative position. At the same time the Democrats continue to promise more hand outs. So the theory goes that in the 2020 election the Democrats may promise Socialized Medicine for all, a Universal Basic Income Monthly Check and a Debt Jubilee which eliminates student and other loans which will be a dream come true for the shrinking middle class. In other words there may be a radical move to the political liberal left so the Dem. can regain power. I know this Debt Jubilee is not a new concept and is attractive to many. If so there will be losers as wealth is redistributed. Your comments pease. If this were to happen where should a little retail investor run? My first thought is gold since inflation and panic should sour.
Thanks!

Q: Our 35 year old son parted ways with his financial advisor and I have been chosen to invest the sizeable cash balance in his rrsp. I get that you discourage market timing. Many are talking about a late 2019 correction; who knows. I can average in over 6 months, but that is little help if the above correction happens. I can average in over 18 months; is this practical. I don't want to be the one responsible if he suffers a large draw down.

Based on your years of successful investing, please help me benefit from that experience and comment what you would do in this situation. The etfs mentioned would be the investment vehicles.
Thank you for your input.

Q: Would you be able to comment on this article and suggest some defensive strategies to prepare for this?
As always, thanks for your insight.
https://www.washingtonpost.com/business/economy/beware-the-mother-of-all-credit-bubbles/2018/06/08/940f467c-69af-11e8-9e38-24e693b38637_story.html?noredirect=on&utm_term=.1408c8689773

Q: With Michael's Q on D. Rosenberg interview. What I am curious about was DR's call on the Fed fund rate for next year. He was saying it should be 2.75% now and that this is what it will be next year. As I heard DR he was saying the market is unprepared for this eventuality. So first, do you think that is a reasonable observation i.e. market unprepared for that large a rise? If so, is it enough to cause a 10%-20% pullback?

TIA

Q: Hi there, I watched an interview this evening with David Rosenberg who was predicting a recession in 2019. My first question is what is your thoughts on this and do you agree with his perspective and second - while I know you are not in favour of timing the market, how would you approach/adjust your portfolio if you believe we were heading into a recession? For a person no fixed income portion, would you stay 100% invested in equities or move into a partial cash position - if so, how much cash? This bull market seems like its in extended innings, however the economy seems to be doing well overall and earnings seem strong. What do you think the best approach for ones portfolio heading into the 2019 or 2020?

Thanks!

Q: It’s becoming increasingly clear Canada is facing challenges on many economic fronts from increasing regulatory burdens, inability to attract foerign capital and sub-national debt at the provincial level. Given that these, among many other, factors make Canada a questionable destination for investment, I’m wondering about your take on what this means going forward. Apart from an increased international focus, are there some Canadian companies doing business in Canada you feel can benefit from a potentially deteriorating economic scenario in Canada. I've recently taken a position in GSY and am considering DOL. Your thoughts on these and other suggestions would be greatly appreciated.

Q: I am interested in your views on the current market cycle. How much longer do you think price appreciation in the Canadian housing and stock markets will continue? And what would be factors that could cause a weakening in those markets?

Q: A lot of banter back and forth and possibly a trade war that could even go Global if it happens .
Can you give me a list of stocks that could be hit the hardest if this happens?

Q: Ian Harnett of Absolute Strategy has talked about Canada being one of the countries most likely to experience severe financial crisis, due to the (high) house price to income ratios. We've been hearing about a decline in housing prices for years but it doesn't happen. But assuming a collapse in house prices WERE to occur, what sectors of the Canadian economy (if any) would be least affected ?

Q: I am new to 5i. My question pertains to portfolio management within 5i portfolios.

I have read your paper on when to sell a security - it is an interesting article. I am wondering if you have a similar paper on when to buy a security? Members who joined at inception have benefited by your portfolios. I am following your BE portfolio and have slowly transitioned my exiting portfolio to resemble your BE portfolio. At the end of last quarter I purchased AIF, ENB, WSP, SJ, SLF, KXS, COV and VB. With the exception of WSP all are underwater.

I have read enough of your posts to gather you avoid market timing and instead take a long view of five or more years. The markets in the USA are late cycle, rising rates, inflation and global tensions are front and center. On several occasions you recommend members raise cash to protect against market downturns however your BE portfolio has a 3% cash weighting .

My question is - do you have a paper on when to purchase securities you have deemed worthy of purchase and how should members raise cash within your portfolios?

Thank you