Investment Q&A

Q: I have this hedged ETF, VXC, for foreign exposure. If I expect the Canadian dollar to trend up over the next few years which ETF should I buy instead? I'm aiming for 15% of my portfolio to be foreign. Sound like a good idea?

Thanks.

Q: I am looking to buy about $100k of Fixed Income for my asset allocation and I have a 12 year horizon. Do you think I should buy actual bonds in some sort of Bond Ladder? or Bond Mutual funds? I am quite sure interest rates will rise at least 2-3% in the next 12 years. Is there a better fixed income product.

Q: Peter and Team:

Even as oil turns and heads lower again and the Saudis confirm they are not going to blink, there is a general consensus that oil will eventually find a "stable" level i.e price higher than it is now.(2016/17?)

I am looking for your opinion on parking 50k in either XEG or ZEO. They are paying a respectable approx. 4%, and I would think would realize a pretty decent capital gain if held over a two or three year term. Would you have a preference, if one considers cheap oil may be around for a while and some companies might fold?

Thanks as always

Phil

Q: Hello 5i team,
There is a lot of talk about deep discounts inflating auto sales in North America, thus suggesting a peak in activity.
What is your take on this ? I hold a little LNR and a little MG (3% of portfolio) and was thinking of adding a little XTC (another 1%)
Thanks,
Antoine

Q: Don't see much Q/A on Airline companies. Would have thought they would be getting a boost to the bottom line in 2016 due to the low (and going lower) cost of oil. WJA share price looks pretty beat up right now. Can you come up with any negatives on this stock?

Q: For a young couple just starting TFSA with $5,500.00 each
I was thinking for the total $11,000
20% xbb
30% xic
40% xsp
10% vee
Please advise if there is a possible better alternate
For a smaller portfolio should one consider individual stocks

Q: 3rd submission:

I forwarded an question yesterday regarding this rant and I guess it was missed so I will resubmit. I have reviewed many of the concerns today on your blog, and wish to obtain your views further.
A bear market condition in which the prices of securities, and widespread pessimism causes the negative sentiment to be self-sustaining. As an investor anticipate losses in a bear market and selling continues, pessimisms only grows. Although figures can vary for many, a downturn of 20% or more in a multiple broad market indexes over a month period is considered a bear market. This has occurred since Jan 1-2016
A bear Market should not be confused with a correction, which is short-term trend that has a duration of less than usually two months. While corrections are often a great place for a value investor to find an entry point, bear markets rarely provide great entry points, as timing the bottom is very difficult to do. Fighting back can be extremely dangerous because it is quite difficult for an investor to make stellar gains during a bear market unless he or she is prepared to short the seller.
My gut feeling that is not a simple correction as well I have been kicking around markets for over 60 years, I cannot remember an incident as severe as what we are presently experiencing. I felt in the first few days of this year it was going to be a usual correction, however within the past week I made the decision (right or wrong) and have liquidated over 70% of my portfolio to capital gains on the ones I was above water on.
Coupled with this our government is arranging a major restructuring for Alberta and Saskatchewan as well as major funding to kick start "infra structure" which is going to take some time in put in place. In addition, Canadians have now been labeled as have the highest personal debt levels of all G7 Nations and if we get an much as 1/2 to 3/4 interest rate increase, we have a bubble in real estate and the consumer cannot service debt. We all know what happened in the US when this occurred. Real Estate will be the next thing on sale.
So My Rant is, as we work through this, and we will, what can 5i offer in suggestions and recommendation for us an investors to get through this delima. If this stays with us, will we have to change our investment style to shorting and putting. :)
I would appreciate your usual and frank suggestion and comments as well as Peters take on the present day situation.

Q: Like most people I have a bit of cash to spare but am nervous about catching the proverbial falling knife in this market. Would you recommend easing into a stock I liked slowly by buying part positions? Or better trying to buy based on a technical signal. Such as waiting for the ten day moving average to turn up or a golden cross to develop etc.? In the past I have found technical signals to be pretty useless and I think academic research shows their accuracy to be at best slightly better than a dartboard.

Q: Recently and in very short order, the TSX blew through a correction (10% down), then quickly passed through bear market territory (20% down) and is right now on this very bad day about 26 % off its high. At what point do we start calling this a market crash? At what point would you consider there to be blood in the streets? It certainly feels like the blood is being sucked out of my portfolio!

Q: Most analysts seem to agree to CDN dollar is going further down compared to the U.S. Some think to 50%? What do you think and is there an ETF or investment that you think would be a good way to play that belief?

Q: Hello, do you think the reasoning 15 or 16 times earnings of 90-100$ which implies the spx benchmark adjusting to around 1500 has some merit in the current environment ? Also, with the US economy doing ok and the $can below 0.70, is it a strong stimulus for Canada or are we not exporting to them as much anymore ? Thank you

Q: Regarding certain analysts recent advice to sell everything I would like to refer to a chart in Stock Charts that was published today on the Juggling Dynamite blog. The chart follows the value of the TSX and the $Cdn. The $Cdn leads and the TSX eventually catches down. 2002 TSX bottom 6000 & $Cdn at 62.5. 2009 TSX bottom 7500 & $Cdn at 77.5. If the TSX follows the $Cdn down to the current 68 cents, the TSX level will be 7000.

You keep telling us that nothing has changed. Maybe all assets are reverting to the mean from their elevated levels caused by all the QE. Almost every 10 year stock chart that I look at shows super charged growth starting about 2012.

The chart that I referenced is quite shocking and suggests that this correction could test the 2009 levels. Would you please comment.

Q: I am 68 years old, retired, and rely on dividends for income. I went 100% into cash on December 31st, thereby avoiding the 7.2% drop in the TSX over the past two weeks. Once the dust settles, I plan on re-establishing my previous positions in individual high paying, low beta, small to mid-cap Canadian dividend paying stocks, diversified across most sectors. I prefer Canada over the U.S. for the dividend tax credit, and I prefer small to mid-cap stocks for their monthly payouts. Given the current macro and micro economic conditions influencing the Markets, in your view, is this a reasonable strategy going forward? As always, thank you for your valued response!

Q: Headlines scream out "Sell Everything" ... but surely there needs to be someone on the other end to "Buy Everything".

I've been slowly dipping in and buying and appreciate the wisdom in your answers to all members questions.

Do you have a gut feel for how long the market sell off will continue? I like open ended questions like these to see where you go with them.

Thanks
Mike

Q: My current position is approx. 65% UK, 19% Canada, 8% US, 5% Australia and 3% Europe (excl UK) where roughly 95% is invested in individual companies and 5% in ETFS.
In a previous reply to one of my questions (year or two ago) you referred to capital flows.
In the environment we're in today where do you think capital flows momentum is or will be - the (perceived)safety of the US or elsewhere?

Q: Some say the extremely high debt governments are carrying will take whole world down.. And China's extremely unmanageable ( undisclosed and previously hidden) debt will bring widespread collapse to the western world as well as their own economy
Do you agree, and specifically why/why not? How-- on what basis would you assess now whether we are going into a severe bear market? Should a 'wise' investor "cut n run"?

Q: Would you advise buying now in anticipation of a bounce back, and if so, what sector? Tech? Health? Or should we buy defensive stocks or bond funds in anticipation of continued heavy turbulence?
If you had some money ready at hand, what would you do with it?

Q: I think the U.S. is going into a recession as some have predicted and much of the data supports. Ones overall view of the big picture should be paramount, not the buy the dip mentality which has been pervasive view and correct over the last few years, prior to 2015. Things have changed and the markets are forcasting the change. Cash will be safe but until the change for the better starts to happen, I recommend stay in cash. Not for everyone, but if you invest or trade, you have to sleep at night. just one point of view and this makes a market go up and down. Watch all the data. not good at the moment imhop.

Q: It looks like a lot of people are taking that RBS advise to "sell everything " to heart today. Wouldn't selling now just lock in loses? Do you advise the best course is do nothing and just ride it out for those who don't need the cash?

Q: I have a fairly diversified portfolio with stocks and etfs in different sectors. But I am seeing a majority of my holdings are down. Practically, anything which was bought within the last couple of years is down especially anything in the last couple of months (which was when I invested a majority of holdings) is down. I have a fairly long time frame but what should I do at times like these? What should I learn from this? Even those stocks which seemed like a good buy at that time seem overvalued..On top of this the drop in Canadian $ was a big hit.