Investment Q&A

Q: Earlier this year, in response to a question about the usefullness of holding gold, you responded that gold can provide portfolio insurance against inflation and investor fear. Could you expand on this idea that investors turn to gold out of fear. What kind of fear drives this behaviour? What kind of events could cause gold to increase in price, because if it is only inflation, it would seem hyper inflation is a long way off. Is gold as "portfolio insurance" no longer applicable?

Appreciate your insight.

Paul F.

Q: Would you prefer the Xhy bond etf over the us Bond etf because of hedging currency? Or because the yield is higher for income investors? Would pimcos bond etc be more stable?

Q: Do you recommend using trailing stops? And if so, what levels would you recommend setting them at?

Q: Hi Team:
Interesting article in Saturday`s Globe about negative interest rates. I have held a # of Cdn
bank stocks for years & have benefited from their dividends & rarely check their stock prices. It is interesting to note the conflicting views in the article concerning the ramifications of going negative. If Canada joins the sub zero fraternity, what effect would this have on the shares of my Cdn Banks?
Thanks: Jerry

Q: Hello Peter,

Per today's the Globe and Mail, one third of the global government bond market is now trading at subzero rates. Under this negative rates environment, what kind of impact will it impose to prefer shares in general? Does it make sense for companies issued prefer shares to call them back, then reissue them at much lower rates. If the prefer share's rate resets in next couple of months, will the new rate be set to much lower rate than before (other than lower prime rate)? Thanks.

Lin

Q: F-Score or Piotroski Score: Could you give me the 5iR evaluation on this stock screen, validate its performance over the long run and provide the results of this screen for the Canadian and US market. I understand that it uses easy to find information on company regrouped under three factors such as profitability, operating margins and leverage. It would appear that Glacier Media has the highest F-Score for a Canadian company. Could you confirm and give me the results of your calculations.
Thank you

Q: Many commentators are concerned growth stocks may retreat in the next while taking a back seat to value stocks. Do you agree? Thanks Bill

Q: just need assurance not to sell stocks when market drops out and stay long

Q: There is an investment(!) strategy whereby the dividend payout dates are used as the basis of buying and selling equities for multiple payouts during a year. Intellectually this sounds interesting. Is a plan such as this practical, feasible, legal, moral etc. On the surface this might generate reasonable returns if mid tier dividend payers are followed closely , with all the usual selection criteria employed. Are there serious tax implications? Your usual pragmatic overview please.

Q: Hello 5i team,
I have learned that, with a positively sloping yield curve, lending institutions provide much needed liquidity into the economy; but the current situation seems, to me, to defy all logic. Mind you, compared to the rest of the world with negative yields across the spectrum, the US yield curve seems OK despite the fact that it is dangerously flattening. How does all this affect liquidity? and is this a precursor of an eventual recession?
Given the uncertainty, 20% of my equity RRIF portfolio is in cash.
Thanks,
Antoine

Q: Would you comment on articles on Bloomberg and CNBC websites, among others, indicating China's potential banking crisis could be 5 times worse than the US subprime crisis? Very daunting article! Thanks.
Steven

Q: What is a derivative in the financial world? I have heard that derivative values issued worldwide are enormous, in gold well over 100 times the value of all physical gold existing. Are we facing a bank problem with these entities that will repeat the subprime mess again?
Mark Stewart

Q: Hi, I have had this stock for a year,and it seems to be on steady downtrend from around $14. I'am alittle overweight at 7%,would you hang in or reduce to 4-5%.Financials look to be weak right now, your thoughts .
Thanks

Q: I am 44 years old and I have $100k, thinking of an even split $50k for CPD and $50k for Zdv. I have also considered putting the whole $100k into XIC, and writing the occasional calls. Your thoughts on this. What would give me best returns over 10years with the least amount of work or worry?

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: What is the best way calculate EPS Growth. I have noticed it is very erratic from one analyst to another. Should I use historical or future estimates to get the most accurate growth rate?

Q: As part of my portfolio, I own five Canadian smallcal stocks, the five I own now are: ALP; EL; LND; PHM and SPN. I have five, no more and no less, small caps so I can spread out the potential risks if one or two behave badly, ie price drops. I am finding small caps trade differently ( ie. sometimes low volume will move price down or up with no news) since volume has a big impact on my decision.

What should I use as a signal to sell my small caps? Cross below the 200 MVA and sell? as an example.

As always thanks for your response.

Q: Hi, how do you feel about csw and should I consider a or b shares. Greetings, Peter

Q: Hi Team

I may be selling my Costco and am a bit low in Industrials. So with the US money to deploy, what is your take on BIN.US?
Thank you for helping most of us keep our course. "KEEP CALM AND CARRY ON" to all.

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.