Investment Q&A

Q: Hi Peter and Staff

Yesterday "D" asked a question about websites to find returns of various indexes and you provided a link for S&P, Nasdaq and TSX. The S&P link clearly said the returns quoted included dividends. Perhaps I missed it but did the other two state whether the returns included dividends.

I am not sure if this is a separate question but when the TSX index shows up on the tickers every day and whether it is up or down and yearly tsx indexes are compared , is it reasonable to assume that is a factored mathematical calculation based on size of companies and their prices over a certain period of time? Does it assume price only or that you re invested the dividends into more shares of those companies?
Thanks for all you do

Dennis

Q: Hello 5i,

A general market question.

Seems a though the next “wall of worry”
to climb as inflation is receding is going to be the potential debt default of the US government. I think they will be extending the debt repayment for as long as possible into the summer/fall, but ultimately I believe a refusal by US congress to increase the debt ceiling to be very credible this time around.

Would appreciate your thoughts and how best to position a portfolio for the worst case scenario?

Q: May I have your thoughts on the USA’s debt ceiling? There is speculation in the press that the most conservative elements (called the “Freedom Caucus”) inside the Republican Party will refuse to raise the debt ceiling without drastic cuts to the country’s chronic budget deficit. In a worse case scenario an impasse will cause government bonds to default. The caucus is quite small but seems to have a large influence over the Republican Party due to its very slender majority in the House Of Representatives. I will need to take some money out of my RRIF this year not covered by the RRIF’s dividend income. Do you think I should be selling stock now or to put it another way will a government bond default is simply not realistic? After all it would take only about 10 Republicans to vote with the Democrats to raise the debt ceiling.

A bond rate spike is typically bad for gold prices but in this case might be positive for gold. Do you agree?

Any thoughts you have would be appreciated.
Jim

Q: I've notice preferred share markets gaining around 2% in a day on a couple of occasions. Obviously somebody's loading up..question...have you noted any other sector rotations that may be occurring or that you anticipate? Many thanks...

Q: Hi group I am out of credits...Hopefully you can give me some guidance on how to play China opening up from Covis restrictions. Commodities and oil seems to stand out if you agree what companies have the most potential upside. Also looks like big tech is another beneficiary if you agree what is your top picks in this sector as well. Thanks for your goodwill service it much appreciated

Q: Do you think the prospects of investing in Emerging markets funds is improving? Are they going to be better performing compared to developed markets? Does the rising interest rates impedes their progress?

Q: Bond market drives the stock market.

I keep hearing this message. Would you please provide a explanation of why this is the case ( if you agree) and how this works. And WHO are the drivers of the bond market.

Thanks as always.

Q: Hello All,

A strategy occasionally mentioned is to consider buying at 52 week highs because it suggests continuing upward momentum .

I am following a few names which keep rising however am loathed to buy at this time because of the possible threat of a market correction.

Would you be willing to suggest any companies that you would almost certainly be buying, into recent highs, despite the looming threat?

Thank you

Q: Hi 5i Team - I sometimes hear about the amount of money waiting on the sidelines for possible investments in the equities markets. Do you have an idea of what this might be in the U.S. or Canada or even globally. Also would you consider it a significant amount. Thanks.

Q: Hello, This is not a question about stocks but more towards interest rate and the effect on markets. How can the US un-employment rate still be around the 5% when we hear of mass layoffs everyday from major companies? It would seem that the 5% is skewed so as to give reason for the fed to keep raising rates which in turn would seem to affect the markets.

Q: I think it’s clear that within the next six months the US will teeter on the brink of technical insolvency given the more radical element of the GOP. This will likely result in a significant decline in the US dollar, what’s an easy way to invest in this, gold for example?

Q: Ruchir Sharma, Chairman of Rockefeller International and Founder & Chief Investment Officer at Breakout Capital suggests that the US$ may have peaked and that it will start to decline in 2023 due to nat'l debt. The narrative was suggesting that USA role as world leader is starting to wane. Conversely, if the C$ strengthens, Cdn exports will be negatively impacted. Does 5I have an opinion on the matter?

Carl

Q: Hi Team,
My thoughts are on what to do with a portfolio that was caught "tech heavy" before the recent fallout. My opinion is...that if the holdings were "winners" in the previous environment, and will survive until the next cycle up for the sector happens, then at this point it is best to just hold on to the positions, as opposed to try to sell for big losses and diversify at this point when the entire portfolio fell 50% in 2022. My hopes are to wait for a big recovery in my holdings at least somewhat...then after that diversify to more appropriate levels. Am I wrong in this thinking? Tough call I know...but what do the odds point to here? Thanks!

Q: Hello Peter,

When the market has been trending up and with positive returns for the year one puts further investment money in what has been working. However when the market has been trending down and with a negative return, it makes sense to put money in sectors and markets that have been battered?
In ball park terms the TSX returned a negative 8.5 % S&P negative 19 and Nasdaq negative 33.
What would you think of rebalancing a portfolio that started 2022 50% Canada and 50% USA (mostly Nasdaq) to now go 25% Canada and 75% US markets with a bias towards nasdaq, s&p in the ratio 4:1? Or somewhere in that territory?

Also what % would you consider prudent to allocate to speculative stocks (for a tech/growth oriented investor) now that high valuations are no longer what they used to be.

Looking forward to your thoughts on the subject.
Regards
Rajiv

Q: US stocks in my RRSP: I strongly believe that 2023 shall be another year with high volatility, for numerous reasons (world economy ,geostrategic factors,debts,China
slowdown,etc..).In this perspective,I increased the proportion of US covered call ETF using call options on 100% of portfolio in order to : 1) reduce volatility et 2) maintain significant dividends during this coming period.When the market will stabilise ,I will reduce the % of these ETF in order to increase the % of Cies stocks and of "conventional ETFs".Please comment this strategy ,plus your point of vue will be appreciated since I know that "no one can predict the future" ! regards,J-Y

Q: Larry Berman being interviewed by Bloomberg indicated that we are in for another year similar to 2002. He had numerous charts to support his opinion. They reference the massive amount of debt that the US has taken on to deal with COVID and the wars it supports financially (Ukraine). The interest which is higher than usual is going to make things even more difficult to pay back. Sounds pretty scary to me. Thank you again

Q: I see there are stocks with an RSI near 30 and at a 52 week low; BNS, TRP, BEPC, and BCE. Also, WCN is not at a 52 week low but has an RSI at 30. I am very tempted to add to my positions at these levels. How much weight would you place on a stock's RSI and 52 week level?
Many thanks, Dennis.

Q: I was wondering if you could tell me how much the Canadian markets are being impacted by zero to date trading options. According to an interview I heard on TD , the US Option Exchange is putting out options with daily expiry. Reference was made to this practice before the 2008 market crash.
I would appreciate your thoughts on this topic.

Thank you.

Q: this is a question about buying us stocks when exchange is high to make sure I understand correctly.

Buy us stock when us exchange is high; example rate of exchange 1.40 means 100 shares @ 10 cost me 1 000 x 1.4 = 1400 $ can
stock price doubles from 10 to 20, means I should have twice as much money BUT if I
Sell when us exchange is low, 1.0 means a 100 shares @ 20 gets me 2000 x 1.0 = 2000 $ can
Price per unit doubled from 10$ to 20$ but actual return to you only went up by 600$ due to exchange rate effect.

so this (presently) would be a poor time to buy us stock due to high exchange rate. CORRECT ?

the corollary to that is: the best time to buy a US stock is when the exchange rate is low or at par with american dollar. CORRECT ??

Since what matters is final amount in my pocket. should I use historical average U.S. exchange rate as a rule of thumb for when exchange is a "good" time to consider american stocks and buy when below ? example historical exchange rate is 1.2 and buy when 1.1

what are historical average U.S. exchange rates over many decades ??

thanks

Ernie

Q: Hello Peter,
I know you may not provide 100 percent guarantee on this answer but am now getting worried. I am not very impressed at our investment managers (when reading news papers or watching BNN) as it seems not many are doing proper research.. For example, AQN was a go to stock but all of a sudden with bad results, everyone is bailing out.. it was obvious that with high rates, utilities would be hit ; why is this a big surprise now and most managers are bailing out.. xbc wow what a stock to buy ; all of a sudden it is bankrupt.. With BAM and BN, BIP, i am not worried about the stock price. I think the leadership is smart but i am worried about potential accounting issues. I know you have said that the issue has been brought up before, but in your opinion, is it something to be concerned about in terms of reducing 5 percent weights. I would hate the shoe to drop again.. if you owned the companies in Brookfield, would you be worried about accounting issues? Since you are not pushing the stock purchases, i am thinking your answer is more objective.. Please advise.