Investment Q&A

Q: Regarding your answer to Chris on Dec 19 re the market pessimism is not all that justified: I agree with your comments re all the current positives. However, what bugs me is Quantitative Easing with its subsequent Quantitative Tightening. This was and is huge. And unprecedented. I'll admit I don't understand all its in and outs. But the unwinding of QE 'spooks' me a bit. Could we get your thoughts on the consequences of QE and QT? Thanks.

Q: Could you please provide me with your opinion on the importance of global diversification within a portfolio. How comfortable are you with a heavy weighting in Canadian stocks for a couple in their mid 60's. The way I see it - we live in Canada, spend in Canada and am wondering if having exposure to US and/ or global equities exposes us to currency risk.

Q: Jeffery Gundlach ... in an interview Monday made a couple of key points: ( and might have been promoting his own business at the same time).
1. (In his opinion) A recession is coming and it will likely be "longer" ... did not say how long.

2. 2019 #1 priority should be capital preservation.

3. The key to capital preservation is to build a high quality bond portfolio.

I f one subscribes to his position/suggestion, what would the components of such a portfolio contain?

Thanks.

Q: Internal Damage?

When companies go through a major drop from their 52 week high (TSGI -60%, SIS -41%, GRUB-51%, NVDA-53%, KXS-35%) What kind of internal damage is created? I'm thinking employee moral, to stock options, to the ability to finance future growth? Other items? It's very tempting to continue to average down (although my dry powder is getting low) but when a company loses 40%-50% of it's value is it the same company anymore? Or is buying something like a Microsoft (down only 11%) a more prudent investment? (i.e. it hasn't breached a point of internal damage)

My holding period is very long, but I'm wondering if the current steep discounts currently are somewhat false illusions...

Q: Do you think stock market action has become decoupled from the world economic reality? I note that unemployment in the US and Canada remains very low, GDP continues to grow and interest rates are still low (and it appears increases are less likely). Furthermore, a reduction in oil prices should put money back into the pockets of consumers. I feel that markets have been possessed by a wave of pessimism that borders on irrationality. I would value your opinion.

Q: Hi 5i
Let's say selling for tax purposes is not relevant for this question. Given the current negative momentum would you prefer (1) walking away and coming back after the New Year to assess the damage (of a portfolio) to decide a course of action or (2) actively manage (chip away or sell) before year end.
I suppose this is a question about "do nothing or do something" decisioning.

Thanks
Mike

Q: Thank you for your thoughtful answers to my previous questions, Peter and Co.

This year, my 50/50 asset allocation portfolio using SPY and a US Money market fund did well while the market ended where it started. I rebalanced when the market dropped by 10% which happened three times — an unusually high frequency.

History shows that 10% drops happen twice within three years whereas 5% drops occur more than twice a year. Would investors do better by rebalancing after a 5% move rather than waiting for a 10% move?

Q: Is Canada out of favor by International Investors. WE Can't get anything done. No Pipelines. International Oil Companies have pulled their funds out of Oil Sands. I listen to BNN Market Call and the majority of Fund Managers say that 2019 will be good year for stocks with a 10 % upward move in earnings. Are we ( retail Investors ) getting suckered in by these slick Portfolio Managers ?
Are you expecting a good rally in early 2019 after all the tax loss selling is over. What will turn International investors on to Canada. The Conservative Party winning next years Election or something else / RAK

Q: this is a market beatdown of epic proportions, furthermore the speed with which it happened was astonishing.
every stock you guys like gsy, tsgi, cov, lgo, doo,toy, dol, pho,mx,cjt,pho, have been decimated some as much as 50% from their highs and i could go on and on.
its true if the fed does not raise wed at 2pm or raises but gives a very dovish statement the market could rally 1500 points until year end,MAYBE.
my question were you a little too optimistic at the beginning at the end of september, yes or no—personally i think so,in your answers too questions the last 10 days you seem to be getting much more cautious, and really why enter any stock right now, just wait until a direction is established, better to pay a couple dollars more. dave

Q: The market is again very vicious today,hitting all,including the above 5 darlings (& RAY.A)of 5I,Any reasons? Buy/add or hold or sell.Please rank them starting with best for buy Txs for u usual great services & views

Q: I've been trying to understand these markets and failing. Much of the wild swings of volatility seem to be associated with fears of China and trade woes. I understand why companies which do a lot of business with China, or source products from there would plunge on such fears. But I haven't been able to figure out why trade fears would cause grocers, REITs and utilities to plunge 2%-3%, as they did today. I mean, how is China or trade going to affect the profits of Chartwell Retirement Residences, or Loblaw, or Algonquin Power? The TSX is down around 1% but these are all down 2%-3%, as are most of the utilities and REITs. Are people just panicking and selling everything in sight?

Q: Hi I’ve read that markets are fairly valued based on forward PE of 15 or so. I’d like to look at this from a bigger picture, the total market cap to GDP ratio, the so-called Buffet Indicator. In the past 100 years, this is showing extreme over-evaluation currently 151% exceeded only by the 2001 Tech bubble, 161p. If rates continue to creep higher I can’t see how this will end very well. Then again, if the they peak and then fall, the over evaluation is at least buffered, Your thoughts ?

Q: Good Afternoon ,
With all this recession talk lately have you ever thought of building a model portfolio that will do well or at least hold its own during a recession? Personally I think the economy is in pretty good shape and the probability of a recession occurring in the next 12 months is less than 20%, odds certainly pick up past that as we are getting later in the cycle and could certainly see a recession within the next 24-36 months. Is a recession portfolio something you are considering? Or will you tweak the B/E model when the time is right to help mitigate some of the downside? For example a larger weight in staples, telecom, utilities, maybe some gold and cash? I feel the Income model is certainly more defensive in nature, perhaps an investor could move from the B/E model to the Income for a period of time ? I realize the average recession only last around 9 months give or take but I also believe that markets can go down significantly during recessions 20-30%. Any thoughts on a strategy here and how to better position a portfolio for the potential of a recession in 2-3 years time?
Thank-you

Q: why did tfii drop so much today? Also when do you think there will be a turn around in the market. I know this is not an easy question and there are many factors. T Steve

Q: Im looking at the Dalio/Robbins "All-weather Portfolio". Do you have any comments about it fundamentally? They both say its about diversifying the risk rather than the sector or products in order to increase the chances of making money in almost any market and decrease losses.

Can you make recommendations for each category please? They also recommend low cost etfs to get further diversification within each category. I would still keep a small amount of cash aside for higher growth names to "play with", so any profit taking would potentially go into the All Weather Account.

What they lay out is:

30% Long term bond (20-25 year)

15% Intermediate Bonds (7-10 years)

30% Stocks

7.5% Gold (possibly a bouillon etf, or possibly just gold with no etf)

7.5% Commodities


Please deduct what you feel for credits since this is a multi part question.
Thanks

Q: Hello Peter
I have question regarding "dead cross" on daily frame of $SPX S&P500 (EMA50/200).
If one would sell all portfolio at dead cross time in the middle of October 2000 or beginning of January 2008 that person would save about 50% of losses and about
4,5 years of recovery . What is your or your technical analyst opinion about "dead cross" and current situation compared to 2000 & 2008 corrections.
Thanks.

Q: In one of today's questions, you note "The inverted yield curve has worried some, as it does tend to predict recessions." This statement has an air of certainty that seems to be at odds with the table of data that you published the day before showing that recessions on average came 20 months after the yield curve inversion. What value is there in a prediction that takes on average 20 months to materialize. I would bet a correlation between not having a recession for ten years and having one in the next 2 to 3 years is even better and just as useless. Do you really want to propagate this myth?

Q: With so much blood in the markets and tremendous volatility, is the future (next 1 to 2 years) really as bleak as the current prices indicate?

Q: david rosenberg just publishes an article in the globe ignore the yield curve at your own peril, the crew at 5i seems to me far more optimistic than this article indicates, furthermore the market action seems to indicate rosenberg is right on,so my question is who is right andshouldn,t we all be raising much more cash including 5i portfolios. dave

Q: Given the current volatility in the market there are a lot of analysts heads making bold predictions. Recently I heard one analyst say that "historically double peaks in a period of heightened volatility signals the end of a bull market". You've taught me there is always an opposing view-so is this statement simply that or is there some credence to it. Thanks for all you do.

Glen