Looking for investing ideas? Here’s your weekly digest of the Globe’s latest insights and analysis from the pros, stock tips, portfolio strategies plus what investors need to know for the week ahead.
Don’t be so dismissive of The Big Short’s bet against the Canadian banks
U.S. hedge fund manager Steve Eisman became famous through his depiction in Michael Lewis’s financial crisis book, The Big Short, which detailed the manager’s successful shorting of markets before the crisis hit. Mr. Eisman is now infamous in Canadian investing circles after reports, initially in the Financial Times, said he has built short positions against Canadian bank stocks. It’s true that Canadian banks have been consistently great investments over the past, well, forever, but it’s also true that Canadian households have never carried debt loads amounting to almost 180 per cent of disposable income, Scott Barlow writes. In Mr. Eisman’s case, Canadian investors should not so easily dismiss a manager with undeniable credibility in predicting the end of financial cycles.
Read more: Short sales on the TSX: What bearish investors are betting against
Beware TFSA day traders: The CRA may be coming after you
Investors found carrying on a business – such as day traders – will now be held legally responsible for any tax owing on income earned in a tax-free savings account, Clare O’Hara writes. In the 2019 budget, the federal government proposed the changes stating the TFSA holder is “typically in the best position to determine whether the activities of the TFSA constitute carrying on a business,” and therefore should be the one held responsible for paying any amount owing in tax. While the Canada Revenue Agency allows securities trading it deems to be passive to occur within a TFSA, it has deemed day trading (buying and selling a security over the course of a day to profit from small price moves) to be a business, and will tax it accordingly.
Read more: Help for retirees living the RRSP ‘tax nightmare’
The yield inversion is bad news for Canadian banks. Here’s what investors should do about it
The bond market is signalling trouble ahead for the economy, weighing on Canadian bank stocks that are already facing high consumer debt levels and a wobbling housing market. Yes, these are uneasy times, but the best bet for bank investors is to stay put. For one thing, for all the gloom in the bond market, there is actually not yet a clear signal of an approaching recession. Not convinced? Then consider the downside risk of holding onto your bank stocks: It’s not that bad. Read David Berman’s full article here.
More from David Berman: Investors take note: This is how useful Canada’s yield curve has been as a predictor of recessions
From John Heinzl: From GIC holders to home buyers, these are the winners and losers in the bond-yield collapse
Rob Carrick’s 2019 ETF Buyer’s Guide: Best Canadian dividend funds
Nothing makes a case for dividend ETFs like low interest rates, Rob Carrick writes. The yield on the five-year Government of Canada bond slipped below 1.5 per cent in late March, while rates on five-year guaranteed investment certificates ranged from 2.2 to 3.2 per cent. Almost all of the dividend and income exchange-traded funds covered in this edition of the Globe and Mail ETF Buyers’ Guide have yields of 4 per cent or more. Use this guide to dig beyond yield in selecting funds.
From John Heinzl: Ten reasons to love dividend investing
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“My dad gets retirement income from an annuity. Should I do the same?”
If there’s a single shining example of investors outsmarting themselves, it has to be annuities, Rob Carrick writes. Annuities are cash for life. You turn over a lump sum of money to an insurance company that pays you a set amount of cash on a regular basis until you die. Retirement experts who are unbiased because their income isn’t tied to the sale of products really like annuities. The level of pushback from investors on annuities is striking. It’s hard to get them to keep an open mind, which is why a recent query from a reader jumped out at me. “My dad gets retirement income from an annuity,” he wrote. “Should I do the same?” The short answer: I have no idea because this reader hasn’t provided any personal information. But I can help build a profile of the ideal annuity customer.
More from Rob Carrick: Interest rate trends say now is the time to make a decision about buying an annuity
What investors need to know for the week ahead
U.S. Companies releasing their latest earnings in the coming week include Constellation Brands, Walgreens Boots Alliance, Hudson’s Bay, Nexus REIT, Roots, EXFO, Novagold Resources, CannaRoyalty and Corus Entertainment. Economic data on tap include: U.S. retail sales and construction spending for February as well as business inventories for January (Monday); Canadian and U.S. auto sales for March (Tuesday); Canadian and U.S. employment reports for March as well as U.S. consumer credit for February (Friday).
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