A Comment -- General Comments From an Expert (A Commentary)

The question was on buying Canadian-hedged ETF's with the Canadian dollar being low. if you have a balance you can't go wrong as long as investing in the U.S. market with Canadian or U.S. dollars.

The question was on buying a Canadian or U.S. bank ETF. He would migrate to U.S. financials which have much more diversity including Visa and Mastercard. You need to pick the right ETF.

Editor's Note: The question was on Harvest Premium but no symbol was given and there are several Harvest Premium ETF's. This is a covered call ETF on long dated U.S. treasury bonds. The yield is 18% so he sees alarm bells. Half of the yield is the return of your own capital.

The caller wanted a suggestion for an ETF for his 9-year-old granddaughter. You can stay heavy on growth and then dial it back as the granddaughter gets older.

The caller wanted his suggestion for a laddered bond ETF. There is Vangard, RBC and TD. His pick would be TCSB from TD bank. It is better over the longer run.

The question asked for a U.S. bond fund in U.S dollars. He suggested UBIL.U (TSX). Its yields in the U.S. are still quite strong.

Editor's Note: The question was on an ETF called RTA but no company name was shown on the screen. He didn't know much about it. Some tactical changes are being made which should add value. Had a gain of 11 to 12% over the past 52 weeks.

The question was on crypto currency ETF's. He considers bitcoin, etc. to be trading vehicles. He uses BTCC and has been talking some profits along the way. The breakout still evolves but it could turn around quickly. You can keep bitcoin, etc. as a very small portion of your portfolio as a trading investment.

Regime change in US formalized on Monday with US markets closed. 

Election in Canada in 2025, with increasing expectations that it will be sooner rather than later. By all accounts, polls favour a change in government. Only plausible change in direction policy-wise is pro-growth, more productivity, and favourable to innovation and investment. That could, and should, prompt a rerating in Canadian equities which are very discounted versus US counterparts.

He's expecting the presidential pen will be busy signing executive orders on Monday or shortly thereafter. Trump proudly calls himself the tariff man, so implausible that he'd make all this noise without actually doing something. This is a real and legitimate threat to Canadian businesses and economy and, more broadly, to Canadian sovereignty.

Our leaders would do well to take this seriously, and to work night and day to mitigate any economic harm done by tariffs enacted on both sides. A tariff war isn't in anyone's interest, it's a mutually assured destruction. Both countries have centuries of history of being friends, allies, and each other's largest trading partners. Too much at stake to let this brinksmanship take hold. 

He's concerned, but confident over the medium term that there's a win-win solution to be had.

When thinking about whether to add more (such as to decrease cost base), consider current weighting in your portfolio. As a rough guide, his firm doesn't like over a mid-single-digit weighting for any one position.

Owns none, but has a file going on the big money-centre banks. Watched earnings flow in this week. Broadly speaking, results were all pretty good, with investment banking doing better than traditional banking.

Favours Canadian banks instead. Total addressable market is smaller, but it's a de facto oligopoly where 6 banks have 95% market share. Margins are higher, credit cycles are more muted.

Benefits of Direct Indexing:

Direct Indexing can be cheaper 

When you own an ETF or fund, you pay an ongoing annual fee to own that fund. With direct indexing, you in theory do not have to pay anything to hold the index allocation. While we think investors can start to split hairs a little when evaluating a 0.05% fee fund to a 0.1% fund, the reality is that ETFs gained their edge because of low costs and now might be a victim of what they used to succeed in the first place.

Direct Indexing can be more tax efficient

When you own a fund and want to rebalance or do tax-loss selling, you can either sell units of the fund or not and those units are sitting at either a gain or a loss. With direct indexing, you would have an ability to not sell the entire index and sell only individual securities that have under or over performed within the index. So, if energy had a bad year, you could sell all energy stocks in the TSX for tax losses and continue to hold all of the other items within the fund so you don’t trigger gains. Put another way, the index itself could be up on the year but you can still harvest a tax-loss within the index. In the ETF or fund format, you would only be able to trigger a tax gain on the entire fund with this scenario.

It can be a tool to generate alpha 

The potential strategies behind direct indexing could be countless as the technology develops and improves over the years. One can envision simple factor filters where an investor can exclude any company in the index with debt over ‘X’ or any company with a payout ratio over 100%. Again, the opportunities are endless and it has the potential to give even passive investors a lot of power in tweaking their ‘passive’ allocations in a way that makes them more comfortable with their portfolio and even allowing for differentiated returns from the index, for good or bad. Perhaps the ironic thing here is that things might come full circle and direct indexing strategies will lead to investors becoming active investors again and not even realizing it!
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High, but we've never seen companies as profitable as the likes of META and GOOG and MSFT. Economic productivity is being pushed by AI. He believes the growth rate for Q4 productivity in 2024 was 2.7%, so that can compensate for an awful lot.