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

Volatility overblown? Realistically, the whole focus is on what's the Fed going to do. Are they going to overreact and plunge the economy into recession? He thinks highly unlikely. Even a hike to 3-5% would be historically low. Nor does he see a recession when there's a large demand for jobs. Some of the large investment houses are seeing modest growth, but not recession. Fed's learned a lot since high interest rates in 1990-91.

Best way to handle the wild ride? Main thing is to have a strategy for dealing with volatility. Most investors have the standard 60% equities to 40% fixed income. Fixed income has been a disaster this year, as the bond market has been clobbered. He took his clients out of fixed income and bond ETFs two years ago and went to cash. Though it's annoying to sit in cash and not make any money, it's better than losing 2.5-5% in bonds or bond ETFs. It's about preparation, not stock-picking or chasing returns.

Global ETF recommendation? If you're looking at a global ETF, remember that 60% of it's going to be US. For an Asian ETF, 52% is going to be Japan. People want diversification. To get decent global exposure, you're going to need to pick up a couple of ETFs, as just one can't do it all. One is XIN, which is mainly France, Germany, UK, and very little Far East. VA Vanguard Asia is primarily Japan, a good place to be, with exposure to other countries in Asia.

Canadian utility ETF for steady income and capital preservation? Definitely look at ZWU. Yield is really high, around 7%. Remember that, for utilities, because prices are regulated by government, they can't respond as well to rate increases, and so they tend to underperform markets. When you put a covered call overlay on them, it reduces the upside a bit, but half of it is not covered.

Geographic allocation. He's always overweight the US market. Greatest breadth and depth, best regulation, strongest market in the world, most innovative technological market in the world. He gets Canadian exposure through Canadian banks, as well as XIC and XIU. He bought XLE, which is US energy. Every time he goes into Europe, he loses money. They have wonderful companies, but crazy labour laws. He tends not to do emerging markets.

Strategy when markets go down. It's about proportionality. When markets go down, you can't stand there like a deer caught in the headlights. Plan in advance what you're going to do and what you're going to buy during volatility. For example, he bought some ZQQ yesterday. He's been waiting around for months to pick his price. For holdings he already has, he's prepared to go in and buy when they hit his target price.

International ETF without Russia or China? If you want a global ETF, look at the S&P 500. There's so much interconnectivity with trade, it's hard to totally avoid countries like China. Enormous amount of trade between the US and China. Easier to avoid Russia, as it has a very shallow export market. Emerging markets tend to be heavily China, though that could change over time. iShares might be a good place to look first, as they tend to have more international offerings than the other ETF providers.

Rules for writing options and cash-covered puts. He doesn't do put-writing. Clients understand covered calls: buy the stock, sell the option, get the premium in the next day. Most clients don't understand puts, and he'd rather his clients understand what he's doing. As a do-it-yourselfer, go ahead. Beware that the great failure of do-it-yourself put-writers is that they leverage everything. You're supposed to have the same risk with put writing as you do with covered calls, but most people don't do that. The risk is that you'll have several stocks put to you that you didn't really want to hold. Several different methodologies for where to write the calls. For example, one or two standard deviations above the strike price. His preference is to go out a few (4-6) months and try to get as close to the strike price that you can to maximize the amount of option premium you receive. He doesn't do them much anymore, as they're awkward to deal with. BMO and Harvest provide very good covered calls, and he's happy to use their products. Though expensive, these products add value.

Canadian ETF equivalent to PKW, which holds companies that buy back shares? He's not aware of one. A niche theme. One of the smaller ETF players might have something.

Navigating turbulent markets. His business model and methodology are built for these times. He does well in bull markets, but also in bear markets that have some volatility. He has stock portfolios, but also hedges which are made up of short equity indices. It involves a lot more active management. When the market starts to roll over, he throttles up the short equity indices overlay. When there's a breather with a rally, he throttles it down. He feels for those investors who participate from the long side only. You need those tools to protect your investment and profit from the volatility and bear markets.

Advice during volatility? Active management. Usually this means you need some professionals to help pick stocks and protect what you have. It's a fact that 85% of the time, markets go up. But when you enter a market where indices are down 20% despite intermittent rallies, you need to be able to go long but also short the market. He does this using equity indices, and they become a barometer of the market. For example, only 10 days ago, he had his hedge up to about 90%. Yesterday, it was down to 30%, but today it's back up to about 80%.

Factors for put options besides unprofitability and high PE ratios. You have to be very vigilant. If you trade options against stock positions you currently own or want to own, you have to pay attention. If they're calls or puts, roll them up and don't let it go through the strike because it can become ineffective and expensive. Requires active management when it comes to single stock options. He does it regularly when it comes to the total portfolio, using equity futures on his hedge. Once the short equity indices position exceeds 50% of the notional value of the portfolio, that's when he starts to use options. You never know how long a trend will play out in the market. So options allow you to define the cost that you're going to use for risk management. He'd recommend using the technical side, such as moving averages and RSI, to manage the market. The last 10 years has been an investing market. Last year, everything changed. Interest rates, Ukraine, lockdowns. Now it's a trading market, and you have to respect that.

Tech on the verge of a rebound? Not yet. It's a bear market, but you can still make money. He has a solid tech portfolio of 28 names that he loves, with 45-75% upside. But you have to defend that with the hedge. He wouldn't short these individual stocks. It doesn't mean you can't have a bear market rally. In March, the market rose 16% in 2 weeks. We won't have a bear market rally until there's certainty on whether central banks can control inflation back to neutral territory.

Outlook for cybersecurity. The sector will continue to grow. But it's still a trading market right now, not an investing market. Revenue growth rates extending for 3-5 years from at least 25% and a lot of them into 35%, tremendous margins. But as a result, it becomes a crowded trade. Scale in, scale out. Write covered calls to generate income.