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

Market. [Live news coverage from the house of commons pre-empted the first segment of this show.]

Market Outlook The base case for him is that global growth is slowing. Commodity producing countries are having a tough go -- Australia may have its first recession in over 25 years. The US election in 2020 will see the Republican party press economy friendly proposals. A lack of a trade agreement between the US and China could create tail winds if not resolved before then.

Market Outlook The Fed comment today was more dovish than he thought. We need to see consistent and persistent inflation before we raise rates, he thought was the message. Equity markets should go higher, unless trade tariffs impact things on the 15th. The US is expected to delay implementing tariffs against China. The rust belt is weakening the US and President Trump knows this, so tariffs will not likely stay in place long, he thinks. Trade war fears impact China more than the US and it creates headwinds for Europe. Next year, the market will be driven by earnings that could continue to improve if interest rates remain contained, which would lower earnings multiples and could propel the market higher.

US bank sector? The market is still pretty cheap, especially for US banks. It is a good long term hold. A cyclical uptick in the economy would add something on the investment bank side. The sector is a good hold for the next 10 years.

TFSA holdings for young investors? You can own banks with their earnings growth and dividends. The telcoms and utilities have done well through all ranges of interest rates.

Protection strategies If you are worried about markets falling, you might look to sell at a higher price later on, collecting a call premium and a dividend in the meantime. This adds cash to protect to market downside. For a high dividend stock, you could sell puts to collect premium and own a great dividend payer at lower prices. You can also consider selling futures to hedge your position, but not have to give up cash flow of your shares or incur capital gain taxes.

The economy and stock market are separate. It comes down to easing by the US Fed with three interest rate cuts this year. The economic data, however, hasn't been good in the U.S., Japan and around the world. The glass is half full. Trade data in the US and China was better than expected, but only because exports from China have fallen less than imports. We're near the end of the cycle, though without the typical inflation. Point is, he doesn't see where the growth will come from. He's getting tired of getting whipsawed by the US president, tired of playing this game of reacting to his tweets. The telecoms look good, trading at 6x operating cash flow, whereas the utilities and REITs are at 15x. Financials are high-dividend places to hide, but he isn't rushing to buy any banks.

OSFI wants Canadian banks to boost their capital cushion by 0.25% of risk assets. We're late in the cycle, so OSFI is trying to prevent banks from doing stupid things. Overall, this lessens risk for the banks, but also pinches growth slightly. Only if we go into a recession will this be an issue. He's not concerned about it now. As for the Dec. 15 US tariff deadline, nobody knows what'll happen. If a deal was signed, markets would stay this high, but if there won't be a deal, he guesses a 3-5% correction in January. He expects the China-US trade front will settle down then we'll hear more news in the new year. Unless something surprising happens there or something weird happens with Brexit/UK election, markets will rally 2-3% more into Christmas.

Preferred shares and what bond to put in an RRSP? The preferred market got decimated earlier this year; plunged 20% because everyone thought interest rates would rise, but went down instead. Bonds are great to own, but yields are very low now. Look for yields of 3%. There remain nuggets of opportunity. Hard to find and be cautious. Stay with BBB-grade or better bonds.

Market. Brexit. It looks like a conservative majority but that does not solve Brexit. There is still a lot of runway, but this is a hurtle for the market and a conservative win would benefit the markets. There will be a Brexit, well negotiated. The British pound has responded. He is still contemplating selling his UK small cap stocks prior to the election or slightly after. A week Sunday if the December 15th tariff day. He would be surprised if Trump did not kick it down the road at this point, but the tariffs could be applied.

Park money for 3 to 4 months. This is always a challenge. The general idea is that one is not getting enough safe return. If your horizon is 3-4 months, then you can't get into equities. There are high income savings ETFs that have emerged. CSAV, PSA and HISA. They focus on high income savings. You get over 2% interest today. ZST gives you a money market kind of holding.

Put Spread. You buy a put and write a put. You reduce the cost of the downside protection. He would look at doing this. A long put offsets a short put.

US security ETFs clearing in New York or in Toronto yet securities may not be located in the city it trades in. You can buy them in both places and it may impact tax consequences.

In the last 10 years US markets have lead the world recovery. We are at that point where the US is so expensive relative to other places in the world that we will start to see conversion to the US doing less well and international markets doing a bit better.

He has a problem recommending ETFs with leverage in them to an average investor.