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

We've had three down days in a row. Trump can't have a day without getting into the headlines. Today, he's screwing up world markets by slapping tariffs on Brazil, Argentina and France, on top of the US-China trade deal in progress. Google is up after changing leadership today with the two founders staying on the board. Not a surprise and won't change Alphabet much. BMO just announced deep job cuts of 4% of the workforce; he doesn't know the details yet and it's his least-favourite bank (doesn't own it). He suspects the layoffs presage bad earnings.

What stocks to include in legacy investing long-term for a child? Insurance companies which take a very long view, like life insurance policies. Those companies have to invest their premiums for 50-60 years. Brookfield and Berkshire invest in infrastructure, proprty and renewable utilities, which have very long lives; this isn't quick-hit investing. Think like those companies.

Do you use stop losses and when do you use them? Not at all. The reason is the last two days. For example, if you own a high-quality stock like Apple, you could get sold out of it when you don't want to, like Trump says something stupid and the stock drops, but rises again. He is an investor, not a speculator. Sure, some traders use stop losses for their benefit. But for a long-term investor, the risk of using a stop loss is too risky. Also, you'll have to pay capital gains on any stop loss sale.

Given global market uncertainty is it time to buy bonds? Bonds are necessary for a portfolio, but don't reward much now. Also, bonds are taxed high outside of sheltered accounts. He considers them shock absorbers during market volatility. Keep five-year bonds.

Market. Trump had exempted Brazil last time when he went after steel tariffs. Now they are on. Energy is a big part of what moves the Brazilian currency around. Trump's use of tariffs is not going away. The markets are rationally exuberant about trade. Globally the Purchasing Managers Index has ticked up, except for the US, which is part of the market weakness today.

How do you play the negative side? He does not just make one bet. Gold equities and silver will likely go up and stocks in Canada while other equities will probably go down. It is all about diversification.

Gold. Gold is a flight to safety. GLD-N, GLDI-N, GLDX, GDXJ are his favorites. ZGD vs. XGD are also options.

Being Green. How do I invest in Biodegradable cutlery? SHE-T is the best ETF of the year last year. It is a gender diversity ETF. It has done better than the broad world index but only by a tiny amount.

Market. Do not take on risks that you do not understand. Index funds get into industries and markets that may be winning or losing. There is nothing safe about being in something you don’t like. Cannabis has no barriers to entry because anyone can growth some of it. If there is a material adverse change or management lies to him, he sells. Cyclicals can be bought when out of favour but when they are in favour, he reminds himself that it is cyclical and prepares to sell.

Gold. He is not bullish on gold right now. For it to do well, the US dollar has to go down, and then global central balance sheets need to grow more than they are now, and there have to be negative real interest rates. Gold has not been a hedge since 2012. It is not timely right now.

You can still get into REITs despite this year's run-up. Valuations are still good and REITs offer a total return including dividends that compare well to fixed income. REITs have held up in the past year during three market sell-offs. We're not out of the woods in the world economy, and he expects a slowdown and choppiness. Also, pension funds invest in REITs to meet their long-term returns (they no longer achieve that with bonds); so they are moving into REITs and will continue to.

Market Outlook He thinks a melt-up will follow an announcement of a trade deal between China and the US, but most is already factored into the market. He thinks there is 6-7% of upside in the market next year. We may not get a pullback in the market until the US Primaries -- around March. Brexit, interest rates, and earnings have already been taken into account by the market. The Chinese want a trade deal passed, although it may roll into January should not derail the Santa Claus rally. He is not entirely in on the all risks off trading strategy and is using a barbell strategy that includes real assets (RA.UN) like infrastructure and real estate paying a 5% dividend yield.

The NASDAQ index is rising much quicker than the S&P500. The charts look similar to the 90s Dotcom Bubble. The yield curve is flattening out, suggesting slow growth. He would recommend taking some profits off the table if you own tech stocks or ETFs. In 2000, there were 85% loss in the NASDAQ.

NASDAQ 100. Cisco hit a high of 85$ a share and it never made it back. Microsoft took until 2017 to break even. It's not about how much you make on the upside, but how little you lose in the downside. The further you fall, the more you have to move up. The US economy is growing at 2.5% and high valuations don't make sense. Now is the time to prepare against downside.

Payment Companies. Owns Mastercard. A great story. Some countries like Italy are only 25% electronic payments. The world is going electronic and he believes some time in the future we will see cash disappear from the system. These companies have a long runway, all of them. Owns Mastercard, but thinks Paypal, VISA etc. are all going to do well.