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

Canadian Dollar – Short vs. US? Yes. He is increasing his exposure to the US dollar.

ZW series of ETFs. Are they enough diversification? 8 ETFs is a good number. There's no fixed income, however. You are not diversified in terms of style, such as growth. You are only diversified by geography.

Educational Segment. The Canadian Federal Election. The opinions of people globally are going more and more to the left or right. The movement is away from the center. NDP performed very well in some of the debates. It looks like a coin flip. It is currently a statistical tie in terms of popular vote. He thinks we will see a minority with the liberals and then backed by the NDP to form a majority. In a coalition government he thinks it will be bad for energy. It's all about pipelines. He thinks the Canadian dollar will fall over time, and finally overall there is interest rate risk as well as debt. The electorate does not seem concerned about the debt. Oil prices will also go down. Interest rates will rise slightly in the short term, relative to the US.

Market. 94% of the time when the S&P 500 dividend yield has been above the benchmark bond yield, then stocks outperform bonds by 23%. Bonds are a sell. Rates on US 10-year should go up to about 2.5. There is a rotation into US cyclicals. Look at value over growth. Lumber is a good sector to buy. You should see an uptick in emerging markets. We will see positive results over the next 12 months. You have a huge number of institutional investors sitting on a boat load of cash.

Market Outlook A 20 year rolling study suggests we are into the meat of high volatility period -- September into early October. Last year October to December was miserable. Q4 typically sees bond yields and defensive stocks start to peak and cyclical sectors get some investor interest. The US 10 year yield hit a bottom in September and is now on the rise. The US dollar is starting to show a slow rollover, beginning to plateau. This is generally good for commodities (base metals, gold, etc.).

The headlines looked like a negative news day, but it was only a couple stocks like Boeing that weighed the index down. Boeing has earnings coming out next week. It's probably a buying opportunity when the news is bad since there's only two names in the world in the space. You have to look at the free cash flow generation, margins and future growth instead of news.

China is still a concern. The focus was on earnings this week. The global economy is slowing with Europe stagnating and China slowing. The US is an exception right now, but it is also at risk of a slowdown. So many people are bearish and there's much money on the sides. Interest rates aren't going up, and inflation is low. Money flow seems to still go to equities.

Market. Bad news is good news and good news is bad news as the market is loving that consumer spending is weak. That kind of thing is going on quote a lot in the world right now. The market is discounting lower interest rates as well as quantitative easing a year away. The IMF is pretty clear that they see global growth slowing. News of China and India are pretty weak as well as North America. It is pretty clear that the economy is slowing and the question is if we get a recession how deep and how long. Have some cash on the sides at least. The market is not going to continue to go up.

Japanese Tobacco. You are not going to find another Japanese company like this with that kind of dividend yield. If you own tobacco then you find yourself in a very mature market. The Japanese market remains on sale. Hold on if you want that kind of yield. There is nothing wrong with the company.

Cash. He is not a believer in being all in cash or none. If you own great companies and have a long term time horizon then you will do okay. Don't go 100% cash.

Three principal variables when buying a high yield bond. When you buy one, you are lending money to a company like a lender. If there is not adequate capital, then it is probably too risky an investment if the company fails. Ask what is the cash flow to pay back the interest on the bond. A number of high yield bonds yield 15% but don’t pass the above tests. You'll be in the 6% range. Buy a diversified portfolio. [No third principle given.]

Day-trading. It is it too risky nor is it profitable. It is against his religion. It has gotten a lot tougher as electronic traders have come in. To say you can call the direction of companies is a tough way to make a living unlike the late '90s. It is not investing. Don't mortgage the house if you are going to try it.

Recommended bond to equity ratio. It used to be 40% fixed income and 60% stocks. If bonds are 2% then it is not a good place to be. All these institutions are looking for something else to do. Regular bonds don't show him any value. They don’t even cover inflation. He would rather hold cash and have the flexibility.

A 5 year bond recommendation. High yield bonds work well in a diversified portfolio. You have to buy a fund. Default rates in high yield bonds are 2% and if you buy one of those you are in trouble. You need to have the currency hedged.

Markets right now. White House is stealing the headlines. Don't confuse political turmoil with market turmoil. Politicians come and go, and markets have a long life. In the last 2 impeachments, the markets went in opposite directions.