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

A good ETF? What is your objective? Risk profile? Do not look at past performance. Find an ETF that tracks the benchmark. Instead of one ETF, find five to diversify.

Market. The attacks on Saudi oil facilities. The markets are under reacting because they don’t know what the policy response will be but Trump does not want a war. From an investment standpoint, we have to watch crack spreads because a spike in oil pricing puts up refining costs. We are seeing a weakness globally in demand for the refined products. The ETF CRAK-N is up a small percent today which is a material difference from the broader energy sector. This is a key thing to watch. Last week we saw a massive reversal in bonds. The question now is where the buyers step in. We are still heading for recession and this is just a technical correction. People should learn how to work this asset class into their portfolios. Gold is a tremendous asset class and nothing has changed recently.

Canadian Dollar 3 to 6 months out. We are probably going to hang out at $0.75 give or take a bit. 3 to 6 months out he thinks the global economy will weaken and the Canadian economy is headed for recession. Use strength in the Canadian dollar to buy snow bird dollars.

Saudi Arabia. This is a shock and more temporary than permanent. This is not good for anything globally. Oil prices go up and supply is constrained. This is not a reason to be excited about Canadian banks [as caller asked].

Index funds being a bubble. There is a battle between the managers that are tracking indexes and those actively managing. It is not in a bubble because it is money coming from a mutual fund because of higher costs. It does not matter whether you sell an ETF or a mutual fund, to the market.

US Investment with Growth Potential but good tax treatment in a Canadian based account. Horizons' has a new structure called Corporate Class and you can defer your taxes as they are done with total return swaps and no annual distributions.

Educational Segment. How do you Structure you Portfolio for Events like Saudi Arabia this week? We have an event now to think about. Don’t try to trade the noise on day one or two. Make sure your portfolios are structured to reach your goals in the longer term. This is probably temporary. We probably get a spike in oil prices and you should use this to reduce your oil exposure. You can't forecast international relations. Don’t make any big bets on this. The 2018 high in oil will be a monumental resistance. AMLP-N is the pipelines ETF in the US, which is the way he is playing it. He would trim this above $10.

Market. There was no risk premium in the market due to the attack on the Saudis. You need to know how badly the facilities were damaged and are there off-the-shelf supplies to fix it. The questions are how long it will take to fix the facilities? The game has changed but don’t chase stocks today.

Major Drillers. PD-T is on his action alert list, but he thinks the debt load is a lot. He likes the service sector. It will not do well now. It is a 2020 story. If they back off, it is a good time to buy them.

He doesn't hold many energy stocks, but today's spike could rise a few weeks or last into the winter. But this doesn't mean a material change in oil. Other countries, like Iraq, Iran and Russia want to produce more oil. That said, some pipelines were approved over the summer, so that's positive. He has picked away at ENB and BP, companies with big, sustainable dividends. He doesn't see a recession in the near future; the US consumer remains strong. He expects a 25-basis point interest rate cut, though it's possible this Saudi attack could delay that a bit. Don't be long bonds.

Market Outlook He is positive on Canadian energy stocks for the first time in five years. He can now construct a positive outlook for the forward value of Canadian energy prices and the stocks have already been crushed -- a good time to enter. In the previous few years, producers continued to grow production not because of good energy prices, but because of prolific increases in production productivity. Now, he is seeing energy production actually falling, while export capacity is increasing. He sees natural gas producers moving back to positive cash flows and earnings. Oil takeaway capacity will move higher by 2022, he thinks. The stock market will take this into account and, over the next six months, will discount the risk to not having enough takeaway capacity. Now is the time to focus on energy.

The market has gone up to the 3000s again, and everyone is getting wary of inverted yield curve, China talks and interest rates. The US manufacturing index showed a contracting economy, but the service sector was up so it is showing economic activity. Consumer spending is also very high, and the US consumers are doing well.

Amazon and other e-commerce makes it so easy for everyone to spend, so it's no wonder consumer purchases are up. He expects the consumer spending to continue.

The TSX hit a high today, but it only regained to the high in April. He isn't selling any growth ETFs, but he's always had covered calls in his portfolio. When there is a surge, you want to switch covered calls to normal equities. Markets are looking to top out so he wants to get advantage of that right now.

Market. We are above the previous record TSX close. What we see in the last week is a rotation from growth stocks to more value stocks. We are going to see the TSX be a net beneficiary of that rotation. He loaded up on insurance but is lagging in banks. The S&P has a nice up and to right trend since 2017. He thinks we will see some new highs but it will also be carried by some different stocks. Copper is in a triangle formation. We have been in a down trend since 2011. Interest rates are at 2012 and 2016 lows. If we break these levels then maybe there is something negative but otherwise the path of least resistance is eventually higher for interest rates.