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

The market is noise. The market today is like February 2018 with a correction in place during a bull market. The US Fed: it's in uncharted territory so they're making up the playbook as they go along. The bull market is now long in the tooth; the yield curve inverts periodically. Both point to a recession. The long bull market is based on easy money, which is actually indicative of inflation. The negative interest rates on the world's debt is actually inflation. No, the weakness in Europe or elsewhere won't trigger a U.S. recession. Only American forces trigger that. The US economy is 70% a service economy, which aren't as volatile as a manufacturing economy, like Germany's who have gone into negative growth. The boomers have money and are spending, so they will keep the U.S. service economy stable.

ETF/stock allocation? 65% of his portfolios are in their pools or ETFs. Stocks are riskier than an ETF, because a basket avoids company-specific risk. If one company in an ETF is hit by, say, wage raises, then it will be offset by other stocks that don't face wage raises. But if you own that company and it faces wage raises, then that stock will get hit. Hold no more than 50% in stocks.

If Brexit crashed out of the EU without a deal, is there an ETF to pick up then wait for a rebound? Good question. He's thinking of buying UK pounds after Brexit; the pound has slipped a lot. The EU won't discuss the last negotiation, so he expects a hard exit which will challenge UK markets. He can't think of an ETF now, but Google for a UK-specific one.

Trump said he may introduce more tax cuts, but this is noise. You can't trade according to the headlines. He doesn't know what's going through Trump's head. Huge sections of the stock market have gone nowhere or gone down 10-20% over the past two years, including Google. Investors are worried about a crash and inverted yields. Google, which he owns, boasts growing earnings, but the stock price has been down. Same with bank stocks. He doesn't understand what's going on. Buy companies that have durable balance sheets and ignore the noise each day. If you buy a stock, be prepared to hold it for at least five years, while investors who trade regularly make less over time. For example, Disney did nothing for years, then shot up this year (on news of the Disney+ launch). He doesn't buy one-day dips.

Canadian oil stocks have been punished, but the oil price has risen. What oil stock to buy? It's not just foreign but Canadian investors who are avoiding Canadian oil stocks. Until these companies start merging, things won't change. Stick with the big oil companies like CNQ, SU or Cenovus. He doesn't own them.

Market Outlook. Has seen twice as many inflows in fixed incomes compared to equities year to date. Bear sentiment in the market, particularly at the start of the year. Believes there may be reason to temper some of that pessimism going forward. Has seen outflows from emerging markets and international equities due to trade tensions, no-deal Brexit, tensions between Japan and South Korean, and political tension in Italy.

Banks. Up until recently the consensus was we were entering a slow steady path of rising interests rates. One of the classic way of playing that was with the banks. With the sudden reversal of feds signal and rate cut in July a lot of the profits have been giving back. The herd is moving where the consensus dictates.

Cannabis. Canada is an innovator in this space in the sense that the first marjiuana industry ETFs were available in Canada. HMMJ from Verizon being a prime example. We are seeing the U.S. catching up. The space is so volatile with so many ways to play it investors should take an active solutions if they want to profit from this on the long term.

Actrively managed small cap ETF? There are small caps ETFs, there are actively managed ETFs, but it's hard to find both. Dynamic iShares Active Canadian ETFs is an active one but it has some large caps in there as well. There are some small caps ETFs, Manulife has some for the U.S, kinda active in a sense, pretty close to the index. Perhaps you shoud look outside of ETFs for this.

ETF with small to mid-cap oil and gas? Some of the older ETFs in Canada play this directly, BMO has ZJN and ZJO, those are perfectly good ETFs, they charge around 0.60 MER, a bit higher of what we see from current generation products. Very volatile. Thinks there is a reason to be optimisic regarding oil and gas. Would be cautious, very risky, particularly in the junior space.

MER factor in the decision of an ETF? It's a very important factor but not the most important. Bid-asks spreads, fund internal trading expenses ratios, which are not necessarily referred to as part of the MER, but really the most important part is the underlying exposure.

Canadian ETF for gold? If you want gold bullion there is CGL which is currency-hedged, there is also a slighly cheaper product from Purpose, KILO is the ticker. Thinks if you think to allocate to gold it does make sense to currency-hedge due to falling rates in the U.S. If you want gold miners there is GOGO that has a bit of quant methodology.

Market. Friday morning, 10am, is the only thing that matters this week. What is Powel going to tell us and the world about US monitory policy by the Fed. Last time he was clear that this was a mid-cycle course correction. There is hope that he says that maybe things are slowing and it is more than a mid-cycle correction. Nobody knows if it is the case, this is an experiment in real time. How do you get people to spend more money? Policies designed to stimulate work until debt levels get toxic.

Hong Kong Situation and Exposure to Portfolio. There is some tangential exposure through capital markets' risk. As a percentage it is pretty insignificant. There is probably non-financial systemic risk in it. But economical output coming from Hong Kong is huge and real estate values are the most overvalued market in the world. He is worried this represents an impediment to a trade deal with the US. There is some belief by China that the US is behind all of this. This is not going away any time soon. He thinks this is a big negative. Chinese stocks are amongst, however, the best valued in the world so he is increasingly looking at adding exposure after a broader market correction.

Educational Segment. Collapsing Bond Yields. He is looking, in his next road show, at the difficulty with these low interest rate environments. We have about a quarter of the world's bond universe with a negative yield. Negative debt in the world Tops $16 Billion ($15 Billion last week). We have now started to see conversations on main stream media about inverted yield curves. The 3 month to 10 years curve has been inverted since May. This has historically portended a recession in a year or two. We could be one foot into it. He is worried about inflation at some point.