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

Market Outlook He is watching for the US Fed to potentially cut rates, but he wonders how much longer it can go on -- especially at this late stage of the business cycle. Trade disputes and geopolitical issues are creating a time for investors to be cautious. Another rate cut would boost the market, but the bond market is telling us rates are getting too low. We will see increasing volatility on equities going forward as a result. He has been more of a net seller than buyer these days as he prefers to hold more cash. Inflation is rising in real estate, but that does not seem to be registering and consumer debt is rising making him think a bubble may be forming.

Areas of the Canadian market have room to run, but he's getting defensive, more so than in years. He's raising cash. He's avoiding cyclicals, materials and energy. He decided last year to stop buying energy. A good call, because things didn't get better. There are better Canadian opportunities elsewhere. Oil has faced political and infrastructure headwinds. The banks: it comes down to interest rates, but we haven't seen a housing crisis. His likes lifecos like Manulife and would hold the banks. No reason to panic, but there will be a slowdown at some point. The US will likely cut rates this month.

Safer to buy a GIC from a bank or buy a Canadian bond ETF if a recession hits? A GIC pays 2-3% guaranteed. A bond ETF is liquid which you can sell any time, and it pays you a dividend. In a crash, the bond ETF may actually go up. This depends on your liquidity, time horizon and risk.

Market Outlook The whole world is going to negative yields -- not quite in North America yet. There are $7 billion of bonds in Europe that are trading below zero -- you have to pay the company to hold their bonds. This may start to push up gold prices, where you are not giving up yield. Now that Europe is struggling with this, North America may be next. Workers are being hired in North America, but wage inflation is not happening.

Preferred shares as proxy for bonds? Preferred shares have higher volatility than bonds. The rate resets issues when interest rates were going up did well, but when rates fall they can get hit by 10-30%. Preferreds are not a proxy for bonds because of this.

We're bumping up to all-time highs on both sides of the border. You can celebrate a little bit; it's comforting. A nice, steady up day today. Coca-Cola and United Technologies reported and beated, though expectations had been tempered. Except Q4 2018, we've enjoyed a very good run of 10.5 years. How much longer can this go? We are very late in the cycle with maybe six months to go. He's doing little and keeping his powder dry. He won't make moves until January 2020.

What happens to the money in a RRIF and an unregistered account in an estate when someone passes away? If one spouse dies, the money passes to the other spouse. Simple. But if the second (and last) spouse dies, then the RRIF will closed and all the money in that RRIF will move to the taxable account. The taxes paid on the taxable account are only on the capital gains made within that account (before the RRIF money was added).

Have six mutual funds in an RRSP that are performing poorly and charging over 2% MER. I keep losing money, so what to do? Broadly, get out of high-cost mutual funds and go into lower-cost products like ETFs. Also, diversify geographically. For income, buy some corporate and government bonds. Have 3-8 products. Depends on your age and other factors.

A steady U.S. dividend-payer for a RRIF BMO offers some (can't recall a specific ETF), including ETFs in US dollars that cover US stocks.

ETFs in a TFSA. Some have a phantom dividend, but you can't receive it in an TFSA. Yes, a phantom dividend exists and it will effect your ACB in taxable accounts, but not TFSAs.

Buy gold in a recession? Yes. It's traditionally a safe haven. And in a recession or downturn, gold will do pretty well. If things get really bad, gold could hit $1,550.

He respected Larry Fink, CEO of Blackrock, until he tweeted over the weekend that the ECB needs to buy stocks in order to stimulate the economy. This blows his mind, makes no sense. The Wall Street elite is saying, keep fuelling the stock market with liquidity. Japan tried this strategy and it has not worked; their GDP growth rate remains weak and flat. Fink is saying, Let's do more of what isn't working. In fact, it will drive up an asset bubble. Terrible, terrible policy.... Interest rates will stay low for a long, long time and this will stimulate the market and create a bubble.

Good vs. bad return of capital of an ETF--how to tell the difference? Call the ETF provider. The bad return happens when the underlying assets yield 3-4% but the the ETF pays 6-7%, because you're eroding your capital and they are giving some of your own money back. The good return happens open in the rapid-growth phase of an ETF. It pays the yield equal to what the ETF earned in that growth period as a return of capital. Caveat: there are lots of intricacies, so call the actual ETF company to find out about the distribution in a taxable account. If you're in a registered account, it doesn't matter.

Educational Segment. Indicator of oil demand A chart showing the long-term demand for barrels of crude oil: The current YOY growth/demand rate is the lowest since right before the last recession. Currently, oil is being boosted by supply constraints is okay, but it is not ideal. What is best is demand pushing oil prices up. The last few years, oil demanding has been moderating but now it stands at the weakest since the recession. The U.S. is the source of the strongest growth with forecasts of $55-75/barrel. The outlook to 2022-23 will see growing supply as demand is declining, rising from 11 million to 14 million barrels per day. Best-case scenario with the help of technology, then the U.S. could be energy independent by 2040 at 20 million barrels per day, which is current American demand. Also, if the futures curve keeps rising, it will be very interesting for the price of oil. So, he remains an oil bear: sell crude during rallies.

Trumps' latest tweet calls for cutting interest rates Unfortunately, trading today involves his tweets. His tweets are often conflicting. Trump wants lower interest rates to boost the market, but how many of his voters own stocks? He wants a strong US dollar, but criticizes China for devaluing. Expect more conflicting comments as we head into the 2020 election.