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

Is there any ETF that protects you on a downtrend? There are the inverse ETF. Just go with the single inverse. Be careful not to go with the leverage inverse. He prefers to buy puts anyways.

What do you think of the Couch Potato investing strategy? He is not thrilled with this. For a small account it is OK. As a portfolio manager you are expected to do a little better.

Market. PMI Numbers were released in China and they were little bit better than expected, but it was due to big builds in inventories as opposed to production for final demand. Everything globally is slowing down, economically. However, the total world ETF, VT-N, is showing we are lower than a year ago even though strong now. We are going nowhere. The Trump tax cuts gave a 'sugar high'. We are looking at a fragile EU economy and all China can do is add to debt. It is only cheap money keeping the economy going. Be prudent. We are going to have a credit problem any time. Britain cannot afford to leave the EU without a deal. They need a balanced soft exit, but there is uncertainty. He thinks they will resolve it and is making big bets on that.

Educational Segment. Educational Segment. Carbon Tax. Pollution and global warming are issues globally. He is bullish on green investing but bearish on carbon tax. He does not think this is the way to make change. If you want to get people to stop driving then you have to double or triple the cost but carbon taxes are not going to work. Transportation is 14% of gas emissions. The agriculture sector is much larger. There is more carbon in the dirt in the ground and as we disturb it, we release it. Clean energy investment does not perform anywhere as well as the total world market.

Market. The lack of rising interest rates in Canada is good for REITs. Real estate companies have been performing quite well because it really comes down to the operations within their business. In the last few years money went into general growth equities to the detriment of RETIs. So any interruption to this expected growth of other equities would be good for REITs. The fund flows into REITs have turned positive. They are pretty fairly valued at this point but he sees no reason for the momentum to slow up. He is holding on and increasing in some cases. REITs have a low correlation to the broader markets.

Canadian apartments REITs are still a good place to be. What drives their returns is their ability to increase rents. There is a shortage of housing in major Canadian cities. They have all been doing it. He likes IIP.UN-T. If you look at next year's numbers you see continued growth. They have been historically smart with their capital. They don’t come to the equity markets unless they can and it really makes sense.

Poloz said today that there are challenges around the world that need to be managed. Indeed, there is slower growth, though maybe things are picking up in China. Clearly, the U.S. is nervous and some there want to cut rates. Market growth may return to mediocre levels, but this is a good time to own stocks. No way interest rates will rise in North America in 2019. But he's worried about relations with China--Canada has taken several steps back in terms of befriending China and shifting away from the U.S., but Ottawa is currently distracted by the SNC scandal. He doesn't see a recession coming--good news.

Which bonds to buy? You gotta hold some bonds and not only stocks. Stocks can plunge. He likes liquid, transparent assets. He's buying very short bonds and corporate ones. He wants zero risk in bonds. He buys bonds to protect capital--but it's horrible to buy bonds right now because of really low rates.

He is not a fan of the commodity based equity sectors. The US yield curve inversion often indicates a recession. Quite often see the markets rally after a yield inversion. Need to structure a portfolio that can withstand short term and long term scenarios. There are always going to be 10% pullbacks, which is the risk of equity investing. You are never going to be able to time the tops and bottoms.

Market. BREXIT is not looking good and with earnings coming out, there is a chance we might see the market weakening a bit here. That usually pulls energy down even though fundamentals of energy remain strong. The time to buy was the tax loss selling of last year. If we pull back we will get another buying opportunity but not as good as December 23rd. Now that Muller is over, Trump needs things to tweet about and now it is OPEC and cutting back on production restrictions. If it happens repeatedly. The market could pull back. If stocks pull back as a result they could be a fantastic buy. He thinks we will see $70+ oil in Q4 and $80 in 2020. In April/May we could see significant erosion in stocks he discusses in this show and if you are going to buy them, do it then. He thinks we are in the early stages of a new bull market in energy and energy services stocks.

Market Outlook - He is finding much more pessimism in his clients meetings. Many people asking: is a recession coming? Pessimism is pronounced. Pessimism is intellectually seductive. There is an asymmetry in gain vs losses. That is why he uses stop-losses where possible. Diversification is a big tool and so a balance between aggressive / defensive. We just had a 20% correction. It wasn't as bad as 2009 but close to 2011. You have to take advantage of those situations. He would argue that in his years of career most money has been lost on opportunity costs or being too defensive preparing for a corrections than in the actual correction. The Market is a big world. Unless you are completed committed to a monthly contribution for 20 years then he is not for passive investments. The inverted Yield Curve is a little misleading and a recession could come after 8 months to 3 years after the inversion. Also some people are picking the points in the curve. Also some people are fitting this event to their negative narrative as there has been cases where no recession came after an inversion.

Veritas saying get out of Canadian banks. We've heard this "cry wolf" for over a decade. Veritas tend to be short analysts. Bank sector is slowing down, but to predict a precipitous drop is really sticking your neck out. Mortgage lending is slowing, interest rates are lower. But they're still making money and have attractive dividends. Doesn't expect big surprises in loan losses. It's fear-mongering. But growth is muted for sure, so he doesn't own any. Plus, they're expensive price to book. There will be loan losses with oil and gas, but sees no ticking time bomb out there.

What sector would you put money into now for income? He doesn't normally invest by sector. He looks for opportunities and value. Avoids resources, oil and gas, mining, biotech. Loves renewable energy, energy infrastructure like pipelines, senior living. Tech, consumer staples, and industrials are company-specific. Stay on the conservative side and keep a long-term perspective.

Brexit: the political process is very messy and PM May is now stepping down (why didn't she earlier?). While this is happening, UK is enjoying low unemployment and decent growth, but UK stocks are on sale....Lyft will do an IPO on Friday. He uses Uber, but it's never made money. This is an example for investors are desperate to find something to give them a return. Even a loss-making business can get financing....Global growth is slowing in Europe, China and North America, so long-term rates have plummeted. The inverted yield curve is an accurate harbinger of a market downturn. He's taking profits now, but interest-rate sensitives (pipelines, utilities and REITs) are back in favour and pay a dividend. Trim aggressive stocks like tech.

Huawei and investing in China Huawei is like SCN Lavalin, facing a lot of political pressure. He wouldn't buy it. When investing in China, it depends on what the Chinese government's policy is. Are you friendly or well-connected to the government? Could those connections suddenly change (and hurt you)? Better to invest through Hong Kong, because it's well-regulated and offers quality Chinese companies and there is some protection legally.