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

Pharmaceuticals. Have to look at where the revenues are coming from. If 40% revenues from the US, you might want to avoid it. For example, type 2 diabetes expected to grow in China and India. Demographics are a huge tailwind to medical devices.

Market. The bounce of the recent lows is a whole combination of factors. The market over reacted in December. There was fear that the Fed would continue to raise rates and that triggered a sell off. That reversed itself in January but where do we go from here? There is a lot of skepticism to this rally so there is a lot of money on the sidelines. The Fed got scared and rate hikes are probably off the table for the near term. He is skeptical of the durability of the rally but the risks are measurable to him.

ETFs. There is no regard for what the valuation is of the companies – what you are paying for it. ETF selling probably accelerated the selloff in the December.

FTS-T vs. Utilities vs. Telecoms. It is an easy choice to Telcos. They are both regulated. Both steady state, stable businesses. BCE-T vs. FTS-T. He is long BCE-T. It is has good valuation here. 16 PE. FTS-T has 13 times. You should do better in Telecoms. T-T is warnings of implications f the Chinese telecom is banned from Canada.

Market Outlook - Retail sales were surprising but seems reasonable to assume that the reason behind it was the market downturn of December. The problem with the telcos is that they have gone the Huawei road and it is going to cost them if there is a ban on it. Given his academic background on defense policy he agrees when the 5 eyes (US, Canada, Australia, UK and NZ) say that they have real concerns about this company integrating in the system. Canada doesn't have the spine to ban the company by itself. If this happens this can happen in conjunction with Canada's trading partners.

What is your favorite option strategy in this market environment? Anywhere where he can make money (laughs). the first thing to do is what options need to do for him. He likes covered calls because he wants to create tax efficient income. Some traders buying options to leverage their position. It is a good way to lose money. So you have to be careful. If he feels the market is overheated sometimes he buys puts.

Can you recommend a tax efficient ETF? On thing about ETFs is that if it is an index-based ETF is that the only time that you get a trade is when a stock is replaced on the index. So it is very tax efficient. If you don't need the income then you can look at the total return ETF of Horizon because they don't have distributions as they use swaps. There is a little bit of risk but they never had a problem and he doesn't see that probable.

Market Outlook She thinks US earnings met expectations for 15% growth over the year. Dove comments from the FED and improvement in trade relations has allowed for a 15+% recovery in US and Canadian markets since the lows in December. Going forward the market will again need earnings growth to continue rising. She does not see a recession on the horizon, given good employment numbers. The FED announced in early January that further interest rate increases will be driven by market dynamics -- which soothed market concerns that rates would increase regardless. Canadian growth will lag that of the US, because of rising interest rates here causing a cooling of the housing market.

2019 earnings were supposed to be up 8-10%, but investors' expectations have come down among fears of a global slowdown. This includes the U.S. economy. Yelp's data shows a slowdown in parts of the world (Yelp reported positively today). The U.S. created an unncessary fear in markets by raising interest rates late last year. America can't afford to go into recession, because rates are already low. He thinks the Fed won't do anything for a while. It's dicey now, and the wrong decision could tip the U.S. economy into recession. The Fed may even lower rates. Also, there are so many political issues, namely the US-China trade war. That said, he's bullish about 2019.

How to look at guidance when you invest Look at all the variables, like events in the world that cause periods of lower growth and lower numbers. He's concerned that the stock market plunged in December, then has since run back up, yet earnings have fallen a lot. There has to be a reset before you can buy the stock market again.

The markets won't return to last year's highs. He's cautious and conservative according to the metrics he's seen. A mix of negatives and positives. Bearish on commodity prices, but this actually benefits economies because interest rates will stay flat. This is a positive. Wait and see. If things slow down too much, it's a negative. But the sweet spot of low rates is also possible. US-China trade talks resolving will be very positive, removing market uncertainty.

It's excellent to see today's sharp move up. He was caught off-guard with how ferocious the sell-off was the last four months. There was a laundry list of worries. There needed to be a shake-out on valuation, like Netflix. This correction was simply a correction. We're still in a bull market and that was a blip. These bad bear market don't happen much, like 11 years ago. We'll see a little consolidation now, but we'll see a rip-roaring rally if US and China sign a trade deal. He's bullish and optimistic. He'd rather pick stocks than buy ETFs in this market.

If China and the US sign a trade agreement, what sectors here would benefit? Cars will skyrocket. Canadian financials, no.

The use of stop losses. They detatch you emotionally from a stock, so you don't cling to one. Stop losses are more art than science.

Sector allocation when the yield curve changes and the effect of U.S. interest rate moves on Canada. Canadians pay too much attention to American news so that we think that what happens there, happens here. No. Canada has its own problems, like high debt. Also, our economy relies so heavily on our banks. We see-saw between Western oil and Ontario manufacturing. Buy quality companies that buy a decent dividends, and be a contrarion.