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

How to buy an ETF When you consider an ETF, look at its weightings, the tracking error (how the ETF moves vs. the stocks themselves) and the MER. He owns no ETFs. he prefers stocks; you make the return minus the fee.

Market. This one of those good but horrible snapshots when you can't look at your typical indicators. What got us here is liquidity. Look at corporate credit spreads; Financial conditions. The turn back in the US is not going to continue. People demand more and more on corporate bonds than on treasury. People are pricing more and more into the default of that corporate bond. The trend is important. Rising interest rates and reducing liquidity mean you should wait this one out. You should always ask if you would buy something today when deciding whether to dump it. Growth is slowing and credit is becoming more unavailable. Don't catch a falling knife. You have to watch liquidity.

Market Outlook - The inversion of short end of the yield curve is probably affecting the markets now. Probably some algorithms also had a part. He sees a triple bottom on the market now which is a bullish situation. The China-US trade situation seemed to have a truce. There are also worries about a recession. All these factors have come in and affected volatility. Expect volatility to be high in the short term. There is an opportunity to be tactical and move into more defensive names with stable earnings and high ROE.

What sectors would you look at for the next couple of months? 75% of the time December is a positive month for stocks. It is the best month going back to the 70's. So he would look at the cyclical names. Financial names have been beat up too much and there is an opportunity for trade. If you are looking a couple of years out and looking for income, look at the consumer staples, health care and some utilities.

What is your opinion on US financials? The concern is the inversion of the yield curve. It is cheap here. He wouldn't own it longer term if the economy starts to slide but he feels there is an opportunity to trade here.

General Market Comment – REITs have not fallen as badly as the rest of the equity market. The US and global REITs are still holding positive gains for the year. In Canada, the REIT index is up almost 1%. You will always get a sell off as interest rates rise, but he feels it creates good opportunities going forward. He cautions this is a tough time to be trolling for value in the REIT space.

Breaking news: arrest of Huawei's global chief financial officer. Is this bad? No. Appears to relate to breaking sanctions rules. Repercussions tomorrow, if she's violated trade sanctions, are minimal. Only impact is China's reaction. No permanent impact on US or China. Bigger impact might be on Canada, as we try to improve trade with China, we're caught in the middle.

Interest rate hikes in US being dialed back a bit. Fed has said they'll focus on the data. There have been trade disruptions, but wage inflation is real. This is a good thing for employees. Bias for interest rates remains upwards. Central banks only impact short-term interest rates, but the bigger impact will be on bond yields rising.

Concerned about inverted yield curve? No. This is part of the regular business cycle. Encourages everyone to read Warren Buffet's letter to shareholders this year, which details how many times his net worth went down and then recovered. Just ride it out. It's always about doing your research, finding value, and stepping in when the world looks terrible.

Are tech stocks on sale enough? He owns Microsoft, trading at a much more reasonable valuation. It's hard to put a valuation on companies like Amazon and Google, though they're growing well.

Is Japan an investable market with the yen going up and CAD going down? Avoid the "big uglies" like Sony and Panasonic, which have lost touch with the consumer. Third largest economy in the world, 4th largest exporter. Everyone has exposure to Japan. Best in class electronics, they shine at manufacturing equipment, and they're long-term thinkers. Owns about 24 stocks, not just the single stock risk of 1 or 2. Problem for investors is most trade just in Japan.

Outlook for gold producers? Never owned a gold stock in his life. Don't look at the 1-year chart, look at the 30-year chart. Barrick is where it was 30 years ago. The only group that's made money is management. Cost of producing now is much higher. If the whole world falls apart, he'd rather have apples than gold bars. Wouldn't touch a gold stock. Instead, own great business that are going to increase dividends.

Massive selling in the markets. Sitting at about 30% cash, and has been for a while. Real issues aren't political. They're rising interest rates, flattening yield curve, and slowing economy. NA economy's peaked. A normal part of the business cycle. If you own expensive stocks, you should probably sell and reposition. Cheaper stocks do better over time. Value will win at the end of the day.

The Santa rally is up 83% of the time, 30 years on the TSX, up 1.4% on average. Sometimes there is a January Effect, which is the tendency for stocks to bounce after tax-loss selling season. Don't hang your hat onto these events too much, but these rallies tend to happen. He is pivoting his investments into defensive stocks as we are in the end of the cycle: REITs, grocers, utilities.

Huge sell-off and volatility today. Investors catastrophize everything, thinking of 1987 or 2008. He's seen countless corrections over the years. People panic. Keep an eye on the long-term. Also hold bonds in your portfolio. Now, we're in a normal correction phase of around 10%. There's no reason to dump your stock. Trade deals don't drive markets--earnings do. As of last month, earnings were up 9% year-over-year. Panic is not a strategy--you must manage that emotion, and have a plan. He's enthusiastic about tech stocks.