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

Buy tech stocks now? It's time to get back into tech stocks. Except for MSFT, these stocks have been beaten up. Amazon, for example, is doing well, though he's not a fan of Facebook. Also, these are not for the conservative investor.

Long-duration bonds? He wouldn't buy any long bonds because they'll get hit by rising interest rates. He'd buy only very short duration, floating rate and/or high-grade bonds. It's a place to park money during volatility.

Which healthcare ETF? HHL or FXH. Both are covered calls and hold large U.S. healthcare (pharma, hospitals). Problem is, you're sacrificing growth for yield (around 7% because of the covered call premium). Do you want growth or income? If not, look at XLV, a very low cost MER. He prefers the U.S. healthcare over Canada. Also, ZUH-T which has a Canadian dollar version, hedged and diversified. Note: Some ETF's are more diversified than others; you want more than just pharma. Also, watch the cost (MER); he prefers under 15 basis points.

Are there hedge fund ETFs? No. 75% of hedge funds in the past decade have underperformed the S&P. As long you hold balanced, broad-based portfolio, you don't need hedge funds. Also, they can kill your portfolio.

Market. Regarding China vs. the US on trade negotiations we have no resolution. The theft of intellectual property is at the core of this. The Chinese got an extension and everyone is celebrating. This is probably going to become a big issue again. This is going to be a hard issue to solve. He does not see a solution. He hopes they are smart about this. We will see how all this plays out three months from now. The Saudis and Russia have agreed to extend but not on size. Don't look for a big rally here, just stabilization. The bottom line is to fix the problem with pipelines and capacity for refining.

When to get defensive. No one knows when we will get into recession. We are late in the cycle and the yield curve is flattening. Once it inverts, the market will peak in about 6 months or so of that inversion. There is not a perfect inversion.

ETFs that achieve diversification – how to compliment it with other investments. If you put a Euro ETF and a US ETF together, you have geographic diversity but they go up and down together. You are not getting diversification of asset classes. You need bonds, REITs, utilities, commodities and so on. That's where you get your maximum diversification. See his road show.

ETF providers have their version of monthly yields, focused on high dividends and so on. When the yield is higher than everything in the ETF, you are getting some of your capital back.

Educational Segment. David Rosenberg is his favouite economist on the planet and was his guest today. He is a forensic economist. He focuses on the yield curve. We have seen that the yield curve did not invert in two countries recently and yet they have gone into recession. It is the general increase of interest rates in the most indebted countries in the world that could tip it into a recession. The recession odds are one in three right now. Catalysts around recession are around trade. Since Trump put tariffs on goods, the markets are really down. His guest feels it is all about the FED. A global recession will be caused by liquidity. We will have massive fiscal policy withdrawal next year. When interest rates rise, the impact is down the road. We are transitioning away from the long term bull market.

STPL and DISC are ETFs of global consumer stocks. Cyclicals do better when the economy is booming. Staples do better when the economic cycle turns down.

Market. The WTI oil price increased. We will see if this lasts more than a few weeks or days. The correction was long overdue. The volatility we saw was caused to a large part by automated trading and panic selling in the retail market. We have tax loss selling season coming, in addition to current market weakness. He does not like E&P companies but likes mid-streamers. You want to be the toll collector in the commodity business.

US-China truce spark a rally today, but can it last? Trump said a lot of things this weekend, and thhis entire year has been volatile. It's nice to see a reprieve. We haven't seen earnings decline, though there's been a multiple compression in the broad market. He's still bullish about 2019. In Canada, Alberta Premier Notley cut oil production will initially cause the WCS spread to narrow, but long-term the ruisk premium will go up in Canadian oil. He prefers buying dominant global oil players, not just Canadian. As for healthcare, you should always hold them in your portfolio, because they are a permanent non-cyclical sector with aging demographics bring a tailwind. The long-term fundamentals are strongs, despite any short-term political headwinds. Healthcare is 15% of global equities; hold 10-15% in a portfolio.

As tech pulls back, will we see an upswing in health? Tech could continue to post robust returns, depsite the fall rout. He likes tech a lot. But the tech sector still trades at a discount to the wider market. Pharma is considered a "superior good" and has outpaced the wider market with great topline growth. Hold 10-15% health, especially large-cap biotech. Drug spending is 10% of expenditures for Americans, but also a political lightning rod. He likes the move towards more transparency in drug pricing.

He is sitting back and processing the violent selloff in tech stocks recently. He is surprised we have not seen a bounce in the market yet. As a value investor he likes the buying opportunities. The US Fed announcement this week towards being neutral has caused investors to become frigidity. The S&P500 PE ratio shows the market is expensive especially with interest rates near historic lows, so he expects “gentle headwinds” going forward.

How does he calculate value? – He thinks of value as a range, not an exact number. He looks at the intrinsic value based on the earnings power of the stock and can he buy it at a low enough price to reduce his risk. You have to do your due diligence and have risk controls when things go wrong.