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

Market. We are in a bull market correction. The fed is forecasting 4 hikes and the market is saying it should b 2.5 hikes. The market is not willing to move up until the Fed acknowledges that may have to reign in their expectations. There should be volatility next week in the S&P, going down another 75 points. He likes the market here. He thinks we will have a year-end rally. There are pockets of overheating in the US labour market but with oil prices coming down that should ease the situation. He is seeing great value in Canadian stocks but foreign investors continue to short our market. The tax break last night will help the Canadian economy. We need help out west with our hydrocarbons, however.

Shorting Natural Gas. The only way to do that here is NGA (*Speculative Short*), which is US NYMEX gas. It has spiked up so will probably swing back down half way. You are making a speculative bet. He is more bullish on Natural Gas longer term. HND-T is a shorting ETF that resets every day. It is very volatile. You should only hold it for one day.

The TSX in General – Why stay? Just use the US. Cyclical names since 2008 have not come back. Don't exit Canada completely. There are software and healthcare companies. 15% of your money should be in Canada.

Market Outlook - The Equity market is on sale. Earnings are very consistent. Even in Canada Earnings surprised more n the upside than the downside. The trillion dollar question is when the equity market goes up. The gap in Earning Yield vs 30-yr Government Bonds is bribing you to buy equities. In the Corporate Bond market his fund is invested in the short term side of the yield curve. Bonds lead and credit spreads are an indication of where Equities are going.

Which one would you pick among Utilities or Telcos or REITs? - Utilities have been washed out. Among them Enbridge (ENB-T) offers a particularly good opportunity as it is cheap.

With rising rate environment how REITs are going to do? - At his firm believe that normalization is happening. We are getting there. They think that inflation is not an issue given the massive dislocation in global market through AI, disruption of technologies, etc. He believes that there is always this inflation fear that is not going to happen. As a result interest rates are going to stabilize and the sector is going to go up.

What would you recommend in term of bond trading at a deep discount? - He has some bonds on Energy company. He suggest getting 1.5% over Government of Canada Bonds. If you are going to own these bonds you have to sit on them. Liquidity for retail investors is difficult. You have to let them mature.

Market Outlook. Seeing a good correction now in the markets. Be patient and take a disciplined approach to allocating capital. Think of it as buying good stocks on sale now. Corrections and higher volatilities are a normal part of the market. When the whole market corrects, that is an opportunity to pick up real good companies that are trading a low valuations. He thinks the US economy will slow next year but does not see a recession. He thinks the Feds may raise rates next year just once or twice depending on the economy.

Today's Canadian fall fiscal update was exactly what the market expected, though Morneau didn't go as far as Trump. He hopes it's a shot in the arm, but those looking for relief from the WCS differential saw nothing concrete. Also today, oil rallied, but what can happen until pipelines are built? The lack of pipelines are a man-made problem and didn't have to happen. Maybe use a legal remedy by Ottawa to build new pipelines. Today, US markets saw some relief today. TSX outperformed New York in the past month, which is encouraging. We're 90% done this correction with maybe another 3% down to go.

What’s pushing markets down? Since October, and especially this past week, fight between earnings and interest rates and the consequent uncertainty. Optimism on earnings side from analysts, giving way to pessimism that earnings will slow down plus rising interest rates. Earnings expectations too rosy going into 2019. Yields are down from their highs, but Fed is conveying rising rates both in US and Canada, affecting equity prices. All this is taking the bloom off equity markets.

Facebook down 40% since July. It’s down, but not as dramatic as earlier in the year. It’s decline is company specific, but it’s also a factor for the tech sector which has come down. A lot of tech companies are doing well, and when they go on sale, that’s a positive.

Nobody likes a prolonged sell-off. Money managers, in reaction to clients calling them during this correction, are selling the baby with the bathwater. Today, oil went down 7%--uncommon--and there was a lot of negativity about Boeing, which is a barometer about China/US trade tariffs. Boeing called off a conference call, and investors want information about their companies. This selling stampede will continue and it's indiscriminate, then a rotation in the value names. The next few weeks will be telling. He has sold off and now holds up to 45-70% cash in some accounts. Investors are running to defence stocks. If the S&P can bounce off its 2018 lows from January and October, then that's positive.

Market. The conference this weekend was a bit of a surprise. It looked like they were making some progress. Theft of intellectual property is a big thing. He is doubtful that this will get solved two weeks from now in Argentina. The markets for the next little will find this to be a significant negative factor. The price of oil for the last 8 weeks has been making lower lows and lower highs. He does not see that it will collapse now. We will probably get a tradable bounce in the energy sector. As global numbers have come in the last number of weeks, purchasing managers are cutting back. The Fed is indicating they cannot raise rates as much as they thought they could do a month ago.

Oil and Natural Gas – An ETF for gas and light oil. There is a split between traditional oil production and natural gas. ZJN-T covers this in Canada. XEG-T is the broad Canadian energy market. ZEO-T is equal weight. There is no split between heavy and light oil via ETF.

Why are Natural Gas stocks dropping in the face of a boom? They are outperforming the oil stocks. When people sell an ETF they sell the whole sector including the gassier companies. These stocks should be going up. The market is considering this spike in natural gas as a non-permanent thing.