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

What to move from insurance into. Insurance has not been fantastic, but it has not blown up like Tech. Insurance flattened out. The picture is not that great for them. He would not want to be overweight on them.

The big sell-off today was caused mainly by the strong U.S. dollar which is inversely correlated to China. Anything not U.S. has been hurt. Since 1946, 12-month returns after the U.S. midterms are 100% positive at an average return of 10.5%. The dollar is dragging markets down as investors flock to it. Also, American companies have been repatriating US dollars in massive amounts since January. There's a massive increase of 7-8 times compared to previous years. Add to these worries over US tariffs on China, which he feels is temporary. Base metals today actually performed well, so he sees this as investors viewing the US-China standoff as a game of chicken that both sides will push to the wire. He feels there'll be a resolution. The market is looking for a place to hang its hat, because the market has been oversold.

1. Political cycle effects on markets: Optimistic that markets normally increase after these midterm elections. Broadly, there are opportunities in the markets. It was time for a pullback. Canada is a bigger concern than the US. In Canada, there are some sectors that are trading at very high multiples and some that are trading at ridiculously low multiples. Canada seems to be all over the place.

Biotechnology Sector. There are a lot of good buy opportunities and good values in the US. He is generally over weight this sector. He likes Regeneron Pharmaceutical, Biogen, Amgen, and Celgene. He is very bullish in this sector. Expects growth in this sector over the next couple of years.

What’s the problem with the markets? Oil is coming off because of supply/demand. It may not be over yet. Pipeline capacity could support this argument. Oil trading at big discount is the problem, plus environmental issues. Higher interest rates in December. Thinks the Fed will do only 2 next year. Doesn’t think 2020 will be that great, that could be the recession. Could have a rally in the meantime.

What should the Fed do? They’ve kept rates artificially low for a long time. They’re doing a good job. Real problem is they’re raising rates and de-levering at the same time, and there’s no playbook for this. Rates have to normalize because the economy’s doing so well. He’s on the side of the Fed.

What’s the best way to short ETFs? Just buy a put option, to keep it simple. A number of ETFs out there are short, but he wouldn’t do that.

If bearish on a company, buy the puts back, short the stock, or wait? Once you’ve sold the put with the obligation to buy, you have to assume you want the stock. But if you’ve changed your mind, just buy it back at a loss, and call it a day. Don’t try to short it. Distance yourself from emotions.

Is the recent volatility due to algorithms or trade fears? October 10 dip was algorithms. The corrections that used to take weeks, now take hours, and there’s nothing you can do. You just have to be able to weather those movements. The main job of a financial adviser is managing the emotions of investing.

Do you look at the technicals in an options trade? It’s hard to trade options technically. But he’d use Bollinger bands, to give him support in his strategy of where he’s going to trade in a range.

Add to or sell preferred shares now that rates are normalizing? Go with floating rate preferred. CPD is an iShares ETF that covers this. Floating rates will bump up with interest rates.

Can you recommend a bond ETF? XBD from iShares, which tracks the Canadian corporate and government bond universe. Duration is about 14.5, so be aware that with a 1% rise in rates it may take a 14% hit.

What’s the lowest risk for a retiree? GICs. Ladder them. Takes the risk off the table. They don’t carry the same emotion as stocks. After that, he would buy the Canadian banks.

Market. Today's event is BBD.B-T. The biggest story is that they are a money pit, taking tax dollars over the long term. Governments just keep throwing money at it over and over. With all the money put into it, where did all the money go and what did tax payers get for it. Their turbo prop is being sold. You have business jets, part of the 'C' series and the transportation business. Every business they are in is political and they just keep bringing the revenue in. This is a trading stock and not an investing stock. The street opinion on this stock is to outperform/buy and nobody ever changes their opinion.