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

Market. The S&P index trend has not been violated. We typically get week about a week before the midterm elections. Some of Canada's macro numbers are down little bit, vs. the US. Normally there would have been a weakness to the US dollar in the summer but we did not have it. A down turn would be very positive to the rest of the world. The Chinese market has been a sinking ship this year. He'd like to see it hold in this base but it is not holding. A lot of non-US markets look like this. We want to see them catch the base of Jun'17. Otherwise there are bigger issues.

AI for Technical Analysis. He incorporates AI into his technical analysis. He will hand orders to trading desks to execute algorithmic trading.

Watch out for more volatility until the U.S. midterms, just like weeks leading up to the 2016 election. He's sitting on cash. He bought a little during last week's dip, but there wasn't enough to disrupt his asset allocation. The correction was deeper in early-February. Be positioned for whatever happens. What kills the bull market? Interest rates will likely rise 3-4 times in the coming year, and there's nothing wrong with that, because it's a sign of a strong economy. But at 3%, the bond market looks attractive again. It's possible that the yield could rise then fall below 3%.

Options in cannabis trading? He doesn't touch this space. The problem is you'll lose your money. He doesn't like companies that don't make earnings. What are the rules for distribution? Overhead? Spreads? Will people buy legal weed or stick to illegal suppliers?

Floating rate bond ETFs: He has had the HFR product from Horizon for years. He likes it because the price doesn't change and has a good duration of six months. It kicks out 2-2.25%. The problem with alot of bonds, though, is that yields look good, but your actual total return is actually much lower. So, he likes floating-rate bonds.

Buy real-return bonds now? He doesn't like them, especially in Canada. Their average maturity is 13-14 years, so you'll get clobbered a rates rise. They're used protection against inflation--what inflation now? He'd rather buy a Canadian bond portfolio.

How to exercise a warrant? Warrants are similar to options in that they allow you to buy a stock at a certain price and time limit. But options are traded between two investors, whereas warrants are used to bring capital into a company at a certain date in the future. Warrants are rare now.

U.S. 2-year treasury bonds: The index bond ETFs aren't doing well because of rising rates, nor are the actively managed ones. So, he decided to buy this instead and play the short yield at 2.5% (now 2.8%). You get all your money, all U.S dollars, plus there are no fees.

Market. We are in a Twilight Zone right now – we have seen the best of the market and from here on in we are in a trading market. Investors will not buy something and hold it for five years anymore. Strange things will happen – like Bitcoin – things that happen near the end of the cycle. The Nasdaq still has rooms to fall – one nasty day does not a correction make. He thinks a pullback to 2550 for the S&P is likely.

Gold. In two years the Trump Administration will not want to have a bad economy going into the election. The FED Reserve will continue to create inflationary pressure, which will be good for gold.

Some green to end the week. Still down for the week. Tax cuts have led US to be up for the year, compared to global markets. With trade fighting and tariffs, markets are not doing as well as they used to.

Why the downturn this week? Program trading, hedge funds using computers. Valuations stretched. Worries that trade arguments will have no resolution.

Do we know what’s coming next? Mid-terms in November, and earnings season where we’ll find out if earnings are artificial or real. US banks went down, even though decent numbers. Investors are wondering if this is as good as it gets for the banks and are worried about the yield curve inverting. Consumers are leveraged to the hilt. Usually, this is the best time of year to put new money in. He has cash on the sidelines waiting to be put to use.

Buying ADRs. Have to be very careful with ADRs because they may not trade much, there’s a share multiple difference, and withholding tax, so it’s not good for RRSPs and TFSAs. Not the same as buying directly off the foreign boards.

Investing advice for these times. He did nothing this week. It’s important for investors to have that discipline and set prices if the market goes down. In the 1970s, interest rates were rising, and no one wanted to own equities. But in 2009, interest rates were 0%, and that was the opportunity of a lifetime. With markets closing in at historical tops and valuations at 25-30x, don’t be a hero. Be disciplined. Make sure you don’t have correlation risk, rebalance when necessary. Have some cash on the sidelines, so you don’t go down with the market. Be diversified as much you can, both stocks and bonds.