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

NAFTA. For now, there’s still hope. Canadian dollar has been pulling back. But the economy overall is built on a house of cards. Oil and timber exports are really holding the exports up. If NAFTA goes away, can the consumer still hold up the economy. Some risks in the employment numbers. Canadian economy is hinging upon a lot of things where there’s risk.

Market over the summer. Great summer for equities. Shrugging off things and shooting higher. Usually see market weakness between May and October, especially in a mid-term election year. But not this year. Markets continue to grind higher.

US Housing. We look for breadcrumbs to follow that will lead us into the next recession. Housing is one of those breadcrumbs flashing a warning signal in the US. In US, below average sales, above average inventories.

S&P 500 seasonality. Go into defensive plays for September. Hurdles for cyclicals like financials, industrials, and materials. But can’t argue with the trend of higher highs, and higher lows. We’re close to 3000, which will be like a magnet to the upside. For the month ahead, be a little bit cautious.

Market. The NAFTA discussions impact individual portfolios as 60% of personal portfolios are Canadian focused. If you held a diversified portfolio the impact would have been lessened – this is one of their core tenets of investing. Today, he would look at bonds more closely now as it allows non-correlation to market noise. Had an investor had a reasonable holding of US Long Term Treasuries (like the TLT-N ETF), it could have resulted in a net portfolio increase during the financial collapse of 2008.

Is than an ETF on the TSX that tracks the S&P500? If you are not inside an RRSP, the Horizon HXS-T has no taxable distributions, so it is tax advantaged. The Ishares XSP-T can be hedged for currency or not. The EQL-T is an equal weight S&P500 fund that can be bought in Canadian dollars and it gives you better representation of the smaller holdings (good if you have concern of the current FANG concentration).

Can a single ETF create a diversified portfolio? It is possible to own one ETF to get diversification. The only problem is tracking error. If the TSX goes up 27% and the global market is only up 6%, then you will have investor anxiety. You need an investment advisor to help balance this out. The HRA-T ETF is a global, equal weighted ETF that he would recommend.

ETFs or Mutual Funds? The funds on ETFs are generally lower. Those who trade ETFs, tend to trade them more often. The ETFs lack the same breadth of offerings.

Market. There was a ruling against trans-mountain pipeline today. The US is not cheap enough to sell his US dollars to come back. It could be an economic downturn catalyst but probably will not be. NAFTA is critical for us to leverage of the US economic success. He is putting client's money to work in the US. Canada has major issues. You have to be selective in Canada. You are looking for companies with US exposure, income and earnings. Today's news in the energy sector is not positive.

Canadian Banks. You always want to buy them on a pull back. We have not had one for quite some time. A 10% or more correction and he would be a buyer. In general they are not cheap enough to buy and not expensive enough to sell. You have to hold them.

Market Outlook. The US economy is doing well. The Canadian market is doing good. So, in general North America is doing very well. The yield curve is flat saying that there is no going to be a substantial amount of growth and relatively low inflation. He thinks that the Fed is increasing the rate but also reducing its balance sheet (down by $200 billion by the end of the year). This in the end is tighter monetary policy that is having an effect in the emerging markets. He thinks the Fed could not be doing both things at the same time. In 2019 the European Community and the European Central Bank thinking about stopping EQ there. He is not negative on the stock market but doesn’t see huge runs also.

How do you see gold? Real rates are positive in the US now and that is negative for gold. Gold had a run up because people believe that QE was going to lead to inflation and that didn’t happen. Gold is also now competing with other assets like Bitcoin for that preservation of value idea. There are other better places to put your money.

What happen to shares when they are bought back? Share buybacks are an economic decision that companies make. The problem with share buybacks is that sometimes companies use debt. When they buyback the shares companies retire them basically. If companies do it when they don’t have a better place to invest their money other than paying a dividend they run earnings per share higher basically.

Is this a good time to get out of all the pipelines? If oil goes up Canadian Stocks and pipeline companies will do well. We have this problem in Canada that we have this great resource and we cannot move it. It is not an easy problem to solve. But pipelines that have the assets in the ground are more valuable because of this. This is why we own Enbridge (ENB-T).

U.S. markets hit another all-time high today: 4.2% GDP growth in Q2. What's not to like? For the bears: we can't go from 4.2% GDP to negative instantly. Yes, there'll be a recession at some point, but he doesn't think it'll be soon. Maybe Canada is producing above capacity with a lack of truck and rail capacity with some inflationary pressure. Debt will bring the party to a close in both Canada and the U.S.--personal, government and corporate. Gradual increases in interest rates will eventually force people to wake up to the cost of their mortage. He warns people about debt. In good times, pay it down.