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

TFSA – What to put in it. The US market is outperforming right now and it could last a couple of years. Over the longer term, you want to look at a worldwide index. If you only want one ETF then you want all the countries. Covered call strategies are great for extra income but if you want long term growth use a non-covered call type.

Market. Not uncommon this late in the cycle to see this type of volatility. Gives investors an opportunity to buy some of the stocks that were hit hard. Seeing a shift from tech into utilities and more defensive names. He doesn’t see a case for recession until 2020. He is long on equities, probably more in growth and cyclical. TSX is down 8% year to date. We have lost a little competitiveness. There are still a lot of good companies in Canada whether it is financials or utilities. Was probably a good year to hold more cash. If you are a long term investment, it is just a blip on what should be a longer term up.

Government commented that Canada is operating at near capacity? Economy is not yet firing on all cylinders. We are seeing some economic growth but not as strong as it should be. Seems to be a tale of 2 countries between the east and the west provinces. With respect to energy, we are over supplied and cannot get our product to market. He would look at companies that have some refinery capacity in the energy sector. He would just have a small or building position in the energy sector.

The Bank of Canada just raised interest rates and said that the global economic outlook is okay. But high debt loads are a concern here and everywhere. Emerging markets are having trouble repaying their debts (especially in US
dollars). We're getting to the end of the cycle, so let's hope that the result isn't as damaging as the collapse 10 years ago. That said, cycles may be getting longer; in the early years of this recovering it didn't even feel like a recovery. The
higher U.S. dollar creates stresses around the world. This is a time to be cautious in the market.

Today was a rough ride for stocks. We've reached a turning point in sentiment, that's for sure. The markets took out the lows. We're in the middle of a correction, just like in January. The lack of volatility has lulled some investors. We're not out of the woods yet. The TSX is down 8% YTD. Maybe we could rally by the end of 2018, but to recover that much is a tall order. He expects Canadian earnings, coming in early November, to be good. The US Midterms are in two weeks, a time which is usually good for American stocks. He thinks the Midterms are a wild card. Maybe the Democrats will win, though polls have been wrong. Canadian interest rates went up today. That's the right move. Unemployment is at historic lows and inflation is still contained. Low rates are not needed anymore.

DOW is down 300 points at the opening today: It's a broad sell-off. The long-awaited correction is happening, but a correction never feels good when it happens even if you're expecting it. The market needed to sell off. It's a cleansing and good to get out of the way. China-US trade uncertainties and the US 10-year yield is over 3% are among the long list of reasons. The volality is the price we pay as investors. But it's uncertain that corporations will spend money with these ongoing trade tensions, thus freezing corporate investment. The S&P is barely up this year, but investors won't feel any gain. The TSX suffers pot stocks sell-off which is inevitable. They are higher beta. But even if the market wasn't selling off, cannabis would still come off--a correction in cannabis was due.

What's a long-term dividend play? Spread it among the Canadian banks but not just one. This lessens risk. CIBC is the cheapest. Also buy BNS because they've been beat up and the price is low, then RY or TD for their US exposure,

Market. The fact that the Central Banks are raising interest rates is causing lots of volatility in the markets. More in the US than in Canada. Household debt is extremely high in Canada. If the US economy starts to slow down the Fed will change plans, otherwise they would stick to the trajectory that is now. He doesn’t see a recession in the US for at least a couple of years. Canada is probably more likely given the household debt situation and the Energy sector. But he doesn’t fear that scenario now as interest rates are still at relatively low levels.

What is best to hold now, perpetual preferred shares or rate resets? Very much depends on your outlook for interest rates and the quality of the preferred shares. He sees them lifting another 1% - 1.25% from here, so he prefers the resets. He suggests having the near duration resets and a few perpetuals. It is a timing game. Tricky.

What bond do you recommend for a person that wants to deploy cash? The bond market is tricky in a rising interest rate environment. You should stay short duration in this situation. It depends also on what type of risk you want to take.

Can you recommend a rate reset preferred with a minimum yield for conservative investors? He has many options, but he would go to a BCE Inc (BCE-T) but also he would look at an ETF as well.

What is your pick for the banks? He only owns TD Bank (TD-T) of the Canadian Banks basically because of their exposure to US. They have an excellent Management team also.

Market. The Chinese government has floated the idea of lower personal tax rates. Trump talked of another tax cut for the middle class over the weekend. They should have a deal before the US election. You are going to see a lot of increased market volatility due to trade issues with China. You can ignore one or two but going into the first quarter of next year there is a good case for more volatility. The BOC is talking about raising rates. They are going to gradually raise rates, they indicate. If the US raises rates 4 times in the next year he thinks Canada will do so less. There is no reason why they will not raise interest rates this week.

Educational Segment. Political polarization. In the long term it will start to weight on markets. He looks at the risk side of the equation before looking at potential returns. Governments slapped the world with a massive amount of debt after the financial crisis. We have a credit crisis coming, but you can't time when. The math does not work. Governments have to work on balancing the books. He thinks the US lower house will move to the impeachment of Trump next year and that the house will be democrat controlled after the election (6 in 7 chance).

Market. The market will go down at least 20% before the end of 2020. He is not sure if this is the first part of the fall. He still holds to his prediction. It would be a bear market. The problem in the US is that what Donald did was short term and now the debt has continued to go up. He believes Italy will have major problems at some point. We may be in worse shape than in 2008.