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

Where to park cash? In Canada, he buys banker’s acceptances, which pay 1.5%. In the US, T-bills get them 2%.

RRSP, TFSA, or cash account to avoid an ADR’s withholding tax? Only in a cash account can you claim back the withholding tax for an ADR.

Market. He thinks there is too much emphasis on the recent slowing results of some of the monopolistic stocks. He thinks the market should focus on the broader market, which is doing very well right now. Wage inflation should be starting to show at full capacity, but so far companies are not increasing wages and that is why the earnings of the S&P companies is looking so good right now. It is good for workers as there are many more jobs and it is good for companies as their earnings improve.

Where is the opportunity? If market dropped 10-15%. But US market is doing very well. Economy also doing well with 4% Q2 growth. No value investing in this market. He’s still looking at US, less at Canada.

Outlook for next couple of months? Volatility with several different 10% declines, but these would be buying opportunities in the US. No reason to exit the US.

Canadian economy. Market’s done well because of oil prices. Though economy appears to be doing well, so many problems to getting energy offshore. “Complete policy bewilderment” in terms of competitiveness and unfavourable tax rates compared to US. Still keeps Canadian banks because of their US exposure, and Canadian industrials. Strongly overweight the US.

Canadian energy policy “bewilderment.” Political will was missing a couple of years ago, and now in desperation the only way to get a pipeline built is to nationalize it. Social license issues are not something you bring to a trade meeting lik NAFTA. Lots of policy problems in Canada.

Bank stocks in an ETF or directly for a long-term investment? There’s the ZEB ETF, but this one is expensive, and only has the 6 banks. He would buy just a couple of the banks outright, and relax.

How else to access Canadian economy beyond XIU? There are 700 ETFs and 2700 providers. BMO, iShares, and Vanguard, dominate 80% of the ETF market. Very competitive prices, pick one. He likes XIU and XIC because they’re liquid, and he can get options on the Montreal exchange.

How important is the brand name of the ETF? Doesn’t matter except what it means for the cost. Horizons are a little pricier because they have do some creative things. But no one can compete with the top 3 providers (iShares, BMO, Vanguard) in terms of cost.

For emerging markets, do you have to look country by country? When looking at EM, would buy as a block, not country by country. You want diversification. Too much concentrated risk. In developed markets, you can look at a country like Germany or Japan.

US real estate etf for income or Canadian one to avoid tax issues? Not a big fan of REITs because of creative accounting. Would rather have covered calls on a bank than a REIT. The Vanguard REIT is very well diversified. If he was going to buy anything, he’d buy that. Yes, there are tax issues.

Looking for monthly income ETF instead of a mutual fund. On the right track to get rid of high mutual fund fees. Look at XEI, good yield. ZDE is another dividend fund, with a few more banks. Down-market protection doesn’t exist in either funds or ETFs, but you are reducing risk as you reduce costs. Fund fees really impact your return over the years.

Role of ETFs in the next recession. Nonsense that next crash will be due to ETFs. ETFs are as liquid as the underlying securities. If your ETF is for left-handed, dyslexic, high-tech, you may have a problem with liquidity. But if you stick with small, mid-, and large-cap, you’ll be fine.

Growth at a steady pace for next 1-2 years? Sees it for the US. Expects volatility with this pretty rambunctious president. Always bullish on the US. Hasn’t seen anything to change his mind. US has a pro-business government, cutting taxes, and energy self-sufficient.