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

Comment on currency risk. He does not recommend hedging for currency risk because so many of the companies that Canadians invest in are already doing their own hedging for currency. It is easy, and expensive, to overhedge. And even if one does hedge, that does not take away the currency risk in the stock because so many businesses are global--their currency issues impact their earnings whether an investor hedges or not. He recommends looking for good earnings growth over time. Currency fluctuations will balance out over time and no one accurately predicts the relative values of currencies over time.

Comment on bond funds. The struggle for bond investors is that Canada bonds yield only 2% and high-rated corporates yield only 2.2%. There is not much yield to be picked up if someone want to keep really safe. He recommends that a retired investor put some money into a laddered portfolio of 1-to-5 years of high-quality bonds. For people who can withstand higher volatility, a high-yield bond fund could be a better alternative. He is a bit cautious on bond ETFs and prefers ladders of individual bonds.

Which oil company can evolve into renewable? For example, BP has moved in this direction in fits and starts. A lot of oil companies engage in mere lip service, like Exxon Mobil. Total (TOT-N) however is the standout--they've created a VC arm to do M&A in green.

Stay patient. The political pendulum has swung away from "green" because of Trump, Ford et al. who want short-term, cheap energy, but ignore climate change. The Liberals' gambit with the TransMountain pipeline has angered all parties. He looks at the long-term and believes the pendulum will swing back to green. Keep an eye on the U.S. midterms. Also, India is now investing more in renewables than coal and gas. China is also moving into renewables, leaving the West behind. Technology can revolution an economy and he believes green tech will have this very effect.

What happens when PPA's (Power Purchase Agreements) expire? These are contracts that power producers sign with the utilities at a set cost at set number of years. Whoever owns the asset decides what to do next.

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.