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

How many ETF's should you hold proportionally in a porffolio? He owns ones like LIFE-T. It's a catch-all of all the innovation. ETFs are an amazing invention, a democratic way to play various areas. But he doesn't use a broad ETF to cover, say, the S&P 500 or TSX. There are always some stocks in a market, like the S&P, that he wouldn't touch. Maybe that works in a $10K portfolio, but not a larger one.

Would you wait until NAFTA is resolved before buying a car parts maker? This reminds him of Facebook; you need negativity to give you buying opportunities, but this is premature. If NAFTA falls apart, then the Canadian dollar and the auto-parts makers get hurt. If it works, they go up a lot. What will make a bigger impact on your life: making 10-15% or losing that much? He himself doesn't want to lose, so he will wait.

Market. He is not a resource stock fan and avoids them like the plague. The money you have to raise for exploration and permitting is too much. The price of the commodity would have to cooperate over the long term and you can’t control that. You end up with an enormous hole in the ground and return little to shareholders. These are huge disconnects between the US market and the rest of the world. There are the trade wars between the US ad everyone including China. The US market is extremely highly valued and vulnerable. Tariffs are causing products imported to us to be more highly priced and to be a problem for US producers.

Cannabis Stocks. A lot of them will become commodities and become commoditized. There will not be that much differentiation. The sector is so overvalued that it is indescribable. You can’t justify these valuations based on forward results 10 years out. There will be causalities. Take a good chunk off the table. There may be a little bump when it is legalized or there may be a sell-on-news thing. It is a bubble. It is madness and greed. There will be some winners in the medical marijuana space.

Market. He thinks there will be a third wave of tariffs on China. Ultimately a deal gets done because it has to. It is just matter of timing. It will probably get done in 2019. He hopes the tariffs will get unwound with an agreement. He predicts that US congress will go democratic in November. The markets have not gone down in North America so see little risk in it. Japan has been keeping interest rates artificially low but now they are breaking. Germany has seen interest rates rising now. He thinks we will see yields drift higher. But the US consumers will keep US interest rates from increasing substantially. Bond yields will get pressured in the upcoming months.

Educational Segment. Gold and Gold Stock Valuations. Gold equities are the cheapest they have been in a decade. XGD-T has gone down to where it is approaching its cheapest ever. It is almost uncorrelated with anything. There are things that have to happen for Gold to do well. We need a debt crisis. A lot of junior stocks don’t have production, but he is okay with them.

The bond yield cracked 3% last week, so perhaps we should be concerned over the shape of the yield curve. We worry about an inverted yield curve because it foretells a recession by 12-18 months; the market rolls over 6 months before that. He's holding more cash and buying longer-term bonds. Telecoms are getting hit this year, but they would do well during a recession. He fears that when the recession hits, then households and businesses alike will carry heavy debt that's unseen in history. Japan would be an okay place to invest in a recession; they are especially advanced in developing artificial intelligence.

What's the future price of oil? He has no idea where oil is going. It's difficult to predict commodity prices. That's the truth. There are so many factors that go into the prce of oil.

Buy a bank ETF or individual banks? Unless you want to do the work researching banks, then buy an ETF of the Canadian banks. If you want to research, then look at ROE, dividend growth history and growth rate. RY and TD are the leaders in Canada.

Market. The growth names are in the US. Canada is seeming good valuations, especially within the lifecos, banks and energy stocks. With interest rates potentially going up and the Canadian government not being pro-business, the lack of growth in the Canadian markets could continue. We have to be cautious in the NAFTA negotiations to not show Canada as being against business development. The cannabis sector seems over valued in Canada and he warns of further potential downside – play it smartly. Some of these new companies will be bankrupt in a year. He is watching the US 10 year bond yield with only a 25 bps spread with short term rates as a potential warning of an upcoming recession.

New US highs reached this week. First time since 2011, he’s been taking money off the table in the US specifically and getting a bit cautious. Has been underweight Canada for a while. Now neutral on the US, and starting to underweight the US. Three things concern him about the S&P 500. 1) The advance is narrow. FANGs have created the bulk of the rise. 2) Earnings in the first quarter were a one-time shot because of tax cuts. Earnings are the fuel for equities. 3) US interest rate being high, and the S&P 500 doing well, and the US dollar going up, all investments flows have been going to the US either bonds, stocks or currency. He thinks we are coming to the end of that road.

Where’s the opportunity? We’re back in the international markets because of process of elimination. We’ve seen terrible underperformance from international markets relative to the US, so now it’s cheap. Unlike the US, that market it’s not tech oriented but more value oriented and thinks downside risk is less. As we take money off the table, he’s keeping it in cash.

What would it take to be interested in Canada again? Thinks the resolution on the pipeline issue is key. The broad TSX index is probably not going to move much it’s 40% financial and although he is not worried about the Canadian banks they’re not going to go up a lot. So it rests on energy and materials. Energy stocks are not responding to the lift of price because we can’t move the product so what’s the point of finding more oil.

Where do you stand on marijuana? If you’re playing in marijuana, you’re not investing. Remember crypto and bitcoin at year end and big swings day to day. As long as you understand that you’re gambling now and not investing it’s up to you.

Outlook for the rest of the year? Fourth quarter is typically good. But the question mark is US mid-terms in November, and then how Trump reacts to the results. It could be a tough end to the year.