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

Is it a good strategy to hold half-fixed income stocks and half-dividend growers and generate income this way in a rising rate environment? In the past two years in Canada, the bond index return is about 0%. You need the return to be 4% which you can get in preferreds without the risk. If you have a dividend grower, find a stock that also has earnings growth, like AQN-T.

Market. He is not lightening up on any position today. He has taken a defensive stance over the last few weeks. He has moved away a bit from tech, industrials, financials. A potential trade war with China could be a cloud over stocks for the next little while but building tech products at the lowest price is good for everyone in the world. He thinks earnings will be great this year and continue to be good in Q2. Tariffs, though could put us into the feared recession. Domestic names in the US have done quite well where they don't deal with borders. Don't fear equities but have a basket that includes unloved sectors.

Split Share Yields. When you have a portfolio of securities that pay a high dividend, you create a split share to allocate the growth and the dividend of the company to two different securities. One is a preferred and the other is a capital share.

Educational Segment. The Best Market Return Indicator. The percentage of three asset classes that are part of the household assets. The value of your real estate, value of your portfolio and all liabilities. When everyone is in and have a high percentage of their household assets invested in markets, usually for the next 10 years, it is just less than 4% annualized. We are in a period now where a high percentage of household assets are in the market. This indicator has a 91% correlation to returns. This indicates we are late in the cycle.

Market. Over the last couple of weeks we saw trade, trades, trade and today we are down. We are sitting in the DOW right at the 200 day. We have not had a close below the 200 day since 2016. If it closes below there then we will test the 200 day on the S&P and if we break that we look at the lows from April and May to test out the downside. In Germany there has been pressure within Merkel's party. If things come apart in Italy it does not look like Germany will write a cheque for it. The more pressure we have on the US dollar, the more pressure we will have on the financial markets. Mid-2019 is where he thinks the recession will come. The market peaks about 8-9 months before a recession is labeled. By that time the markets are down 29% on average. The market peak should be early next year.

Vanguard double taxation of some ETFs. There is a withholding tax for an ETF wrapped within another ETF that also has withholding tax. He suggests calling Vanguard to discuss it.

Gold and Gold Equities. It offers a different path of return. It offers no yield. He added to gold recently. He sees a trading range for 6 months.

Today's 2% drop in North American markets, triggered by Trump's tariff tweets, is a short-term hiccup. The more noise we hear from him is finally taking its toll; the Dow is down 1,000 points in short term. There'll be more downside about 5%, but long-term we're okay. The market needs a sell-off of another 1,000 points, then it'll be calm and steady before we see new highs. We have a lot of steam left, but need to blow off stale air now. He doesn't see a recession in the near future, just a correction, which is healthy. The TSX has been faring better than the American markets lately. It's amazing there's been so much volatility in cannabis stocks when there hasn't gotten under way yet. There's a lot of eurphoria now; he's in a wait-and-see mode.

Market. Lots of noise out there. People are positioning for Trump. At the end of the day you have to ask, are sane and rational people going to get self-inflected wounds? There is going to be drama along the way, but he thinks in the end what is going to end the cycle is what usually ends the cycle which is interest rates or extreme valuations. None of which are really flashing now. Some areas, like the TSX, are undervalued. OPEC has engineered a false market for oil. Differentials in Canada are narrowing and if that continues there is going to be great opportunity in Canada for the oil patch.

Recently retired would like to know options to get 5% return. In preferred share-land there are many names that can give you 5%. He likes the rate resets. Many issuers, banks, insurance companies, etc.

All the utilities have been going down since mid-last year, when are they bottoming out? Great question. Area that used to be a big part of their portfolio. They reduced it. He thinks it is close on the growy names. On the ones that don’t grow, there is still some more downside to go.

Market. Based on his recent work, he thinks this is the greatest credit boom and possibly greatest bull move of the stock market. Even if the forward interest rate curve inverts, there will be substantial credit available in the shadow banking space. He thinks we are another year and a half away from seeing rate curves invert. Pension funds have large shortfalls and have hurdle rates of 7% returns, which must be earned by fixed income (i.e. bonds). This group is lending to credit-worthy companies. This could eventually lead to the largest credit bust in history, as these groups become more and more leveraged. He prefers the US market, because the limited number of quality Canadian equities makes the good ones very expensive compared to their US counterparts.

Currency balance within your portfolio. He likes the US market. With today’s currency, you will be paying up for US holdings. As a Canadian having all your money in the Canadian dollar is very risky. Adding US dollars helps reduce risk. You will find cheaper valued stocks in the US, due to the premium paid for quality brands in Canada – and the US companies will be bigger and better. He likes 60% US dollar exposure. He thinks $0.80 CAN/US would be a good time to buy US dollars.

Trump threatens a tariff on EU cars: He's telling the G7 you're on your own. He's unwinding a global system, and there's further fraying from other parties, such as Italy. Gold is seriously undervalued and should be at $5,000. Western banks aren't valuating them anymore. The monetary system needs to change. Markets aren't working as markets anymore, because ETFs are manipulating them. Cryptos are not competing with gold, but currencies. Outside gold, he sees anything that's inflation-driven. All hard assets and real estate should do well. He sees opportunity, but not where it is right now, but later. What problems lie ahead considering all the debt there is? Investors are not considering this.

Would Treasury Inflation Protected Securities (TIPS) act as an inflation hedge? He hasn't looked at TIPs in a while, but they should. A concern is whether the value is being generated from futures or options? How? The reason is that if there is the market go negative, you could run into trouble and lose your investment. He has looked at TIPs in the past, so he can't say yes or no now. If it's generated by an options-driven vehicle, then you're okay. He thinks the best hedge against inflation is gold and gold producers.