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

We are heading for a recession as the next economic cycle and this may be the fear-of-missing-out stage. He would not chase things. Be more conservative. The BMO covered call ZWE-T – more than 6% yield. It should be a good holding for the next 6 years. ZWC-T is also good – more than 5% yield.

An Inverse ETF. Only unleveraged ones are recommended. He would use SH-N for the S&P, PSQ-N for the NASAQ and his favourite is RWM-N for the Russell 2000.

Educational Segment. Guest Tim O’Brian from DBRS. Credit ratings try to look at the most likely scenarios. They also stress test. They try to get a reading on what the fundamental business strengths and challenges are plus financial risk profile. From this they come up with ratings. A stock can go up based on fundamentals but the credit rating may not change. You can go to their web site to see all of their press releases on credit rates of companies.

Market. Dividend stocks are out of favour. NAFTA has a lot to do with this. International capital inflows are impacted. A negative outcome could send the Canadian dollar down. This applies to all Canadian stocks but includes dividend stocks. He suggests to just stay the course. The US market should smooth out. You are getting a lot of opportunities to get into these stocks. You can get a yield of 4%+. He has been increasing his cash position from fixed income and is redeploying some of it into capital markets such as into ENB-T.

Canadian Banks. The dividends will continue to grow. They have great pricing power. He would not sell. These names look fairly cheap. Interest rates rising should be good for the sector.

Preparing for Retirement at this Point in the Cycle. If you get the majority of the income from your portfolio yield then you don’t have to worry so much. Dividend stocks are trading at the same point as when bond were at 7%. Your portfolio yield should be growing over time. Your portfolio cannot be too aggressive at this time of the cycle, however.

We had a big day on Friday, so he was unsurprised about today's slight pullback. We're seeing good global growth. S&P is trading at 17.4x. European companies are enjoying better earnings growth. Topline growth in US happening because of global growth. We'll see higher interest rates around the world and slightly higher inflation. So, the market is adjusting. He looks at the U.S. and Europe. The U.S. still has cheap stocks in some areas. The UK is one of the cheapest markets, because of Brexit. Europe has massive exporters--the whole world is growing now, unlike five years ago--and German, French and some Dutch companies will thrive. Japan's ROE is not as strong as other parts of the world, but they are big exporters. We'll see also what happens to the Yen. In Canada, we carry a lot of mortgage debt which is not necessarily bad debt. People can cut back on things like eating out if interest rates rise from, say 3 to 5%, but it's a different story if they lose their jobs and can't pay their mortgage.

What will happen to Canadian and America banks if NAFTA collapses? Canadian banks are at more risk. Ontario would face a tough time, because a lot of jobs here are tied to NAFTA. Canadian banks also trade at a higher multiple than U.S. ones. The biggest ones down there are more global than the Canadian ones, and the American ones have large capital markets businesses. Ontario may tip into recession. But he doesn't believe NAFTA will fail. NAFTA needs some revitalization, but all three countries know it's good for them. It takes time to revise the deal.

Nothing makes sense as an investment today except gold. Thoughts? It's wrong to own only gold. Gold was supposed to rise because there was going to massive inflation, but that hasn't happened. Gold is supposed to "work" as everything else fails, but that just hasn't happened. Inflation isn't actually rising if you look at the yield curve of the bond market flattening. Also, gold is held by those who think the world is falling apart, but now Bitcoin has replaced that and become gold's big competitor.

Market. He is over-weighted away from fixed income right now as he sees a rising interest rate environment and does not see deflation anytime soon. Mortgages and principal protected notes are better alternatives for fixed income investing. He is staying away from government bonds. Even in a recession (GDP declines in two consecutive quarters), he only sees a 20% potential downturn as a black swan event. He does not see a trade war with the US as being likely.

Can Trump win a Trade War? – He thinks free-trade is better for everyone. The major losers would be European Union (where 21% of steel imports come). If it happens it could be disastrous, but he does not expect it to.

Bitcoin Comment – He said back in December the price of bitcoin would collapse. He built a pricing model using the adoption rate, money supply, and other factors and calculated a forecasted weighted average value. Current bitcoin prices of $9000 US, he says, suggests an adoption rate of 40% for bitcoin and a 25% likelihood of it happening. He sticks by his thought that adoption will not occur near this rate, therefore, the current valuation should be around $500 US. If you are buying it, you are expecting growth in the adoption rate.

Legal marijuana stocks to buy – This is the toughest target to hit, he says, with 15-20 players in the sector. He would buy the HMMJ-T ETF, to avoid unknown factors in one company. This is the safest way to play it right now.

Tonight was a special Talking Tax show. No opinions were recorded.

Market. Trade threats from the US don’t worry him. It is NAFTA and especially in the energy space. It is a guess and he is waiting on the sidelines to see what language and body language we get. Short term we go a bit to the sidelines. In the long term you have to pay attention and be aware of what it means if something changes. Oil has doubled since January of 2016. The energy index is only up 8%. In the S&P the commodity index is at multi decade lows. We need to see a few quarters of results before the market accepts the new price of oil near $60. OR-T is investing in the Yukon. The reaction has not been too positive. He thinks this will be attractive to seniors in the next few years.