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

Marijuana stocks. When you invest in commodity stocks and that commodity keeps falling, with marijuana to fall to $7/gram, you don't want to be in them. At least the ETF HMMJ-T gives you broad access to this space, but he wouldn't be in it at all. The market value of cannabis nowhere resembles what the market could be in the near term. There are few competitive advantages and these business are at over-capacity. Eventually these stocks will make some money, but he'll stay away from this for now.

Gold. Why would someone invest in a gold company as opposed to an ETF? Individual stocks pay better returns. He doesn't own any gold stocks, just some bullion because gold holds it value in periods of panic and considered a hedge against inflation.

Recommend a REIT with 10-year horizon? REITS are a great source of income, but have recently sold off due to interest rate fears. REITs should make up 5-10% of a portfolio. Start with an ETF, like ZRE-T to get into industrials, apartments and healthcare, or get internationally diversified (i.e. Brazil and Germany) with NWH.UN-T.

Volatility. Commenting on the current pullback and volatility, he says that people are paying too much attention to short-term price action. Over a few days, the market can drop significantly and then come back. The last few years have been unusual in having low volatility and no negative years (years in which the market ends at a lower point than the previous year). It is normal for the volatility to come back.

Yield Plays. The pullback is creating yield opportunities as it drives down the price of stocks. In the decline of 2008, the Canadian banks were paying 5% dividends. There has been a significant pullback in the price of Telcos, as much as 9%. This has to do with rising interest rates, not with the business itself. Higher yields as a stock pulls back must be evaluated in the context of a rising interest rate environment. If there is no possibility of growth of the company or of the dividend, the price of the stock will drop further as bond rates rise.

Canadian Banks. At this time, he prefers Canadian banks to U.S. On a valuation basis, U.S. and Canadian banks both trade at about 12x earnings. The big U.S. banks cheaper than Canadian banks a year ago but they had such a run that the two groups are now comparable. Canadian banks pay higher dividends and the Canadian investor is better off receiving the dividends from Canadian banks for tax reasons.

Canadian-Based North American Dividend ETF? He suggests looking at the Vanguard and iShares websites for currency-hedged stocks.Unless you have a clear view of where the relationship between the US dollar and the Canadian dollar is heading, having a currency hedge is important.

Interest-sensitive stocks? The price of interest-sensitive stocks, such as telcos, REITs and utility companies have dropped recently as interest rates have risen. How low they should go depends on interest rates, on what’s happening with the industry as a whole, and on company-specific factors. To protect yourself, look for companies that have growth prospects to help their share price appreciate. This can help offset some of the downward pressure on the dividend. Examples: Algonquin Power (AQN-T) and Enercare (ECI-T), which just made a U.S. acquisition.

Market Outlook. It feels that we are in a silly business. Everything is calm and then suddenly boom! people lose their minds, and everything is unsettling. But what has changed in the last couple of days? Profits are the same, but prices are going to do what they want. Average company in the S&P500 market is trading at 17-18 times earnings and companies like Apple or Google or Facebook are companies with huge return on capital and huge profit margins trading with slightly higher multiples doesn’t making sense to him. Should trade at higher multiples. A pullback is healthy. Marijuana stocks are basically speculation. They don’t belong in the average investor’s portfolio unless you really understand the business.

What is the best way to place stop losses in the market today? Those two words together makes his blood boil. He doesn’t let the market dictate the price at which he sells.

Market. Last week the S&P and markets around the world fell off and today we saw them buying the dip. This is normal and we have not broken any trend lines. This is nothing to be concerned with. This is a buying opportunity. A correction has been overdue for a long time. It will happen at some point but you cannot say when. We are seeing strong corporate earnings helping to keep the stock market going. He prefers the US for investing right now. He is not a big fan of the Canadian banks right now. The energy sector and gold miners are being hit.

Fixed Income ETF, US or Canadian recommendation. Bond yields are picking up so bond prices are going down. He would be cautious right now on these.

World Debt – how does it affect gold? Debt should help gold but we have not see huge moves yet. We have seen an ascending triangle in gold since mid-2016. People are starting to step in. It is really hard to time this.

Educational Segment. What The US 10 Year Bond Market says about the Economy. When the yield rises it becomes more expensive to borrow and cuts down on growth. Both the S&P and Bond yields have been going up rapidly recently, which is not normal. Now investors are concerned the bond yield moved up too far too fast. We have to be cautious here.

Market. Alberta is considered a third world country now at this point by CEOs. It will eventually come back but right now you have to be specific in what you invest in. Government has created uncertainty with carbon tax and new regulations. There are opportunities in that people have been out of the Canadian energy for so long and are starting to come back.