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

Markets. The central bank of Canada insists the economy of Canada’s is really strong. The US wants to raise rates so there is something to cut later and he thinks it is really the same in Canada. Energy sensitive provinces had somewhat of a rebound. The government is extrapolating out to the end of the year, but now energy prices are going back down. We are the only real petro currency in the world, after Mexico and Norway. The Canadian market is weird compared to the rest of the world. Outside of our biggest sectors, there are world beater mid-sized companies in Canada. A lot gets taken over by bigger entities. Canada is not a sector by sector thing. The good sectors are worth 15% of the index.

A recommendation for an Index Fund for Oil. Don’t get a leveraged one. He is not that wildly bullish on the price of oil right now. The price of oil is going to bounce around. Rebalancing in a leveraged fund could cause you to lose money even if oil goes up.

Markets. It is a special day today, July 17^th. On average the S&P over the last 20 years has peaked on Feb 17^th, then down until the middle of October. Today is the average day for the start of a correction. For the TSX it is similar. It peaks about July 17^th. There is volatility and there is lower volume. Volatility starts rising about the beginning of July. The markets bottom in October. The VIX is doing about nothing right now. The spike in volatility has not happened yet this year. All this means is a selloff to come. There are some interesting buying opportunities.

Educational segment. The VIX. It often rises in the summer, connected to a correction in the markets. This year it could be a problem in Korea or a problem in the congress of the US. Not everything goes down when you have a spike in the VIX. Gold. When the VIX spikes in July to October, so does gold. We are seeing early signs of XGD-T bottoming. Momentum indicators are starting to turn higher. Stocks are moving off their 20 day moving averages. There are early signs that gold has bottomed. Look at bullion and stocks and pick the one that is performing the best. It looks like gold stocks are the way to play the seasonal trade this year.

Market. We are experiencing the 3^rd largest economic expansion in history, and if it goes to 2019, it will be the longest in history. The market has tripled since the financial crisis and many investors are concerned that it has gone up too far and too fast, and that there is going to be another major correction. That is making this the most unloved market that he has ever witnessed in 40 years. Feels it bodes well for the longer-term and doesn’t think it is over. It is hard for the US to do something, and not have Europe come into play, along with the rest of the world, so he is not sure there are going to be any further interest rate hikes for the rest of the year.

Obtaining “implied volatility ratings” for Canadian stocks? Implied volatility is what is used to price an option, and is based on how volatile the underlying security is. Volatile stocks command a higher option premium. The easiest way to create a list of implied volatility stocks, is to look at the most volatile stocks in the Canadian market. Gold stocks would typically be in the top quartile of volatility. You can get implied volatility numbers if you have a discount broker that provides you with a quote machine, which will, in most cases, show you the implied volatility.

A Covered Call in a registered account. Buy back the Calls and roll them out, or just let them get called away and write another Call? He does a lot of rolling, which is usually a good thing as it means the stock is going up in value and you crossed the strike price and are going to get called away at a price a little below where it is and you want to roll up to a higher strike price. It really depends on how comfortable you are with the stock, and is it a price point where you normally would’ve sold it if you didn’t use options.

Covered Calls Comment. One thing you want to look for in a Covered Call is a good quality company that has upside potential and has enough volatility in it that the option premiums are valuable enough that it makes sense. Tech companies fill that bill on so many fronts.

An ETF representing the US defence industry? SPDR S&P Aerospace & Defence (XAR-N), iShares Aero & Def. (ITA-) or Power Shares Aerospace & Defence (PPA-N) all do the same thing.

How do you determine if an Option Bid/Ask is overpriced or not? If you have a very wide gap between the Bid and Ask price of the option, you may be better off avoiding the option, because you are going to have a challenge trying to exit the position later on.

Energy. From a technical analysis perspective, oil hit a bottom in June at $42. Despite that oil can be found for less than $40 in a lot of US oil sands locations, this is more of a general economic reflection. The stock indices of emerging market countries, have broken a six-year downtrend, a reflection of an improved economic activity. With that comes a rising demand for commodities, including energy, and he thinks oil has bottomed at $42. This is in a band of roughly $42-$56. Whether it goes to the top end of that band or not, it is a significant percentage change and would be very beneficial to a lot of energy companies on the TSX. If we get an increase in overall world demand, that should help with the overall tone and hopefully with the price of oil.

Markets. The US is expected to raise interest rates in September, and Canada follows in October. The banks should do better because the spread widens for them. The curious thing is that almost every stock going up in the past few days are reset rates preferreds, which are doomed. People are expecting rates to go higher and higher, but they won’t go that much higher. Mines and metals are beginning to glimmer a bit without anyone saying very much. Hard assets are going to go up a bit with inflation and interest rates.

Electric cars in cold weather? He wouldn’t worry about that. They’ve mastered the cold. He hasn’t heard that they don’t work in cold climates. Also, we could probably need so much energy to pump into the batteries that we will definitely be back to the coal mines. The difference between electric and internal combustion, is that in the latter the car itself makes the power. Whereas with the electric the energy from another source has to be created. There might be a crisis, but he doesn’t think it will be the cold weather.

Markets. He has a long short strategy to help him sleep better at night. He is agnostic to what the market is doing. Long has market risk, industry risk and industry specific risk. He isolates the company specific risk with pair trades. He pair trades within an industry space. A Mid cap is $200 Million to $2.5 Billion. There are about 450 mid-caps and 200 if you take out resources.

Economy. The Bank of Canada’s economic outlook is surprisingly rosy. He shares that outlook, and on a global basis as well. However, you are not going to see the kind of robust growth that you saw in previous cycles coming out of a growth period. Expects we are going to have a 2%-2.5% growth globally. Thinks we are going to have lower inflation for a period of time, so doesn’t think rates will be going up as aggressively as people think.