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

Canadian dividend paying ETF? He doesn’t do ETF’s for dividends. Prefers buying stocks one at a time. You can’t go wrong buying good stocks. He would be looking at 1 bank, 1 utility company, and 1 REIT. He would buy BCE because of its very high dividend yield, Fortis as a Canadian utility, and probably National Bank of Canada as well as H&R REIT. This will probably outperform an ETF, but you will have to pay attention.

Canadian Economy.The strength in the Canadian economy is one of the biggest surprises for financial markets. His outlook is fairly strong. It is on pretty solid footing. Oil prices are now back over $50, which is stabilizing things in Western Canada. There is continued infrastructure spending across the country. There are a lot more hiring signs around, so employment seems to be strong. Minimum wage increases in different provinces will affect things longer-term, putting pressure on businesses and earnings, which could be a problem for the stock market and some of the retail sectors. It probably also drives a fair amount of automation through some of those lower skilled jobs, and could sow the seeds of another employment downturn 3-5 years out. In the meantime, it is a good thing because they have got strong employment so those wage pressures will be pushed upwards through the whole system and should be good for the consumer economy, but eventually there is a limit to that.

Energy.With higher oil prices there is concern that US producers will tend to open the spigot. This week, the US added rigs for the 1^st time in about 8 weeks, and prices became a bit soft. However, he is looking positively at the Brent price, which has moved up over $55 in backwardation, which typically means the stock market is getting tighter. Also, there are increased US exports, which is really needed to clear the inventory balance in the US, moving barrels from West to East. As long as the demand picture remains solid, he doesn’t think US shale can really do that much more at $50-$55, but if it gets much more above that, there could be some additional production come on.

Market. Market expectations on tax reform were for nothing getting done. Now it looks like they will put all their weight in getting a tax package done. Whatever they get done should be disappointing and we should get a sell-the-news reaction. Over the last three months earnings revisions have gone down on the S&P. Canadian tax changes will mean nothing to markets initially but over the long term it may discourage the Canadian entrepreneur. The government of Spain may fall as a region tries to separate but markets are not reacting.

CAD$. On the rate hike front, the BOC is more likely to match the US Fed. He would not look for an October move -- December maybe. In the next 6 months the CAD$ will go from 79 to 83 cents. Below 80 cents he wants to be hedged. He is fully hedged today.

Bitcoin. Governments don’t control it. He believes we are moving to electronic-only currencies globally. He does not think governments will allow alternative currencies with unlimited amounts in circulation. Electronic currency gets rid of the gray economy. GBTC-N is a speculative instrument.

He has been cautious for a year and a half. There are defensive things you can do. He runs portfolios with half the risk of the general market using covered call strategies, for example. Make sure you are globally diversified. Don’t sit in cash and wait for a pullback. It may be 2019 before we get a pullback.

Educational Segment. (weekly series) What Investor Personality Are You?: 4. The Independent. A lot of behavioral learning has been incorporated into the body of knowledge. The independent is a BNN watcher, reads the paper and is interested in being involved in the investing. These investors are susceptible to a self attribution bias – they take credit if it works and blame the other guy if it doesn’t. It causes portfolios to be concentrated. They should focus on diversification.

Market. We are into 10 dangerous days. This is a time when companies give negative guidance and analysts reduce earnings estimates. We had hurricanes and earthquakes this year. After that things look better. We are about to enter the period of seasonal strength for US and Canadian markets. It takes until the middle of October for the strength to start. It should happen again this year. The first quarter of next year should be even better.

Oil. We are starting to move into the trend already, over the last couple of days. The period of seasonal weakness is coming into oil. Stay away from it for now as well as energy stocks. Late January we should go into another period of seasonal strength until May.

What is the most seasonally predictable? The base metals sector is quite reliable. Stocks are more predictable than ETFs. Commodity prices are more reliably seasonal than stocks.

Gold.Exploration has been falling from its peak in 2012 at about 20% a year. Most of this was due to falling commodity prices. At one point, in the late 90s and early 2000s, Barrick spent 8% of their revenue on exploration, and are now spending 3%-4%. They seem to be less interested in exploration and more interested in optimizing their current assets and are focused on their core assets, which worked at lower gold prices. He is looking more for those assets that work at $1200, which are not being found, because no one is doing exploration, especially grassroots exploration.

Market.This is supposed to be the season of volatility, but where is the volatility? It hasn’t spiked in September, which is supposed to be the weakest month of the year. It looks like the S&P 500 is going to go with a 2% gain, and the TSX is even better at 3%. This just speaks to the fundamental backdrop in the economy right now. We are seeing phenomenal manufacturing numbers, and are reaching a point of full employment.

Energy. We are beyond the period of seasonal strength, which just ended recently. Between the middle of August to mid September is the period of seasonal strength. We are getting into the maintenance season. Hurricanes have always played a role at this time causing supply disruptions, which tends to drive the price of oil higher. We might not see this come back until November, which is the end of their historical maintenance period. There could be some volatility. He would be cautious.

Consumer Spending. This is showing the weakest year-to-date performance in decades, and we are also seeing that in terms of vehicle sales. Vehicle sales and restaurant sales are the most discretionary items of consumers’ budgets. Has also started seeing weak housing numbers as well, and that predates the hurricanes. We are coming into the 4^th quarter, which is heavily driven by consumers spending. If we are not seeing it coming into this period, is it really going to materialize? He would avoid the sector or at least market weight it. Certainly wouldn’t overweight it. Look towards industrials and materials, the things that will really benefit from that manufacturing push.