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

Iron Condors? A limited risk nondirectional option strategy. He finds it is never worth it, because you are getting gobbled up on commissions on 4 different sides, and you are dealing with market makers beating you up on 4 different sides, for relatively marginal gains. Don’t do it.

Buy a stock on dips or sell Naked Puts and collect the premiums? If you are a fairly sophisticated investor and like dealing with options, take your pick. Most people do this because they don’t have the cash to buy the stock. Make sure you have the cash available to back you up.

ETF which includes India and South Korea? iShares MSCI South Korea (EWY-N) will give you South Korea and iShares CNX Nifty India (XID-T) will give you India.

Market. Thinks it is going to be pretty good for the rest of the year and will surprise a lot of people. There is a bit of investor confusion. A narrative is starting to be built, rightly or wrongly, that inflation is going to come and rates are going to go there. There are certain sectors that are going to benefit from that, particularly financials. We are clearly now in a pro-growth environment. Besides the financials, industrials are going to start to do well along with materials. Energy will probably start to catch up here. It has been beaten up for a fair bit. He recently got rid of all his utilities. A lot of his defensives were pared back last week, and he’ll continue getting rid of his bonds.

Markets. We are seeing a blurring of the lines between the mutual funds and the ETFs. Mutual funds are offering index strategies. It is getting bewildering for consumers to deal with all of those issuing ETFs, which are lower in fees than mutual funds. Canada’s are amongst the highest of the mutual funds in the world. Active management has a place and a lot of studies have incorporate costs, so they show mutual funds not performing as well as ETFs because of the fees. Mutual funds work well for a lot of investors. But for specific investors, other investments work better. His economists have started to turn the corner on Canada. He is now tilting toward the TSX.

Marijuana companies. He would steer one away from here, but an ETF that is diversified would be okay, but beware it is steered toward a niche sector. They could offer the prospect of a lot of capital growth. It depends on your age. You might want to revisit this holding at the next election.

Know what you are buying. An ETF is like any other fund. Names of the funds are descriptive of the asset class, but that is not enough. Look inside the portfolio. Check the fee. Some are low, but don’t put everything on that because the advantages may not work for a very long time. Don’t be ashamed to ask for help. Make sure you are not overweighting any particular equities in your portfolio. Don’t double down unknowingly on declining sectors.

Long term investment. There are many discount platforms. You want to be globally diversified. International equities, fixed income, etc. There are very good ETFs that offer this. There are 26 providers in Canada and sometimes offer compelling strategies. For a long term, you might find that currencies do not offer any variance. You should get professional advice.

Canadian ETFs that provide tax delayed returns. He is not a tax expert. He can recommend where to look. There are swap based ETFs that track indices, pay no dividends, and the derivatives track the total return index. You end up with a capital gain only. There could be a swap fee in additional to the MER. You may get more after tax return on these.

Europe. He is feeling good about Europe. There are risk factors that may have been factored in. Europe is a great place to invest. With broader emerging markets you may want to be careful how much exposure you have.

He welcomes our new robot overload. Robo advisers will assess risk tolerance then put you into various asset classes. He likes this concept because robots never get tired, emotional, etc. They don’t make human errors. Many errors made in the investing world are human errors. This offers a high level of discipline.

Markets. The move from tech stocks into financials started last night. There was some good data coming out of the financial sector. A lot of buybacks and dividend increases from the larger banks. There had been a slowdown in the Tech space, which was really becoming a crowded space. Financials and technology are his biggest weightings. Long-term, technology will be fine, but in the interim, given that it is the end of the quarter, money is moving out of tech and into some of the more value names. If you have a weighting in technology of over 25% or 30%, then you probably want to pare back a little. However, if you have very little weighting there, then you can start to nibble at some of the tech names. There could be more of a pause as we begin to rotate into financials, or even the energy or telco space. International markets are looking very nice from a relative valuation level.

Market. Had been constructive on the “value” trade all through this pullback, but it has carried on so long, growth stocks are really moving higher. Maybe the value trade isn’t coming back as quickly as he would’ve liked. Economic growth is not going to be there. Growth stocks tend to market late cycle “end of market” behaviour. There was a similar run up in growth stocks in 2015 (healthcare and FANG stocks), and 2016 was a particularly dangerous time for those types of stocks. People overpay for growth. Canada can’t seem to get out of its own way, and we keep having mini crisis, such as theoretical housing crisis, theoretical Short positions by speculators and weak energy stocks. All these things are weighing on Canada, but if you take a step back, it really is the “value” trade.

Market. The TSX bottomed in January 2016, and has gone up fairly significantly. However, it is starting to break down in April and May. We are bumping up against the 50 and 20 day moving averages. The chart indicates a descending triangle and we could see potential downside all the way down to about 1450. We are entering the summer, which is known for volume tapering off, which causes volatility. Over the next few weeks we are into the typical Summer rally period, so from about today, all the way through to July 17 the S&P 500 goes up on average, but only 1.11%. Beyond that, you enter into the most volatile time of the year for stocks. From mid July through to October, the VIX tends to rise from the base it has carved out in the 1^st half of the year through to the height of the summer season.

Market. It has been a really tough year for the Canadian marketplace. Looking back to 2016, things were going right. Commodities were firmer coming off that terrible 2015, and the bank stocks were moving. In 2017, bank stocks are not moving and energy is down, down and down. The market is treating commodity stocks like there is a recession, but there is no risk on the horizon. That is a great dichotomy that will come unwound as the year unfolds. US technology stocks have been the darlings. The big cap names have seen all the money flowing. The bond market keeps going as if there is going to be a recession. There is a decline in long bond yields, which is a bit of a shock. He wants to protect his clients’ capital and the best way to do that is by being careful of high growth names, those trading at very, very high multiples, and look for value in downtrodden areas. When the market comes back, it will be good for the Canadian market, and Canadian resource stocks in particular.