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

Auto parts suppliers? Hasn’t owned anything in this group for a while. The sector is the statistically cheap, but there is nervousness that new car sales have peaked. Magna (MG-T) and Martinrea (MRE-T) would be 2 possibilities where they are 40% Europe and you could get decent growth, offsetting slowness in North America. Still not quite attractive enough for him.

Cannabis stocks such as Aurora (ACB-X) or Aphria (APH-T)? We know that there is growth coming. There is a medical side and a personal side, and still over a year until we get there. The stocks ran to the moon, but then that gets messed up with fundamentals. They have now all had a pullback. Wait for a little more certainty. Also, bigger is better, so Canopy (WEED-T) or Aurora (ACB-X) would be the 2 to look at, because they have revenue and a little bit of profit.

Market. The 3 US government houses are aligned, which is a big deal. That is good for the economy, and we have already seen a pickup in business in consumer confidence. We are starting to see a pickup in economic growth in the US. When the US gets better, that is great for Canada as its biggest trading partner, and that will be positive for stock markets. The corporate tax cut plan of 35% to 15% could probably be brought down to 20%. The direction is the important part. Probably most important from a tax perspective is some movement on the repatriation of capital from foreign subsidiaries.

Cannabis. If this were a baseball game, he would say we were in the 6^th inning of a bear market in cannabis stocks. They made all-time highs on November 16, so we have a few more months of downside. Thinks purchase prices for consumers are going to be high, as the government will want to protect the youth. Expects we are going to have a bad day for these stocks coming up.

Gold. This seems to trade more conversely with the US$, than it does in the context of geopolitical events. While people think about gold when they are nervous, pricing in gold really has to do more with the real interest rate of the 10-year treasury than anything else.

Markets. He is overweight in the States recently. He still sees value in the US market. If Trump is able to do the kind of things he says he will do, like lower corporate rates and so on, he is optimistic. He is not going into the US hand over fist. It is advisable to do a covered call strategy. It has been a pretty flat market in the US. People are not making a lot of money on the low VIX. The technical stuff counts but it is not a major issue to him. His first thought was to go into VGK-N but it is not hedged against currency. The UK could have issue with their currency also and may have to lower it. The ZWE-T is what he likes and it pays a good dividend.

Deep in the money options. They have a lot of intrinsic value as well as time value. Buying deep in the money is squeezing out time value. If it drops, the option can go to zero.

XLV-T is a Pharma/healthcare ETF from Spider. QRH-T is from Questrade and based on US health care. ZUH-T has a number of US healthcare holdings, hedged to US$.

Total Market ETFs vs. Large Cap-only ETFs? He prefers fully hedged. He prefers the S&P and then he moves into specific sectors if appropriate.

Long term suggestion on an ETF that would be relatively safe. He suggests multiple ETFs and some cash. He suggests one Canadian and one US index fund for small amounts of money. There is no commission for regular contributions. You have to be firm with your bank manager. 1/3^rd / 1/3^rd / 1/3^rd Canadian / US / Cash.

Market. We are still in a corrective mode, but expects to have a nice little run in May, followed by a pause, and then a pretty decent run for the rest of the year, possibly your typical stuff in October. This next run is going to surprise a lot of people. The US$ probably doesn’t get as strong as people expect.

Inflation? Expectations have been reasonably low over the last bunch of years. Today they are starting to creep up a little. Moving up to a year from now, he doesn’t think inflation is going to be that material. There are 2 sources of inflation that matter, one is wages and one is housing. In Canada, we could be at a tipping point where things cool down a bit. He wouldn’t worry about this too much.

Market. There has been a sleepy feeling in US equities, a lack of volatility. Volatility is at a low point, not seen since 1993. Stocks haven’t made a move since February. There are markets that are moving, but they are overseas, particularly in Europe, as well as in emerging markets where they’ve had gains year-to-date of 13% and 15% respectively. The US economy is doing fine and the rest of the world is struggling, but that is changing. The electoral mood in Europe is now focusing on the economy, and there are strong signs the economy is picking up. If you want to play in emerging markets, European companies have a larger exposure of sales to them, then US companies. European stocks have underperformed for 9 straight years, which leaves them undervalued.

A safe pharmaceutical company? He has a philosophy that the analysts don’t really understand large pharmaceutical companies. They are typically very complex. He prefers looking at the cheaper names, and by just buying cheap, that will bail him out. Right now the cheaper names are in Europe. He is looking at things like Roche Pharmaceuticals or Norval Nordisk.

Healthcare. There are 2 things in healthcare that are really driving the market. One is the shorter-term dynamics, and then there are the longer-term dynamics. A key driver is the aging population, which is a global phenomenon. As a person gets older and moves through the age differentials, the amount of money spent on healthcare increases exponentially. In developing markets, as your wealth increases, it is a disproportionate amount of money that is actually spent on healthcare. We are seeing some changes in the US health care act, but that has a long way to go before it actually becomes enacted.