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

ETFs or Mutual Funds? These can coexist together harmoniously, and are not mutually exclusive. Typically, you get smaller size portfolios in mutual funds giving you some trading efficiencies. Also, mutual fund fees are going down, and the industry is definitely undergoing some significant shift.

UK £ if rates are cut &/or a faltering UK economy? This is a good currency to own longer-term. Macro fears have really trashed a lot of assets. Some of these currency shares offered in the US or Canada are good way to do it. He also likes UK equities. If he only liked the £ he would be long the FXB (FXB-N), but because he likes UK equities and the £, he is long the EWU (EWU-N).

Oil? He was looking at a chart that showed how far the stocks were ahead of the move in oil. Valuations are basically the highest they have been in 40 years relative to the industry. You are obviously paying for a lot more than $44 crude. Oil prices have rolled over from the $52, and the stocks have not come back that much. He has a hard time sticking money in the sector right now.

Markets. Toronto has been outperforming the US, and a lot of that is because of the improving economic outlook. In particular, you will see gold stocks doing really well, but also an improvement in some of the base metal stocks. Also, Teck Resources (TCK.B-T) (?) has done really, really well to date.

Gold. On December 29, he had suggested that a new quarterly, monthly and weekly Buy was unfolding on gold the metal. Because of the quarterly, that typically means it usually lasts longer and goes much farther. There is more to come. We are within about 6% in Cdn$ terms, of what the old Cdn$ high was. So when you see gold stocks reporting their Q2 results for the end of June, there will be significant surprises on the upside. A lot of gold stocks themselves, even based on the Q1 results, are now producing positive free cash flow. Thinks there is still a 2^nd and 3^rd up leg in the backdrop of an overall strong equity market over the next year, if not 2.

Energy. Gas. Prices have rebounded off of their lows, and have probably moved faster than they should in Canada. He hasn’t been positive on natural gas for some time. However, natural gas production in the US has rolled over. Extremely low, almost generationally low, rig counts right now. Also, we have a hot summer. We are seeing switching from dirtier coal plants to natural gas. Mexican exports are on the rise. There is a pretty good picture taking shape. On top of it, we came through an El Niño winter very warm, and that usually gets followed up by an Al Nina winter which is extremely cold. Stars seem to be aligning for natural gas. His concern has been on excessive capacity in Western Canada, and how they will actually get the gas out. Storage are still heading towards a full condition, which will probably happen towards August. There is risk that the basis differential, the pricing difference between Alberta and US benchmarks, could widen.

Oil. Thinks February 11 $26.05 was the low on oil prices and we are not going to see that again. Seasonally he thinks we are due for a bit of a pullback, and wouldn’t be surprised to see it go through $40. He was in Calgary recently and was starting to see green shoots of optimism about the commodity. There have been more transactions happening.

Markets. Markets have been moving up quite a bit in the last month or so, and he has decided to build a little cash. Trimming some of the names that he thinks has been a little more overvalued. He’ll redeploy it when the market comes off. Has about 9% cash right now, which typically is about 4%-5%. As the market continues to move up, he will probably continue taking some money off the table in the short term.

Markets. We are not actually sure that negative interest rates stimulate the economy. People have to save more for retirement because they get a very low return on their money. If you are actually saving more than you would otherwise, you are not spending it. It is not getting results, so she is not sure that it is working. Investing in this environment is tough. The market overreacts to any idea of rates going higher or lower. It is really disruptive. She is not going to thrash around with the market, because that is counterproductive.

Precious metals? Beginning in August the seasonality is good for both silver and gold. Today there was a fairly meaningful correction for some of the stocks. Over the next week might be a good opportunity to add to your positions. A strong US$ is negative for gold and silver.

Markets. This is one of the most unloved advances we have seen in a long time, which is why he thinks the markets are a pretty decent place to be investing in right now. You have this very contentious US presidential election, we’ve had the big BREXIT scare, there are lots of geopolitical issues going on, etc. We’ve had a little bit of an earnings decline for the last five quarters. Historically, 70% of the time the market is up in a declining earnings period going forward, and this is because the market is forward-looking. On this huge wall of worry, the foundation keeps getting stronger and stronger. His 2 big concerns are European banks and the lack of performance in the US banks.

Canadian Banks? It has been a while since we have been able to say that Canadian banks have been at their 52 week high. He’s been underweight banks, and currently owns Bank of Nova Scotia (BNS-T) and the Royal (RY-T). At the end of the day, the 5 Canadian banks are in a horserace. CIBC (CM-T) and Bank of Montréal (BMO-T) tend to lag. Feels the US banks are much cheaper right now, but is not sure where we are going to see a catalyst.

Markets. We have just gone through the 1^st significant correction of a new bull market that started in 2013, when the S&P exceeded its all-time high. The US market has really chopped its way sideways since 2000. There are lots of people who have become very sceptical, nervous and bearish. A new bull market is always borne out of skepticism and a difficult environment. We have now made a new high. There is all kinds of money that is trapped on the sidelines, which is going to have to find its way back into the market. Not to mention that $200 billion that came out of equity mutual funds in the last 2 years, and chased things like bonds at 1000 year lows in interest rates. He has been fully invested since the 2^nd week in February. Markets look exceedingly good, and people will be very surprised at the next 2 years as the US economy slowly recovers.

REITs? There has been a focus on things that pay a predictable income. There is always a concern for any income investment that rates could go higher. However, looking at the history of REITs, when you had periods of months when rates went higher, they tended to do better than other sort of bond proxies. This is because of the possibility of rising rents and rising distributions. He would be more likely to focus on US REITs.

Markets. The Markets have been very calm in the light of the coup attempt in Turkey. The S&P sold off quite hard on the futures at first. People were making moves at first. There were more moves on the currency market, though. Country Specific ETFs: TUR is the ETF for Turkey. When you go into a country that is emerging, you have to ask if it makes sense on a risk adjusted basis. The currency risk defines much more of the risk than anything else. He thinks the Turkish currency will wipe out any country returns. The initial polls regarding the US election indicate Trump may not have made the best choice. The republican party is fracturing. For all the negative that Hillary has gone through, she is still fairly far ahead in the polling and that tells you that people really don’t like Trump. As long as the polls stay close it is a negative headwind for the markets.

Equity or Bond ETF for new money. Bond yields will probably stay low for possibly decades. He does not like what has happened to the long end of the yield curve. He would look at short term corporate bonds, and wait for a correction in the equity markets to get back in to equities.