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

Long Term Income ETF. It has to be diversified, have high yielding dividend stocks, and corporate bonds. FIE-T holds Canadian banks and preferred. It is somewhat diversified.

Educational Segment. Crisis for Savers. In Europe in asset classes, there will be negative real returns. They expect 4.3% in emerging markets. The buy and hold world is going to be challenged for the next number of years. Fixed income and treasuries are looking negative. Small caps are looking like zero returns. Higher volatility investments will have higher returns. Most returns come from the currency of the country.

Markets. With negative rates in some countries and zero % rates in North America, 3-4% income rates are attractive. In the developed world, there is little demographic growth. Without immigration in North America it would be half a percent. If the population is not growing then economic growth over the long run is impossible. Governments are pushing money into the economy, but taxes are going up, compliance is more expensive and these things inhibit growth. Lack of growth is why people are moving towards income. Interest rates will be low for a very long time. People will be looking for safe income plays for a long time.

Hunt Company Bond 9.625% due March 2021. (Top Pick Dec 3/15, Up 1.00% plus 9.625% interest) They have some exposure to Texas. They manage assets for investors who want exposure to real estate. This is a high yield bond, not investment grade. The balance sheet is very manageable. It is almost 10% yield and is up 1% on the capital.

Bank rate reset preferred share at 5.5%. These new products are capital that the banks issue and are more easily convertible. He owns a lot of these. They are higher up on the balance sheet. It will not reset into a yield substantially lower than 5%, regardless of where interest rates are. If interest rates rise, they should continue to have almost a 5% spread over rates.

Cott Beverages 5.375% 07/01/2022 USD. They have changed their business in the last few years so more than half of their revenue and earnings come from filtered water. It is a very good growth industry.

Markets. We are not seeing a lot of earnings growth and growth catalyst for share price appreciation. This uncertainty provides a buying opportunity. His concern is a lack of strong underlying fundamentals to justify continual rises in the markets. Feels the market is turning a blind eye too much to uncertainty, such as what is going on in Turkey and with BREXIT. In the short term, the earnings numbers we are going to get will not justify an immunity to bad news. Because of all the uncertainty in other areas in the world, the NA market, particularly the US, are by far the best versus what the alternative is. Money flow is continuing to flow into US markets because of the uncertainty. This is another reason why we could see another leg up. A lot of what we have seen has actually been less a flight to safety, but more of just the markets moving on the Fed and their language of them backing off on raising rates. In the short term the market pendulum is swinging too much, and we are a little too much on the optimism side, and not pricing in much of a rate increase. Eventually, at some point, that will come. His holdings is 2/3 US and 1/3 Canada. Starting to slowly move capital into some of the higher-quality energy names. He finds there is more to choose from in the US. Currently sitting at about 7.5% cash right now.

Risk management strategy? The name of the game is “managing the downside”. First of all, focus on high-quality names. Don’t try to hit home runs. Despite how many home runs you hit, when things blow up it wipes out all of the gains. Focus on safe geographies, developed markets, such as Canada, the US and Europe. Emerging-market capital markets lack regulation. Also, don’t bet big on any one name. He limits his exposure to only 5% on any one stock. Also, doesn’t have more than 5 names in any one sector.

DRIP program for a retiree? If you are withdrawing from your portfolio, you need to have liquidity. You generally don’t want to look at equities for liquidity, other than the dividend or the cash flow that is coming in. In other words, you never want to have to be in a situation where you have to sell shares in stocks to generate your monthly requirement. If the yield or dividend coming from your portfolio is sufficient to meet your monthly needs, then you are okay as long as you are willing to withstand the volatility. On a DRIP program there is a good and a bad. The good is that you are saving costs by not having to acquire shares in the open market with commissions attached. However, don’t let that steer you in a manner where you forgo having liquidity because all of your money is in stocks and you don’t have enough for your monthly requirement.

Adding high yield to the fixed income side of a portfolio? He is not a big fan. With interest rates being as low as they are, investors have been pushed to take more and more risks on the fixed income side of their portfolio to get any kind of reasonable rate of return. High-yield bonds carry a correlation, very similar to equities. In a bad market you can’t really rely on the high-yield bond side of your portfolio.

Buy a stock directly or sell a Put first? He doesn’t use options. If you buy the right company, it is more of getting the timing right, and even if it isn’t right you will do fine over time.

Effects of a Bank of England rate cut? Generally, when Central Banks cut interest rates, the currency weakens, meaning that the £ would sell off. The euro would also sell off. You also might see North American equities rally off of that.

In a rising rate scenario, what stocks should we move toward? The short answer is that financials and insurance companies benefit the most from rising interest rates. He would not be betting on rates rising at this time. At the other end, REITs and utilities, will sell off.

Markets. There is a lot of fear mongering by politicians, particularly with BREXIT and what we are seeing in the US. People are upset and politicians are finding it very easy to point fingers at globalization and free trade as being culprits, rather than at the effects of technology. Those jobs are probably never going to come back, but will be supplanted by technology to a great extent. We are undergoing a major shift in the workforce, which is having an effect on the markets. They have been trying to keep things going since 2008 through zero to negative interest rate policies globally. Today we have over $13 trillion of “negative” trading bonds in an attempt to keep the economy limping along. He questions if politics can trump economics in the end, but somehow doubts it. The economic cycle is alive and well, and we are going to go into a period of greater volatility. There is a bifurcation of markets with the bond market telling you things don’t look so good going ahead. At some point postings have got to come together, which will provide a real opportunity for value investors. Expects people will come to realize that expansion of trade and expansion of economics is good for jobs in the long run.

Market Call Tonight was just a repeat of last night's.