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

Educational Segment. Is Italy Too Big to Fail? Italian vs. European banks: all banks across Europe are underperforming. In Italy, 20% of all outstanding loans are non-performing. The Spanish banking index has been dropping since 2014. It is by no means free and clear for Europe. This is a big challenge and it is not over by a long shot. Markets are going to stay volatile for a long time yet.

Markets. He looks for companies that return on equity more than 20% and have done for 3 years or more. He uses Dupont analysis. He likes expanding margins over increasing leverage. Debt is not bad, but it is how they use it. He protects against downside by keeping companies that still maintain top line growth when markets decline. Brexit does not affect his analysis much. The Brexit is a sign of some of the largest trends going on in the world and is the tip of the iceberg.

Personal Finances. A recent research report showed that typical investors lagged their benchmarks by 3%-3.5% over all time frames, such as 1, 3, 10, 20, 30 years. We need to be more mindful of what is called behavioural finance, behavioural quirks, little decisions that people make that are knee-jerk reactions that seem to make sense. If we stop, step back, and look at it dispassionately, we realize that it was not a very good thing to do. We are all guilty of overconfidence, men especially. People who try to time the market overwhelmingly fail. You need to be able to do a really good self-assessment in terms of anchoring. A lot of trade-offs being done are not rational. His one recommendation to investors, especially financial advisors, is to Google “behavioural finance”, learn about it, and learn what the ticks are.

Investing in volatility ETF’s as a swing trade? Volatility trades are the sorts of things we have to think of. People are coming up with products that give you a chance to express an opinion with regards to your risk profile/preference. There are products that are more volatile than the market that are expecting to get a higher return, products that track the market and have the same risk in the same expected return, and products that have lower volatility. In other words, you have a choice.

Solvency of lifecos and their annuities? You should be entirely comfortable with the solvency of lifecos. Some of them have been around for well over 100 years, and there is nothing coming down the pipe that they haven’t seen many times before. The great thing about an annuity is that you can’t outlive it.

Moving Averages to buy ETF’s? There is no reason why you can’t use these. ETF’s have the same attributes as a mutual fund. He doesn’t use them.

Moving from mutual funds to ETF’s. Best way to set up a portfolio? Look at your mutual funds and what you already hold. Hopefully that will be a good representation of what your risk profile is. Then try to find an ETF that will have a similar mandate.

An ETF to cover the entire commodity area? There is no single broad commodity ETF. You might want to mix and match with different commodity ETF’s, such as water, agriculture, infrastructure, base metals, gold and energy. They are going to be more volatile, but they have been beaten up and are still pretty cheap.

Emerging markets on a rate hike? There is no doubt in his mind that on a rate hike, the emerging markets would take a dip. He generally does not try to time things on that kind of a micro level.

Markets. The big things he is looking at from a catalyst point of view is US corporate earnings and where they are going to be in relation to last year, 5 quarters of negative earnings growth, the Fed on interest rates and the China yuan devaluation. On BREXIT, the market has indicated that it is not a big deal. The China yuan devaluation is a bigger risk for the market, and is less known across the marketplace. They devalued this a little more during the BREXIT issue, and no one was watching.

Markets. Stocks are not cheap. The market has had a big run since the financial crisis, and world economic growth is very subdued, so generally he finds stocks, especially large caps, quite expensive. We have been in a low interest rate environment for a prolonged period of time, and this may continue for quite awhile. Dividend yield is very important, so the companies you invest in have to grow profitably, and can hopefully increase them over time. That is how you will make some real returns. There is a cautious stance globally, generally by business leaders and corporations. He has been able to outperform the TSX for 10 years by heavily weighting portfolios by small and mid-cap companies.

Program was pre-empted because of the US Presidnt's address to the House of Commons.

Economy. House prices have gone up like crazy and he expects that by the end of 2018 there will be a housing bust. Thinks the government should increase the amount needed for down payments. There should be a special tax for foreign buyers based on the price of the home and should pay more in taxes. Knows the government will not be raising interest rates soon, but they should think about doing that.

Markets. Today’s rally shouldn’t have been too much of a surprise, as you always get a snap back after a big plunge in the market. This is a normal market action. He will probably use this as a chance to Sell more. Views BREXIT as a continuation of what has been going on for quite some time. It is really a function of big secular changes going on in the global economy, which manifest themselves in these sorts of situations. We are going to be in a sort of disinflation, deflationary type environment for quite some time. It sets up some really interesting opportunities for investors, but just outright Long equities are probably not the optimal solution. There are 7 or 8 really big things that have manifested themselves in today’s vernacular of lower for longer in terms of both rates and global growth going lower. We have a lot of debt, and this debt needs to get addressed. You can either write it off, monetize it or mark it down.

EU and the euro. Feels the UK vote will hasten the development of the breakup of the EU and the euro. There will be an election in France next April, which will be very, very important, as well as an election in March in the Netherlands, and a recent survey indicated that most people would want to see a referendum. Feels people really understand that the EU is not working. Doesn’t think that foreign exports for markets is not a big deal. London is one of the greatest cities in the world, and with the pound weakening and the UK markets coming off, there is going to be some phenomenal shopping to do in London.