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

Biotechs have been creamed over the last couple of days. As a sell off picks up steam, investors look for anything they can take profits in, so biotechs have been hit hard. Investors should be looking hard at the big names in this sector. This group will likely have a very good turn as markets start to improve. He likes GILD-Q.

Financials have the biggest weighting in his portfolios (mostly US). Large US banks are good. Regional banks could be more interesting or KRE-N that invests in a basket of regional banks.

Solar or Wind recommendation. He is cautious on energy. It is a tough space to be. He recommends ETFs (e.g. TAN-N) for the group. TSLA-Q is also recommended. VMC-N is another. Be careful adding anything in this space except as a trade.

Markets. This is a correction within a bull market. A 10% decline in 4 days only happened 9 times in history and after that it re-tests the lows. These are interesting times. It might be worth starting to dip your toes. There are a lot of risks in the market right now, however. Going into the summer he positioned for high risk. There is a lot of nervousness in the markets. He started picking away the last few days. The TSX got into the buy zone. Use stop losses. S&P earnings will likely be flat for the year. CXR-T was weak after the deal. The money from the new issue is in the bank. He thinks they can earn $6 a share conservatively so it is undervalued at these levels. He does not think the sell off is warranted.

Markets. Chinese profit numbers show an 8.8% drop. It is not surprising to see it unwinding the way it is. The Spanish are going to use the referendum to put together a proposal to separate from the EU. It is one of the things that complicate a recovery in Europe. The EWP-N ETF shows downside even after you take out currency fluctuations. There potentially could be some more downside.

In his dividend fund he hedges sometimes and not others. Now he is fully hedged. He is doing 30% covered calls (usually 20-40%).

Educational Segment. Financial Literacy. Financial Fraud: Guest’s book talks about avoiding identity fraud and financial fraud. People should go to their accountant with an offering memorandum before investing. The accountant should be independent of the offerer.

Markets. It has been a very difficult environment for small caps for the last 4 years. The energy names are coming off quite a bit. He concentrates on companies with good balance sheets and are good producers. He is still 8-9% in energy for his Canadian portfolio. He is waiting with cash on the sidelines to make some purchases as we get to tax loss selling. You have to buy companies with balance sheets with next to no debt. The tech sector in small cap looks good. There are special situations in base metals.

ETF Turnover rates in actively managed BMO ETFs. It is a measure of how often the manager makes trades. BMO does active management through covered call strategies. You have to look at the financial statements. Look at the SEDAR website to get the financial statements. Look for the TER (Transaction Expense Ratio), which will be in basis points.

Is there an ETF that tracks Canadian equities with resources removed? There is not one in Canada.

Markets. You have to be focused defensively. He thinks there will still be more down draft. The markets are really looking for some direction and all they are seeing is black boxes. If you can’t compute how China is growing then how do you know how the world is doing and how do you price equities. There was a notice that GLNCY-5 could be wiped out if they can’t handle their debt - we have seen a slide of 70% in market cap. He is afraid there is more bad news to come. VRX-T dropped 16% on threats of regulated drug prices. IBB-N is off almost 20% today.

Why is US congress picking on a Canadian Pharma? Drug prices are a hot button. Prices are higher in the US. He does not think anything formally will come of it. Anything that has a high valuation is going to be a risk right now. They are going after a Canadian pharma company because it is so high profile.

He thinks ETFs won’t work as well as they have in the past because you can’t be defensive – you are getting the entire index. If you are looking at one for 5 to 10 years then get one that is diversified over the TSX and get one that is fairly liquid.

Keystone XL: A republican win in 2016 could be the best possible news for Keystone XL. Other projects are stalled but this one is dead in the water. Most investors do not have this in their numbers.

Markets. He is starting to see the US turn over, which was a very important part of the supply chain that we needed to see start to slow down. Starting to see growth going negative. The only thing that is a question is OPEC increasing their supply. That has really offset the benefits of the US. He is looking for a balance point of $60-$65 US a barrel in 2016. Sees oils improving in the 1^st half of 2016.Has been telling clients who are in oil already, to try to high grade. Take those losses which can be valuable in the future as you create some gains from some new positions, and high grade into companies with the right balance sheets, assets that can continue to generate returns. If you can start layering in positions in October and working your way through January, you’ll start to see some better strength going into the latter half of the 1^st half of 2016.