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

Is it now time to sell US$ ETFs and move them to CAD$ ETF equivalents? The Canadian economy is behind the US in terms of recovery and so Canadian interest rates will go higher more slowly than in the US. Thinks the government would be happy to have the dollar go down to $0.85.

Markets. Increased volatility is going to increase. A large part of it is the talk and discussion around the federal reserve raising rates. The dollar is going up, so there is a bit of a flight to safety. With that scrambling, comes the volatility. He is forecasting volatility to remain for at least the remainder of the year. His equity fund is about 55% invested in the US although there is some cash position in this. This started about 1.5 years ago for him and has done quite well. This is where his research is focused right now. You get the benefit of the US currency plus the diversification.

What US sector would you choose to put your money in other than pharmaceuticals and healthcare? He would select the Information Technology Sector. This is about 15% of his fund and is all US focused. This is basically where the future is going. Also, the balance sheets are usually in pretty good shape. He likes Apple (AAPL-Q) and their new products, which will be favourable along with the cash flow. Microsoft (MSFT-Q) is another one for the service side. Cisco (CSCO-Q) is a good one. There has been talk of a split. Pays a good dividend and has a super strong balance sheet. (See Top Picks.)

Markets. The lack of hot weather has been a disappointment for the gas bulls, but there has been more at play than the weather. There has been a perceived oversupply from all the shale plays in the US, and in Canada in the third quarter the price of Nat Gas was twice what it was last year. There is some cause for excitement going forward for the gas bulls. Light oil and heavy oil pricing is up year over year and you can’t say that about North Sea or Brent. There are dynamics working here. We export all our crude into the US. Lots of interesting catalysts in the future.

Markets. The jobs report out of the US was not perfect, but somewhat encouraging. Last month was revised up about 40k. Thinks there was some short covering in the US. The week after next is the US third quarter earnings and that will determine the short term direction of the market and we may stop the slide, get through October, and get part of the decline back by the end of the year. Thinks we are seeing an average 8% increase in US corporate earnings. The TSX has roughly 10% and better than the US for the year. The energy side seems oversold.

Markets. It’s a gray day in the markets. There is a lot of geopolitical risk in Europe and Hong Kong. Even Ebola in the US is creating jitters. It is a little bit of a panic. He thinks the sell off is overdone. He would be stepping in and buying equities that sold off. He is picking up some good companies in Canada and the US. The correction will be short because you don’t have lots of debt. Companies and consumers have delevered over the last few years. Dividend payers are the place to be, but you need earnings expectations that meet expectations or exceed them. Buy value and GARP.

Canadian Banks – which is the best? He is underweight Canadian financials and prefers the US. Loan growth will be weak in Canada. The Canadian banking system is very sound and there is no risk of a big downturn. He likes CWB-T, leveraged to commercial loan growth that he feels will hold up better and they could be a takeover target. He also likes TD-T as they are well leveraged to the US.

The oil price has been weak of late, especially the Brent price. Production growth in the US has weighed on sentiment. US production growth was strong last year in an environment of strong oil prices. It will be interesting to see the capital discipline of companies at these prices. Thinks it will eventually drift up.

Markets. There has been a 20% move year over year in the Canadian market. The fundamentals are still intact. He is sitting tight, but did rebalancing in early September. He now has redeployed the proceeds. It increased the income generation in his clients` portfolios. He doesn`t think commodity prices have to be so weak. US and Global growth should have lead to stronger commodity prices.

Markets. Consumer confidence numbers today were weaker than expected. There is profit taking as we get into Q3 earnings season. The US is decoupling from the rest of the world. It is a quarter of the global GDP. China continues to decelerate. Emerging markets are worried about a downshift in commodities. You want stocks that have a range of growth possibilities ahead of them.

Australian Banks. Buy now? Very, very strong banking market like Canada. They have high dividend payout ratios. Good long term investment.

Markets. We had an interesting day. A number of technical indicators are indicating more downside. We are just getting started on the selling. The bottom of the 4-year cycle for US presidential cycle is mid-October. He is 20% in equities, 7% in commodities and the rest is in cash or fixed income securities. Mid to end of October things will change. Earnings this month will not be that good. Estimates do not take into account the higher US dollar so you should get lots of negative guidance. The S&P and Dow are only down 4% from their all time highs. Others are down 10% or more. We are going to have some fun on the upside.

Seasonality for Gold is strong from end of July until the end of September. The seasonality conked out very quickly. Stay away from it.

Oil. Seasonal strength from Jan to July/August of each year. But the seasonal trade was truncated. Now the trend is down, it is underperforming the market and below its 20 day moving average. Seasonally it starts to go down until Jan of each year. Get out of crude oil, but not necessarily out of the sector.

Nat Gas is interesting. It is bottoming and showing strength in a difficult market. Nat gas does well from end of September to end of December each year. Technicals are finally starting to turn positive.