A Comment -- General Comments From an Expert

A Commentary

Should I replace a floating-rate preferred ETF with a US Treasury ETF? No, because the market is pricing in three interest rate cuts this year. The US 10-year is down to 2%. If you did make this move, then you have to time it very carefully, playing it for 40-50 basis points, then shift back into something with protection as yields rise again. He'd rather hold onto that rate-reset amd be ready when rates move up later--and they will at some point (maybe in 6-12 months).

The December low changed his mind about US stocks. It haunts him. He's gone from green to yellow. That said, the Fed is on our side and so is the US dollar. Now, if the US can get out out of its own way (re: China trade deal)... Value stocks continue to implode--they are so cheap.

Edible cannabis and the cannabis space He has no investments here. The space is a little inflated. 10 mg per package is the new limit, just announced. (A joint has 12 mg, a vape 17.)

For gold companies, go with junior, mid-size, or senior? Have to have gold investments in Canada. If you buy the actual gold, only way to make money is for the price to go up. If you own a business, you make money if you end up with more gold than you started with.

Time horizon for beaten up stocks. Two things to think of. One is how much a rate of return do you expect to get, or timing, but don't try to get both. Tries to compound consistently in the portfolio, and as long as that's happening, he doesn't care how long it takes. Be patient, and don't put pressure on the timing.

Market. He is a bottom up fundamentalist. He is not as much focused on the macro. Small caps have underperformed so far this year. They often are not as big a dividend payer. People are pushing up valuations of REITs and utilities. The energy stocks are not doing better as you would think they would do on a day like today. There are a few mining stocks that have done well. As gold prices move up in US$, they are moving up much faster in Canada because of currency. He thinks there is better opportunity in the small cap space in gold.

Market Outlook - Geopolitical tensions affected oil. A draconian scenario in the situation more severe than what happened today at the the strategic Strait of Hormuz would cause a shortage in oil and an increase in oil. For now the oil market is fairly supplied. In the long run oil is broadly locked in the 40 - 80 range and we are kind of at the bottom half of that. For Canada is different as we don;t have enough capacity to move the oil. This is a political issue and it might change in October. The market is pricing a rate cut in the US. It is kind of strange given record levels of employment. Maybe the Fed is more focused on the inflation target as it has been running below 2%.

Market Outlook He expected this year to have a lot of volatility just like last year. US-China trade talks, Brexit, North Korea and Mexico have created that this year. He was fully invested going into the year. He has taken a lot of profit and has built up his cash position -- up to 55%. Anything goes this summer, he thinks. You will probably see a couple of times where corrections could be close to 10%. You need an active manager to keep you nimble.

The last 9 months have been a challenge: ultra-low interest rates globally and Trump's sudden tweets. You don't know how to react. He's keeping his clients calm. The US has hit its top range, the S&P at 2,900-3,000. We'll be rangebound between 2,700-3,000 until there's real news, like Trump is re-elected or not. Also, the US Fed has become so politicized and is no longer effective. The fact that Trump is telling the Fed how to manage rates...really? The markets expect a rate cut this summer; it could happen. The big infrastructure spending plan will emerge in the next US campaign. He does not see a recession, but we'll see a rotation out of North America into cheap, cheap markets.

High-frequency trading through ETFs. So if investors go short, won't this be reflected in buying at the end of the trading day and hurt retail investors? It creates a lot of volume--and noise. Remember ETFs trade very closely to their NAV, meaning they'll be off by only a little. Don't worry, unless you are trading ETFs a lot. Andi f you are, it's cheaper to trade a lot of stocks than a lot of ETFs, because it's cheaper (given the MERs on ETFs). Unfortunately, in Canada you don't get real-time NAV ticker for ETFs (in America you do)--and this bugs him.

Market Outlook The market uncertainty lately has been driven by trade fears between the US and China and more recently Mexico. The rally this week has been driven by potential interest rate cuts. The market needs more economic positive signs to get back to the recent highs. The small business sentiment still points to more spending, which is supportive. US jobs numbers are still good with unemployment under 4%.

The SNC CEO is out. It was time to move on. SNC saw one political disaster after another. 10,000 workers are being used as a football. SNC will probably get split up with job losses. Nobody wins. This stock has been a total disaster. They have to decide whether to continue to deal in emerging markets (which is a big source of revenue) or focus here....Trump's tariffs: The Mexico president played Trump a little, but China is a different story. China will need to transition into a stronger domestic economy, but to make the quickly changes that Trump wants will be difficult.

Buy US dollars with Canadian now? Generally, buying currencies don't matter because over time they normalize. The USD is strong now and will stay that way. Instead, look at the Swiss Franc, UK pound and Euro which are quite cheap now. The Euro usually trades at 1.65 instead of the current 1.5.

Market. The raptors don't move the needle on the markets except for a few upticks in bar sales in downtown Toronto. Trump created a trade issue with Mexico for no reason. He will continue to use this tool. Trump is using tariffs for other than trade issues. Larry thinks it is a tool he will continue to use. Trade issues with China will go into the election issue, in which case China gets the 'trump' card. As long as Trump is on this path of tariffs then there will be no confidence by businesses to make any big deals. In the US there are no new net jobs so things are slowing dramatically with the economy.

Educational Segment. We are at full employment in the US so how can they fathom cutting interest rates? But in March the Fed was still intending on raising interest rates. Since then the tariffs and trade wars have driven policy. The market thinks the rates will remain where they are at only 82% probability. The Fed is now talking about emergency rate cuts with full employment.