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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.

Negative bond yields? The entire spectrum of Swiss bonds/government bonds has negative yields. With this flight to safety, it shows that people are worried about equities.

Markets. You would think that VIX would be spiking up today in a big way. There was a big spike on Friday because the BREXIT results were not expected. However, today with the markets down as they are, VIX is not spiking again. Either markets are a bit complacent or there is much more to come. He is leaning on the side of much more volatility to come. We will get trading rallies, but those trading rallies are not something you want to get excited about just yet. There is a lot more downside, right through to the US election.

High-yield ETF’s? The Fed is probably off the table in terms of raising interest rates. It wouldn’t surprise him if the next move was a cut. If there is an economic downturn again, the answer is lower rates, but they are not going to work. There are some big challenges ahead. He has said for years that interest rates are going to stay near zero for decades, just for the world to get a little bit of growth. If interest rates are going to stay low, then utilities are a good source of dividends because they are regulated. There is not a lot of growth, but the dividends are pretty consistent and stable. He would stick with Canadian dividends. It is still a little too early to be aggressively buying things as there is more downside to come. His favourite is BMO Covered Call Utilities (ZWU-T). You are getting a near 7% yield.

ETF to take advantage of the drop in UK and European stocks? None just yet. Depending on the type of investor you are, and your tolerance for risk, BMO Europe High Dividend Covered Call Hedged to CAD (ZWE-T) is an ETF that is a way to get dividends from Europe with a Covered Call overlay. In an uncertain environment, you are getting over a 7% yield and volatility. This will be a fine one to nibble at into weakness, but could easily fall another 10%.

Ultimately gold is probably going to go higher, but right now when you look at this company, it is probably repricing in $1500, $1600, $1700 gold already. You are not buying this because there is good value there, you are buying it because it is a safety play right now. The stock is already becoming unglued and gold is not up very much, so he is not sure gold gives you the safety it used to.

For years analysts, including him, have been negative on this. A long-term chart shows lower lows and lower highs. Now something is changing. Is this because of demand coming back for copper, etc., or a simply short-covering on a relief trade? He is more on the side of short-covering on a relief trade than new demand. For the next few years it probably bounces back and forth between $6-$10 on the low end and the recent highs. He doesn’t like it here, and would be a seller, and buy it back on a dip.

Buying US$s now? It depends on how you are buying. If you are going into the bank branch and paying 2.5%, and then 2.5% the other way, don’t do it. If you have some US$ exposure in your investment account via an ETF, the answer is yes. It really depends on what your cost of trading is when you are trading foreign exchange if you want to do that.

Dow Jones, how low? Thinks we stay weak generally heading into the US election. There will be trading rallies, but probably failed ones. At a minimum, equity markets need to retest their February lows from this year, over the course of the next few months. It could go down to 15,000.

This has been underperforming for quite a while. At a minimum it has to test the February low of around $42. Wait for $42, and if it holds there, you could buy some, but if it doesn’t hold there you have another 10% below that at least.

RESP with an 18-year time horizon? He would say this is a good choice, but investing with a long-term growth horizon, dividend weighted stocks are going to be underperforming. He would much rather have something like a total world Index that is going to give you maximum upside growth.

Has just started buying Japan because of the strength in the yen, and thinks the next side of this is Japan weakening in the yen, in which stocks will outperform.

Educational Segment. Brexit. At the end of every Bear cycle, if you are still bearish you make no money, markets rally. At the end of every Bull cycle, the Bulls have to feel some pain when things go down. Every correction we have seen in the last couple of years has been 1 month or 2, and then a recovery. Thinks BREXIT is enough of a catalyst, that this time it is going to be more painful, taking out the lows that we have seen earlier this year, and in the middle of last year. He showed the STOXX 600 Banking Index (European bank index chart). It showed the 08-09 lows, and lower lows in 2012. Today we are at about 6% from those lows of 2012. Those lows need to be tested and probably to be taken out at a minimum before we see people confident about coming back in to European banks. He then showed the STOXX 600, which is like the S&P 500 of Europe, a benchmark of all the European countries including the UK. Chart shows a long upward trend line from 2008, and we are sitting on the trend line now. If it breaks where do we go. Retracement levels are where you look for where the market might come back to. The trend line is almost certainly going to break, and that adds to the broader European markets of another 10%-15% downside. On fundamentals, looking at the last 5 years of the earnings, earnings have been going down. Negative interest rates don’t work, they are toxic. He doesn’t know how they stabilize things, and there is more downside to come. Fundamentally we have to go down lower, there has to be some pain. The US and Canadian markets are going to come down in sympathy. They probably retest February lows, and let hope it holds.

Commodities. Everyone is focused on Brexit and how the UK is going to play out over the next couple of years, but the real risk and the real fear is the contagion from that. The UK vote to leave is going to possibly trigger votes in other European countries, which will bring the euro into question. That will become the bigger issue. A stronger US$ has a strong impact on energy, but on other areas of the market such as gold, the US$ is typically weak, but the dollar is rising right now because of negative interest rates in Europe, as well as the risk premium that is being demanded by investors. There are other areas, such as China, that are much more significant. As long as the contagion doesn’t spread there, he thinks it is going to be relatively contained.

Interest rates. With the European situation, low or negative interest rates are going to be lasting even longer. Most economic models rely on having a risk-free rate, but those models don’t work with negative interest rates. What people have been saving for retirement is kind of irrelevant now. That is going to be the bigger impact if negative interest rates continue for a longer period of time. We need zero or positive interest rates around the world. We also need economic growth to pick up, so countries in Europe and Asia will be able to allow their interest rates to flow back up towards zero.