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How will this and XCB be affected by a possible interest rate hike? He is not sure that if the Bank of Canada raises short rates, it will have a huge impact in Canada. The bigger question is what the Federal Reserve is going to do with their bond portfolio. If they start to focus on the longer part of the yield curve, that is going to be a negative for Canada. He would prefer corporates over governments. Hang on to XCB and use this one to go into another part of the market, such as a preferred share ETF, or look into the US market.

Gold through an ETF? The most popular way of doing this is through GLD-N, the big gold bullion ETF. If you are looking at buying underlying commodities, and you have a reason why you want to speculate on the commodity itself, don’t use an ETF structure. It is easier to use the futures market.

This has about 10 US bank positions with a currency hedge on it. He sees the Cdn$ making its way back down to $.75-$.73 range, with American banks being leaders in the back half of the year.

Is the hedging aspect hurting the performance? This was a core holding for him. Earlier in the year he moved from being currency hedged to unhedged. Currencies in the EAFE index will be accretive, so you are better not to have the currency hedged.

On a longer-term basis, emerging markets are going to be an area that will continue to grow. It is the riskiest of all the classes. Vanguard’s are generally very inexpensive, and this is as good as any for tracking this particular market.

Your portfolio is going to be made up of fixed income and equities, and he recommends that within the equity portfolio that you have 1/3 of your equity positions invested in international markets. That is a big order, and if you need to start somewhere, this is the one he is using. A great entry point into the international market.

When you are into an EAFE (See comments under Top Picks for ZEA-T) he likes continental Europe. This one excludes Japan and the UK. It tends to focus on euro focused countries. Thinks France and Germany politically will be in the driver’s seat in the next 6 months.

He really wants people to look outside of North America. About two thirds of your portfolio should be outside of Canada with a third if that in the US, a third international, and maybe a small sliver in a more aggressive portfolio into emerging markets. This is going to be the area that has the greatest growth. He is using this as a proxy for China, because XSI and some of the other specific Chinese ETF’s are much more expensive.

Market. We are a week away from the Bank of Canada’s decision. They will probably hike interest rates, but he is not sure there is a particularly good reason for this. To slow down housing markets, it would seem that the housing specific rules are accomplishing that anyway. He would worry about the strengthening of the Cdn$ and the impact of that on exports. He is in a strange spot at the moment in that he is bullish on energy, but bearish on almost everything else. It’ll be interesting to see, if he is right on energy, what happens to the rest of the market. The issue on energy is that a lot of money was raised, a lot of money has been spent and no money has actually been made. You can grow production all you want, but at some point economics has to kick in, which he believes is happening now.

A good Short? The short answer is yes, and the long answer is yes, but he would advise against doing it. To do it, he would put a Long against it such as Lundin Mining (LUN-T) or Hudbay Minerals (HBM-T). They have an awful lot of debt and are very concentrated in Zambia. There are execution risks on a very large mine they are building in Panama. With a lot of debt attached, this is a very tough place to be.

He is short this. They are in a particularly tough spot at the moment in that they operate in what he believes is a commoditized business, mobile hydro-vac vehicles. With almost 70% of the business being in the US, this is one of the companies that would be harmed by a stronger Cdn$. However, it really comes down to an overcapacity issue. There are more trucks than are required. Two of their competition are in the process of merging.

A renewable energy independent power producer, largely focused on wind with a little hydroelectric power generation mixed in. They initiated a process to Sell the company, which has been dragging on and on, for almost a year. Investors started getting a little squeamish, so he exited his Long position when he got wind of more capital controls in China. This morning, it was reported, but not announced by Northland, that they were about to end the sale process, and the stock traded up on that news. A very worthwhile name, and he is probably going to buy his shares back.

If he were going to buy a bank, it would probably be this. He likes the retail focus, and it has far less exposure to Canadian mortgage market, and a lot less exposure than some of the other banks to energy lending. A good, steady, bread-and-butter business. With their exposure to the US, it should give them exposure to rising interest rates and improve their net interest margins.

He is Short this, but it is more of a generic Short in that he needed a hedge being Long on energy. If he is wrong on energy, this company will be harmed quite a bit by a very enormous debt load.

Not quite sure that being Long a Canadian brokerage would be the best place to be over the near term, particularly given that he is not that rosy about the Canadian economy in general. It is a very, very hyper competitive industry they are operating in, with margins being compressed from every direction. However, it is diversifying into other countries, the UK, which is an interesting contrarian play because of the BREXIT overhang. Trading below BV and also have considerable retail assets that would be worth something to a potential acquirer.