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COMMENT
Market Outlook There is a positive sign in the market over the last couple of weeks with the market looking to establish a floor -- somewhere around 2400 on the S&P, he estimates. We are now only 200 points away from the highs of September 2018. We are seeing a recession coming with large numbers of people being laid off. He sees large sums of cash sitting on the sidelines. The panic selling is now over and he sees a recovery coming of some sort. You have to have a strategy with dealing with volatility. This is done through asset allocation. He began to get concerned with bond issuers and sold his bond ETFs before the crash.
HOLD
He has held this before, but sold it when the market began to decline. A covered call is good in a flat or rising market, but in a down market it can impede future recovery. The fund usually only has about 50% of its holdings with covered calls and its yield is about 8%. He thinks it is worth holding.
E.T.F.'s
COMMENT
He has recommended this before, but it too was hit hard when the market declined. He asked one of the big bond desks about liquidity issues and when they said it was drying up, he sold out. What people need to understand is that bonds trade over the counter, not through an exchange. When the liquidity drives up, this negatively impacts bond values.
E.T.F.'s
HOLD
He does not own this one. They have an effective covered call strategy and he has no issues with the fund at all. He prefers ZUH, where it is not impeded with calls being written.
E.T.F.'s
HOLD
He does not own this one. They have an effective covered call strategy and has no issues with the fund at all. He prefers ZUH, where it is not impeded with calls being written.
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DON'T BUY
He generally does not like preferred shares. It has the risk of a stock and return of a bond. You also have to be concerned about rate resets versus perpetual dividends. He would prefer to sell call options against the banks. He thinks you should focus on the recovery being in the US as Canada is purely a commodity based economy and will take much longer to recover from this.
E.T.F.'s
COMMENT
CAD bank dividends safe? It is not very likely that the Canadian banks will cut their dividends. They are in much better financial shape than back in 2008. He thinks the Canadian Central Bank would make enough liquidity available -- we may pay for it as taxpayers however. The Great Depression was caused by there not being enough liquidity available for the banks. This is not a worry.
