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Given the string of numbers we've seen both north and south of the border, he'd be inclined to want to cut rates. However, the Bank of Canada's already been very aggressive on that front. They don't need to, but it's clear with the job losses we're seeing that the level of nervousness at the BOC is high. 

It could go either way at the next meeting. Right now, the market's giving it an 80% chance they'll cut by 25 bps.

We had a big revision a month ago to the employment situation, which President Trump was very upset about. Then we got Friday's report in the US that confirmed a fourth month of weakening payroll growth in the US. At an average of 75k jobs a month, which comes out to a bit less on a 3-month average, the trend is clear.

The demand for labour in the US is weakening, but we're not yet seeing unemployment and layoffs tick up in the weekly claims. That's the next part of the cycle. If this gets worse, we're going to start to see layoffs at some point. Right now, it's only a pause in the demand for labour.

Now there's the Treasury influence on the Fed. Scott Bessent put out a piece in some of the journals on the weekend about Fed independence. There's a political game going on here. They talk about independence, but the influence is very clear. The Fed will certainly do 25 bps. Could they or should they do 50 bps? Probably not. 

The slower they go, the better it will be in the long run. Don't want long bonds rallying higher on fears of inflation being reignited. If the labour situation is that weak, then they will have to be more aggressive. We won't know until we see more data. Predictions in this area are notoriously imprecise.

Equity markets are extremely overvalued, especially in the US. Better value in other places. You can switch from a growth-oriented ETF to something that gives you a bit more protection. This allows you to keep playing. ETFs are coming out with more innovative products, such as one that gives you 10% upside over the next year, or 10% on the downside if markets go down 10%. A good choice for those who might think there's not much upside left, but don't see a big correction coming. See today's Educational Segment.

It's not about raising cash. It's about trying to stay fully invested. As we know from history, markets that are overvalued can remain overvalued for years. The late 90s was a great example with the tech bubble. This AI-led market expansion has decades to go. Take data centres, for example. We currently have 11k, but we'll need 30k in the next 5 years. That growth is driving a lot of capex, with ancillary benefits for the economy.

Invests only in short-term corporate bonds, and it pays out all that income. With this type of vehicle, there should be no expectation of capital gains. If you look at a total return chart, the average gain over 15 years is just over 2%.

Remember that this is money market in an era where money market yields were very low, and went to 0% in Canada, while corporate bonds were trading sub-1%. Very hard to get a positive return for a couple of years after Covid. As interest rates have normalized, the returns there have gotten very compelling.

Corporate debt -- slightly higher risk, so you get a premium yield. No junk bonds. Best-quality corporate bonds in Canada. Some credit risk, but quality holdings make this minimal. Money-market like, very safe, additional yield. It's still the best money market solution for investors looking for a bit of extra yield.

AAA-rated collateralized loan obligations. A way to get an enhanced yield without taking on a lot of interest rate risk, because the structure is floating rate in a sense. Fine in a stable environment.

However, there is credit risk. If we go through a time where credit spreads widen, it will be a drag on this ETF. Yield is 5.36%.

Just because an ETF pays a distribution doesn't make it a dividend. A lot of investors are confused on this point. This is short-term, federal bond exposure. So you're getting income; if it's in a taxable account, you don't get the benefit of the CRA tax credit. 

If interest rates are rising, you have good protection. If falling, you don't benefit. Current expectation is that interest rates are going to come down, so you want nominal bond exposure. But it's not buy and hold. If all of a sudden inflation starts to be an issue, and rates start to go up again, then floating rate is what you want to hold.

Putting a covered call strategy on long bonds. If markets are very volatile, then the long end of the interest rate curve is also volatile. A lot of the income is generated via the option premium, which is treated as a capital gain. 

Here's a scenario to think about. Market goes up, you get called away, don't get a lot of gain, but you get the income, and then the market goes down. That's been the trend YTD, sideways to down. But you have to look at a total return chart, not just the price chart (as it's misleading on how it distributes).

The price chart shows that this ETF has gone from $11 to $9 this year, that's down 16%. Total return shows it's gone down (because interest rates have gone up), but only by 6%. And you're getting a huge coupon. Very tax-efficient exposure to fixed income. But not a growth story.

If you want growth, buy ZTL or TLT. But these don't have great tax treatment. It depends on what kind of investor you are.

If you want growth from your bond portfolio. But these don't have great tax treatment. Depends on what kind of investor you are.

If you want growth from your bond portfolio. But these don't have great tax treatment. Depends on what kind of investor you are.

The answer is both, because the securities holdings underneath them are identical. ZWE is currency hedged, ZWP is not. The choice depends on your view of the CAD relative to the euro. If you don't want to trade, buy the hedged version; it'll be your better holding in the long run. Huge distribution (from selling calls), but not a lot of growth (as calls sell some of the upside).

Loves them both, uses them in his sleep-at-night portfolios. He goes back and forth, depending on his view of CAD vs. euro.

The answer is both, because the securities holdings underneath them are identical. ZWE is currency hedged, ZWP is not. The choice depends on your view of the CAD relative to the euro. If you don't want to trade, buy the hedged version; it'll be your better holding in the long run. Huge distribution (from selling calls), but not a lot of growth (as calls sell some of the upside).

Loves them both, uses them in his sleep-at-night portfolios. He goes back and forth, depending on his view of CAD vs. euro.

Money market exposure, but focused on government debt. Both buy instruments of less than a year's duration.

ZST is corporate debt -- slightly higher risk, so you get a premium yield. No junk bonds. Best-quality corporate bonds in Canada. Some credit risk, but quality holdings make this minimal. Money-market like, very safe, additional yield. Likes it.

Trading at 40x forward PE. Need he say more? Extremely overvalued. Should trade closer to 20x PE. But there's a premium for safety. Avoid, avoid, avoid.

Has maintained a premium valuation for a long time. If you're a growth investor, you could buy this one, but he's not wild about the valuation. Wait for a market correction.

Growth of ETFs

Lots of new products. No one issuing ETFs can try to compete with the MERs of Vanguard. The game is over in terms of cost-cutting for ETFs.

Today there are more ETFs listed on the ARCA of the NYSE than there are single stocks. So the ETF world is growing rapidly. But almost all the new products are innovative and thematic. They're charging management fees that are 70-150 bps. But they're doing things that are different. There's also more work and thought involved than just replicating the biggest index in the world.

Here's an example of an ETF he likes to use, RSP, at 20 bps. It's an equal-weight S&P 500. ProShares recently launched an ETF called URSP -- ultra, which means it's 2x the upside and 2x the downside risk when you're wrong. URSP carries an MER of 95 bps.

Fixed income's been dead forever with falling interest rates. But it's one of the fastest-growing areas in the ETF world. Active strategies are growing rapidly versus passive strategies. Why? Because the average management fee on  passive is very low, and no one wants to compete with the Vanguards. But you can compete if you have an active strategy, while earning more in MERs. Many are worth it, but some are not.

At his conference in California this morning, he picked up a fact sheet for DDTS. For 79 bps, it gives you 10% upside on the S&P over the next year and 10% downside. If it goes down more than 10%, you're at risk, but you can't get more than 10% on the upside. Lets you make money on both sides of a market, but you are paying that higher MER.