A Comment -- General Comments From an Expert (A Commentary)

What are the benefits and costs of ETFs? Are they like GICs? Better than stocks? ETFs allow investors to diversify, the greatest innovation in investing of the past 20 years. They are magic. ETF's have reduced fees, certainly cheaper than mutual funds. Use these to diversify. For example, you can buy the entire Chinese stock market. Yes, consider ETFs.

Core ETF with a 25-year horizon? Risk parity. This mean you have assets exposed to all four of the market regimes, and you're balancing your exposure so you don't any more risk in any one particular market regime outcome. A risk parity ETF will give you a smooth ride. But the challenge is that it'll be very low risk, whereas with 25 years, you can absorb more risk and earn more. Look at VGRO and other Vanguard ones. Also consider iShares.

Should I buy an inverse ETF on the S&P? This is really shorting. The problem with shorting is that financial assets have a positive risk premium--you must overcome not only the fees you'll pay (50 basis points for exmaple) and 2.5% dividend, plus the risk premium (+5 on average). The upshot is: this is really, really hard and a retailer investor shouldn't try it. Instead buy the 7-10-year US treasury (see his Top Picks today) or the 20+ year US treasury. This acts like a short, when you expect market duress, but you got positive risk premia. You'll get the 3% yield and you will gain if the market falls. Look at USD-denominated bonds. Don't short the S&P.

Nice to see Apple returning to December levels (just announced earnings), but it has a long ways to recover 2018's high. There will good volume but may hit resistance at $175. Apple is a driver so it'll help the index traders. US-China trade war: certainly important in relation to the markets, but earnings in the coming weeks and interest rates are bigger drivers. Now, there are many discounted stocks, but the markets in the past year have been confusing with emotional panic buying involved. This results in unusual whipsaw moves. It's difficult to trade this. More certainty would encourage buying. S&P pulled pulled back today. We see support around 2,700 which is a jumping-off point. He's short-term bullish meaning the next few months. Be diversified with hard stops and exit points. Sell into strength. He's slightly bullish.

Relative performance to sector vs. the broad market as an indicator in tech analysis? He looks at volume vs. price. A lot of trading means support at that price. For swing trading, you can use relative strength and short-term moving averages, but he doesn't do swing trading. He looks at relative strength in a sector vs. the index, but this is complicated. He removes the random components from the market, though, to look for a bottoming opportunity.

Market. There have been earnings disappointments. He continues to feel bitcoin is worth nothing. AI is going to be a growth space. China is slipping so it is important that China and the US come together with a trade deal soon. Quality of earnings and number of companies beating is in line but the amount by which a company beats is dropping and that is not a good sign. We have come off the bottom on the yield curve, but now it is flatting again. The Fed seems to be on hold with raising rates. We are heading for a recession and the question is only when.

Where to deploy cash raised in the last few days. He raised a lot of cash last week and the only money he put to work was emerging market debt. It is a currency play that might make 10%. He has just started doing this and will buy more. The ETF is EMM-Q. He has also written a lot of puts in the last few weeks.

REITs. Usually the last thing to fall going into a recession is REITs. They will fall significantly in a recession. This could be a 2020 or 2021 story. If they went 10% lower they might be interesting for a while.

S&P or NASDAQ in a 3x inverse leveraged ETF? He would never recommend it because of the erosion of net asset value. The most overvalued part of the market is the small caps so you could use a 1 times leveraged inverse as a trade.

Educational Segment. Guest - Barry Allan. He tries to have ETF products launched before the sector is going to perform very well. FGO-T has done 3.85% with lower risk. He thinks we have seen the peak in equity markets and the peak in bond markets. It does not mean we are going into recession tomorrow, however. The risk of owning long duration government bonds is minimized significantly now. He thinks it is an opportunity to accumulate long term government bonds. He sees pockets of value in short term high yield corporate bonds also. He is cautious on preferred shares and floating rate products.

Market. Speculative manias coming into the markets are usually indicative of a top. Global markets are slowing down and NASAQ companies get 44% of their sales from global markets. It was bound to happen that companies would guide down. We saw a bit of a rebound this year but now you are seeing companies impacted by a higher US$ and trade wars slowing growth. CAT-N is feeling the pinch. Canada is his focus. He thinks there have been bargains in Canada for the last few years. Last fall there was indiscriminant selling that created real bargains. He is sticking to sectors that are not that cyclical and have low sensitivity to the Canadian consumer like wine, retirement residences, cemeteries, etc. They are recession resistant.

Banks may decline over mortgage fears and debt concerns. Those are always fears. The banks look toppy, which means we're probably at the premium level. As a technical analysis, sell them.

Gold? $1,100-1,400 is his expected range. Once gold breaks above $1,400, which he expects, then it's time to look at gold stocks.

Market Outlook 2018 was a disaster year for energy investors. What we didn't see was the narrative around the Saudi production ramping up in support of the the Trump Administration Iranian embargo. However, exemptions were allowed for Iran and there was a clear long position for supply and traders sold oil and energy stocks. The late season tax loss selling was the most vicious he has seen in his career. This year is a year of rebuilding confidence for energy investors. He sees this as an opportunity for investors as upsides are easily 50-100%.