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

U.S. 2-year treasury bonds: The index bond ETFs aren't doing well because of rising rates, nor are the actively managed ones. So, he decided to buy this instead and play the short yield at 2.5% (now 2.8%). You get all your money, all U.S dollars, plus there are no fees.

Market. We are in a Twilight Zone right now – we have seen the best of the market and from here on in we are in a trading market. Investors will not buy something and hold it for five years anymore. Strange things will happen – like Bitcoin – things that happen near the end of the cycle. The Nasdaq still has rooms to fall – one nasty day does not a correction make. He thinks a pullback to 2550 for the S&P is likely.

Gold. In two years the Trump Administration will not want to have a bad economy going into the election. The FED Reserve will continue to create inflationary pressure, which will be good for gold.

Some green to end the week. Still down for the week. Tax cuts have led US to be up for the year, compared to global markets. With trade fighting and tariffs, markets are not doing as well as they used to.

Why the downturn this week? Program trading, hedge funds using computers. Valuations stretched. Worries that trade arguments will have no resolution.

Do we know what’s coming next? Mid-terms in November, and earnings season where we’ll find out if earnings are artificial or real. US banks went down, even though decent numbers. Investors are wondering if this is as good as it gets for the banks and are worried about the yield curve inverting. Consumers are leveraged to the hilt. Usually, this is the best time of year to put new money in. He has cash on the sidelines waiting to be put to use.

Buying ADRs. Have to be very careful with ADRs because they may not trade much, there’s a share multiple difference, and withholding tax, so it’s not good for RRSPs and TFSAs. Not the same as buying directly off the foreign boards.

Investing advice for these times. He did nothing this week. It’s important for investors to have that discipline and set prices if the market goes down. In the 1970s, interest rates were rising, and no one wanted to own equities. But in 2009, interest rates were 0%, and that was the opportunity of a lifetime. With markets closing in at historical tops and valuations at 25-30x, don’t be a hero. Be disciplined. Make sure you don’t have correlation risk, rebalance when necessary. Have some cash on the sidelines, so you don’t go down with the market. Be diversified as much you can, both stocks and bonds.

Market. There is more selloff to come. Rising interest rates, rising oil prices and China trade discussions and reduction in world GDP forecasts has concerned investors. It should finish by the end of the year. And he expects a bit of a bounce. You typically get the S&P going in for another 11 months after the yield curve inverts. He thinks there is an opportunity in Canadian banks. Oil is the only commodity doing well right now.

With this current pullback, these are days investors long for because you can invest. You can buy companies cheaper. Interest rates are rising because the economy is growing. The market is adjusting to this. Now is an opportunity. If you have a long-term perspective, you can pick up companies you really like. There may be more volatility until rates settle. Could go sideways. There's also the China trade slowing with difficult numbers in Europe, not to mention the US midterms in a month. Volatility can hurt you, but also be your friend if you believe in investing in the next 20 years (i.e. your RRSP). US companies will continue to do well. Maybe there are a few more days of down markets. It's healthy to see a correction. In the next two weeks, a lot of earnings are coming out. Look out for projections of the next several quarters, like the impact of oil or wages. A great opportunity now.

Hold the Canadian dollar or go American? Currencies are tough to call the CAD dipped down to 1.22 then ran up to 1.30 because of the US trade issue, but then that was solved. He thinks the CAD will slowly strengthen as Canada raises rates. He'd convert USD to CAD. Stronger oil will help the CAD.

Market. He thinks the emerging market jitters is a leading indicator for market sentiment -- an indicator of market liquidity. Another indicator is peak debt issuance. A lot of little signs, including slowing global growth. He sees the cannabis mania as the play out of the “greater fool” theory. He thinks the TSX is breaching keep support levels and thinks there is further down side yet to come. He is 25% cash right now.

We knew rates were going up last week and the US got good jobs numbers, so their economy is sound. I guess now the market realized that rates will ramp up. She's glad to see the 10-year yield curve rise to 3.2%, while the spread between the 2- and 10-year is now 3-4 basis points vs. 25 points last month. The US Fed said it would increase rates once more this year and three in 2019, so we need rates to rise to counter a recession down the road when the yield curve inverts. Earnings should be very good this quarter, and up 22% in 2018. We need that profit growth from the U.S. in Q3. The big question is what happens to the tariff impact. Friday we see the bank earnings and this will be critical. Tech stocks got ahead of themsleves, so this pullback is healthy. We need rates high enough to cut later when the recession hits.

Pipeline or a bank for an RRSP? Buy an income stock in a non-registered account to get the dividend tax credit. Put growth stocks in an RRSP, so you can shield the capital gains for as long as possible. The pipelines pay a higher yield than banks. Put the banks in the RRSP and the pipelines in non-registered.

Overview. He is taking a bearish view on oil, expecting it to drop to $60 US. He expects it to drop this quarter. since refineries close to retool for winter grades, seasonal build in this quarter andIran sanctions are overestimated and expects an exaggerated fall back. Every month OPEC has been increasing its oil production. He expects the Western Canada Select Discount to stay low for the winter. In contrast, his view has been bullish on natural gas. Gas has gone up about 20%. He recommends AGAINST buying natural gas stocks at this time because he believes tax loss selling will be brutal this year to offset large capital gains from cannabis stocks by selling their losers.