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

Market. He thinks we can expect something more from Canada before the end of the year. The FANG stocks have lead the US and Canada is not deep in technology stocks. He expects Canada to play catch-up with the US. Earnings will improve in the banks. Resources could rally. The Canadian housing market has held in quite well. We should get a rally going.

Market. He thinks oil is likely to break below $60 soon. Inventories of gasoline and distillates continues to rise and now we are heading into the end of the gasoline driving season in the US. He expects US demand to drop by 1.0-1.5 million barrels per day as a result. OPEC production continue to increase despite about 150,000 barrel per day decline out of Iran. He expects the TSX Energy index to drop to 160 from 187 today. Trans Mountain pipeline delays, LNG uncertainty and service industry stock hits are all setting things up for a “table pounding” buy opportunity soon – likely in November and December during tax loss selling season. He thinks they will have over 20 companies on their recommended buy list during that time. He prefers natural gas stocks ahead of an expected LNG announcement.

Energy or Cannabis? If a general stock market correction occurs and cannabis stocks take a hit due to margin collapse, investors may run from volatility of the cannabis stocks. He thinks energy still needs to earn its place first, with fresh buying back from investors (which he expects following the tax loss selling season in November or December). He expects another bull market for oil and natural gas in the next few years – WTI back to $100 and AECO at $4.00/GJ.

How do you make money these days? It’s been very frustrating. Doesn’t own FANGs, but does own marijuana privately. We’re long in the cycle. Not a lot of breadth, which is usually a sign of the top, though the top comes when no one expects it. Interest rates still low, bonds don’t pay much, yet dividend payers are being sold wholesale. It’s FOMO. He can’t bring himself to hold or buy the big weed companies. He has a problem with the market cap. Can have a good company, but a bad stock. Hard for pot stocks to backfill the valuation. It’s a great industry, and Canada is breeding the frontrunners.

When will we get a real idea of cannabis market cap? Won’t see a lot of people take it up, if they don’t already use it, because people don’t want to smoke, period. People aren’t going to jump in just because it’s legal. Good long-term potential, but first we’ll need to see products that people are interested in.

Market. Hexo has an active shareholder saying they did a bad job of getting the stock price up. He disagrees. He thinks it has gotten very high. He does not own anything in this space. This reminds him of the Internet bubble in '98. A few players maintained and grew. With Cannabis, you have a timeline into next spring. NAFTA affects specific companies. MG-T has taken a drop because of the uncertainty. Rationality is not a factor today.

Gold. He would love to be able to explain the future for gold but just has to avoid it. The producers are not great capital allocators. Good is doing poorly mostly due to rising rates. Gold does not give any interest.

Market Outlook. Emerging Markets are an area of the world where there is a lot of macro misinformation. Now it is oversold, and he is positive on emerging markets contrary to what many people feel. He is not in Turkey and Argentina. He would focus on countries that have taken structural reform seriously and have a growing middle class. He thinks that the biggest story of our time is the rising middle class in Asia. N develop countries we have aging demographics, high debt levels, large mortgages. It is very uncommon to find that in emerging countries.

Given that Mexico had progress on NAFTA negotiations, what is the effect on Mexican Stocks? They bought iShares MSCI Mexico ETF (EWW-N) last quarter in advance of the macro misinformation was there before the election. He thinks it is a little overbought now and wouldn’t buy it now.

Is there a good ETF for the electric car sector? Difficult to get a pure play. There is an automobile innovation First Trust Global Auto index ETF (CARZ-O). There is an upside potential. ETF are double edge sword in some regards because they offer the diversification but for sectors like this it is better to be a stock picker.

Do ETF have an influence on the market when they buy large blocks? They are not very large in relation to other securities. They basically trade on the secondary market. ETFs offer transcended liquidity according to a friend of him. When the underlying went no bid, the ETF continued to trade providing price discovery. Don’t trade at the end of the trading session, don’t use market order, a few simple rules could help you overcome the criticism found in popular media.

Is there a and ETF that covers venture capital? There are Hedge Fund replication strategies such as IQ Hedge Multi-Strategy Tracker ETF (QAI-O). They don’t track a basket of hedge funds but rather track a basket of popular long/short trades that hedge funds place. His company would never invest in something like this.

Is there an ETF for an 18 years old to max out her TFSA? She has a very long-term horizon. If you are a passive investor and want to invest in the fortunes of our country you might look into Horizons S&P/TSX 60 ETF (HXT.T). If you have a higher risk tolerance and want a more globalized portfolio Horizons Managed Global Opp ETF E (HGM.T) is an option (he runs it).

Is there an ETF in US funds that you would buy now? Yes. A classic one would be iShares Core S&P 500 ETF (IVV-N). Cheap, low cost, liquid. He would be careful with the low vol or low dividend. He prefers the pure beta.

Market. These next two months can be tough on the market historically. He thinks the market will continue to consolidate with an upward bias into the fall. The S&P500 has gone basically sideways for most of the year. There has actually been a net cash outflow out of the market for most of the year, yet the market has stayed flat – he thinks this is a bullish sign for the future. If it doesn’t want to go down, it probably will go up. The longer the consolidation the more aggressive the upside will become.