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

An ETF or bond recommendation? Cheapest is XCB, which tracks corporate bonds. About a 3% rate of return. Investment grade bonds, with a mix of government and provincial. People buy bonds grudgingly, but there’s a reason for bonds when the market gets volatile or drops.

The Amazon Effect. There’s always an overreaction in the media. But Amazon is not going away. We’re all getting more comfortable with online purchasing. Bricks and mortar is struggling, except perhaps for Walmart. Drag on earnings. If you have hard assets in the retail space, you can’t turn tomatoes into bananas.

Market. US earnings are even better than expected. It may be that they were shooting for higher numbers than they advised of so they would beat estimates. He is quite happy with how things are going right now. We are starting to see the risk in the FANGs talked about last week playing out. The Bank of England is looking to raise rates for the first time. He is watching Japan as they have said the yield curve is too flat. The unconventional monetory policies around the world are starting to be unwound, starting with the US. It will cause a slowing of economic growth. He would be shocked if there was a NAFTA deal done before the US mid-terms.

ETF in Canada with heavy weighting in Chinese high techs. He tracks EMQQ-N in the US. There is not a similar one in Canada. You can trade EMQQ-N short term but it will come out lower in then recession.

GOLD. Seasonality supports it. It is one of his largest positions. He has 25% between gold and gold equities. We are probably range bound. Over the next couple of years we might break out to the upside. He prefers ETFs than to be exposed to company specific risks.

Educational Segment. The Future of Economic Growth is Fake News. Larry does not believe what the US government is saying to the media about maintaining growth rates of 3+-4%. 1950-1973 were the golden years with massive growth in productivity. Today when the government spends money, you don’t get the same bang for the buck. Getting 1.9% growth in the US would come from a deficit.

Market. The fair market value for the S&P is now about 3000. In 20 years he has never seen the index exceed his calculation of fair market value. This would be a peak. Right now the market is stuck in a trend channel with the fair market value on the top and a structural break point on the bottom. If we hit 2500, he thinks we will see a bounce. This will be the case until something happens. He wonders if the market could die of old age. In 1987 we saw the end of the bull market without any warning. The FB-Q and TWTR-Q drops recently could be warning signs.

Market. The trend in Tech is still up. There has been a change in the character of the volatility since February. Of particular interest in the sector is the concentration. The top 5 stocks in terms of market cap on the S&P are the same market cap as the bottom 282 stocks by market cap. Tech indexes are concentrated in the largest 5. That leads to unintended consequences when managing risk. You are not getting the expected diversification. You want several sources of return that are unique and different. The indices that had a big piece of FB-Q had a big drop on the day FB-Q dropped. You should look at ETFs that don't let this concentration happen.

Oil ETF Recommendation. The IXC-N gives exposure in the US. He prefers to invest in producers than the commodity.

Where to put $200K cash besides Banks in Canada, Utilities and European dividends. Add REITs for their inflation hedge, XRE-T and ZRE-T are good, but XRE-T is equal weight so gives you less concentration and more diversification. Consider also something more global.

Millennium Investor – ETF vs. Mutual Find. The ETF is an evolution in technology. Their management fees tend to be lower. A mutual fund is not different in its structure. If you want some exposure to something and there is no ETF then you can consider a mutual fund. ETFs trade intraday vs. Mutual Funds trade at the end of the day.

Covered Call ETF or buy equity and write your own. You need to be diversified – 20 stocks. Do you have enough capital? Do you have the time to be writing these calls? You are paying retail level commissions.

Market. He stills sees value in the Canadian market, but volatility in the US market is picking up. He is playing defense now and Canada is the favored market right now. It comes down to the valuations of the Canadian sectors.

Precious Metals. Precious metals, he would have thought, should have performed better. He thinks the US is about structurally run trillion dollar deficits, so the outlook for gold over the next five years is very good. Over the next 6 months to a year, however, the sector is facing uncertainty.

Telcoms. He prefers owning BCE-T. They have made great investments in fibre optic technology and are well positioned for the 5G movement.