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

Choosing an equity mutual fund. It is hard to do stock picking as an individual so he would recommend a mutual fund. It is better to have it in a cash account than an RRSP. It depends on the environment and where you are in the cycle. A lot of people are managing their own portfolios these days. If you are willing to spend the time and do the research you can build a decent portfolio. We have been in a great cycle for 10 years. The world's not getting any safer or stable with Trump in power. You want to look for lower fees. The industry has shrunk in terms of companies. An ETF is a market or a part of the market and it depends on how you feel about the sector. The market is not without risk at the end of the day.

Growth vs Defensive. Normally this time year, on a seasonal basis, there’s a shift from heavy cyclical stocks like base metals, industrials, financials. Staples, bonds, utilities tend to pick up in summer. And we do see this rotation, but with all the talk of inflation, still don’t see US 10-year yield much higher. Somewhat pro-cyclical tech sector ETF, XLK, should carry on into July. Industrials have come off. XLP (staples) and XLU (utilities) have started to pick up right on cue. Corporate and individual debt lag rate increases. At Castlemoore, when they look out, they’re thinking is this typical rotation or might there be something more.

US tariffs on China. Might tamp down economic growth. The way the market reacted today, it’s looking past this. Markets do often reverse after a big day on the market. Market’s saying it’s just Trump being Trump, China reacting as opposed to implementing, and it will all work out. If we do get a meaningful trade war, not good for long-term global growth.

Gold. Coming into seasonal period. Bottom is being formed and there’s a little trend, which we’re seeing in many gold stocks. Gold stocks and producers track each other. Gold can stay weak, but the sector moves forward, and some stocks hit new highs. Gold has been not loved, but with strong US dollar, going to give some indigestion to emerging markets, because they have a lot of debt. Gold producers have been quite positive. Today gold was way down, but the high quality names have been acting quite well. Bodes well for the future. Producers will always lead the direction for the commodity on the downside and the upside, so we expect a bit more action as we move into July.

Banks. Has really lightened up on the banks. If market thinks rates going marching up, but banks have stalled, does the market think the economy’s not going be able to handle higher rates for longer? Banks won’t do better until the fall.

Market. Valuations multiples in the US are very expensive compared to the tepid growth there. There are high debt levels and trade wars affecting them. There is a lot of uncertainty out there for companies trading at rich multiples. Marijuana stocks are indicating market tops, typically. We are in that zone so be a little more cautious at this time. There can be opportunities in Canadian stocks. Smaller and mid-sized stocks have been neglected for the last two years. ETFs require a liquid stock in their portfolio so demand for those ETFs push up those large caps. People will scramble at some point for the exits.

Market. Have had a little more volatility in markets this year as compared to last year, but seems to be continuing on same trajectory as last year with certain sectors. A marijuana bubble, and now cryptocurrency bubble which seems to be imploding. The old economy has been left behind, especially in Canada. A very sector money flow market right now. Be patient on weak stocks that have great fundamentals. Sees opportunities when some of these bubbles blow up. Feds tightened the yield curve again and thinks there may be 4 tightenings this year, but the economy is still doing well in a low interest rate environment.

Market. He is cautious right now, especially in Canada, where things get quite illiquid in the summer. He is holding a little more cash than normal. With the World Cup beginning this will only make things worse. This may create some short-term opportunities for buyers looking for opportunities.

Cannabis. His group did the first major financing in the space. There are only 5 or 6 major players. The stocks have had a massive run-up, which caused them to take profit a while ago. He is now looking for opportunities to buy again. He sees the Aurora deal as a pure paper-for-paper deal and is not involved in it.

US Fed hikes interest rates by 25 basis points today: that's a positive, because the US economy is
doing very well, with low unemployment and a progressive tax regime. Banks will be
making more money. It's easy to look at Trump as mad. Yes, he's petulant, but your portfolio is making money, like it has this week. He remains very positive about the U.S. Re: Canada/US clash & NAFTA negotiations: This is really a spat that'll get sorted out. Friedland is doing a good job.

How can I avoiding US taxation when buying a US ETF? There's no escaping the IRS. Instead, buy a Canadian ETF that includes a US sector(s).

Do you ever cover the short sold calls or leave them alone till expiry? When dealing with options, there are two components in the price: time value and intrinsic value. He looks at how much the time value has been squeezed out of option? One rule: When you get to expiry, close everything out.

When you do covered calls on the banks, do you make the covered call right away or wait for the share price to rise? He does it simultaneously. He looks for the price of the option to the bank, and looks for the ex-dividend date so he can capture two dividend periods.

Horizon ETFs: pros and cons: Most Horizon ETFs don't list the stocks inside, because they are total return ETFs, meaning they don't pay distributions, such as HXT-T. This reduces the capital gains. These are swap- and not index-based. They have a counter party, namely National Bank and CIBC, who swap the return on the portfolio. There's very slight added risk, not much. He owns some Horizon ETFs. This is very tax advantageous in non-registered accounts.

Closet indexing: It's a negative description where active portfolio managers are making their selections, but are really just buying the index. As a result, you're paying over 2% for near-zero input from the portfolio manager. You may as well buy the XIC or XIU. You're not getting what you're paying for. Also, ETF index investing outperforms active management 80% of the time. Lastly, it's nonsense that ETFs will cause the next crash: ETF's are not that dominant.