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

Market. Recommend a good Canadian dividend paying stock. The Canadian market is small but on the other hand it is big enough that you can do well owning just Canadian Stocks. There are many good names. Restaurant Brands (QSR-T), Magna International (MG-T), the telco space, Manulife (MFC-T), there are probably another 15 or 20 that he could recommend.

Market. Impact on our debt and deficit on what the Trudeau government is doing. The debt to GDP for Canada is pretty low compared to other countries. There is room for more infrastructure spending or lower taxes without affecting the Canadian Dollar.

What relative portfolio weight to assign to Canadian Stocks and what sectors you prefer? Canada is out of favor. He doesn’t like energy. He likes the banks and the insurance a lot. He likes some industrials. He sees a lot of value in Canada despite all the negative sentiment.

Any ETF that you would recommend for rising interest rates? Some pref shares can benefit. There are other ETFs like the Mackenzie Floating rate income ETF (MFT-T) that would benefit. It is tough. You want to keep your duration short. You never know where the future is going to be.

He wasn't worried about the recent minor correction. He's been waiting a long time for a return to volatility, which is good for the market. We're likely to see more of it in the coming months which will be buying opportunities. He doesn't expect a major correction unless there's a geopolitical cause. We could see rising interest rates and a return to inflation. So, investors will want compensation for risk and that will create volatility. During pull-downs, these are opportunities to buy good names. Investors should do well if they have a long-term horizon. If interest rates rise precipitously, then we will see a major global recession which nobody wants.

[What happens to the Canadian dollar if the U.S. dollar plunges?] The value of our dollar would go down, but not as fast as theirs. There is a whole host of factors. Our government would like to see a lower Canadian dollar. Also, our productivity has always lagged America's. We won't see a strong Canadian dollar unless metals, oil, gas and forestry products really pick up which is unlikely. Can't predict if our dollar will reach 75 or 85 cents a year from now, but the days of trading at par are gone for a long time

Market. Folklore says you get three rate raises and then a selloff in the markets. We had five rate increases and are slotted for three more. The question is how much is too much and when is the market going to stumble. There are many things driving bond values. AGG-N has been trending downward since mid 2016. One of his Top Picks is a yield stock. He likes the look of US financials. We are in a period where the market tends to be strong. This is not the time to pull things out of the market. You ride it out at this point.

Gold. From July 27 to the end of September Gold does well, but it can also do well in China. Silver is his preference right now but he just exited yesterday. For Gold we are past the period where it typically goes up, but right now it is forming an ascending triangle and if we break above then it is very positive. Technically it actually looks strong although not seasonally. He would exit gold if it breaks below the triangle.

Steel. Stelco (STLC-T) or SLX-N ETF in the US. We saw some big days in the last little while. We have an ascending triangle. It is very positive. Steel stocks do well until late April.

Artificial Intelligence Technology – He feels this is very old technology and that there has been no innovation made in the last 20-30 years. High speed communication and lower cost data storage has made AI more cost effective. He prefers companies in the chip manufacturing sector instead. Facebook (FB-O) has been able to benefit from AI as it is not proprietary technology.

Overview Rising Interest Rates: Selloff was caused by reaction to rising wages in the U.S. Rising interest rates, at this point, are a good thing. When 10-year rates reach 3.5%, they can become a headwind. Real estate stocks and utilities will underperform as interest rates go up, but bank stocks will do well and healthy companies in other industries will grow in parallel with rising rates. Rising prices will also be good for base metal stocks and oil.

BC Budget - BC will raise foreign homebuyer tax: The vacancy of homes is a real, valid issue, but increasing the land transfer tax for homes above $3 million but will reduce supply. That's a negative.

Recent correction: We went from an overdue correction to overdone, and now we've come back too fast. This was not a systemic correction, meaning he didn't lose confidence on the market, government or numbers that were coming out--he still believes in what he owns. This was a technical correction. He used stop losses. 80-90% of his holdings were sitting on average-moving lines and didn't break. It was a tense, but orderly correction in valuation. Running for cover in bonds didn't work. Meanwhile, safe yield plays in REITs and telecoms are still down 6-9%. It's now difficult for a dividend investor, but good for a growth one. Tech stocks have led the charge.

Market. How do you set a stop loss so you don't lose a lot of money on a security? It's a combination of science and art. It's not easy. Some rules to follow: Don't buy a huge position at once, but buy bit by bit. When you build your position to full and the stock keeps growing, then sell it down to, say, a 5% weighting. Then, you're left with a minimum weighting. It's also about a stock's relative movement within its sector. Say Loblaw drops one day while the grocery sector rises, then sell Loblaw. The past two weeks saw a lot of situations for stop losses, and admittedly it was a tense time as I sold to raise cash.

Question. A retiree owns 20% in fixed income. Should he buy a real return ETF, a rate-reset preferred or buy more US and Canadian banks in his TFSA? Look at the SPDR DoubleLine Total Return Tactical ETF (TOTL-N), a catch-all ETF in U.S. dollars. Also consider XSI-T which has 30% floating rate bond exposure. Or even GICs, which he doesn't like, but some yield 2-3%.