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

Market. The Canadian economy is doing all right, but you look at the composition of the index and it is mostly oil, gas and banks. Then we had the Home Capital effects which spilled into the banks, and they became unloved. Oil and gas fundamentals have not been great this year. The base metals and all the other resources had a little bit of a lift in the last little while, but it has also been going down in the first 6 months of the year. Banks will probably do okay, but it pretty much depends on what oil and gas does. Everybody is looking for a rally in oil and gas, but no one knows how long it will last or how good it will be.

Cannabis? She hasn’t done enough work to recommend one name over another. Every day there is a new name that comes up on her screen, and it is getting to be a crowded space. In the long run, whatever the politics, etc., her experience is that the front runner and the consolidator will be the name to own. It’s a little early to tell at this time.

Canadian bank? He would rather choose a US bank over Canadian banks right now. There are some potential rocks in the water for Canadian banks. However, if he were looking for a Canadian bank, it would probably be Toronto Dominion (TD-T) because of their US retail exposure. Virtually all of them are trading below the 150-day moving average and have had a very weak rally through May and June, while US banks had a very good rally.

US or Canadian healthcare services? It is very hard to invest in healthcare in Canada. In the US, this is the largest industry. There is a secular growth theme behind it in that you have an aging population who want more and more services. There are going to be bumps in the road along the way. Medical devices is the most attractive area, because some of it is discretionary spending. He also really likes the biotech space, because it is innovation and new treatments. You could consider the ETF ALPS Medical Breakthroughs (SBIO-N).

Markets. We are in a pretty good market, and when you are in a decent market, you want to be able to take advantage of it. Correlation, stock to stock and sector to sector, the way they behave are very low. There are some really strong, long-term themes that you can focus in. When you consider how much of the return is coming in from the top 10 stocks, it is actually not high. There are some sectors that you absolutely have to be avoiding. You don’t want to own the indices. We are in a world where active management works much better than passive. On the negative side, you continue to have to be careful of some of the big sectors in the Canadian market, including energy, retail and some of the defensive sectors that could be at risk if long-term rates slowly move higher. You want to be focused in industrials that do well in improving capital spending, technology, the 800 pound gorilla, and healthcare where demographics are driving things.

Is 40 too young to invest in dividends? When a company declares a dividend and raises a dividend, it is a clear signal that they are confident in the upcoming year. You can never be too young to invest in dividends.

Markets. The central bank of Canada insists the economy of Canada’s is really strong. The US wants to raise rates so there is something to cut later and he thinks it is really the same in Canada. Energy sensitive provinces had somewhat of a rebound. The government is extrapolating out to the end of the year, but now energy prices are going back down. We are the only real petro currency in the world, after Mexico and Norway. The Canadian market is weird compared to the rest of the world. Outside of our biggest sectors, there are world beater mid-sized companies in Canada. A lot gets taken over by bigger entities. Canada is not a sector by sector thing. The good sectors are worth 15% of the index.

A recommendation for an Index Fund for Oil. Don’t get a leveraged one. He is not that wildly bullish on the price of oil right now. The price of oil is going to bounce around. Rebalancing in a leveraged fund could cause you to lose money even if oil goes up.

Markets. It is a special day today, July 17^th. On average the S&P over the last 20 years has peaked on Feb 17^th, then down until the middle of October. Today is the average day for the start of a correction. For the TSX it is similar. It peaks about July 17^th. There is volatility and there is lower volume. Volatility starts rising about the beginning of July. The markets bottom in October. The VIX is doing about nothing right now. The spike in volatility has not happened yet this year. All this means is a selloff to come. There are some interesting buying opportunities.

Educational segment. The VIX. It often rises in the summer, connected to a correction in the markets. This year it could be a problem in Korea or a problem in the congress of the US. Not everything goes down when you have a spike in the VIX. Gold. When the VIX spikes in July to October, so does gold. We are seeing early signs of XGD-T bottoming. Momentum indicators are starting to turn higher. Stocks are moving off their 20 day moving averages. There are early signs that gold has bottomed. Look at bullion and stocks and pick the one that is performing the best. It looks like gold stocks are the way to play the seasonal trade this year.

Market. We are experiencing the 3^rd largest economic expansion in history, and if it goes to 2019, it will be the longest in history. The market has tripled since the financial crisis and many investors are concerned that it has gone up too far and too fast, and that there is going to be another major correction. That is making this the most unloved market that he has ever witnessed in 40 years. Feels it bodes well for the longer-term and doesn’t think it is over. It is hard for the US to do something, and not have Europe come into play, along with the rest of the world, so he is not sure there are going to be any further interest rate hikes for the rest of the year.

Obtaining “implied volatility ratings” for Canadian stocks? Implied volatility is what is used to price an option, and is based on how volatile the underlying security is. Volatile stocks command a higher option premium. The easiest way to create a list of implied volatility stocks, is to look at the most volatile stocks in the Canadian market. Gold stocks would typically be in the top quartile of volatility. You can get implied volatility numbers if you have a discount broker that provides you with a quote machine, which will, in most cases, show you the implied volatility.

A Covered Call in a registered account. Buy back the Calls and roll them out, or just let them get called away and write another Call? He does a lot of rolling, which is usually a good thing as it means the stock is going up in value and you crossed the strike price and are going to get called away at a price a little below where it is and you want to roll up to a higher strike price. It really depends on how comfortable you are with the stock, and is it a price point where you normally would’ve sold it if you didn’t use options.

Covered Calls Comment. One thing you want to look for in a Covered Call is a good quality company that has upside potential and has enough volatility in it that the option premiums are valuable enough that it makes sense. Tech companies fill that bill on so many fronts.

An ETF representing the US defence industry? SPDR S&P Aerospace & Defence (XAR-N), iShares Aero & Def. (ITA-) or Power Shares Aerospace & Defence (PPA-N) all do the same thing.