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

Market. Indexing or quasi-indexing is just not going to work. In the Canadian market, there are so few stocks to choose from. With everybody in the newspapers, regulators and media pushing everyone towards ETF’s, passive investing or Index investing, this is changing the means to have the efficient market hypothesis. What was perceived as a safer course of action, actually becomes a lot riskier. This applies to any sort of investment strategy; if everybody is doing it, you want to be doing something else.

Forestry sector? The raw materials have so many issues attached to them. He prefers hardwood distributors to any of the softwoods or basic manufacturers of 2X4s. Also, you should have an “added product”, if you want to participate in the growth in the US housing market.

REITs? Real estate has done very, very well. The trick will be going forward. There is only so much land that people want to live in. Interest rates are so low that the return that investors are willing to accept on real estate investments, has pushed lower and lower and lower. This makes it very vulnerable to a rise in interest rates. Every time people think interest rates are going higher, the REIT sector takes a hit.

A winter stock, for a TFSA account gain in the next 6 months? Energy stocks do well at this time of year. If you buy them now, and sell them in the early, early spring, you should historically do well. However, the last 2 winters have been really, really mild, and we have had a very, very hot summer. He would look at some of the bigger ones like an Encana (ECA-T) or a Crescent Point (CPG-T).

Markets. The S&P 500 was stuck in a holding pattern a year long and then broke out. Now it is stuck again. If we break the new support you then you start to look at lower levels of support. As you come into an election it can be quite volatile (Sept and Oct) which are also seasonally low. September did not move lower this year, however. Right now the odds are greater for a market correction than not. Put your cash to work during the fear trade before the election.

Gold. $1250 would be the support level. Old resistance becomes support. If it doesn’t hold $1250 it could go down to $1200. We have to wait and see.

REITs. He sold one of his two holdings to raise cash recently. The new mortgage rules will affect some REITs and not others, depending on whether they hold residential apartments. XRE-T looks a little bearish right now as it is trending down.

When to convert from US$ to CAD$. The US$ is in a tight trading range. It is not going to sell off any time soon, but it is not going to take off. If oil got to $62 it will put upward pressure on the CAD$ but raising interest rates could put upward pressure on the US$. He would keep an eye on oil prices as they will have the biggest impact.

Market. He doesn’t obsess about broad market conditions, but the US election is hard to ignore. It is clearly one of the biggest elections in years. Regardless of who wins, he thinks it will have a big outcome on equity markets. On top of that, there are a lot of other things going on. The UK has announced they are going to formally exit the EU in Q1. China is flexing its muscles in the South China seas. There are issues with Syria. The way he invests, he can largely ignore these things because he uses a lot of pair trading. When he is Long and Short, it allows him to essentially to take out the movements in the market. Instead of worrying whether the market is going up or down, he just focuses on the individual companies.

Gold. Believes the gold price fell today because the US$ was strengthening. The global economies are picking up and he sees more confidence coming into the system. As the economies move forward and the US gets stronger, golds have a smaller role to play. Thinks this will continue throughout the fall and that the US markets will begin an early rally here.

Economy. The US is looking stronger. Consumers have been a little bit choppy, and some of that may be related to the baby boomers not spending as much and millennial’s not catching up, but around the world, the US is probably the best and most liquid market. Valuations are reasonable. Consumers have not come back yet, but the industrials are starting to come back. Both US parties have indicated that infrastructure spend is a priority, and that will do well for the US economy. Durable goods were up in August. There will be periods of volatility, but that is the norm now. Commodities are going to be a tough place to be until India industrialize, and that’s a long way away. US PE multiples are a little higher than where they ought to be given where the interest rates are, but there is wiggle room if interest rates go up.

Markets. OPEC soft agreement: The Saudis have never within the last decade been able to stick to their quotas. Almost assuredly it is not going to happen. He thinks prices will go lower before they go materially higher. He would not trade this story unless you are among the most savvy day traders. We had Brexit and the markets have said it is no issue, but actually it is a massive issue and we will see what it means in the first quarter of next year. Nothing has happened yet.

ETF to short Europe. The problem with the European banking system and negative interest rates is not over. There is no ETF that trades in North America and shorts Europe. EFZ is an ETF that shorts non-North American markets.

Recession in next two years – what to do. He has reduced equity exposure in non-growth funds he manages. He is net short the market in his long/short strategy. He is positioned defensively. He likes ZPW and ZWH in the US. The combination of the two of them yields a little over 7% while you wait for volatility to play out.

Educational Segment. Today's educational segment was pre-empted by an announcement by the federal government on housing.