Our RBC Monthly Morning Coffee

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1 Our RBC Monthly Morning Coffee You miss 100% of the shots you don t take. Wayne Gretzky With temperatures outside now having shifted to the lower end of the paradigm, folks may become more prone towards the added temptation of binge-watching as a winter activity It has been some time since my last Netflix recommendation, but I did use parts of last week-end to complete the second season of Ozark starting Jason Batemen of Arrested Development fame - although as a colleague here pointed out to me, his Arrested Development supporting cast was significantly stronger than in Ozark (this lack of casting support is apparent through a couple of episodes). Upon my analysis of this series, I would categorize the two seasons from a quality standpoint to Rocky and Rocky II, simply due to the fact that the first season was very tough to duplicate from an entertainment basis. That being said, still very good value for your money, and I will still offer a rating of two thumbs up! A NAFTA Update This week, the Trump administration will publish a draft of the new NAFTA agreement. In its current form it includes only the U.S. and Mexico (more like HAFTA!), but the language allows

2 for Canada to rejoin the pact in the future. The move is meant to put pressure on Canada, as the U.S. is no longer counting on its self-imposed September 30th deadline to reach a deal. However, President Trump may see some pushback from members of congress on a deal that excludes Canada. On Wednesday, Trump went a step further in showing his true colours by actually declaring his disdain for the Canadian trade representative we re still not sure if he was in fact referring to Chrystia Freeland, our minister of Foreign Affairs In terms of stocks affected, Magna shares have suffered as of late due to these tariff talks coming out of Washington; I have however been buying shares of MG A for some clients in my discretionary Canadian portfolios. I expect the shares will continue to be volatile, but still offer good value at the current price levels ($70/share); keep in mind that Magna still earns over 70% of its revenue from deals reached outside North America. Appointing an Executor Things to Consider Last month in this monthly publication, I introduced a lady named Connie Freitas (a lawyer by trade) who joined RBC 6 years ago, and has become an essential part of my service offering. Clients who have $1M or more invested with me can sit down with Connie and undergo an extensive Will & Estate review at no cost to them. I wanted to share with you a topic that did arise during our last meeting as we sat down with a couple which ties in with the appointment of an executor. Listening to the story these clients told, it dawned on me that we do not give very much consideration to the appointment of an executor to look after our final wishes after we are gone. In fact, we are supposed to consider this appointment an honour if we are in fact given such a title despite the actual magnitude of such a task not to mention that the appointed individual has virtually no experience in performing such duties in 9 out of 10 cases. Here s one more thing to consider. if said designated person makes a simple and common mistake such as improperly interpreting terms of the Will, favouring some beneficiaries (or creditors) over others, and not maximizing sale value on estate assets, executors could potentially be held personally liable for these mistakes. Statistically speaking, there is considerably more litigation than there was 20 years ago, as both laws and estates are becoming more complex. There are new tax issues, there are new legal matters that arise. Another factor not to be ignored is that beneficiaries have become more assertive; when estate information was less accessible, there was a notion that the executor or the lawyer was doing what they were supposed to be doing that is less common now.

3 The change in landscape by way of the personal liability an executor carries has actually made executor insurance a large business. If you have further questions here, please do not hesitate to give me a call. For more information on Connie, please visit my website Portfolio Returns Revising Expectations I am writing this on the morning of Sept. 28, which is essentially the last business day of the month (which leaves us with 3 months remaining in the year). In looking at the Canadian stock market, the average index investor has yet to realize any degree of return on his/her portfolio as the main benchmark index (S&P/TSX 60) is showing a return of 0.0%... I am not joking here Furthermore, if you are in a Canadian Balanced portfolio where 30-40% of your money lies in some type of a bond portfolio, your overall returns for 2018 thus far will likely be negative; this is due to several rate hikes by the Bank of Canada this year which has had a dampening effect on the price of bonds. Now many of my clients have seen some degree of a positive return from their American equity exposure, due to the fact that the bulk of North American economic growth has come by way of the United States. That being said, it has been a very humbling year for equity-minded investors who have committed to holding the majority of their investments in what I refer to as risk assets (a.k.a. stocks). Furthermore, it would not surprise me to see some type of a short-term market correction, as history has shown us that the market is a tool that humbles investors when we least expect it. From a technical standpoint, we see now that the recent advance in the stock market has come on a note of decreasing participation by many stocks as the recent new highs for the indices saw weaker numbers of advancing stocks with fewer names hitting new highs along with the indexes. This is a sign of slowing momentum Keep in mind that I feel any type of market correction at this stage will be healthy for this market, and will eventually lead to further subsequent advances due to the overall health of the US economy. I very much still see the value in holding equity-based assets for the investor seeking long-term returns (more than 5 years). If you are nervous about the current state of your holdings and/or second-guessing your current asset mix, please feel free to call me directly and we can have a fairly direct chat in re-visiting how your account is positioned.

4 Stocks to Watch Pembina Pipelines (PPL) Pembina is a Canadian pipeline firm which I own for many clients in my Canadian dividend portfolios The firm has just increased its 2018 earnings guidance, citing increased volumes through its pipelines and fractionators, strong results from the assets previously acquired from Veresen Inc. (which it acquired last year) and higher margins from its Marketing business. Pembina trades under the ticker symbol PPL, and at its current price of $44.50/share pays an annual dividend of 5.1%. (RBC has a one-year target price of $54) Of Sound Mind & Body Top three excuses men make for avoiding scheduling an annual check-up w/ their physician: 1. They are afraid to find out that something may be wrong with them. 2. They are uncomfortable with certain body exams. 3. They are too busy. My last statistic to share - 1 in 4 men say that it has been over a year since they last had contact with a doctor of health care professional. - Investing in the US Banks In the context of a rising rate environment, our internal analysts remain comfortable with exposure to the U.S. financial institutions. In the money-centered names, investors can look at JP Morgan or Bank of America. Both of these are good play on return-of-capital, while also being somewhat growth-oriented. Amongst the regional banks, RBC s favored play is PNC Financial which is also amongst the best names for return of capital, and could potentially experience multiple expansion as a result of its above average growth. Note that JPM, USB and PNC all reside on the RBC U.S. Focus List.

5 For the record, I own JP Morgan for clients and have also been adding to Warren Buffet s favourite bank stock Wells Fargo (WFC) on recent weakness. I also like to own BMO s banking ETF, which trades under the ticker symbol ZUB. A Holiday Tradition Maria & I are contemplating a twist to our holiday movie/food drive tradition we hold at the Fox Theatre here on Queen St. each December Specifically, we are floating the idea of doing a movie event in January after the holiday season has passed during a period where folks presumably have a little more flexibility within their personal schedules. Furthermore, instead of a holiday movie, we are toying with the idea of renting a production that made its debut at the recent Toronto Film Festival (TIFF) We are open to suggestions here, and your input is greatly appreciated Well, the Blue Jays have gracefully closed up shop for the winter and Torontonians can focus on their beloved Leafs.although the Raptors will give their ScotiaBank co-tenants a run for top billing this year. By the way, has anyone seen the Philadelphia Flyers new mascot, which was unveiled this week?! The creature is one very scary giant Muppet and could be considered a new version of the old Montreal Expos Youppi, but only after he s ingested several Vodka Red Bull drinks!! Enjoy these beautiful fall months.that s it from me. - Ian

6 Ian Fitz-Gerald, CIM Vice President & Portfolio Manager RBC Wealth Management RBC Dominion Securities Inc. T or F Queen Street East 2nd Floor, Toronto Ontario M4E-1E5 Securities or investment strategies mentioned in this newsletter may not be suitable for all investors or portfolios. The information contained in this newsletter is not intended as a recommendation directed to a particular investor or class of investors and is not intended as a recommendation in view of the particular circumstances of a specific investor, class of investors or a specific portfolio. You should not take any action with respect to any securities or investment strategy mentioned in this newsletter without first consulting your own investment advisor in order to ascertain whether the securities or investment strategy mentioned are suitable in your particular circumstances. This information is not a substitute for obtaining professional advice from your Investment Advisor. The commentary, opinions and conclusions, if any, included in this newsletter represent the personal and subjective view of the investment advisor [named above] who is not employed as an analyst and do not purport to represent the views of RBC Dominion Securities Inc. The information contained herein has been obtained from sources believed to be reliable at the time obtained but neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers can guarantee its accuracy or completeness. This report is not and under no circumstances is to be construed as an offer to sell or the solicitation of an offer to buy any securities. This report is furnished on the basis and understanding that neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers is to be under any responsibility or liability whatsoever in respect thereof. The inventories of RBC Dominion Securities Inc. may from time to time include securities mentioned herein. Investment Trust Units are sold by RBC Dominion Securities Inc. There may be commissions, trailing commissions, management fees and expenses associated with Investment Trust investments. Please read the prospectus before investing. Investment Trusts are not guaranteed, their values change frequently and past performance may not be repeated. In Quebec, financial planning services are provided by RBC Wealth Management Financial Services Inc. which is licensed as a financial services firm in that province. In the rest of Canada, financial planning services are available through RBC Dominion Securities Inc. This commentary is based on information that is believed to be accurate at the time of writing, and is subject to change. All opinions and estimates contained in this report constitute RBC Dominion Securities Inc. s judgment as of the date of this report, are subject to change without notice and are provided in good faith but without legal responsibility. Interest rates, market conditions and other investment factors are subject to change. Past performance may not be repeated. The information provided is intended only to illustrate certain historical returns and is not intended to reflect future values or returns. RBC Dominion Securities Inc.* and Royal Bank of Canada are separate corporate entities which are affiliated. *Member-Canadian Investor Protection Fund. RBC Dominion Securities Inc. is a member company of RBC Wealth Management, a business segment of Royal Bank of Canada. Registered trademarks of Royal Bank of Canada. Used under licence Royal Bank of Canada. All rights reserved.