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Financial abuse of the elderly becomes a tragic trend, pot stocks in valuation danger zone, and playing defence with bond ETFs

Financial abuse of the elderly is becoming a tragic trend.

The business model of the brokerage industry has been under pressure since the wide adoption of the Internet – before the World Wide Web, the brokers were the only ones with information like price earnings levels and stock quotes. The resulting stress on profit levels appears to have resulted in one of the more tragic trends in the finance industry – the financial abuse of the elderly.

A recently released column by Charles Schwab quoted a 2014 study which found that more than a third of U.S. seniors, 37 per cent, had been victims of fraud or financial exploitation. A separate study in 2016 estimated the average loss in these cases at US$36,000.

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The New York Times detailed a horrifying specific case this week where a woman moving her mother, who was suffering from Alzheimer ’s disease, to an assisted care facility found that her mother’s $1.3-million brokerage account had been charged fees of $128,000 in the previous 12 months.

People lacking ethics will do virtually anything to protect their livelihoods and this is particularly true for professionals like brokers who became accustomed to seven figure annual income in previous eras. The increasing number of financially successful Boomers in retirement, unfortunately, is providing more easy targets for the desperately unscrupulous.

The Schwab column provides a number of useful tips to combat the financial abuse of seniors. It wouldn’t be the case in a perfect world, but younger generations should use these tips and take responsibility to advise and protect their elderly relatives.

-- Scott Barlow, Globe and Mail market strategist

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Stocks to ponder

Aphria Inc. (APH-T). This marijuana producer appears on the positive breakouts list (stocks with positive price momentum). On Friday, the share price of this pot stock popped 23 per cent on the back of speculation that the company may strike a marijuana-infused beverage deal with alcohol beverage giant, Diageo. This pot stock has been a laggard with its share price falling 25 per cent year-to-date. However, analysts believe its share price may continue to rebound. The stock has a unanimous buy call with the average target price implying a potential one-year return of 54 per cent. Leamington, Ont.-based Aphria produces and sells medical marijuana products. The company is one of the lowest cost producers in the industry owing to its greenhouse operations at its flagship facility in Leamington. Jennifer Dowty reports (for subscribers).

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Martinrea International Inc. This auto parts stock with a market capitalization of $1.2-billion has recent research coverage by 10 analysts, of which eight analysts have buy recommendations and two analysts have hold recommendations. The stock is seeing negative momentum, points out Jennifer Dowty, and recently, several insiders have been accumulating shares in the market.

The Rundown

Pot stocks flashing warning signs as investors drive valuations back to January peak

Several days of frenzied trading have driven marijuana-stock valuations back to near the record highs set at the start of this year, setting the stage for what could be another brutal sell-off once the enthusiasm subsides. Even usually optimistic sell-side analysts are signalling that the biggest pot stock of them all – Canopy Growth Corp. – may be due for a pull back. The cannabis industry was trading at 21 times projected 2019 earnings before interest, taxes, depreciation and amortization (EBITDA) as of Friday, according to Echelon Wealth Partners. That marked a steep increase from 14.8 a week earlier. Those valuations stretched even further on Monday, when pot stocks surged yet again. Matt Lundy reports (for subscribers).

Short sales on the TSX: What bearish investors are betting against

There was a fair amount of turnover among Canada’s 20 most shorted stocks in August. Some companies, such as AutoCanada Inc., First Majestic Silver Corp. and Laurentian Bank of Canada, saw jumps in short interest that catapulted them onto the top-20 list or considerably raised their ranking from the previous month. Other companies, such as Quebecor Inc. and Badger Daylighting Ltd. experienced major drops in short interest that took them off the list or further down the rankings. Larry MacDonald takes a look at which companies caught the attention of short sellers this month (for subscribers).

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Whatever you do, avoid this type of investment

Binary options involve placing a bet on whether a specific stock, commodity, index, currency or whatever will go up or down within a specific period of time (usually very short). If you guess right, you win. If you don’t, you lose. Think of it as the financial equivalent of betting red or black on each turn of a roulette wheel. The attraction is that you don’t need to invest a lot of money, it’s easy to understand and it can be done online from your home. The disadvantage? Most people lose money (sometimes a lot) and some of the sites that promote this activity are scams. According to Wikipedia, the FBI estimates that these scam sites steal about US$10-billion a year worldwide from unsuspecting investors. Gordon Pape explains why you need to stay away from these sites (for subscribers).

How a $781-million outperforming fund manager is positioning for the next phase of the bull market

The S&P 500 closed last week at a record high and U.S. stocks are now widely considered to be in their longest bull market in history. For Bob Doll, senior portfolio manager and chief equity strategist for Nuveen Asset Management LLC in New York, it means investors must start to be selective when buying equities. That’s especially true given the lingering threat that the trade dispute between China and the United States may escalate and lead to economic challenges. Mr. Doll, overseer of the Nuveen Large Cap Core Fund that has more than US$781-million in assets, spoke to The Globe and Mail about his investing strategy, top picks and sectors he is currently avoiding. Clare O’Hara reports.

This is how ETF investors are playing defence in a hostile world for bonds

Interest rates and inflation have been rising, yet bond ETFs are crushing equity funds in attracting new investment. The exchange-traded fund format can be a smart way to add bonds to a portfolio, but what’s up with the strong preference for bonds at a time when fixed income is under pressure? For answers, consider the bond ETFs that were most popular with investors in July. Rob Carrick takes a look at some top bond ETFs (for subscribers).

Potash producers are rallying sharply

A surprisingly high price for Indian potash pushed stocks of the fertilizer producers up in Monday’s trading. David Milstead explains (for subscribers).

Top Links (for subscribers)

Canadian economic indicator flashing red

Others (for subscribers)

Monday’s Insider Report: Companies insiders are buying and selling

Monday’s analyst upgrades and downgrades

Others (for everyone)

Three stocks on the move that investors should pay attention to

Canada near peak for new ETF players, Horizons sales chief says

Loonie gains at risk as eyes turn from NAFTA to the Bank of Canada, says TD

The Globe’s stars and dogs for last week

Inside Elon Musk’s reversal on taking Tesla private

What the Street is saying about Tesla’s latest u-turn

AMD’s $14-billion rally hasn’t swayed Wall Street skeptics

Number Crunchers (for subscribers)

Stock hunting in this bull market’s best performing sector

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What’s up in the days ahead

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Compiled by Gillian Livingston and Darcy Keith

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