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

Portfolio positioning. He hasn't changed a whole lot. Barbell approach. On top of it being a mid-term election and markets doing well, the market has corrected severely. Over the last 75 years, the market's corrected 25% or more 9 times. Research out of New York shows how the market does subsequent to a 25% correction. Details can be found at goodreid.com / Insights / Gauge.

Leisure travel outlook. We're moving toward a tightening of the screws on the individual. Savings rates are dropping dramatically. Only a matter of time where people are being pinched to the point where they don't take that expensive vacation.

How to use Top Pick ideas. A manager always likes to come on Market Call with good Top Picks to reward people. Highly dependent on markets, systemic issues, luck of the draw. Viewers have noticed that energy and healthcare stocks have done well, whereas tech or communications stocks have not. Top Picks are just a part of well diversified portfolios containing about 40 stocks. At his firm, they diversify geographically with half in Canada, and half in the US. Foreign exchange hedging. Diversifying by industry and sector. Proper weighting of dollars within portfolios. A balance of growth and value. Think of your portfolio as a conglomerate with good ideas for subsidiaries feeding up into that conglomerate. His Canadian portfolio is up this year, while his balanced portfolio is down about 5.5%. He's not unhappy with that, given the environment.

Sell and take a loss or hang on? Remember that it doesn't matter where the stock price has come from, look at where it's going.

Damage from housing downturn would be limited? Coming off of 2008, Canada and US had completely different experiences. Loan to debt ratios are quite low. We'd have to see housing prices drop precipitously before credit values of mortgages would be affected. He doesn't anticipate that at all. Canada has a bigger issue with a bubble being built in the real estate market, without question, since housing prices in Canada have grown many times more than they have in the US.

Consumer discretionary. A tough sector, as we're coming off elevated savings rates. Consumers are eating through their savings. Objective of the Fed is to scare people into not buying, and that's not good for discretionary businesses.

Believes US midterm elections won't impact financial markets too much. Gridlock in Washington (Congress swinging to Republicans) will prevent too much spending. Chinese economy, inflation and US Fed policy much more impactful on financial markets. Expecting further lock downs in China that will impact global markets. Too early to determine if we are at the bottom of the recession. Earnings headwinds are presenting themselves with stronger US dollar.

Educational Segment. Not bullish on traditional energy and believes clean tech offers better long term opportunity. Believes structural decline in traditional energy. Would prefer am ETF than combines both traditional energy and new clean tech names. Debate between traditional energy and new energy is not one or the other - need both sources.

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. Time vs. Timing. Our clients always ask: “Is this a good time to get into the market?” We — almost always — say yes. Equities have provided substantial long-term returns over time, even if you buy just prior to a crash or a market correction. No one knows if the market is going to crash tomorrow, or soar. You can guess, trade, pay taxes, go to cash, borrow money to buy, buy technical trading software and so on, and none of it is going to improve your market predictive ability. Just invest what you can when you can and see the benefits over time. The lesson: stay in school (stay invested).

There are signs that the worst of inflation may be over and that the central banks may be slowing rate hikes to see what their impact has been so far. However there may still be more rate hikes. We should see prices start to stabilize. Investor sentiment is the most negative since the financial crisis. Markets can turn very quickly so stay fully invested. He has seen very safe sectors have a major sell-off in the last few months - such as telcos, pipelines and utilities. This provides good valuations and many opportunities. Also opportunities with small and mid cap companies that have been thrown out with the bathwater.

Economy is in a strange position - hoping for weaker economic data, so central banks can stop raising interest rates. US Federal Reserve hawkish stance will be tough on macro economy. Thinks there is division within US Fed on interest rate increases. Too early to determine whether economy is at the end of increasing interest rates. Forward curve still projecting high interest rates.

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. Share Takeovers Can Backfire. Yamana Gold Inc. recently agreed to an all-share takeover by Gold Fields Ltd. The transaction calls for each Yamana share to be exchanged for 0.6 shares of Gold Fields. But Gold Fields’ shares were US$12.20 ($15.86) each the day before the announcement, and are now US$8.75 ($11.38). Because the takeover compensation is in shares, Yamana shares, even with an announced takeover premium of 37 per cent, have fallen to $6.21 from $7.03. I would get pretty depressed if I owned shares in a company that received a takeover bid, and my shares fell 13 per cent. Of course, things could have gone the other way, but the lesson here is that in a share-exchange takeover, you are still at the mercy of the stock market. Share-exchange deals happen all the time, and don’t require debt, but they can still be risky for shareholders in the target companies. A secondary lesson: Cash does not drop in value.

Bullish on USD. In theory, the US should be deflating, which we see, while the rest of the world (including Canada) will inflate. Numbers indicate we're inflating, but anyone looking at companies sees a plethora of layoffs coming, and so on. We've had two quarters of negative growth, which is the old definition of a recession. So everyone sees the economy slowing down, businesses are cutting head counts, controlling expenses. On the other side, the rest of the world is inflating because as the USD picks up, things get more expensive. For the US, the stronger USD makes their imports cheaper.

Client portfolios. Up to half his client assets are in USD assets, so they have yet to feel any of the impacts that the markets are feeling because of currencies.

Central banks and inflation. Everyone sees a recession, but inflation is stubbornly high. Central banks aren't going to quit, and asset values have to be lowered, since no democracy can go with 15% annualized inflation. People would be in the streets. Already labour is wanting more money. Only way to lower inflation is for central banks to take out liquidity and reduce the market.