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

He's constructive about real estate, seeing supply-demand balance in most geographies, and things are better than a year ago with more stability in the trade environment. There's less market risk and the real estate market is solid. REITs were strong in 2019, solid; he had a 20% return. He likes the US sunbelt, apartments, and e-commerce-related real estate. There are land constraints in Vancouver and Toronto, so no surprise that single-family homes are going up. Affordability is an issue here and in condos. Also factor the strong influx of 350,000 immigrants yearly, plus students, plus overall high population growth across Canada. That's why he likes apartments.

Which percentage of REITs should I hold in a balanced portfolio? 20% is decent. Retail investors are increasing their real estate holdings. There are many advantages to owning real estate on the stock market than directly, including liquidity, diversifying holdings easily (around the world) and not fixing plumbing late at night. Also, you can buy real estate cheaper in the stock market than in the property market.

U.S. manufacturing is still weak with numbers showing contraction for five straight months. She wants to see growth. Consumer spending and unemployment numbers are strong and are keeping the US economy going. US markets are also strong because the Fed's Powell cut interest rates, so she wants to see the follow-through in profits in the upcoming earnings season. Earnings multiples on stocks have risen. She also wants to see corporate spending, which was held back in 2019 because of the US-China trade. Now, we have clarity; both countries are signing phase one of the trade deal tomorrow.

Markets were crazy today. A headline said that the American tariffs on China won't be removed until after the November vote. Tomorrow, the signing of the phase one trade deal is good. The details of the deal don't matter, but rather it will tone down the rhetoric. Maybe global growth will rebound, or that is already priced into markets. His 2020 outlook comes down to earnings and interest rates. All else is news and noise that doesn't matter to your portfolio long-term. He sees a strong rebound in earnings and rates to stay low or rise very modestly. Energy prices will boost prices. Facebook, Google, Apple and Amazon will also rebound in earnings. A lot of sectors can rebound, since trade worries will be off the table.

Market. He is saying 'Show me the money!' We have now gone a year without any real earnings growth and there is now expectation for earnings to grow high single digits. When you have a year with absolutely no earnings growth and the markets are up 30% you have to ask how much earnings growth the markets have already priced in. You want to see earnings growth that is unaffected by share buy backs and so on, but he does not think we will see that. You want to watch out for investors fearing missing out and then chasing the market here. There is anticipation of the signing of a US/China trade deal and he thinks it will be pomp and circumstance without out a lot of substance. There were not the escalation of tariffs in December but there was not the roll back. The tariff rate is 16% and that is not a good thing. He thinks there is no phase II coming. The trade balance is the only thing that matters.

Educational Segment. The markets are expensive by many metrics but cheap by some others. He presented a table of current vs. historical valuation models of some indicators. He looked at price to sales. The last peak was in the late '90s and we are back there. He looked at Enterprise value to EBITDA and we are also at a peak just above the late 90's peak. We are creating a massive bubble and this is not the time to get excited about stocks. Be conservative. The market may not top for another two years.

Market. Cool heads have prevailed regarding the middle east incident. It would not be a good thing to proceed into war. The Chinese have to translate the trade deal. Some words in it are hard to translate. The market is assuming things will go well. He is watching ETFs. ETFs in the US are heavily weighted in the biggest stocks. All the same names are owned and for every dollar that flows in, they buy in the relative weight. It has nothing to do with the earning. When they sell they all sell at the same time. There is a business case for diversifying away from highly concentrated ETF owned positions. It is different when a dollar or a sell comes into a mutual fund.

Chinese ETFs. Many large Chinese companies were on sale recently and we have seen some recovery. He thinks there will be upside here. If you can't buy them directly then by all means buy them through an ETF.

Packaging Sector. The whole sector was beaten up last year. He would suggest Amcor. It is a well managed company. It is a sector that might be due for a rebound. He would also look at CCL.A-T.

We had a fantastic 2019, but he's concerned that markets have become irrational as the chug along. He's waiting for any shoe to drop. Drill down and you don't find much depth. Apple and Microsoft are among the very few couple of names that move the needle; this is a crowded trade. What about the rest of the stocks? Something big will happen that causes the market to re-adjust. 2019 went from 14x PE to 19x. We are very expensive, historically. At some point, we'll hit a recession, and that's when you need cash to invest....Among banks, he likes TD which boasts 40% of its business from the U.S. America banks, starting with JP Morgan, start reporting tomorrow...Today, Visa announced the acquisition of Plaid to branch into the tech space (https://www.marketwatch.com/story/visa-to-buy-fintech-company-plaid-for-53-billion-2020-01-13). He owns Visa and likes the stock and this deal.

Oil outlook He doesn't own commodities, including Canadian energy. He needs to see in a stock consistent growth and cash flow. Oil is at the whim of global prices. Too volatile and inconsistent. He owns oil indirectly, like through CNR which ships oil.

Market Outlook He thinks we are in a "Booming Depression" in the market. The market no longer trades on fundamentals -- it trades on liquidity. And it looks like the central banks are already talking about more QE coming up. A year end rally into January is happening right now. Fair value on the S&P, he believes, is around 3720 -- compared to today's 3275 level. His quant model has been pointing to this value for some time now and with liquidity still coming in, thanks to QE, there is a real potential for a market "melt up".

CAD$ He sees nothing positive in the Canadian market presently. Real estate in the Toronto market is ridiculous. It would be interesting if the CAD$ dropped to the mid-$0.60s. Watch your exposure in Canada, he warns.

Your funds under performing? He is a value trader. Value beats growth 7 out of 10 years, but this has reversed in the past three years. The liquidity coming from Central Banks is reversing this right now. When Value stocks return, there will be massive swings in this trend back to normal.