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

You could see a 10-12% correction, but he thinks there are good values now. There are also lots of areas that are fairly priced that you don’t have to worry about.

The principals are, you have to buy when people are nervous. Healthcare is extremely ingrained in this society, and you can’t change the whole system. There are opportunities in health insurance and on the administration side. It’s one area that he is looking into closely.

He doesn’t trade volatility but he trades facts. Don’t trade based on headlines and chose businesses that you want to be invested in the long term.

Market. The premier of Alberta is looking forward to working with Christa Freeland to come to some accommodation with the federal liberals to move forward on energy. They want to get moving forward on the TMX line. Takeaway capacity is an issue. LNG is moving forward. There is a delegation moving forward in China regarding facilities on the coast of BC. He thinks in 2020 we will be looking at higher commodity prices. Tax loss selling, however, could be nasty this year.

Is the lower market downturn today concerning? Slowdown today after several weeks of nice moves and new highs. Not surprising to see the pause. The S&P is at the higher range of a 10-year valuation. Not surprising that trade issues have caused a bit of a slide in markets.

Retail sector results are mixed. Some doing well, and others like Home Depot are not. You have to be selective in the space. Be careful. Be more defensive like dollar stores, or off-retail, Costco. Avoid luxury brands.

Comfortable getting back into equities? Rotation back into cyclicals coincides with yield curve being steeper. So investors feel recession is not in the next 12 months. He feels that rotation into cyclicals is a bit of a trade. Be well diversified. Have some value, don't be all in growth. Growth has higher beta and is more volatile. He errs on the side of non-cyclical. Watch valuations, as the defensives are expensive.

Has your view on the energy patch changed with the new federal Liberal cabinet? Liberal government needs to be more sympathetic to the west. But at this point in the cycle, energy tends to underperform, so he doesn't have any exposure.

Market Outlook When he was on in January, the end of 2018 was very weak. He thought then it was a correction in a bull market. Now, we have taken out 2018 highs, economically sensitive sectors like finance and tech have made new highs. This is not the sign of the end of the bull market. He thinks we have another 24-30 months of upside. Investors are not positioned for this as they have worried about Trump, trade wars, etc. Money has moved into highly defensive sectors instead like telcos and REITs. We are set up for a good run ahead of us.

Gold: producers are outperforming as he predicted. That said, have a diversified portfolio, but high net worth investors. We're facing a market rally because of cheap money and low interest rates--but also volatility. Physical gold is at an all-time high. Going forward, the producers--as seen in the GDX--are doing well. Smart money is coming into these producers. The breakout we've had this year is holding, which is good. He predicts markets AND gold will rise in tandem.

Gold price It's creeping up, but should be much higher than now. Look closely at what happens in December as there'll be a lot of rollover on the repos (repurchase agreements).

Market. The markets are finally doing well. CM-T is a day late and a dollar short. If you compare to the others it is truly underperforming. Most every bank follows the same strategy. But CM-T has never put the puck in the net. It may be now the one to buy as management has spoken about getting their act together. He loves the banks. He thinks banks in Canada are underpriced. They can go a lot higher. His favourite bank is NA-T. The markets are discounting a lot of the negative stuff we are worried about. For markets to go higher you need an accommodative fed (check), you need profits to go higher and he thinks we are seeing turnarounds in PMI and industrial data (check), and finally you need China and the US to at least have lunch together. We may get half of phase one.

He's bullish the TSX with the financials leading. This will go much higher. Oil is stable now. Buy Home Depot after today's sharp sell-off; he likes this overreaction. As long as interest rates stay low, the markets will remain the place to be; buy on weakness, he stresses. Buy hiccups.

Market. The bigger story is why Saudis are selling their oil now. Share buybacks are what is boosting earnings for S&P companies. This is not a time to get bullish on the stock market. One way or the other 50-100 years from now the vast majority of the world will be on alternatives to carbon. The Saudis are converting a 10-30 year life-span asset and converting it to cash. This is the biggest insider sale in history. BRK-N has massive cash on the sidelines right now compared to past years.

The Inevitable Debt Meltdown. You can look at debt levels as a percent of GDP. There cannot be a forgiveness of debt. The debt is owned by pension plans. He thinks countries will monetize the debt by printing money and inflating the currencies. He does not see a way out. It is an argument for 5-10 years for interest rates to stay low.