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

The headlines looked like a negative news day, but it was only a couple stocks like Boeing that weighed the index down. Boeing has earnings coming out next week. It's probably a buying opportunity when the news is bad since there's only two names in the world in the space. You have to look at the free cash flow generation, margins and future growth instead of news.

China is still a concern. The focus was on earnings this week. The global economy is slowing with Europe stagnating and China slowing. The US is an exception right now, but it is also at risk of a slowdown. So many people are bearish and there's much money on the sides. Interest rates aren't going up, and inflation is low. Money flow seems to still go to equities.

Market. Bad news is good news and good news is bad news as the market is loving that consumer spending is weak. That kind of thing is going on quote a lot in the world right now. The market is discounting lower interest rates as well as quantitative easing a year away. The IMF is pretty clear that they see global growth slowing. News of China and India are pretty weak as well as North America. It is pretty clear that the economy is slowing and the question is if we get a recession how deep and how long. Have some cash on the sides at least. The market is not going to continue to go up.

Japanese Tobacco. You are not going to find another Japanese company like this with that kind of dividend yield. If you own tobacco then you find yourself in a very mature market. The Japanese market remains on sale. Hold on if you want that kind of yield. There is nothing wrong with the company.

Cash. He is not a believer in being all in cash or none. If you own great companies and have a long term time horizon then you will do okay. Don't go 100% cash.

Three principal variables when buying a high yield bond. When you buy one, you are lending money to a company like a lender. If there is not adequate capital, then it is probably too risky an investment if the company fails. Ask what is the cash flow to pay back the interest on the bond. A number of high yield bonds yield 15% but don’t pass the above tests. You'll be in the 6% range. Buy a diversified portfolio. [No third principle given.]

Day-trading. It is it too risky nor is it profitable. It is against his religion. It has gotten a lot tougher as electronic traders have come in. To say you can call the direction of companies is a tough way to make a living unlike the late '90s. It is not investing. Don't mortgage the house if you are going to try it.

Recommended bond to equity ratio. It used to be 40% fixed income and 60% stocks. If bonds are 2% then it is not a good place to be. All these institutions are looking for something else to do. Regular bonds don't show him any value. They don’t even cover inflation. He would rather hold cash and have the flexibility.

A 5 year bond recommendation. High yield bonds work well in a diversified portfolio. You have to buy a fund. Default rates in high yield bonds are 2% and if you buy one of those you are in trouble. You need to have the currency hedged.

Markets right now. White House is stealing the headlines. Don't confuse political turmoil with market turmoil. Politicians come and go, and markets have a long life. In the last 2 impeachments, the markets went in opposite directions.

E-Trade is under pressure now. Markets care less about what you did, and more about what you're going to do. Have cut commissions to zero, which will affect all discount brokers. Often see knee-jerk reactions to results, though it opened up after hours, so you have to be careful.

How do you position in this market? He doesn't try to time the market. Set up a long-term investment policy and asset mix and stick with it. When equities go above the correct percentage, they take profits by selling high and reinvest by buying low.

Market Outlook He has an investment clock that suggests it is a good time to invest in gold equities. Now that gold producers have cut debt, dividends and costs we should now start to see a recapitalization of the junior mining sector as gold prices have edged back to $1500 per ounce. Smaller transactions are getting done suggesting it is starting to begin. The issue is when will the institutional investors come back in. The divesting of large assets by the large players could suck up some of the capital that could have been directed towards the junior miners -- this could slow the progress of the junior space somewhat.

He's cautious about markets. Re: US-China trade war: at least we know new tariffs weren't applied, but there remains uncertainty for manufacturers. Also, global macro data indicates sluggishness. So, be cautious. He's a long-term investor, and positive about America. One reason are young demographics there, but also the shale revolution in the oil space. U.S. shale production is far more sensitive to market price to stop and start production....US consumer data today slipped, and US consumers are carrying global health. Watch this data as well US employment numbers.

Portfolio diversification: Why can't I follow the Buffet model and hold 10 names to make up 80% of a portfolio? Why should I hold 15-30 stocks? It depends on the person. Buffet can endure long drawdowns without taking out capital, but most investors can't afford to do that. Also, it depends on what's happening in the markets in the past year or so. We're transitioning from growth/defensive to heavy defensive in the past 6-12 months. Don't make accidental bets--make bets you only want to make, as simple as that sounds.