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

Expecting 4% real return on banks, utilities. You want to have a sustainable income stream. These companies are not going away. If you are wrong then you should have some exposure to industrials. But otherwise he agrees with this.

Investors often panic and sell. Don't buy a stock unless you hold it for 5-10 years; you're guaranteed to make money over 20 years.

Investors do a lot of short-term thinking these days. There's always someone going to be pessimistic; if you want bad news, you'll find it, like FedEx yesterday. The key is timing. You don't know when the next correction will be. Who cares? You've made money if you've done nothing. He ignores worries and news and focuses on companies that grow quickly. Too many people sell out of fear, but many sell because they made a profit. You might have the next Microsoft. Don't average down. His investment horizon is very long, 5-10 years. You're guaranteed to make money after 20 years.

Market Outlook The attack on Saudi oil facilities has to be good for Canada as security of supply will become paramount. The oil sands are safe and reliable and available for a long time to come. We are at a very high level of valuations for the market in general. His fair market value analysis would allow for another 5% upside for the S&P500. That market has NEVER broken above that threshold in the 35 years they have been tracking the data. The 3000 mark is a key technical level, so be cautious about adding length above this level. Central Banks don't have a clue about what is really going on in the market and neither do their political counterparts. All the Central Banks are playing things by ear, but negative interest rates are taking the easy tools away as they can't really cut rates anymore. When the Fed meets again this week, the market is bound to be disappointed regardless of their decision on rate cuts. He is buying energy stocks with positive and reasonably predictable earnings -- refiners, for example, as they work on the spread between products and oil prices. If oil prices ever return in a meaningful way, there are many opportunities in the producer space that could offer 10 times returns. As a portfolio manager, he doesn't have the luxury to hold and wait for two years for energy stocks to rise as investors become impatient. So he is not jumping back into oil in a big way just yet.

Gold He still likes the gold space. Central Banks are beginning to run on fumes and have no idea what problems they are causing for investors down the road. Gold is good in deflationary times and even better in inflationary times -- it doesn't do well in between.

Silver When gold moves, usually silver moves more because of the gold-silver ratio. He does not have a formula for how much to hold in a portfolio. He would favor owning the SLV-N ETF.

The US Fed announcement today went according to script with a 25-point cut to interest rates. Powell delivered a dovish message and it was important that he said that rates would NOT fall to zero. He's relieved he said that. The market wants cuts like a spoiled child which keeps asking for more and more. What must happen long-term is a fundamental change that strengthens the economy, built on productivity, good trade and fiscal policy and an educated population. It's like exercising as opposed to drinking. Remember: things change, like the trade better and changed by people who have a better understanding of the economy. He's become more defensive after the past 18 months.

How to build a portfolio Hold 20 stocks, equally valued, including those that are growthier with a higher valuation, but can produce above-average cash flows. You also want some cyclical stocks like banks, tech and consumer stocks. Add to that stable stocks, like consumer staples. Then, you re Caveat: Most of the time your timing will be wrong, like momentum stocks losing favour to growth stocks.

2019 has been a pretty good year for North American stocks, though there's no shortage of things that have scared people. Investors are bidding up companies that can grow. Watch for market pullbacks, since it's getting harder to find things to buy. Low bond yields are pushing people into buying stocks. Meanwhile, volatility has gone up. Pick your stocks, set a price and jump on them when the pullbacks happen.

How do dividends work? Companies pay dividends out of profits. It's small enough and paid quarterly, so paying out won't detract the value of the company. But if a company pays 20% of its earnings, that's a red flag. A yield above 6% risks a cut and could be a red flag.

The market expects a 25-point cut tomorrow by the US Fed's Powell. All these cuts are staving off the recession, which he expects 12 months from now. He hopes to keep selling in 2019. We will have trade uncertainty as long as Trump is President. (FedEx just reduced its forecast due to trade tensions.) Don't invest by guessing the outcome of the trade war; it's a moving target. That said, markets are relatively benign now.

Passive vs. active investing in US stocks He's shocked that Canada is 90% active vs. the US. There's increasingly more money going into passive investing. Active investing doesn't add value, so lower your cast by buying passive investing. Canadians have to catch to America where passive is far more popular.

How to protect an RESP with the coming recession with a child who just started university? Some of the RESP is in GICs with the rest in ETFs? That's a good strategy and asset mix. He has made his RESP more conservative as his child approaches university with fewer (riskier) stocks. He went from 60/40 stocks/bonds to 40/60 and this trend will continue for him.

What are the best stocks for a TFSA? It depends what you need the TFSA for, like a house. Otherwise, find something global, like VXC-T, and broadly diversified.

Portfolio building (in general) Build one according to your circumstances. Advisors have clients fill out a questionnaire to determine risk profile (bonds vs. stocks ratio) and advisors must create a portfolio close to that risk profile, like 70/30 with a 10% variance, like 60/40 or 80/20. Then, stick to that ratio.