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

He thinks the job of the Feds is to be forward looking and react to key economic data. It’s their job to see that it’s coming and stave it off.

Market. The percentage of IPOs for companies with negative earnings has increased and we are back to year 2000 levels. Unlike the 2008 incident that involved a housing problem with half a dozen states instigating a European banking crisis, this fund has a lot of middle eastern and their sovereign investments and so this could be more reaching than we expect. People are chasing these returns and being forced into riskier investments. He is more conservative for his clients. The more you go into the greed momentum, until that trend breaks it does not change and then there is significant change. At least MSFT-Q has a business.

Gold. It has put two or three percentage points on the index this year. He has a difficult time with the gold space. The rally leaves him cold. There have not been dividends in the sector and the companies have been terrible allocators of capital in the sector. They are expensive now. He is not about trading them. The investor is in it for the gold trade in most cases. Larger companies have done a better job.

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.