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

Concerned about retailers like Canada Goose getting pummeled in the markets? Stock lost a disproportionate amount of its valuation because of missed earnings. Market is supposed to be forward looking, while central banks are backward looking. Interesting that now the market is extremely bearish based on past experience.

Short sellers on Canadian banks. Loan loss provisions will grow. A very extreme position put forward by the short sellers on the banks. Far-fetched, and the numbers don't bear out the thesis.

How vicious will the US-China trade war get? It's already escalated. He agrees that it's brought the timetable for a recession that much closer. US could just put tariffs on everything coming in from China, which could backfire, impacting earnings like Walmart. Whereas China could dump a lot of US bonds, drive yields through the ceiling, and create a recession. Imposing export reductions is a nuclear tool that experts didn't think would happen.

Why did defensive utilities fall today when the market also went down? Market today had a risk-off sentiment. Doesn't always hold that when rates go down, my interest sensitive stock must always go up.

Arguably are looking at needing another correction. Revenues compared to last year are relatively flat. We are seeing a clear slow down in growth. So probabilities of correction seem to be increasing. Global growth is slow. We don't have China growing the way it used to. China was a driver to the global economy.

Diversification within a sector? It makes sense to diversify within a sector. There are different business within a sector, however, they are correlated. Should limit one's exposure to a sector. We do not have more that 25% in one sector and no more than 5% in any one name. It is also important to look outside of Canada.

REIT's vs owning real estate. Can access housing, commercial, industiral, senior housing through REITs. They are very liquid, so if sector changes and you want out, you can easily get out of the sector. Not as easy as owning real estate. Would not look at owning real property versus REITs as the same thing. They have very different risks and exposures.

high dividend names vs growing dividend names? There is a high correlation between raising dividend and share price going up. Generally you see a preference to companies that grow their dividends as opposed to high dividend names, is because you normally see share price appreciation as well in the names that continually grow their dividends

Market Outlook - The stock markets is quasi-ignoring the yield curve as the traditional signal (the 2-year to 10-year curve) is still not indicating a recession and paying more attention to the trade war. Going forward is going to be choppy but it will go up again. For Donald Trump the primary measure for him on how he is doing is the market. The bond market often signals trends before the stock market. Scotiabank missed but it was a very small in the big scheme of things. He is not worried. The rest of the banks exceeded expectations.

What is your view on Gold? - It has been flat for a year. A reserve in case Donald does something really stupid. There is a catalyst that he doesn't see for gold to go back to $1900 that was 6-7 years ago.

Market. EU elections don’t mean much to the markets. He has said for 20 years that the whole EU project does not work. We have to watch Italian bond spreads. We have to watch Italy in the next year or so for volatility. He feels there is a fundamental difference in the way China views the world and the way the US views the world. Theft of intellectual property will not easily be addressed. It is not going to be easy and will go well into next year. The markets are completely complacent about the volatility risks to world trade. There is a lot of talk of international people shorting the banks, but over the last couple of years there has been no growth in the Canadian banks. He would not buy them until they get back to the discounted levels of 2015/16. He thinks at best we will chop sideways for a couple of years, or perhaps an event takes us down the 15/16 levels.

Educational Segment. What does he like today. He is looking around the world like Japan, South Korea, and the UK, that have been hurt some amount. He looks for capital gains, the yield and what will the currency impact be. The UK market, currency adjusted, has made no money for a long number of years. After BREXIT, you have the potential to make about 20-25% on the currency alone on the UK. People have too much money focused on Canada.

Market. He has worked in the auto industry in manufacturing. The auto industry is the scale industry. You lower costs when you build cars on platforms. Alliances and mergers help this. Fiat Chrysler's merger with Renault would be an example of this. Renault has electric cars out there, but he does not know if they will be one of the winners. There are controversies in the electric car space. Internal combustion engines have to become a lower percentage of auto sales.

He has not been an investor in steel distributors. He is concerned that as the market improves, you are buying more inventories. It is hard to have a steadily increasing dividend policy. A lot of the margin has to do with selling prices going up. He has not been a fan of them as public companies.

Trade tensions. Trade is on the radar. NAFTA close to being ratified. Japan, US, and China will be a bit volatile before we see a resolution.