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

Market. The current market turmoil does not bother him that much because of his portfolio. He was going to say that but for most participants in the market he wants to be more respectful of volatility. Bottoming is a process. It will only be proven with what goes on from here. This was an area where one would expect a bounce. What counts is what happens next. He would like to look for a bottoming process from here which includes the credit markets stabilizing. The banks should go sideways from here and not down. He is optimistic. Focus on owning higher quality companies for the longer term.

The US Fed. If the Fed wants to communicate a message clearly, they know how to do it. He thinks they want to continue to run off their balance sheet and to continue to hike. It should be no surprise that volatility is increasing. He thinks they want to have dry powder. He thinks they should be more moderate than they are. The corporate world has never had more cash. He has no corporate bonds in his portfolio. Cash is a much better asset to barbell a portfolio.

American and Canadian markets snapped back after Christmas. New York markets today gave up half the gains of Dec. 26. Lots of volatility based on old-fashioned fear and greed. It's hard to get a sense of what will happen from day to day. Tomorrow is anybody's guess. We just got to ride through it. In 2019, we'll see economic growth slow to 2% in the U.S. (and Europe), but we will see positive growth and earnings. We've seen tax-loss selling lately and algorithms exacerbating the selling. We'll see calmer markets; volatile markets last 3-6 months typically. The U.S. Fed has been quite aggressive with 3-4 rate hikes scheduled for 2019 while selling their bonds. The market is telling the Fed that it's getting ahead of itself. He predicts the Fed will moderate their outlook in reaction.

Market. `` Quantitative easing was when the Fed was pumping money out into the market by buying bonds – $4.5 Trillion. Quantitative tightening is the opposite. They are pulling money out of the system and affecting overall liquidity. So now the market does not have those support levels. Earnings are still growing, however, so that is cause for some optimism. Companies beating earnings expectations could change the sentiment in the marketplace.

ETS and REITs: Are there Trending ETFs that provide significant growth? An ETF is just a container for companies. There are so many ETFs out there but the market has not done well this year. He would not blame the ETF structure for bad performance. You have to focus on what you believe is the right way to go. A REIT ETF is a good thing in that it lets you invest in REITs.

Rate Reset Preferreds. Some of the rate reset preferreds have not done well this year. You have to understand the product – the underlying investments.

Educational Segment. What history tells us about the performance of the TSX vs. US markets. We tend to think that if the TSX underperforms this year then it will definitely outperform next year. Historically, that just has not been the case. We often underperform for a few years and then outperform for a few years. One of the determining factors is the price of oil and the energy sector. The TSX performs closer to the US Energy sector less the S&P percent gain for a year. And there is a high correlation of the TSX to the price of oil. Starting October we saw a slide in the price of oil.

Market. In October he said there was a minimum 85% chance of the market dropping over 20% by the end of 2020 and he did say it could happen this year. It is not surprising him. It is the biggest December sell-off since the depression. Debt levels of governments were not tamed during good times. He is surprised only by how much it has come down and how quickly. Markets were really high and people recognized the problems. People are asking what governments will do as we head into a recession. Human psychology says that when things are bad you run out the door. It could be a reasonable time to buy now and there could be more opportunity ahead.

Crypto currencies, AI, and marijuana. The key here is choosing the right companies. He does not have any recommendations, however. You are going to have bad actors and you have to stay away from them. AI is the big buzzword now and choosing the right companies is still the right thing to do. He only buys companies that have been around for 10 years.

Tax loss selling is huge this year and has been accelerated because of what is going on. He does most of his buying this time of year. Normally there is a Santa Clause rally worth a half percent or more. He never transfers between currencies. He would prefer, if he had to, to transfer US to Canadian right now because it is so beaten up.

Market Outlook Since Q3 the market has been downhill. There is too much uncertainty -- with arrests, indictments, and espionage leading the way. The recent Fed announcement hinted at raising rates next year, causing a 1000 point turnaround. He is not prepared to say the absolute worst is over, but for a long term investor there is great value. It is too late to exit holdings now. Lots of good value in the energy sector with tax loss selling. Hedge fund year end redemptions are also pulling the market down. He feels this could all lead to fresh buying early in the new year.

How does a small investor afford GOOG-N? Trading board lots does not make a difference anymore. It all depends on your dollar amount to invest. If GOOG split 100:1, it would not make any difference in his opinion -- it should not dissuade you from investing. Yes, a lower share price might attract more investors. Stay away from stock consolidations -- this is a troubling sign.

CAD currency and stock values. If commodity values weaken then our stock index will weaken. This would put pressure on the Canadian dollar. Most of the majors are inter-listed on US exchanges and benefit from re-trading. You would be unwise to buy US stocks right now, due to the weakness in our currency.

Dollar Cost Averaging He has been guilty of this -- sometimes it works out. If the outlook has not changed and you believe in the business model it can be a good strategy. It is tricky to find a true bottom in price. If something gets under-weighted in your portfolio it also makes sense.

Technical analysis on equity markets. You can follow his blog at valuetrend.ca. 2540 on the S&P 500 was a reasonably significant support level. Don't want to see it broken because it represents the lows of the year. It broke yesterday, and fell more today. So we've broken significant support. He uses the rule of 3 -- he doesn't make a move until 3 days, which has prevented him from buying back in. If Monday is down, after that if we don't start basing, then the market's in trouble. If it doesn't stop falling later next week, he's going to have to start selling out. We are oversold, and we could get a rebound to the old support level. But if we don't crack above 2540, we could be in a new bear market. The 200-day moving average broke some time ago, and we're getting lower lows. He has about 13% cash now, and will start raising more in the next few weeks.