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

Is it a good idea to get tech companies from Canada and between Open Text (OTEX-T) vs CGI Group Inc. (GIB.A-T), which one you prefer? if you long term track record of Open Text is a great story. CGI is also a great story. He prefers open Text for the dividend.

The U.S. Midterms last night were as expected. With uncertainty removed--and historic seasonality--the markets took off today. Also, the third year of a U.S. presidency also sees the strongest returns, averaging 14% (6% in the 4th year). True, US-China trade tensions, rising rates and peak earnings remain concerns, but he's bullish. Investors have something to look forward to.

Are you concerned about China with its volatility, and emerging markets? He actually likes some of the Asia EM markets. He won't buy big now, but he has some limited holdings there. China is trading at forward earnings less than 10x. Sentiment is still negative. Wait until that sentiment turns. He doesn't see a major shift in U.S. policy towards China after the Midterms. It's more like how long can China hold out on these tariffs. A trade war benefits no one. It's a matter of coming to an agreement.

The U.S. Midterms today: Whatever happens today, the markets will be happy because there will be certainty. If the sentiment swung dramatically to the Democrats, then there might be a market hiccup. The October sell-off has taken a lot of risk out of the market. The S&P has a great chance of hitting 3,000 again; it may not happen overnight, but it likely will. Seasonally, the next 4-5 months is the time when money strongly flows into the market (i.e. pension plans get a lot of money this time of year). We've already had the kind of move in interest rates, like 1982-87 (in 1987 the market crashed), where rates have risen from very low to higher. Now, we're having a correction (like the 1987 crash). However, the scenario now is much better than 1982-7.

When will we get back into the interest-rate sensitive stocks? We're in a bear market for interest rates for long time. Not just a year or two. Inside those cycles are smaller cycles--maybe you can step into them. Utilities are full of debt, and interest rates will rise for the next decade or two, even. These stocks will face headwinds for a long time.

Is it a good time to invest in cannabis stocks? It's a trade, not long-term investments. It's like the tech bubble of the late-90s: no sales, no revenues, balance sheets were cash until they were all spent. Sure, there will be winners that'll survive, but others that'll go to zero (i.e. Nortel). The valuations are NOT cheap. Trade, trade, trade. Not an investment. He's not in this space at all.

The US Midterms--happening today--are usually bad for the incumbents. Tomorrow, we could have a rally because there's so much liquidity given the U.S. tax cut, artificially low interest rates. If the Democrats control both houses, liquidity would diminish and be bad for markets though. Also, there could be gridlock ahead in Washington but good for markets, because there'd be no interference from either party. Commodities should rise on a valuation basis. The commodities complex id priced near/at the price of production. Also, commodities are also economically sensitive--we are in the 9th year of an economic recovery and he can't see this lasting. Also, Americans and Canadians make the mistake from looking at the world economy through an American lens. We should consider MANY parts of the world instead.

How do you reconcile the difference between the spot price of gold and gold share prices? In the last bull market for gold from 2000-2010, the gold price rose $250 to $1,900/ounce, but earnings declined. Until management teams can effectively turn the gold price into cash flow, you'll see the gold share prices languish vs. gold prices. The companies that have the best leverage to gold are the inefficient producers (high costs). We need gold companies to show the same financial acumen as companies in other industries.

Why own gold? It's a hedge against collective stupidity, government and currency depreciation. It's like an insurance policy.

Market. He expects consensus in the US mid-terms where the house goes to the democrats. The republicans may gain a couple of seats in the congress. That may be the best case scenario. If the democrats sweep both that would be the worst case. Markets might get excited about another tax cut for the middle class. If tax reform is pushed back it might be a kind of a yawn. After that focus turns back onto China and trade. It could take years to reach an agreement. The theft of intellectual property is not easy to solve. We are late in the investment cycle and we are going to see the European bank stop buying 10 year bonds. There will be credit stress there next year.

Recession. When is it coming? Caller sites Larry predicting it later and later from 2017 through 2020. The average bull market is 5 years so that long after 2009 a correction seemed increasingly predictable. Since then it has a lot to do with what has happened with the interest market. An inverted yield curve is the best foreshadowing of a recession. Mid-2019 is his best prediction of when the inversion will come. Nobody knows. This is the longest expansion in time that we have had a bull market without recession in history.

If you own something that you owned for a while, you should think about it as: Is there something out there that I could own that would be similar in risk that will do much better? He has been nibbling here. He used ZPT-T for preferreds. ZWU-T has a similar risk and gives you a nice dividend.