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

The VIX. The VIX was at 60-70 back in the day. The big driver is technology. Consumer staples are doing well, drug companies turning around. VIX signals market’s ripe for M&A activity, especially drug companies and tech.

How far can this bull market go? VIX level signals risk is gone. Presidential unrest could bring risk back in, and give you another buying opportunity. Looking at a company’s fundamentals, if you think that revenues and earnings can grow, market shenanigans beget buying opportunities.

Interest in the cannabis sector by Constellation and Diageo. The space has been the go-to sector in Canada for a lot of international companies. The valuation can be justified by having a big company behind it. For a beverage company, in the wake of declining beer sales, they need to bet on another asset class.

Market. If the US president would be impeached what reaction would we see? Markets do not like uncertainty so if that scenario played out the markets would be uncertain as to who would get in next, etc. The market has had time to digest Trump's approach. The world would not end but there would be meaningful volatility of 5-15% of he was impeached. This is now the longest bull market in history so people are trying to guess when it will end. Going to the sidelines has shown to be risky over the last few years. There is nothing out of the ordinary or a reason to hit the panic button. He gets concerned from a geopolitical perspective that the market is incorrectly balancing the bad with the good. This could lead to a meaningful pull back. You need to look at what you own and decided if you can live with it if we get into a bad market.

Combining TFSA and other Accounts in Retirement. If your RIFF owns all equities, you may have to sell at a lost to create liquidity. You could look at the TFSA and non-registered as one account generally, however.

Can the caller retire yet? Look at the income the portfolio is generating and see if it is enough to live on. If you are making up the income by selling equity then in a bad market you are selling that much more and increasing the erosion of your portfolio.

Get rid of the 10 Mutual funds in caller's account because of high fees? Don't gamble with this. Don't hold too many funds because there will be overlap in their holdings. Hold 3 or 4 funds at the most. He suggested caller interview advisors about fees.

Market. Probably the worst week ever for the US President and still little market reaction. He thinks this is a positive sign. Valuations are fair. We had a great earnings season. He remains constructive. A bump in the rates is not unexpected. It won’t draw money out of equities, which on a relative basis is still the best place to be. You need to have some exposure to stocks that are not sensible to trade wars. It is business as usual. There is a lot of blaster without a lot of action out there.

Market. Investors are more worried about volatility than what they should be. Generally, year to date, market has been very good in the US. Just as we have entered the summer is where we see things getting shakier. Seeing a trend away from FAANGs into value stocks. Some of these value stocks are very cheap. The companies below the big FAANG stocks are seeing money flowing into them as well. Below the FAANGS, there are a number of companies he likes. He looks for innovators and disrupters, and there are quite a few good companies. Bearish sentiment has been up year to date even though S&P has hit record levels. Bullish sentiment has been dropping like a stone since January.

Lately, investors are paying more attention to geopolitical concerns around the world and trade negotiations which could have a severe impact. For eight years we've been in a benign recovery and suddenly the U.S. economy breaks away from the others. We're getting more and more an uncertain economy. Will China's growth slow down? Last year, we were talking about a synchronized global economy, but it isn't synched anymore with these trade negotiations. Trade policy could have a severe impact. The U.S. started this, so are they going to win big? Worst-case scenario: global recession or even depression, especially when debt is so high. Meanwhile, central banks are normalizing monetary policy. Trump's woes have been a cartoon that investors just let play out.

Overview. There is a balance of sentiment in the market, which is healthy. On the one hand there are concerns about trade, interest rates and age of the market cycle. On the other, corporate America is doing well. The last earnings cycle, just completed, shows 24.6% growth of earnings, following 24.8% growth in Q1. He expects 20% for the full year, and 10% next year. The market has been relatively flat, so with the growth in earnings, the market has evolved from full-or-over valued to fairly valued. Earnings growth tends to create a longer-term effect than the transient political trends. Some companies will suffer from the specific issues, and the role of active investment counsel is to identify these companies. But overall, the market will probably do well and the market will forget about the past transient issues.

Comment on Uber. Uber just appointed a new CEO. In his view, this is a good sign as it moves toward an IPO. However, he does not buy any stock at the IPO. He thinks that new IPO’s are often mispriced and waits until the stock demonstrates a track record as a public company.

Comment on US Health Care. He thinks this was out of favor because of uncertainty about how President Trump would handle Obamacare. The sector has recovered as people realize that the government is not providing solutions; they are coming out of the industry instead.

The S&P 500 over the last 3 months was trading at the top of a trend channel. The medium-term outlook is positive. We still have upside to the mid/late-2020's. There's further upside to go. We're in a secular bull market phase. So, buy on the dips? Actually, sometimes sell. For example, with Valeant when it broke trend in 2015, he reduced exposure and risk. However it's tempting, from a fudamental perspective, that the lower a stock goes, the more attractive it gets.

The increasing value of utilities: commercial hedgers positions in US 10-year bonds are at record levels. The hedgers are the smart money, and the not so smart are hedge funds and speculators. The smart money sees push higher in bonds, and bonds are inversely related to yields. If bonds rise in price, then yields decrease which is a positive for the bond proxies: REITs, utilities and staples.