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

Trump’s wanting companies to report only every 6 months. Companies waste a lot of time having to deal with investors. A longer term horizon, not having to worry about beating earnings, is a positive thing. More companies should do it the Warren Buffet way, and not worry so much about short-term earnings.

Positioning heading into the fall? Defensive posture. Focus on high quality, cash flow companies and on the yield. Chance for market to go higher if trade gets resolved positively. But with the stress in emerging markets, there’s risk of volatility in the spring, so have some cash on hand.

What makes a good real estate stock? Over time, most stocks that trade at a discount to NAV are due to mismanagement. It's not good enough to increase occupancy and rent, but it's what managerment does with that
capital, like overpaying management or issuing equity improperly. So, this discount to NAV will persist. Can I invest directly in a property instead of a real estate stock? He doesn't like REITs that pay high dividends, actually. In fact, those that pay low dividends generate outsized NAV. Real estate demands a lot of capital to operate. Buying a property itself--are you comfortable manintaing/fixing that property all the time? Also, how much yield/profit are you really earning by renting out? 1.5% vs. a 5% yield from a REIT?

Canadian REITs have outperformed US ones for two years, 14% vs. flat in the same interest rate environment. Why? The U.S. had a strong run-up in fundamentals coming out of the recession. Demand was strong and supply was in cheque, so owners could demand higher rents. Investors latched onto this trend until 2016, when the growth names in FANG stocks stole investors from U.S. REITs. In contrast, Canadians love REITs and supply has remained in check.

Market Expansion of North American equities. He is getting a little concerned that the expansion is long in the tooth. This party has to end sometime and no one is predicting the rally will last 5 more years. He thinks the markets will be fine over the next 6 months. When we get into next year, we will see the impact of monetary tightening and slow down of the US economy. Canadian stocks have been dismal the last 2 years. This is due to concerns over NAFTA and trade. Canadian banks have done well since the first quarter. He thinks we have seen the best we are going to see regarding oil prices, this could be a problem in the second half of the year.

Market. He is well under weight in the base metals and materials and is glad for it. The US dollar has been the place for investors instead of precious metals. Cannabis stocks are in favour, but the recent proposal of Constellation Brands to take over Canopy Growth would likely require the US markets will become open in the next 3-4 years to make the valuation make sense. The investment would be worth $10 billion and he is not sure how successful it would be.

Gold. Gold has been weak, because of the strength of the US dollar. People are not looking at it as a store of value anymore. He no longer thinks it is the safe haven for recessions or other economic catastrophes like it was in the past.

He likes the U.S. to invest. Earnings and economy are doing well. He holds a lot of cash, though. Still positive about America, despite the headlines. Sector to avoid: gold which he's never liked. With U.S. rates and dollar rising, EM
currencies are dropping. Gold hasn't been a hedge in a long time. He likes ETF all-caps like VUN, and is steering away from the FANG ones. Turkey is our August problem this year, but market impact won't be that great. Otherwise, we'll watch the usual Trump tantrums.

What U.S. dollar bond ETF to buy? AGG, ZMU and ZIC, the latter of which are mid-term corporate bonds with several in the U.S.

An ETF to weather volatility? There's risk in whatever you do. You can buy a bond ETF, but with interest rates rising, bond values will decline. For stable growth over time, look at ZWB-T, HFR-T, XFC-T or one of many bond ETFs.

An ETF that covers venture capital or hedge funds? There was a Globe article today about how lousy hedge funds perform. He doesn't like hedge funds. Hedge funds aren't like buying bank stocks; there can be huge liquidity issues and there are many, many kinds of these funds, all different from each other. Avoid both hedge funds and VC--you can't sell them when you want, and he hates this.

Gold has been down, but has been sustainable for centuries. It's wrong to dismiss gold today, especially during the current currency storm (Turkey) of which Trump is pulling the strings. Amid uncertain geopolitics, gold is stable. A
monetary reset is inevitable--the current system doesn't work. History teaches us that as currency systems break up, the dominoes will fall, starting with the weakest currencies to the strongest, the U.S. The ultimate currency is gold, which will see a rebirth.

Market. The market’s rise is long in the tooth. Markets come off their highs unexpectedly. He is increasing his cash position. At the start of a big drop, everything goes down. Then the value stocks start to shine, but they will drop a bit first, so he is increasing his cash.. The market looked more overvalued last year than this year because Trump’s tax cuts changed the profitability of companies. However, with recent rises, they are looking overvalued again. The tax cuts provided a temporary stimulus that will wear off as the year goes on and into next year.

Marijuana stocks. These rose parabolically and made people a lot of money for a while. This is in the same category of tobacco, alcohol, and casinos. Those industries have a small number of suppliers who make good margins. In contrast, there are tons of companies in marijuana, fighting for a share of the space. This will hurt margins. People don’t know what pricing or demand or margins will be. There are too many uncertainties and these are bringing the stocks back down after the elation of the initial rush. The easy money has been made, the insiders are fighting to get out and realize the value of their investments and that will drive stock prices down further. The marijuana companies have a long way to go down. The research reports written to promote investment in the industry are speculative and make assumptions that should be ignored by investors at this time.

REITs: First, look at asset allocation. He has raised more cash recently, especially from companies that raise cash outside Canada. But he's more concerned with currency within a portfolio, worried about a decline in the CAD. He's looking at American REITs or in REITs that hold rental properties. (Younger people need to rent.) Also, consider long-term inflation; any inflation-driven stock will benefit. He has reduced his REITs a bit.