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

The tariff announcements didn’t make them shift their investments. They think that the global economy is improving. Key driver is corporate profits. Earnings are 16.5% up year over year. Better than expected. The tax reform package is boosting corporate profits. Going into 2019 earnings are forecasts to go up 19%. In Canada also, earnings are forecasted to go up by 12%. The other aspect is inflation. Relatively low inflation expectations mean that Central Banks don’t have to increase interest rates rapidly. Buying in the dips seems to still be working.

Is there a relation between gold and Bitcoin? Not sure if you can correlate both. People consider them both alternative investments.

If forced to choose between Amazon and Alibaba, which one would you choose? As a value investor wouldn’t pick any but if forced she would choose Amazon because of their cloud service sector that is basically subsidizing the entire company.

Amazon vs Alibaba vs Shopify – what do you think for the long run? They all trade at such a large multiple that they don’t own them. Downside prices are very difficult to establish for these stocks given the big expectation on them.

Market. He continues to be positive on the market. The pullback is really heathy and reminds people there are risks. Over 78% of companies beat earnings estimates in the last quarter. January was the largest upward revisions month since 2002. The P/E ratio is at very reasonable levels. He is most optimistic on US markets, and modestly on European markets, and less so on the Canadian market.

S&P 500 Comment. There has never been a bull market that has ended on the first shot, he says. You can expect higher volatility but nothing significant into later in the year. Tech, financials, industrials and consumer discretionary have been leading the market since early-2016. As there has been a recent recovery, these same sectors have again been leading. This bull-run is not over he believes.

Pipelines Comment. Between 2009-2014 he was a big energy infrastructure proponent, because of fracking and the growth in overall production and the ability to increase tolls. As pricing power is less for producers now, the ability for this sector to command growing multiples is at risk.

Blockchain Comment. He sees blockchain as a technology that allows owners’ assets to be tracked. It takes out a middleman in tracking ownership. It is at the early stages and it is difficult to identify the opportunities. There is a lot of risk at this point. They only have a relatively small investment in this area. Unless you invest in a basket of securities, it is too difficult to pick individual companies right now. Evolve Blochchain ETF (LINK-T) is an ETF in this sector.

Technical Stop Comment. He runs indicators that track market breadth. In late January these indicators turned defensive. He runs stops using point-and-figure charts. When the charts swing to lower highs and lower lows that is when he gets out. The sharp correction in February began, he put index hedge positions in place for about 50% of their holdings. He took off the hedges on February 9. He is quite bullish now.

Alibaba versus Amazon Comment. The risk to Alibaba (BABA-N) is that it is operating in China and he sees this as risky. He owns more Amazon (AMZN-N) than Alibaba and has more faith with Amazon. KWEB-N is an ETF offering a basket of Chinese online companies.

Canadian Banks Comment. He has some exposure to Canadian banks, but would prefer to own US banks. He would consider Royal Bank (RY-T) as it has significant capital exposure and a large wealth management business in Canada. He also likes National Bank (NA-T).

Structural Bull Market Comment. He sees the period of 2000-2013 as showing no persistent growth. Now that we are in a structural bull market, you should hold onto your winning positions. The first stock that doubles will likely double again. There may be market pullbacks. Don’t go looking for change where it doesn’t exist. REITs, telcos, utilities and other interest rate sensitive stocks remain vulnerable – don’t get caught buying on a bounce. If you own these types of stock, use the bounce to get out of them.

Infrastructure Assets Comment. Years ago pension funds looked towards infrastructure as better investments compared to bonds. This has squeezed out the value and forced these towards the value of bonds. If interest rates rise these companies will be hurt.

Energy Market Comment He is not a fan of the energy sector currently. It continues to strike him how poorly this sector is preforming relative to the commodity price. He would look elsewhere than the energy sector. It has not appreciated during a strong structural bull market.

Bank of Canada not changing interest rates today We started the year thinking the BoC will follow the Fed's three rate hikes, but now we think one or two. The reason is that our economy is slowing quickly. Consumer debt is high, while new mortgage regulations are coming in and will effect the housing market.