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

Gold. He does not own any gold as a value investor it is rarely something they own. He would rather own bullion or an ETF versus a gold stock which can be prone to operational problems. He has not opinion on current prices.

Market Outlook. Inflation and growth sometimes get interchanged. Now we want inflation. Central banks are changing to fight the inflation demons as opposed to the deflation demos. The market likes the pro-growth theme. How long it lasts given the push back form Central Banks on the short end? That remains to be seen. 10-year rates have come a long, long way from 1.4% to the current level of 2.9%. Housing has been decent in both countries, labor is tight. The S&P500 will continue its long-term trend after the correction. There has been no damage to the broad market.

Market. We had the quickest correction in history and snapped back a long way. He rolled into US tech financials last week. He does not think we are going back to the old highs. It is momentum strong. It is a global recovery. This move in rates cannot be underestimated. Cash levels are at all time highs. We have no idea how new ETFs will behave in a downturn. People buying ETFs have no idea what stocks are included in the underlying ETFs. It has the potential to make a downturn more veracious. Earnings and economic numbers are good, so it will be an interesting play. He would sit with a more neutral approach and move into value and cyclical.

Market Outlook. Very eventful start of the year. January started like a rocket. And then the US had an employment report with wage growth a little higher than expected and then everybody freaks out. Very volatile since then. S&P500 companies’ earnings are coming great, better than expected. So, you have this factor where prices are coming down and earnings up making valuations more attractive. Interest rates play a big factor as everybody got used to low rates and as interest rates ran up he suspects some institutional investors are shifting in asset allocation.

Opinion about the volatility on the cannabis sector? These stocks are trading at very high multiples with no real justification. Many good things are priced in the stocks. Very speculative. Proceed with caution.

Market. There is stuff to buy and he thinks they have been sitting on too much cash lately. His is putting cash to work in Canada, the US and the UK. In Canada he thinks energy remains in the dumpster. He likes interest sensitive areas like utilities and US telecoms.

Are life insurance companies well positioned for rising interest rates? He leans away from the life companies, because they are complicated businesses. Yes, interest rate increases are helpful. Intact (IFC-T) is a good company with ROEs much better than their competitors. Auto insurance companies will always be required in good and bad times, so he favours this type of insurance company over life companies.

What vulnerability is there in the food services sector to higher minimum wages? He thinks rising input costs will pressure the bottom line, unless companies have the ability to pass along the costs. Active management can overcome rising costs

What is your outlook for the rest of 2018 for the markets? Investors who chase fads (i.e. crypto) need to think of a long term plan and understand why you own and why you own it. You can gamble, but do that only for a small portion of your portfolio.

Market. Happy with days like today where there was a bounce. The recent sell-off and volatility weren't a surprise given the outstanding January. Fundamentals, like earnings trending up, remain strong though there's still a question of interest rates. Keen on IT stocks, seeing value, and still positive on Canadian oil, expecting positive reports coming down the pipe.

Canadian oil service companies. The big question is where can these companies deploy their rigs? Canadians don't have the opportunity to get the oil out, compared to their American companies. Any company that focuses on the U.S. will have better results. Given oil prices now and the spreads, there could be trouble ahead for the Canadians. It comes to getting our products out as well as a sustainable price, and he believes these will happen in the next couple of years. Positive valuations.

Volatility. The pullback last week was not the start of a bear market because (a) global economy is improving and (b) corporate profits are growing. This is rarely the signal for a bear market. Rates in treasuries are still 2.85% compared to normal levels around 4%. It is important to watch them, but they are not a concern at this time. The spike in volatility triggered selling from funds focused on low volatility, as they sold off, stop-loss orders were triggered as well--this is not an indication of an underlying fundamental problem in the market. She is now looking at stocks whose valuations have improved. It’s growing, trends are in its favor.

U.S. and Canadian corporate profits could hit a record high this year. World economic growth is the the highest he's seen in 10 years. We had ridiculously low volatility for the last 18 months until recently. So now we've returned to normality. As Warren Buffet says, "When the tide goes out, you find out who's swimming without a bathing suit," and "If you can't explain an idea to an intelligent eight-year-old, then probably it's a bad idea." Canada has been a dismal returning market, going nowhere for the past 10 years in the broad index. However, we have good quality banks trading at less than 11x earnings, high-yielding utilities and telecoms with growing dividends. These are opportunities. High-yield stocks are historically where you make your money in expensive markets. (Advice to Minister Morneau who's about to unveil the budget?) If he's spending time with doctors and lawyers, get a bulletproof vest. These people are terrified that their entire financial structure will crash, including retirement planning. Canada is in a boom time. The Liberals haven't got the message that we don't need fiscal stimulus. Cut the spending and don't look for more tax revenue.

S&P 500. Fears another plunge in the market. Is it time to jump in? Yes, he would. Earnings expectations continue to rise 10% premium to where it stands now. Add a dividend yield of a couple percent and you're not bad. End of 2018 guesses 2,800-2,850. Rising 10% and earnings are still reasonable.

Market. Last week was quite challenging. One of the tests for are we over sold enough for the bottom is the McClelland Oscillator. We had two lows last year and one this year and they have historically marked bottoms. We tested the 200 day moving average on Friday and a couple of times it held very nicely. We have to make higher highs in the future. If we don’t take out the highs from January over the next couple of months it means the bears are in control. We can trade the market on the rally.