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

Gold. The price broke through $1300 today. Would this be a real break out, or just some year-end adjustment? Would you use the commodity or a stock ETF to give the maximum torque? A 5-year chart shows a saucer formation. Most importantly 2016 was the year of the strong US$. When the US$ is strong, there should be downward pressure on the price of gold. For gold to be able to do well in that scenario, it means the Bear market is now done, and we are on a gentle rising bull market. However, you need to be patient. The best way to own gold is to own a good, Canadian, gold mining company.

Cd$ VS US$? His forecast for 2018 is that the Cdn$ will be weaker than the US$. In the last few days, the Cdn$ has been rising, but into very thin year end trading. There may be some short-term strength, but the overall big, big picture is still a slower Canadian economy. We have NAFTA negotiations; the US Federal Reserve will raise rates and the Bank of Canada has to give more thought to raising rates.

Market. As we see a better economic recovery globally, the TSX should do better. This is the 1st time we have seen a global recovery, and it may only mean 2%-2.5% growth, but that is very good. The issue facing 2018 globally is what happens to central banks around the world and how they slowly ease themselves out of quantitative easing. The Federal Reserve is well on its way to doing that, and the other banks are thinking about how to best solve that issue. The yield curve in the US is flattening, which tells you there is going to be less growth and less inflation. How do you increase interest rates in a low inflationary environment? That is very difficult.

Market. The TSX hitting a high is a relative thing compared to the rest of the world. Weed stocks are not stocks he has invested in for his clients because it is a business that is in its infancy in Canada. No one knows what it will look like in 2, 5 or 10 years. He does not know who the survivors will be, the winners, etc. Lots of money managers have not invested in these stocks. Most companies are getting in the beginning into the medical marijuana business. It is not based on science like regular drugs. There is not a good substitute to use as a bind placebo. You don’t know how much of the product will come from private grow-ops where it is not taxed.

US Bank Recommendation. He favors US over Canadian banks right now. See his Top Picks today. A second one is BKU-N. It is based in Florida. It is mostly commercial and real estate loans. It is well run and has a great future ahead of it.

Utility Stocks. See his Top Picks today. Every portfolio should have a portion in utilities and regulated companies. You own them for diversification and dividends. They outperform when other stocks don’t do well.

A Japanese stock that can be traded in North America? The one cautionary note about Japan is that the Bank of Japan has been the heaviest buyer of ETF's in Japan for the past year. That would give him cause for concern. They are propping up the market by being the biggest holder of the Japanese ETF's.

Market outlook for 2018? Thinks the tax cuts have already been priced in, so it is time for earnings to start to grow. If earnings can grow beyond the 8%-9% that economists are forecasting, then you'll probably get a positive market in 2018. If the earnings don't grow at that rate, we’ll probably see a correction at some point. This is why he has a cash on the sidelines. To him, it is the best of both worlds because he has been able to outperform, not being fully invested, and if the market falls he doesn't have to sell into a falling market.

(South African investment?) The Rand has rallied back big time in the last 2 weeks because of the recent election results. There are a couple of ways to play south Africa. You can go into the consumer or banking with any of the companies. It is doubtful if you are going to be able to get them on an ADR, so you may want to go into South Africa on an ETF. You may also want to get an interest in the supranational bonds. If you believe the economy is going to turn around and improve, there are bonds with coupons running around 8%.

Model Portfolio for 2018 Look at individual companies, specific fundamentals, and individual drivers and build a portfolio that’s diversified across industries, sectors and around the world when appropropriate. On the margin, they are generally seeing better opportunities in Europe and Asia. Opportunities like the UK who are undergoing their negotiations for Brexit is where a macro event is creating some specific opportunities. Tax packages in the US are definitely going to be a tailwind for earnings in 2018.

Industrials Impact of the Technological Revolution Industrials are one of those areas that the benefits of technology hasn’t been fully felt yet. He’d rather see a diversified portfolio across a number of different industries and sectors. Financial Technology is also influencing the banking sector.

U.S. Dollar The Canadian dollar is probably getting closer to fully valuated and it's hard to see sustained upside. He favours U.S dollar at this time. Sees upside interests rates in the U.S. and sees the economy moving in the right direction. Leaning toward seeing 3 interest rate hikes in the U.S. in 2018.

U.S. Market Outlook He has been long & overweight on the U.S. market so he is very pleased with what’s happening in the U.S. Tax reform bill, proposal to repatriate several billion dollars in capital, low interest rates; the U.S. is becoming self sufficient on energy. What better things can you have for the market. He’s continuing to be bullish. He expects to see more of the U.S. market to trickle down, going to some of the smaller caps as well now.

Canada The problem with Canada is that we have to get those pipelines built. Can’t blame M. Trudeau for that, the Harper government had a majority and should have ramrodded these things through. He thinks we will be dragged along anyways. It’s just unfortunate they’re not making enough effort on getting the pipelines done. Build the pipelines and build as many as you can, otherwise we’re going to have an orphan resource, which could happen with the electrification of cars. We need to get that out of the ground.

ETF for European Asian Tourism? He doesn't know of a travel ETF, but you can look at Vanguard VGX. It’s an all European ETF. If there’s increase earnings as a result of asian tourism, that’s where it would be reflected. It’s very successful and quite large, and quite reasonably price with MER around 0.12 to 0.14%. That's one you can look at to capture some of the growth in the European market as a result of Asian tourism.