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

What sector for new money? The one area that will have staying power is technology. Valuations are not extreme now. Many of these companies are growing at a faster rate than they have in the past, and the valuations are at a lower level than they have been in the past. Technology is not as economically sensitive as it once was.

S&P 500 or DOW From seasonal perspective, the DOW and S&P have the same seasonal period from October 20th to May 5th. The DOW has done particularly well this year because of the large caps. He can’t say anything negative about it all. Technically, it’s strong. Seasonally we’re still in the period for it as well. In the fall-time, it’s typically DOW that tends to perform a bit better. Small cap tends to perform better at this time of the year so the S&P 500 might be a little bit better but they are both in fairly good shape at this point.

Market. They slipped some things into the US tax reform package at the last minute. Capping salt (state and local property tax and mortgage deductions) will impact markets like California. Most of the tax cost of the package is going to benefit corporations and the top 20% of earners. Over 10 years he understands they will pay more tax under $75k of income. It looks terrific now if you look at the numbers, however. Corporations won’t build more plant and equipment if they don’t see demand going up. He thinks people won’t get paid more.

India ETFs. There are two he really likes. They trade in US$ so you have the currency risks. SCIF-N is a small ca play on India. This in where a lot of growth will be. INDA-N is another one he likes. Because of the time zone, there are liquidity problems resulting in wide spreads. He is looking to add on pull backs.

Gold stocks. It has been selling off recently. He backed up the truck in exposure to gold in the last dip. He can’t see it getting out of the trading range we have been in over the last couple of years: $1200-$1380. ZGD-T is the one he was buying. ZJG-T is junior golds. He has been buying on the weakness.

Educational Segment. Forecasts for 2018. Looking back on 2017, he was looking for a disappointment, but the market has not been. He has been running portfolios very defensively. His global dividend strategy is almost 9%, which is not bad. He focuses on better risk adjusted returns. Should we step on the gas now with the US tax bill. No, 8 years into a bull market he will remain defensive. In the last couple of months we saw a dramatic downturn in the western Canadian select oil compared to WTI. Pipelines are not getting enough oil down to the US, so all of a sudden we can’t get enough our landlocked oil to Asia, due to a lack of east/west pipelines. Canada should underperform next year. The housing market and rising interest rates will start to cool, which was the biggest contributor to GDP. He does not think we get a recession next year. 2775 is his target for the S&P, a 4 to 6% return, and less for Canada. You should focus on dividend strategies for next year. He expects a 5-10% pull back next year. We are in for some bumpier markets in the next couple of years.

Market. He just turned more bullish on Natural gas. He has always said to buy on weakness. He finally went bullish. Tax loss selling ends this Friday. He thinks there will be more downside until then. When he was on Nov 9^th, he cited specific companies that were down 30% on average. Natural gas is down 9% on Nynex on the year. On the year many gas stocks are down more than 50%. Everyone is taking a pessimistic approach to what natural gas is doing, but it has good draws this year. We are below inventory levels of last year, and below the 5 year average in terms of 5 year average. Inventories are now lower. You can’t give up on winter now. There is going to be more demand based just on LNG processing – it is about a 10% increase in demand in the last couple of years. He sees a 25% demand for our export of Natural Gas. Cold weather always helps and we benefit from it.

Drillers. PD-T vs. ESN-T. You are talking apples and oranges. The big upside in PD-T is the US business. ESN-T is the largest coiled tubing player in Canada. They are very different in size. There is more debt for PD-T. $7 target next year. He likes both of them. TDG-T is preferable to both, however.

Market. Thinks there will be 2, maybe 3 interest rate increases in the US in 2018. It's not a big deal, and has very little impact on the longer end of the yield curve even to this point, which has been flattening. What they are trying to do is to bump rates at the longer end, and if investors don't see inflation they are not going to believe they need higher yields at the longer end of the curve. The Amazon affect is a huge reason. If you think about the consumer Price Index, you are really talking about retail prices. Amazon has been in so many segments of that economy. Prices have been falling in the retail space, right across the board. Amazon is not making money. Their margins are being squeezed They are looking at a 1% margin on their retail products. They make their money on Amazon Web services, which allows them to do this, but at the end of the day, the consumers are benefiting, which is really affecting the inflation numbers. Also, wage inflation is almost nonexistent, and is somewhat surprising.

Buying Calls on the VIX? If you are going to do this, you have to recognize it is unlike any other instrument you are going to trade options on. Volatility is a separate asset class. It is never going to rise to infinity. It is never going to have the trend line you would have with a typical stock that goes up in value. The only way you can trade it is to operate and use futures, so you go to an ETF that is trading volatility. He would use iPath S&P 500 (VXX-N), short-term volatility on the S&P 500 composite index. They have a volatility index, which means the ETF makes money if volatility rises. The inverse is that it will make money if volatility contracts. If you look at a chart on both of these ETF's for the last couple of years, they both look similar, because they are rolling the futures over, and it is a very expensive roll over. Every day they have to roll 1/20TH of the portfolio. You buy this because you want short term insurance on the market. He is not sure this is the best way to do it.

Where do you see the Cdn$ going? He is not enthused about the loonie. Canadian oil has dipped substantially. That is a big export of Canada. There are a lot of big changes going on in the US, which is going to be very beneficial for US business. We are going to have a tough time holding $.77 against the US$ early into the 1st quarter of next year.

Market. Technology will continue to be a big driving sector. We've seen a lithium bubble and all sorts of speculative trends in some of the really small junior companies. It's a dichotomy kind of market with large companies doing well, some of the crazy stuff doing well, but some stuff in the middle nobody cares about. People are still worried and still have the recession belief in their brain. Executive confidence is pretty high right now. A rise in interest rates is a given and this is fully reflected in the market right. There are no issues unless the Fed does something crazy. Everyone is talking about synchronized global growth, and that is occurring. It is really time for someone to pay attention to the resource market. There have been lots of takeovers and lots of shortages of production capacity. As you get expansion of capacity demand, then you have to get some sort of slingshot effect in resources. Thinks that sector is going to do better.

Marijuana? An emerging industry, and you cannot value these compConstellation Brands has come in, and we know that other companies will come in as they want a piece of this market. It's probably not because Canada will be huge, but it is when other countries go the legal route. Expects there will be a lot of consolidation. This is going to be crazy, and then you get July and people will realize it is not going to be quite as exciting as what they thought. You can probably trade these until the 1st quarter after legalization, and that is when the party ends.anies. It's all based on what might happen. If every single person in Canada bought $100 worth of weed a year, it is still only a $4 billion market. But if you look at the market cap and what people are expecting; the market cap and potential is just ridiculous. Because of that, he is very, very cautious. The other side is that there will be more consolidation in the industry.

Market. He’s been very Long this market for a while, and for asset allocation model 70/30 to fixed income, he is right on the edge in terms of his swing for 90% equity. Stocks are expensive, but are not expensive relative to bonds, apartment buildings, a lot of different private equity alternatives. If you can find a stock with a 11 or 12 PE with a 4% dividend and visibility growing at 10% and EPS, there is still lots of opportunity. As a protection strategy, he is using the options market to squeeze out yield on both sides, using Calls or puts.

Dividend paying stock to provide an income? He would start with one or 2 banks and 1 or 2 insurance companies. There are some really good industrials that still look good, such as a Magna (MG-T). A lot of people are looking for the high dividend paying stocks, that are good to be owning in this environment. He would suggest a Russell Metals (RUS-T) with about a 5% dividend, which is strengthening from metal prices.