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

Tonight was a special Talking Tax show. No opinions were recorded.

Market. He thinks Asian markets (ex-Japan) and Emerging markets offer growth at a discount. There is still considerable upside there. GDP per capita is the real upside in these markets. The developed world has its growth behind it. In the developing world GDP per capita averages less than $10,000 US, whereas the Developing World averages over $47,000 US. India is sub-$2000 US per capita. You can park your money in these areas.

Piplines Comment. There is an oil export pipeline shortage, but we are trying to get into a market that is already filled. The best thing Alberta could do is build refinery capacity. We are a small country and must think tactically.

Emerging Market ETFs. He likes the emerging markets and if you are in, stay in. He prefers to be in an emerging market ETF than the S&P. There are better individual stocks to purchase however, in his opinion.

Marijuana Market Comment – The marijuana market in Canada is not going to see the growth others believe, he thinks. The black market already meets current demand. In reality the capacity to produce in the legalized world will outstrip demand by 2x and will create a glut in supply. The Colorado market, as a proxy, suggests an annual Canadian market of 600,000 kilograms, while the market is projecting demand of 1 million kilograms and building capacity to that level. He does not expect a new wave of users to develop – only gradual increases. The black market will not go away, based on the Colorado and Washington State example. Prices in Washington State for marijuana have fallen from over $20 US/gram in 2014 to less than $5 US/gram today. He thinks it is all hype.

Market. It seems like a step back for free markets with the announcements on NAFTA today. It will hurt Canadian companies’ bottom lines but in a couple of quarters companies will figure out how to adjust. Companies should build contingency plans into their plans.

Market. Today’s drop in stock prices, especially American stock prices, seems to come from trade uncertainty. The extent of restrictions on imported steel and aluminum is still uncertain as is the state of NAFTA, and the recent rhetoric is causing volatility. He thinks that Canadian stocks reacted less to this because trade uncertainty has already been baked into most of the stocks in the Canadian markets. He thinks that the auto space and the rails are not yet pricing in the NAFTA risk. We are not yet in an all-out trade war with the United States, but we are in an uncomfortable middle zone.

Market. He expects U.S. shares to end the year higher, based on stronger earnings and the tax package.

Oil Sector. There is a hug discount on Canadian Select oil because of transportation prices. He believes that in the next 6 months to a year, the capacity issues will be improved and the differential will get smaller. He feels that the next year or two will be favorable to commodities and will favor Canadian oil after the capacity problem is resolved.

Market. He thinks economic indicators look strong still. Small cap holdings do tend to sell off harder during downturns. The recent Canadian budget announcement did not have any surprises in their opinion. Going forward, the “Sell in May” trend may have already begun – he expects another 6 weeks of volatility. From there it will depend on economics and earnings.

Market. Investors are worried that the American economy is overheating with inflationary pressure on interest rate hikes, particularly after the U.S. Fed Chair's Jerome Powell's testimony yesterday. Powell is adding to the overall uncertainty: will there be three or four interest rate hikes? Compare him to Janet Yellen who was straightforward with her intentions. Even if NAFTA is resolved tomorrow, Canada's economic prospects aren't as rich as America's which has more visible growth. In fact, Canada is unsure how much Ottawa will spend on infrastructure. Where's the major catalyst, like a pipeline, to encourage our economy to grow? It isn't here.

Canadian Oil. We have $60 oil, but the oil differential with Canadian oil is vast. We don't have enough pipelines, which we desperately need. Crude by rail was supposed to be a solution, but they've gone away. Now, that we want to return to rail, companies like CP Rail want more. We're stuck with oil that we can't move. She's very bearish on oil and so is severely underweight Canadian oil. Skeptical about the ARAMCO deal.

Market. It's been hard to find bargains this season. His stockwatch list is the smallest that it’s been in at least a decade. He did very little buying in his buying season. The VP Portfolio doubled down on one stock. He picked three, doubling down on one. Few value plays and contrarian plays. The prudent thing to do is to be patient rather than buying. He does not venture on the Venture exchange. He buys stocks on the TSX, NYSE, NASDAQ and sometimes AMEX. He does not go beyond these to find new opportunities because he has refined a process by learning from his mistakes. Too many people feel an urgent need to be active. This often ends up costing them money. At this point, he wants to sell a few stocks. He is happy to sell his winning stocks: “Stocks don’t love you so why should you love them back?”. But he often times his sales if there is a seasonal trend or event trend that is likely to take the stock a little higher in the near future. Many people follow sell rules like selling a loser when it returns to the price they paid, or when it doubles. These have no basis in the underlying value of the company and so they make no sense, but they are very popular. Several of the companies he invests in are taken over. He recommends not buying when there is a strong rumour that the company will be taken over because the price rises so much on the rumour. Wait until noise settles down, the price comes down, and then buy.

Gold price seasonality. He prefers to buy gold stocks in November and December. Gold prices often move up in November and December, especially because of buying in China and India. This has changed a bit because of new regulations in India. Stocks also rise just before PDAC and then have a tendency to come down.

Tonight’s show was a special on the 2018 Federal Budget. No opinions were recorded.