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

Stock Screening? He uses Globe Investor Gold and, as a contrarian, he looks for stocks that are down about 33% in the past year. Also looks to see if they have been listed for 10 years, as he only buys stocks that have been out there for 10 years. He'll then look at financial ratios. With the Globe filter, he throws in a few things on the screen along with a certain amount of revenues, and this gives him a bunch of stocks to look at. MorningStar is also quite handy as they have information going back a number of years.

Uranium. With all the stocks decimated, isn’t this a good contrarian play?He loves buying into sectors that are out of favour, and uranium is way out of favour. Uranium prices are way down. Japan hasn't recovered from the problems they had. This is definitely a sector he is interested in. Cameco (CCO-T) just reported results which were not good, but they seem to be doing just about everything they can to keep it going in a very poor marketplace. A big wildcard is their fight with the tax authorities. They've settled in the US, which cost them virtually nothing, but could cost a fortune in Canada. A company like Denison (DML-T), which he owned years ago, is at the other end of the spectrum.

Market. There are 2 real reasons why markets go higher here. One is fundamental and one is technical. Fundamentally, S&P earnings are calling for an estimated 10% earnings growth for 2017 and 11% earnings growth for 2018, and that is without tax cuts. We are not at peak earnings yet. Technically, in the past we have had 12 such times since the S&P data was formulated, where the S&P was up in the months of August, September and October consecutively. Each of those times except for one, the market went higher for the rest of the year.

Market. The US announced final duties on softwood duties. Stocks are already discounted for this. He wonders if now that we have certainty, is it a positive for further NAFTA negotiations. Maybe he can be optimistic. The increase in lumber prices this year has more than offset the duties. WFT-T is up nicely because of a lot of business south of the boarder and not subject to the duty. It will now be $3 per sq. ft. more or $2000 to $3000 per house more expensive for housing in the US.

Energy industry recommendation. PD-T is struggling. Rig counts are pretty flat so they are not benefiting as normal. Service guys are where you want to play but he does not own any. He would wait until the new year at least.

Global Economy- We are seeing very strong positive numbers from the global economy. For the first time in a long time, we are seeing a kind of global growth, partly as a result of Quantitative Easing. We are effectively going into a quantitative tightening, where they are pulling back on quantitative easing by buying less debt. The caveat is that global growth is not 4%-5%, so rates can’t be increased aggressively. We'll perhaps see slow increases in rates, but now it is more about what the picture looks like. We've had 2% growth, but as well as an increase in deficit. That is unusual. A tax cut is probably going to increase the deficit. From an investment point of view, you'll have low rates and low inflation, which probably means it is pretty good for the stock and bond markets. Globally, we are seeing some good earnings numbers. They’ve been fantastic for the last couple of quarters.

Percentage of US investments if living in the US for 1 month a year? He is two thirds US$ and one third Canadian, and has been that way since January 2012. In Canada, if you take commodities and financials out of the equation, there isn't very much to choose from. You should be aware that when you receive dividends from American companies, they are not subject to the Canadian dividend tax credit, so you should get some tax advice on that. Regarding Canadian banks and the growth potential, he would prefer US banks if you are looking for share price appreciation, but the Canadian banks for the yield. He owns both in his portfolio.

Market. Now is the time people should be adding money to their portfolio, but because the market is at these lofty levels, do half now and bleed the rest in. Valuations are very rich and are reaching new highs. Also, people who are just North American focused have really fallen behind the curve. Canada is up 4%, and the US in Cdn$ terms is only up 10%, whereas the emerging markets and Europe have done much, much better. Having global diversification provides you with less risk and greater return.

Oil & Gas?Saudi Arabia just announced they were building 2 nuclear power plants. This means they can flood the market with oil rather than keeping it domestically. At the same time, Pres. Trump wants to export oil also. There is going to be pressure on changes in demand and supply. Also, electrification is moving forward, and how much of an impact is that going to have on oil? Coal fired plants are being rejigged into gas which is cheaper. Demand is starting to ebb a little. If you own oil stocks, you have to do a very quick discounted cash flow to find out what the true price of a company is going to be, between now and the next 10 years. When it hits that price, you need to either pare back or sell.

Market. We pretty well have a globalized synchronized growth period now. Brazil and Russia have turned around because of oil prices. Greece, which has always been the problem child until about 2 years ago, will probably put the strongest GDP growth rate in the Eurozone in 2018. China and India are the main drivers of global growth, but with all the other developed nations doing their part. We are seeing that in strong earnings, consumer confidence, unemployment stats and the stock market. He’s been allocating a little of his North American exposure into Europe. The US has been a great place, but thinks they are in the 8^th inning. Tax reform is coming, which can give a little more of a melt-up to the stock market. There are still some nice tailwinds on earnings growth coming from the US, but he doesn’t see a multiple expansion happening. In Europe he sees earnings growth, similar to the US, probably 8%, but there will probably be an extra turn in the multiple, and a possible 15% next year in Europe and only 8% or so in the US. The next NAFTA meeting is around November 17, so be prepared to get some noisy headlines. The bigger card in Trump's poker game on world trade, is China. That could be a 2018-2019 story, and he can't deal with China if he is lackadaisical and bends over with NAFTA and the south Korea trade partnership. Don't be surprised if we get a more negative outcome on NAFTA in what the market is anticipating.

If I sell Canadian Banks, where should I put my profits for income and a little growth? This may crystallize some capital gains which you have to look at as a factor. He likes Canadian banks for the long-term. They have a good control on less volatile earnings than we have seen from other banks globally. However, valuation is a little stretched and he prefers European banks that trade around BV. NAFTA could be a headwind in the next while, and that could hurt general Canadian markets and there could be a selloff. In addition, there are new housing rules coming in January. Keyera (KEY-T), Pembina (PPL-Y), Inter-Pipe (IPL-T) have sold off and give you a mixture of good yield and some growth. You can also find some growth and income in some of the REITs.

2 Market Halloween Scares.

1. According to some polls, Pres. Trump's approval rating has dropped below 35%. When a president falls below 35% and the market is hitting new highs, the average performance of the S&P 500 is -1.6% the next month.

2. You need widespread participation across the market. If it is only being led by a few stocks or 1 or 2 sectors, you are often in trouble. Effectively, we are being led by 5 stocks on both the S&P 500 and the NASDAQ. If you look at the broad market, a lot of stocks are not doing as well as those 5. With such narrow leadership, if the steam runs out in any or all of them, you could be in for some interesting times.

Market. New highs but the TSX has been lagging world markets for a considerable time. We are heavily weighted in banks and energy. The banks bounced back and we had some GDP growth. Curbing the growth in housing is going to be a huge problem. Oil will stay at $50 for 5 years so there is not a lot of optimism for growth. It looks like in the US we are going to get a vote on the tax bill in mid-January. This will not solve any of the problems the US economy has. AMZN-Q is destructive. The stock has been the best stock for the last 15 years (38% over the last 15 years). They lost almost a billion dollars in their core retail operation. They are only great at disrupting so where is this going to go. As a value investor he does not get the story.

Uranium as a contrarian Investment. It has been a value trap for many years. Look at URA-N. It does look like there is a longer term bottom forming. He likes it. This is a speculative area he would be okay having a percent in. He does not have any right now. We are getting close to this.

Energy. He does not like the energy sector. He likes what they are doing for fracking over the next 5 years but he is not company specific.