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

Gold?Technically, this looks really good. You throw in inflationary pressures with wage inflation, gold sells off a little, but not that much. Thinks it is basing. It has the capacity to surprise to the upside.

Market.Since last year’s election, the message has been clear. Trump is trying to push a pro-growth agenda and it is having an effect. They’ve had some difficulty in getting legislation through the 3 houses, which is always the case in the US. On the executive branch, he is pushing the regulation and helping to get things approved, as opposed to holding things up. The market has had some pretty decent growth, and we are seeing economic growth and earnings progression in companies. Even though there is a lot of conjecture back and forth, we are now into a slow tightening cycle on the monetary side. In this interest rate environment, the multiples on a lot of the stocks look pretty reasonable. For investors that are looking for individual securities that are fantastic companies and trading at really, really low valuations, this is a great environment. There are great opportunities.

Which bank would you buy based on earnings and dividend growth?His favourite Canadian bank is Toronto Dominion (TD-T), which has had the best execution over time. They are well positioned both in Canada and the US. In the short term, there is probably more upside in a number of the US banks, and he feels the US economy is going to be stronger than the Canadian economy. In that case, something like a Wells Fargo (WFC-N) or one of the mid tier US banks would be a good opportunity.

Gold bullion? One key thing you have to look at is if you are dealing with an MER (Management Expense Ratio) and what it is. Also, it is better to buy into certain companies, rather than buying into a whole smorgasbord of companies through a fund. Gold is not cheap, but also not particularly expensive. Thinks that a lot going forward is going to be via the US$, which he thinks is still too high. If it comes down, the price of gold should go up.

Oil/gas service sector? When oil was $30 a barrel, he was predicting it would be over $60 by the end of 2018. If that happens, that is going to help the whole sector. He does almost all his buying in Nov/Dec, and has a number of companies on his list in the sector. One major problem is that a lot of companies have bigger debt loads than he likes to see. A lot also have a lot of upside potential, and a lot have insider buying. It’s a good space to look at. There could still be more tax loss selling towards the end of the year. Hone in on what you are looking for, and have reasonable valuations.

Market.He is seeing cracks in the Trump scenario. A lot of things we were expecting such as lower taxes and increased infrastructure spending didn’t happen. The only thing that we kind of got was a move to reduce regulatory red tape in Washington. As investors, we are not as aware of the risks as we should be. There has been a real complacency. Last week, the S&P 500 had the least volatility it has had in 45 years. On average, earnings came in okay, not as good as expected 12 months ago in terms of growth, but were okay. However, if you missed, you got nailed. In this kind of environment, he wants to have a little more cash than usual, to buy those kinds of dips. We haven’t had a correction though. This market has gone on so long without having a material correction.

Markets. Trump was not focused on North Korea over the weekend in Tweets. But North Korea is suggesting that previous tweets were a declaration of war. Markets have dropped slightly. At some point the market wakes up. In Germany, Merkel was re-elected but with fewer votes. The Euro has dropped. Governing in Germany is going to me more difficult. Eventually the European project starts to break apart. The risk factor is there. Unwinding of countries’ balance sheets is another market risk present. Caution should prevail in the markets right now.

Lithium ETF Recommendation. LIT-N has had a great run up and is tremendously over bought. He would wait for a pull back into the low $30s before buying.

Fang Stocks ETF Recommendation. FNG-N. See his educational segment today. When we go into ‘Risk Off’ you will see a lot of profit taking happening.

Sleep At Night Portfolio. He nick-named the portfolios he began running for BMO-T about 4 years ago. He still believes in these very much.

ETF in AI Category. BOTZ-N and ROBO-N. They have had a phenomenal run up and are probably over done a bit at this point. Japan has a significant weight. It will be an investment theme for decades to come.

Educational Segment. (weekly series) What Investor Personality Are You?: 3. The Follower. Typically are interested in markets but don’t know a lot and are most interested in looking for a ‘tip’. Their portfolios don’t have a lot of construction or diversification. They suffer from regret aversion and hindsight bias. They won’t make a lot of their own decisions. The FANG stocks have a lot of these.

Markets. The BOC may have blown it by increasing rates so abruptly. The CAD$ just blasted off and that is never a good thing when it moves too far too fast. They need to telegraph the message better next time. It will be harder on exports in the next few quarters. He feels the proposed tax reforms are regressive, attacking small businesses. It is extremely negative for the economy. American stocks are very stretched in terms of valuations. There are better opportunities in Canada. He likes small to mid-sized companies that have leadership roles and are doing business in the US also.

Market.Believes the US is set to underperform relative to other markets, and its currency is part of that. However, we are still in a secular bull market. Looking back to 2009, we had the US equities and the US$ very undervalued and the Fed as the most accommodative of liquidity provider globally. The Fed has become almost a leading indicator of what other Central banks will do. Coming up to December 2016, there were a lot of hopeful opinions on Donald Trump and the US$ was sitting at a 14 year high. US equities are very expensive, and the Fed was no longer the most accommodative liquidity provider. Be prepared for some underperformance in US equities. Globally, economies that lagged since then have been the emerging markets. We’ve had 7 years of underperformance of emerging markets, and they just broke a 10 year downtrend in the last quarter. EMs have done incredibly well year-to-date, but there has been some froth. Looking forward, this trend is going to be measured in years, not quarters like many are forecasting. In currency ETF’s, there is a big knowledge gap with investors. Most think currency is too difficult so they become passive investors to that class. He views it completely different, i.e., as an asset class. Currency can become overvalued and over loved or the opposite, similar to a stock. The Cdn$ has some good tailwinds, but also some good headwinds as well.

Will North Korea affect the stock market?The luxury of being a macro investor is that you can lengthen your understanding of history, and look back at past episodes. He is not opposed to analysing risks and geopolitical risks. He is opposed to individualized risks in not remaining diversified. Stay globally diversified.