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

Markets. If you look at Canada, we are trading at quite a discount to the US. If you look at the Copper price, and oil price, over the last number of months they are starting to move up. In 6 of the last 7 years small caps have underperformed. These sectors should start to do better. A lot of bigger energy names got added to the small cap index. They will probably start to move their weights up.

Market.Everybody is concerned. High valuations, the US is at record highs, lots of barometers are saying that investors are very complacent, Yellin is a little more inflation concerned, there is a Trump agenda that is uncertain, North Korean fears. Because of all these reasons, people are calling for caution, but there is something much stronger going on. There is a global reflation trade happening. You’re getting improved economic data in all key regions. There are improved top line earnings, bottom-line earnings in the US, the emerging world and in Europe. We are still in an era of low interest rates. In this environment, stocks might be expensive and might be counterintuitive, but they are still a lot cheaper than bonds. This is a market we are going to have for some time. You still want to be picking away at good stocks. There are a lot of really good overlooked names on the TSX, that are starting to look really nice right now. Canadian financials and Canadian lifecos are cheap. The dividends are great. US financials are very cheap. Technology continues to be good. A lot of these areas are going to pay you 3%-4% just to wait.

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.