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

Bitcoin. Governments don’t control it. He believes we are moving to electronic-only currencies globally. He does not think governments will allow alternative currencies with unlimited amounts in circulation. Electronic currency gets rid of the gray economy. GBTC-N is a speculative instrument.

He has been cautious for a year and a half. There are defensive things you can do. He runs portfolios with half the risk of the general market using covered call strategies, for example. Make sure you are globally diversified. Don’t sit in cash and wait for a pullback. It may be 2019 before we get a pullback.

Educational Segment. (weekly series) What Investor Personality Are You?: 4. The Independent. A lot of behavioral learning has been incorporated into the body of knowledge. The independent is a BNN watcher, reads the paper and is interested in being involved in the investing. These investors are susceptible to a self attribution bias – they take credit if it works and blame the other guy if it doesn’t. It causes portfolios to be concentrated. They should focus on diversification.

Market. We are into 10 dangerous days. This is a time when companies give negative guidance and analysts reduce earnings estimates. We had hurricanes and earthquakes this year. After that things look better. We are about to enter the period of seasonal strength for US and Canadian markets. It takes until the middle of October for the strength to start. It should happen again this year. The first quarter of next year should be even better.

Oil. We are starting to move into the trend already, over the last couple of days. The period of seasonal weakness is coming into oil. Stay away from it for now as well as energy stocks. Late January we should go into another period of seasonal strength until May.

What is the most seasonally predictable? The base metals sector is quite reliable. Stocks are more predictable than ETFs. Commodity prices are more reliably seasonal than stocks.

Gold.Exploration has been falling from its peak in 2012 at about 20% a year. Most of this was due to falling commodity prices. At one point, in the late 90s and early 2000s, Barrick spent 8% of their revenue on exploration, and are now spending 3%-4%. They seem to be less interested in exploration and more interested in optimizing their current assets and are focused on their core assets, which worked at lower gold prices. He is looking more for those assets that work at $1200, which are not being found, because no one is doing exploration, especially grassroots exploration.

Market.This is supposed to be the season of volatility, but where is the volatility? It hasn’t spiked in September, which is supposed to be the weakest month of the year. It looks like the S&P 500 is going to go with a 2% gain, and the TSX is even better at 3%. This just speaks to the fundamental backdrop in the economy right now. We are seeing phenomenal manufacturing numbers, and are reaching a point of full employment.

Energy. We are beyond the period of seasonal strength, which just ended recently. Between the middle of August to mid September is the period of seasonal strength. We are getting into the maintenance season. Hurricanes have always played a role at this time causing supply disruptions, which tends to drive the price of oil higher. We might not see this come back until November, which is the end of their historical maintenance period. There could be some volatility. He would be cautious.

Consumer Spending. This is showing the weakest year-to-date performance in decades, and we are also seeing that in terms of vehicle sales. Vehicle sales and restaurant sales are the most discretionary items of consumers’ budgets. Has also started seeing weak housing numbers as well, and that predates the hurricanes. We are coming into the 4^th quarter, which is heavily driven by consumers spending. If we are not seeing it coming into this period, is it really going to materialize? He would avoid the sector or at least market weight it. Certainly wouldn’t overweight it. Look towards industrials and materials, the things that will really benefit from that manufacturing push.

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.