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

Lumber. They subsidize BBD.B-T so why not lumber. This is going to play into the border adjustment taxes. Lumber companies log on publically owned lands. Canada is not negotiating on a position of strength on this issue.

Market. Looking at the landscape over the last year with all the election and all the noise, if you were to go back to say you were going to get 3% GDP growth in Canada and the US and keep interest rates low at 1.5%-2%, with labour being fluid but still tight, you are going to have higher equity valuations. Everyone is concerned with volatility, but in the last 3-4 months, there has been no volatility. Valuations are still not incredibly extreme.

Equities or bonds for income? Don’t confuse the stock market with the bond market. It depends on what kind of risks you are willing to take. You have to assume that you can handle a 10%-20% drop in the stock market. Money markets don’t give you that, but also, they don’t give you any yield. The closest thing would be corporate or high-yield bonds. He wouldn’t recommend high-yield bonds because spreads have compressed so much. The next would be investment grade bonds, but at a retail level, it is very hard to buy them. Following that, he would recommend looking at a bond ETF, such as XCB.

Buy REITs on pullbacks? Even though we had much stronger GDP today, some of that was due to inventory gains. The Gov. of the Bank of Canada was pretty clear in that he doesn’t want to raise rates, even if there is a rate increase in the US. Some of the higher-quality REITs he would definitely buy on dips.

Emerging Markets. Overall, the emerging markets are trading at a much lower valuation than the US, but you need to know where you want to be, what sector and what countries. She is very overweight India which is undergoing a multiyear, and potentially a multi-decade transformation under a government that is very pro-reform. Also, it is a very young country. 1.2 billion people with a median age of 27, who are starting to earn their 1^st salary, buying the 1^st car, etc. She also likes Korea where they have a new president, who is much more about creating jobs, as well as reforming the big conglomerates in Korea. She also likes China tech. Sees a lot of value, but also a lot of growth in emerging markets, and thinks this is where the opportunities are. There is still a lot of infrastructure left to be built in emerging markets.

Market. He is in a good situation, but is in kind of an unnerving situation where a lot of his portfolio is sitting at 52 week highs. There is a lot of noise about a coming correction, and it has really been a stealth one in certain sectors. He is still committing new fresh capital to these markets, but has a risk management plan in place. Because of that, he is not too worried about being precisely correct or being precisely top or bottom. His Stops do a wonderful job of weighing it out for him.

Markets. It bothers him that Trudeau has no plan in place to balance the budget. He is concerned about the debt in the world. It is unsustainable. Balancing the budget is important to the conservatives. Trump has been wavering on some of his promises. He said he does not like German trade. It is built on export and it does not matter if Trump does not like it. Markets don’t seem to care what he does now. Europe is not fixed because France did not elect an anti-EU leader. Italy has been underperforming the world for decades. This is a problem. Their banks should be a leading indicator as we approach the Italian elections.

Educational Segment. Demographics. You have two natural drivers of growth: Growth from population growth and growth from productivity growth. From the sum of the two we get about 1.3% growth in the world. We have a growth problem, despite all the money being spent in the world. We are in a low growth world. The vast majority of the growth in the world is from China, India and Africa. But China is near finished growing. AFK-N and INDA-N are ETFs he likes. Buy on pullbacks.

Markets. The S&P multiple has come up to 21 from 15 since 2014. Profits are actually down. That is a massive optimism amongst investors. We are as high as just before the tech bubble in the broad market. We are vulnerable to a more severe correction. There are some stocks in some sectors that are attractive. There are opportunities in the tech sector.

The one thing about pipelines is that in 2008 the sector that held up the best was pipelines. The XEG-T for the last 10 years, has not gone up. It has been a downward slope. The mid-stream players and pipelines are the only ones that made any money.

Market. In some instances, such as banking, he prefers the US for investing. Doesn’t own any Canadian banks. US banks are cheaper and have a rising tide with the economy. Rates are going to go up more quickly, as well as having deregulation and tax cuts, etc. He is a little worried that volatility is at ultra-low levels, P/E ratios are at historic highs. The economic growth in the US is pretty good, and Canada is not quite as good. Markets are fairly, fully priced, and he has to spend his day looking for hidden gems. Buying the market broadly is not a great idea right now, given the levels we are at.

Market. We are still seeing the phenomena of a few big stocks such as Amazon, Apple and Facebook leading the market higher. That will probably continue as the power of them is absolutely solid, amazing, and overwhelming.

Market. We have hit all-time record highs in the S&P 500 and the NASDAQ. The TSX has been largely wedged in a sideways move since the beginning of the year, mostly due to energy prices struggling for most of the year and uncertainties in the housing market. US equity valuations look somewhat stretched. The S&P 500 is trading at 18X forward earnings, but in corporate earnings momentum, we have seen a very, very strong slate of corporate earnings coming out, which has kept the market propped up. We need to continue to see that through the next few quarters in order to sustain the valuation in the marketplace. Also, investors and the marketplace are very, very hopeful of tax reform and deregulation coming out of the US. From a global perspective, we are seeing a synchronized economic growth and earnings forecasts, which are trending upwards for the 1^st time since 2010, in all major regions of Europe, Asia, etc. He remains very constructive on cyclicals, which includes the financial sectors, technology, industrials, etc. Continues to be underweight defensive stocks, which would be the consumer staples, telecom type stocks. In his portfolio, he prefers dividend growers versus dividend plays. As rates start tracking upwards, you’ll see dividend payers start to move sideways. You want to see those names that can properly grow dividends over time. The VIX is showing under 10 at this time, a very low number. However, historically a low VIX does not mean markets are going to take a downturn, so he is not too concerned about that.

A defence stock? Some of the go to names would be Raytheon (RTN-N) a missile producer, Lockheed Martin (LMT-N), Northrop Grumman (NOC-N), General Dynamics (GD-N). He has always liked General Dynamics a little bit more because of its diversification. Valuations are very, very similar across the board, and you see that the returns are also very similar over the past year.

Emerging Markets ETF? One of the longer standing ones would be the iShares MSCI Emerging Markets (EEM-N), and his other choice would be the Vanguard Emerging (VWO-N). These have very similar types of performance. Thinks Vanguard might be a little bit cheaper. He likes the emerging markets. (See Top Picks.)