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

Market. He is not too concerned about higher rates right now. Everybody is well aware it is coming and it is all priced in. We don’t know if any of Trump’s proposals are going to happen. It’s speculation which makes him nervous. He is not sure Trump’s policies are going to help in the long run. Protectionism and border tax scares him. A lower corporate tax is good. However, he is still fully invested. He is in the fortunate position of doing recommendations and doesn’t manage portfolios. Managing a portfolio would be harder because it would be difficult to unwind a big position. If you have to unwind bigger positions, he would recommend lightening up and going to more conservative, less cyclical type names.

Market. The elections are going on right now in Europe. We have Trump, and we don’t know what kind of legislation is going to go through. We have the debt ceiling coming up at the end of April, so Trump is going to try to push through a $1 trillion budget. Earnings are starting to grow nicely for many companies, and they are generating free cash flow, but overall the market is still looking pretty rich. There has been a lot of money moving from bond ETF’s back into the market and that is usually not a good indication.

Defence stocks? Defence stocks have had a big run since the election. You really have to drill down through each individual company, because each of them provides a different type of defence. A couple of companies he owns do have defence in their businesses. The biggest one would be Heico (HEI-N) which does aerospace parts as well as electronic equipment. In this environment, his recommendation would be, if a 1^st time purchase, to buy half a position in the event that there is a market correction and you can step in at a better price.

Market. From an economic standpoint everything is looking quite strong. He looks at a number of different indicators, such as short, intermediate and long-term. The intermediate and long-term look fantastic. Short term looks like it could be a little extended. Sentiment is seen as pushed to an extreme, certainly on the retail side and on the fund manager side. As well, valuation is up there, so he wouldn’t be surprised if we saw a little bit of chop and volatility. That would represent a pretty good opportunity to get into the market or add to your favourite positions of the selloff.

Cannabis. There was a big shut down yesterday of some of the cannabis culture shops across the country. This may be laying the groundwork for legislation, which most people are anticipating will be proposed and tabled around April. He has always felt legislation would be tabled in 2017, and probably early on, and will probably take the better part of a year to get approved, and will take about a year after approval before being implemented.

Tonight's program is on taxes, not stocks.

Market. The Investors Intelligence Survey is at the highest it has been in terms of bullishness in 30 years. The policies of the Trump administration including tax reform, regulatory reform and infrastructure, are all bullish for the market, but the tax and infrastructure ideas are probably going to take longer to play out than most people think. Also, since 1951, whenever January and February were up for the 1^st 2 months of the year, 23 out of 25 times, the market was up for the balance of the year by an average of 11.75%.

Market. Feels investors in general are still feeling that the glass is half-full at this point. Although markets have faded a little in the last couple of weeks, they haven’t ripped roared up as they had been since the election. PEs on the American markets have pushed up to about 18X on a forward basis, 17X on the TSX and 18X on the S&P, the highest level since 2002. We could be looking at some sort of a pause or a healthy consolidation at some point. Since bond yields bottomed in July before the election, and inflation started to rebound in 2016, there has been a significant rotation from the perceived safe assets into riskier areas. With interest rates moving higher, you have to be careful of names that are just dividend payers, and are not able to move dividend yields higher going forward. It appears the market is shifting from an interest rate driven type of market to one driven more by earnings. Feels value names will outperform growth once again this year.

Cdn$ or US$? The US$ is moving higher against most currencies, including our loonie. The loonie has dropped to its lowest level of the year so far, at $.74. Last year it dipped below $.70, and could very well get there again. He is bullish on the US$ as there is more selection in the US market, and more opportunities with US equities.

Market Investing. Donald Trump’s unpredictability and its effect on the market heightens the case to have somebody actually selecting securities. With his there will be uncertainties, and with uncertainty you have volatility. You don’t want to be standing still. A passive approach to investing would be very problematic in these times, so active management is very important. Instead of trying to forecast what is going to happen, the best thing is to follow the money. Every point on the chart he follows, is validated by real money, so looking at a chart, you know where the money is going. The chart is the best risk management tool. Just by looking at it you should know whether you should be buying more or selling. The TSX chart showed money coming in from 2013 into 2014, money going out in 2015 and money coming in from early 2016. His 2^nd approach is Multi-Market Analysis. The world is made up of 4 major asset classes; commodities, currencies, stocks and bonds (the interest rate market). When big money moves through the market, they often cross asset classes. If you follow all of them, you have a much better chance of knowing where the money is coming from and where it is going.

Benefits to the US from a strong dollar? The US is the largest debtor in the universe. A strong dollar is always good. It keeps investors confident to buy and own US Treasury debt. It also keeps the US in a dominant position in the world. Chart shows that it was breaking out in the latter part of 2016, as well as testing old highs and making a new high, which are all bullish signs.

Dow Jones Industrial Average. Are we on the brink of a market collapse? He doesn’t see that at all. The price action has been very strong. Any market collapse usually needs a topping formation. You need to build up overhead supply before the market can crash. As of now, buyers are very persistent and are willing to pay progressively higher and higher prices, and sellers are kind of shy.

Energy. There is a lot of dynamics happening from the Middle East and we are seeing a little of it. Thinks oil stays around the $60 level. It is going to be volatile because there are many things going on. A lot of the shale companies are in better shape and are willing to produce a lot more oil. You are a buyer at $50 and a seller at $60. In that lucky environment, it may get up to $65-$70, but you have to see a lot of good things happen in the economy to push it up there.

Canadian Uranium mining? Canada is blessed with some of the best uranium projects in the world. Uranium price has suffered, but we are probably coming off a bottom now. According to the World Nuclear Association, they are calling for the supply deficits open up in about 2-3 years’ time, so he is expecting a nice recovery in uranium. (See Top Picks.)

Market. He is very bullish on the market and sees it going higher. Unquestionably Trump has been good for markets, the stage was set for a reflation trade. You have very tight labour markets in the US with increasing wage pressures. There are all these underpinnings that are very strong, however we have had a big move. There has been some mixed data recently, namely the 10-year retracing back to a yield level that we saw in November. Gold has done reasonably well of late. All these are worrying signs for the continued faith in a bull market. A certain element of caution is warranted. Looking out over the next month or so, he doesn’t know if we are going to get a big pull back. There will be periods of softness where there will be a few months where the market is down 1% or 2%. You have to be a little cautious going into the market, seeing that we have had a big move. Caution is probably the order of the day for the next 2-4 weeks, until we see if the Trump agenda can actually be implemented.