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

Market. He’s been in the Dow 20,000 camp for quite a few months. Technically, this is only important once we touch it, and then we can move on from there. Right now it’s a technical issue, a resistance point, because it’s a psychological number and we are having trouble getting through it. Once we get through it, he might be more interested in it. We have moved awfully fast in a meteoritic rise to almost 20,000 from 17,000, and it’s just too much too soon. To have a year’s moves in multiple months, it is time to take a win. Stocks just don’t move this way in one direction for very long. The move we’ve had now, has been too much, so we have to come off a little, consolidate, and confirm that we are ready to stay at these levels. The next move through 20,000 will be more dramatic. This current run looks like it is losing steam. The support level for the Dow is at 18,500, so far off from where we are now, because it has gapped up so quickly. The S&P is the same, 100 points higher than we need to be without testing a support level.

Market. There is an issue in that Donald Trump has promised a lot of things, but can he execute them within the 1^st 90-100 days. How will the people he selected work with Congress to get things done? There are a lot of expectations based on that, and the stock market has run up on what they feel is a much more business friendly environment happening. Also, what happens to interest rates and the US$ with that. There is the question of how Trump deals with the rest of the world. There are also a lot of changes coming in Europe, potentially on the political side. 2 major countries in Europe, that kind of forged the EU, may have changes, or certainly have less power than they did before. Also, are we in a much more inflationary environment going down the road in a year or so?

Marijuana stocks? The problem is that there are such high expectations. One has a $1 billion market cap, but only $1 million in revenue. That makes no sense in any kind of dynamic. Like many of these things, he expects it will blow up. If you are involved and have made some money, you should take some off the table.

Market. After the Trump election, there was a complete reversal of sectors. The sectors that were performing into the election, were completely reversed. US banks were underperforming, and suddenly started performing. The only thing he is a little concerned with is how fast the market moved recently. Things are a little overbought. Technically, sentiment is a little overdone. There are some seasonal cycles that suggest that we may see a little more upside for the next couple of few weeks, but he wouldn’t be surprised if it took a pause in the latter part of January. There is nothing to be bearish about, other than the probability that the market is a little overbought right now, and there may be a small pull back in the next few weeks. Other than that, he is relatively bullish. Something that might drive the market up is the presidential inauguration, where markets tend to rally into them. The longer and mid-term cycles are good, and the short-term cycles could go either way.

Markets. It is concerning that Trump may not be able to do what he has promised and yet markets have rallied. Tax cuts could be positive on the earnings side, but he is worried about how they would be funded. Are there enough shovel ready projects out there? Reforms around health care are causing a lot of concern. A clear positive is the financials. They are already benefiting from higher interest rates and will benefit from lower corporate tax rates and higher interest rates. This is the sector for 2017. It gets complicated as to whether you prefer US companies who do business around the world because of currency hits.

Market. This has been an interesting year for forecasters, if you think about BREXIT, which virtually no one forecasted, and then the Trump election, it hasn’t been a very good year for them. No one forecasts the stock market very well in the short term, so he doesn’t make any effort to do so, and is quite happy to stay on the sidelines. The market has had a heck of a rally since November 9, and fundamentals have gotten ahead of themselves. His style is pair trading, so he can afford to be agnostic as to what the market really does. Volatility is his friend in the way he invests.

Market - Traditionally, when we end a 2-term president, and the other party takes over, there tends to be some market weakness. He thinks the correction will be shallow. Between now and early February, you probably should be looking at some names you want to own. Those procyclical themes we saw before the election, materials, financials, energy, some technology; they should really be carrying the water through the spring and into the summer. Into August and late fall, we are going to have a better idea of some of the headwinds.

Natural gas? Looking toppy and seems to be wanting to break out. Seasonality ends right about now. The technical date is December 21. This coincides with some overhead resistance. This might come back in the next couple of weeks, and you could pick it up, but seasonality doesn’t start until August.

Market. This is not a time to be overweight in utilities, telecoms, REITs, etc., but it is also not a time to be totally out of them. Most are quality companies with earnings that are growing, and more importantly, dividends that are growing. They are not going to lead the market here, and in the short run they may suffer for a bit, but as a long-term investor he is happy to keep the quality companies. The tax rates in the US go down next year, so he thinks that there may be some delayed selling into next year for people taking tax losses. As a value investor, he is looking for things that have not gone up.

Market. He is very sceptical of this whole belief that the Donald Trump presidency is going to resurrect the whole US economy by his spending program, they are talking of as much as a trillion dollars. What they are really talking about, is some addition to existing spending, which is far less then that, and it’s over a ten-year period. If you spread it over 10 years, and are probably adding .2%-.3%, he doesn’t think the impetus of the spending is that great. These little snippets of information blows Trump up into bigger things, and people are all buying in. When Ronald Reagan came in, interest rates were coming off multiyear highs, and they had a lot of room to drop. Now, interest rates are at an all-time low, and there is only one direction to go. At the same time, there is potential for trade wars.

Market.Donald Trump made a lot of promises, and you have to position for both extremes. He expects that he is going to try to get through the agenda items which are easier, those agenda items that the Republicans have been pushing for, and ones that will be popular with both investors and the general populace. Thinks he will do the repatriation of capital. There are hundreds of billions of dollars sitting in offshore accounts, not coming back to the US because of very high tax rates. Thinks he will offer the possibility of a 5% tax rate. If this happens, expectations are that there will be $500-$800 billion back into the US, and likely going into a lot of friendly shareholder type share buybacks, dividend increases, special dividends and, as Trump hopes, spur the economy on. Another that is also likely, but to a lesser extent, is the corporate tax rate. Expects it is going to come down, and a 20%-25% rate is likely to happen. Hopes that the protectionist Trump does not come into play. There could be some problems on infrastructure spending, as he doesn’t think the party will be supportive of an increased deficit. Europe is very attractively valued, but you also need to be in the stronger US market as well.

Investments to generate income?Bonds are considered to be conservative, but you are getting a very low yield for potentially significant risk, particularly if they are longer duration. He would recommend preferred shares, particularly if they are taxable accounts. The rate you are seeing on most of them is 5%-6%. You need to spend the time to find the right manager who has the expertise and the track record.

Markets. Markets never continue to go in one direction. We often get a Christmas rally and the January affect. Once people realize that many of Donald’s polices don’t make a lot of sense the markets may reverse themselves. If you invest a lot in infrastructure, where do you get the labour from when you have low unemployment rates, what if you kick out a lot of Mexicans from the US.

Bank outside of Canada recommendation. Most of them have moved up so far. He still likes First US Bank Shares (FUSB-Q). He can see it doubling from here. It is based in Alabama. Otherwise he is taking money off the table in this sector.

Cannabis Stocks. He needs companies to be in business for at least 10 years. The area is expanding quickly and picking the winner is difficult. There is a lot of hype and hope. You have to look at balance sheets. He would like to see more clarity on the legal front.