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

Market. One of the big things for Canada was the US signing of the Keystone XL pipeline. On the other side, we just don’t know what Trump is going to do with regards to revisiting NAFTA. The stock market likes it so far. If things continue, a 20% increase on imported goods is going to increase costs for products consumed in the US, but also on goods that are imported to be remanufactured and sent out to the US. There are going to be opportunities for those who take contrarian views.

Markets. He started to see changes in the economy last summer. The bond yield was going up even before the election. Trump and the republican’s control of the house is the catalyst for them to get control and stop the fed dictating the direction of the markets. He has seen a major change and he was preparing for it well before the election. He knew there had to be a catalyst for some change even if it was not Trump. It has treated him quite well. He is in cyclical companies that will benefit from economic growth. He has been increasing weightings in financials for the last couple of years. A flat yield curve could not go on indefinitely.

Market. The macro political force is very annoying and very distracting, but it will always be a part of the investment climate. A great example of when you really do have to pay attention to what is going on. He thinks there is going to be some interesting trade wars going on around the world, some currency manipulation around the world. Things can change, and the rug can get pulled from underneath your feet by an announcement or an Executive Order, or even a tweet. It looks like Canada is going to be left untouched for the time being, we can’t expect that to always be the case. He is looking at his whole portfolio and every scenario that is possible for every stock he owns, and being prepared. It looks like Trump is trying to show China, with his stiff principles on Mexico right now. Stay invested, but watch your stuff.

Marijuana? Big Pharma is not interested in owning these companies. However, some of the middle cap or smaller cap companies would be absolutely interested in these. What you really need, in order for this to happen, is that regulations need to be homogenized state-by-state, as well as dealing with some of the banking problems.

Market. He looks at a number of different things including economic and market indicators. On the economic indicator he pretty much sees green lights across the board on everything he is looking at. The 2 big ones he looks at are the ISM Manufacturing and ISM Services. They troughed early almost a year ago, and have continually and steadily been moving up. At the same time, you are seeing the leading economic indicators continuing to improve also. Current data continues to be improving and fairly strong. He is confident and constructive on the market. In the shorter term, he still sees a little sentiment that concerns him, but can’t be used for timing on a day-to-day basis, but he would like to see some of that move in favour of a longer-term market.

Market. This has been a great 5 years. It is not a cheap market anymore. We’ve gone from very cheap to pretty fairly valued right now. PE multiples on the index are pretty much in line with historical averages, but he feels that the next stage in the market comes from earnings growth, which we are starting to see with some of these fourth-quarter reports that have been coming in.

North American investment strategy? Has not changed his strategy since the election. The concern is that on any given day, the president can do or say something irrational and send markets in a tizzy. There are checks and balances in place that will sort of moderate things, and you can’t start making investment decisions on what might happen. To change your investment strategy over a 3-5 year period, would not be in keeping with your best interests. His portfolios are basically 50-50 between Canada and the US.

Market. He is cautiously optimistic for 2017. There is a high level of uncertainty with respect to Trump being elected in the US, and how that is going to impact the financial markets. The companies he looks at, growth companies with high ROE’s, spent the better part of 2016 lagging the market as money moved from growth stocks back towards financials and energy. Feels it is time for those stocks to regain their leadership positions. He screens for companies that meet certain criteria, but some of the sectors that fall through his screen would be consumer staples such as Ross Stores (ROST-Q), Alimentation Couche-Tard (ATD.B-T) and Dollarama (DOL-T). He feels comfortable owning those types of companies as he feels they can do well in a great economy moving forward, as well as if the economy takes a step back. Also, the healthcare sector is attractive, as is technology companies.

Stop Losses. Using stops in portfolios is a certain kind of style for people who do not understand diversification and are pure momentum players. It is fine. But the vast majority of guests on BNN are portfolio managers and have a long term horizon. Being stopped out can be silly in that case. He is going to do a series on them in his educational segment in the future.

Markets. The first one hundred days of Trump: It remains to be seen, but today we saw some of the rhetoric about trade and breaking NAFTA. This is what people were worried about. You will see markets getting a little nervous. He is looking for markets to go back to levels from around the time of the election in November over the next couple of months. Trump’s talk to CEOs about taxes to companies that moved production outside of boarders should be negative. Trump’s administration does not want to go down the road of a process where they get things done without congress. So far so good in this year’s earnings season, but expectations were high with a rally preceding it. A lot of good news is priced in.

ETF for Demographics. It would be great if they had an ETF for this. There is not one in the market, but he thinks someone is working on it. Maybe in the next couple of quarters one comes out.

ZEB-T & ZWB-T or Buy The Banks Directly? A covered call strategy takes a lot of work to implement so you would not want to do it yourself. He thinks without the covered call, this index will come down. You could buy the six banks yourself if your portfolio was big enough, but the covered call strategy would be a lot to implement yourself.

North American Oil. With Trump turning on the spigots there will be a lot more investment in the oil area. Despite the oversupply, there is still a lot of money to be made in fracking. They are getting more efficient every day. It will be a great growth area. Buy dips in this area.

Educational Segment. Smart Factor ETFs. Research affiliates. He showed a graphic depicting smart factors that look at momentum, volatility, liquidity, profitability, etc. If you calculate excess returns, on average over history about 40 years you average about 2.4% in excess return. The average volatility is mostly less than the index. A second graphic looked at cross correlation of factor returns. If you put two together in a portfolio you get diversification.

Markets. They are having trouble getting access to pipelines. Gas is huge in North America. An exciting part of Western Canada is Gas. But you are having trouble getting your gas taken away. When gas supply came off last year, the price went up. Now Oil and associated gas is going to come on line. Companies are being asked to commit for very long terms for gas transmission and they just can’t commit to the current transmission prices that long (10 years). So companies now just can’t get all their gas to market.