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

Market. A new bull market was started in 2013 and we have lived through the 1^st major correction of a long-term bull market that ended in February 2016. Since February, economic data, price behaviour in the market and leadership has slowly been improving. We made new all-time highs in July in the S&P 500. Cyclicals that are leading the market, started to lead in June signalling a transition from a market driven by interest rates, to one driven by earnings. The groups that have been leading since then are the groups that led through the election period. Then we made new all-time highs again over the last few days. The market is showing steady improvement, and there is no deterioration. Earnings growth is coming in a little ahead of expectations. In a strengthening market, you always want to look for low correlations, i.e. stocks that are not behaving like one another. That is very healthy in a market. There is no bear market or major correction in history that happened while breadth was expanding. The simplest way to determine what type of market you are in is to look at the way the market reacts to news. If a market can handle bad news and rally, don’t fight it.

Diversified investing? Looking at a fully invested equity portfolio of 20 to 40 securities, he starts with a 2%-2.5% weighting. A full weighting is 5%. If he had 20 positions, it would be about 5% weight. He picks companies, not size. Prefers an equal weight portfolio, but you want representation from different types of companies, i.e. different industries, different market sizes.

Market. A lot of correlation has been made about the market move and Donald Trump, but he has been calling for an increase in interest rates flowing some money back towards the equity market. Economic fundamentals are strong. If rates rise a bit more, some of his favourite stocks might go on sale so that he could add to them on a dip. We are 9 years into this economic expansion, the second-longest expansion on record in terms of a business cycle. However, it has been a tepid expansion, so it could go on longer.

Markets. He is not sure we will see anything significant coming out of the Trump/ Trudeau meeting. If you X-out all the commodities we export to the US, there is a pretty balanced trade between Canada and the US. If they target specific industries those industries could get hurt. He did not see softwood lumber on the agenda for today. Trump’s idea of fair may be very different than Trudeau’s idea of fair.

Paying the S&P-500 – Pullback possible? He thinks we will get some disappointment risk on execution. The tax plan is probably not being implemented until 2018 now. He thinks there will be a buying opportunity coming soon with a 5-10% pullback as there is one every year. He would not be a buyer of the S&P-500 for the long term right now, but it is good for a trade.

Canadian version of ZPW-T? He does not think there is one coming because there is not the depth to the Canadian market.

Gold. He was buying XGD-T, ZGD-T when gold was around $1150 a month and a half back. He has since sold out of XGD-T. He trimmed GLD-N last week. He does not know if Trump will be bullish for gold or not.

Educational Segment. Using Stops. The value approach looks for a range of support and how you buy into it. Anchoring is a behaviour where you want to try to get your money back. That is the wrong way to think about it. You should think about where you should put the money in a losing stock. Get out of a position if it is not working. You should have a plan on when to get out.

Markets. Trudeau and Trump should be talking about the economic issues that both countries share, rather than how to deal with refugees and so on. NAFTA is important to both Canada and the US. Energy and financials have upside potential. You need to see some action being taken for the stocks to move higher.

Market. It was interesting to see the $20 trillion mark on the S&P 500. The US government is going to go through a level of $20 trillion worth of debt as well. He is reducing his positions in financials and materials. He is not finding a lot of things to buy in this market. Valuations are too high, and there is not any fear out there. Volatility is low, and no one thinks anything can go wrong. There is a time for caution. Volatility is low and people are not worried, and that is the time when you should be worried. Economic growth is OK, but he questions if it can get ahead of inflation which is coming a little bit higher. The game of low interest rates is somewhat over. Valuations are excessively high and bullishness is high. Once you get to thinking you are missing the party, the party is almost over. There is a lot more risk to the downside than there is to the upside in the short term.

Energy? Canadian oil stocks have been under a lot of pressure this year. A lot of that was US selling on the basis of taxes, royalties and changes in Canada, so they have been dumping Canadian stocks. He is not a real Bull on oil long-term. Thinks it is stuck in the $50-$60 range for a period of time. Shale production in the US and global production is going to limit price gains. Has been picking away at some of the names in the past week or so, buying on some of the weakness.

Energy. OPEC is following through on its cuts for a 6-month period, but that has always been a murky issue. He thinks they are really going to try to do it this time. Looking at the world supply/demand balance, we are getting fairly close to being in balance right now. We have had growth in China and the US. Oil consumption is going up, and you are seeing that in agencies like the IEA, which are actually backdating some of their demand.

Metals. Copper had some supply issues because of a possible strike in Chile as well as with some troubles with the Indonesian government that is renegotiating a contract. China just had some good import/export data numbers that were very strong for all materials.

Gold. Thinks there is going to be enough noise throughout the year, which will keep gold elevated and investors interested. There are numerous elections in Europe, which could possibly sway things. As well, there are always middle east concerns.

Markets. TWTR-N is under tremendous pressure today. He stayed way because of high selling pressure. They don’t understand how to get their advertising revenue. They are only growing users at 4% and so seem to have topped out. They have $5 in cash (1/3rd) so he would not be surprised about a takeout developing. As the stock price falls the investment case gets more compelling. The cash on the balance sheet is starting to make this stock look more attractive. Be wary of the high US dollar in investing generally, January was strong for the S&P and fundamentals are on pace to grow 5% this year. The jobs number continues to come in strong. The economy is going in the right direction. The market is rewarding Trump on coming through in some of his promises. Healthcare is the only sector that got a negative return in the US last year. This is the best value in the market.