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

Markets. This year small caps in Canada have outperformed for the first time in years. A lot of golds got moved up and out of small cap indexes. A lot of managers didn’t own gold earlier in the year. He tries to pick the best stocks in each sector and to have a well diversified portfolio. It has a lot of sector rotation recently.

Marijuana. He bought one stock (APH-X) and did extremely well. He does not understand the valuations on these stocks now. It is a tough industry right now because the stocks are all going up and the multiples are extremely high. This is not the time to get in but APH-X would be the one he likes best.

Market.The Dow is almost at $20,000, and he can almost guarantee it will get there. However, it is just a number and the Dow is a pretty lousy index. The highest price stocks are the ones that move and have the most influence on the Dow. Goldman Sachs (GS-N), which has done nothing until a few weeks ago, is the highest priced stock on the Dow, while one of his favourite stocks, Visa (V-N), has done nothing this year. The Dow is a collection of very good companies, but price movement doesn’t tell you very much. More importantly is the market capitalization weighted index, the S&P 500, companies based upon the size and shares outstanding multiplied by price. You want to have a portfolio of uncorrelated stocks so that things don’t kill you when the marketplace goes down. A lot of people are betting on interest rates going up, inflation and material and commodity prices going up, so people are betting on those interest sensitive companies. If they are wrong, they are going to be in for a world of hurt. They are selling the interest sensitive names like REITs, utilities and pipelines. The best approach is to have a diversified portfolio of your best companies. If interest rates go up, maybe some will do well and maybe some won’t, but over the long-term, (2-5 years), it shouldn’t mean a thing if you own good quality names. 3 out of 4 years, the market goes higher. He always wants to position his clients for the long-term.

Markets. In a post election year markets typically go higher. The market typically goes up until inauguration day, then pulls back and then goes higher again. During big changes in government you get big changes in markets. When Eisenhower and Reagan were elected, markets dropped from inauguration day until September. Be careful for now because markets are overbought. Between now and inauguration day you should still do well. The TSX typically goes up more than 2% in that period.

Euro vs. US Dollar. The Euro is still in a downward trend but may be forming a base. You want confirmation that a base is forming. The US dollar is still strong and broke to new highs Friday. There is a longer term base at par to the Euro. Euro stocks during the last two or three weeks have started to outperform Canada and the US. It looks like Europe is finally starting to show some good signs.

Oil. Historically prices bottom in the first week of October and move higher until August each year. The sweet spot is the first week of January until May. It broke out last week to a new high. It looks like OPEC agreements could hold.

Gold. Seasonally, gold and gold stocks are strong from the middle to the end of December until the end of February and then again from the end of June until September. We don’t know if gold and gold stocks have bottomed. Watch for another couple of weeks.

Canadian Banks – any going to split their stocks? When banks get to $100 they often do a split at the next AGM. Seasonally, bank stocks are strong from the end of August to the end of November. He is still looking for a technical reason to sell banks but they just keep going higher. Around this time of year, the banks tend to underperform.

Educational Segment. When Stocks are Overbought or Oversold. Look at the percentage of stocks above and below their 50 day moving average. Below 20% (30% in Canada) is a buying opportunity and above 80% is a selling opportunity. These give you signs of the market preparing to sell off or to go up after buying. He suggests you hold off until inauguration day and then you have a good opportunity to take money off the table.

Markets. Trump is not a single catalyst. The bond market made a turn in July. The reason for rotation was made clear through the election. The republican senate makes way for change. Investors should look at their portfolios to see which one will be the winners. This will not be a trade but a long term investment. With the rate move in December it was not a front page story. This is a positive thing for the economy and the equity markets.

Healthcare Stocks. He thinks the sector deserves an equal weight in any portfolio. The market does not know how the Affordable Care Act will settle out. He thinks in the end there will be more insured healthcare in the US in one form or another. He would go large in the insurers. He likes biotechs rather than pure pharmas. He does not like device makers because of pricing pressures. Also beware of one-product companies.

Large Tech Stocks. He does not use ETFs because he is an active manager and buys the individual stocks. Tech stocks offer a good opportunity. He thinks it will wane a little bit. A number of them have very good valuations. They are a good long term hold.

Markets. There was some geopolitical risk priced into the market before today’s events. Once we know more we can see how it unfolds. If these events hit North America people will react more negatively and so will our markets. Geopolitical risks are ongoing and we have to live with them as investors. Pre-Trump there were interesting things happening. Employment and personal income were picking up. What we are about to see is a major change in investor Psyche. The value of homes are now back to where they were pre-crash. It is possible that Trump will succeed beyond our wildest dreams. There is deregulation, repatriation tax cuts and a reduction in corporate income tax that will bump S&P earnings one time. We could be in for a very bullish two or three years. The bull market is over for the fixed income market. If the US$ does get stronger then it will dissuade the Fed from raising rates three times next year. You will see damage to your fixed income portfolio, however.

Gold. He is a long term bull on gold. We are creating more and more debt in the world. You have ongoing liabilities from pensions. Short term, however, gold is not going anywhere. You should have 2 to 3% of your portfolio in gold at all times. Eg. CEF.A-T

Fixed Income Market. Should you sell off bond funds? He would not stick around. Take the money and run. Look at high dividend paying stocks. Rates have been coming down since 1980. Now rates will have to go up.