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

Bonds ought to be an important part of your portfolio, but he would suggest caution in investing in bonds bow. The difficulty is that the yield is about 1.2% on a gov’t 10 year. If you subtract tax and inflation there is not much left.

Markets. The top line S&P and TSX seem to be holding it but there is a lot going on underneath. Now investors are selling cyclicals and going to defensives. He is much more value focused. He is finding pockets of value here but is holding 40% cash. A Trump victory would cause a knee jerk reaction in the form of a sell off. Certain stocks would be bid up. If Trump got in the Fed chairman could be replaced and that would impact financials. The biggest risk to the market right now is OPEC and the discord, as well as the US election and the total uncertainty. The market may sell off no matter who wins.

Banks. C-N is the only one he owns. It trades below book value and the dividend should increase more than its peer group. In Canada the best one is TD-T because you have a US growth platform.

REITs. They trade off on long term rates more so than short term. The US 10 year has gone from a low of 150 to 180 and this is why the US REITs have all fallen off. In Canada it is sentiment driven. They complete with government bonds for your money even though REITs outperform bonds. If you have a long horizon, stick with them.

Markets. There are BMO executive changes taking place. Bill Downes is 74 and approaching retirement. The most likely replacement is rather young and so if it is next year, then 46 would be the age of one of the younger Canadian CEOs of Canadian banks ever. He likes banks and owns them with favourites being TD-T and BNS-T but he also likes US banks and almost had one as a Top Pick. There are bigger beneficiaries in the Canadian banks. Stock valuations are not that demanding and they are nice holds. Industrials and consumer discretionaries have signs of a rotation so that the market itself might be sideways. If we get more GDP numbers then the economically sensitive sectors could benefit.

Markets. He has hedged and is short in some of his portfolios. He does not know how this US election is going to play out. Short term there are a lot of negative influences on the S&P. We could have an explosive upside rally after the election.

Markets. The S&P has been bumping up and down. We have been looking at hesitation. The market is looking at hesitation with the US election, which is an overhang. If the Democrats take both houses there could be a lot of overhang because of that. There is still a lot of uncertainty out there. The Fed is out there with their raise of rates in December. There is nothing driving markets higher or lower. It is a Physiological impact. Once a year whether they need it or not the will raise interest rates.

How to play Pharma in light of the US Election. It is going to be a long and drawn out process. If Clinton gets elected it will take months and months and months. He would avoid the sector.

Sell in May and go Away? You want to be easing off in your beta and going away in May. This is the time to get in.

Uranium stocks. It has been crushed since Mar’11. The seasonality is about this time going into April. But we have such a factor that has taken effect outside of seasonality. Until the new uranium power plants start buying there will be a lot of shut in supply. It is a macro trend. Wait until you see a turn around.

Markets. There are risks out there and the Market likes to climb a wall of worry. Inflation will slowly tick up here and you are seeing it in the yield curve here and in the US. The risk is that you have higher inflation and slower growth. People are going on about valuations and he just doesn’t see this excessive bullish sentiment that people are talking about. A lot of people have missed the stock market since 2009 and have been in the debt market instead. With Brexit and all the other things going on it does not take away from the fact that dividend yields are so much higher than bond yields. This quarter should be flat or better on the earnings side. You should see better numbers in oil so the market should be able to do better going into the end of the year. Everyone is looking for the market to come down and he thinks it is more likely to go up than pull back. The unintended consequences of QE are happening now and you are seeing lower inflation and higher valuations. People are caught up in thinking there is something else.

Market. The market is a little bit long in the tooth, but there are going to be opportunities for stocks to grind higher over the next 6-12 months. Doesn’t think a recession is imminent and equities are still going to be the preferred asset class for the next 6-12 months, but not a smooth ride up.

Energy. There is a major resistant point at around $51.67. Expects $45-$46 is the floor, but it is going to be hard to get over the $51.67 boundary, but will probably will take some OPEC help to get over that. Once we get over $51.67 he could see it easily moving to $60.

Market. The markets have probably lost a little of the momentum that they had in the previous quarter. Commodities have not necessarily been as strong as they were, but some of the more growthier are starting to accelerate again. Once earnings come through, we’ll probably see some acceleration if they are good. There was a real focus on energy, materials and banks at the beginning of the year. As we enter the 4^th quarter, there is more interest in those areas.

Market. Fundamentals are mixed, yet markets are still at their highs and keep grinding higher. Some concerns are the upcoming US election, how the BREXIT fallout might look over the next couple of years and, most importantly, what is going to happen with the bond market. We have had ultra low interest rates; a reason investors have pushed equity valuations up to relatively high levels. If we see an inflection point here and start to see rates turning higher, what will that mean for equity valuations. Can they stay at that 18-18.5X earnings levels where they are right now? He would worry a little about valuation metrics on Canadian consumer stocks, and whether those valuation levels can be sustained.