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

Markets. This is the first year in 5 that small caps have outperformed. He expects that to continue throughout the rest of the year. There is more of a sector rotation and more into small caps than large. Mining stocks have done extremely well. Small and mid-cap energy stocks are outperforming the large. In Canada there are more small and medium cap companies that are in the oil space than elsewhere. People are looking for more outside of resources as well.

NO SHOW TONIGHT. The show is a repeat of last night's show with Rick Rule. I didn't hear any announcement, but presumably BNN Market Call Tonight must have had a problem.

Maybe the slated guest couldn't make it???

Bill

Market. As far as the macro things go, earnings are sort of done, there is no catalyst, the US election is coming up and the market is just waiting. There have been the cross currents with BREXIT. The defensive part of the market including Internet senses has sort of fallen, but has started to pick back up in the last little while.

Energy. Thinks energy is range bound between $40 and $50 for the next 18-24 months. He is near term bearish, because there is a surplus. Globally it is estimated that it takes about $60 a barrel for the industry to break even, including cost of capital. Right now they make the stuff for $60 and sell it for $40 and lose $20 a barrel, and try to make it up on volume. If you look 2-3 years out, the supply destruction that will take place in the marketplace will push prices substantially higher. Thinks Canada is in relatively good condition. Canadian producers did a better job than the Mexicans and Venezuelans of making sustaining capital investments over the last 10-15 years, and have done a very good job in the application of technology. He is near term bearish, but longer-term bullish. $65-$70 would be easy to see in 3 years.

Gold in Colombia? The troubles are really not over in Colombia, only officially. Rural Colombia will continue to be a tough place sociologically. If you can stomach the risk, the exploration prospectivity is spectacular. There are a number of Canadian Juniors exploring, and it is a wonderful place to look.

Lithium? The lithium equities market seemed to do pretty well for reasons that are completely foreign to him. The lithium battery contains about 3% lithium, and is actually a nickel battery. The world’s 4 big lithium producers have about 100 years in reserves in place. The world is substantially oversupplied with lithium.

Platinum and palladium? He is very attracted to these markets. They are precious metals, but precious metals that have industrial uses. The trade-off going forward in platinum and palladium is that we make it worldwide at below the cost of production, and they are essential to the air that we breathe. Thinks the price has to go up and that it will go up.

Market. His portfolios are 20% cash. His maximum is 25%, so 20% is a lot for him. He is not forecasting any meltdown type of scenario, but it is a combination of a few things. Valuations are stretched. Being a conservative money manager, he sees valuations stretched even more for the higher-quality names, as there has been such a move into dividend paying stocks, and earnings are dismal. Also, the market has demonstrated no volatility in the last 3-6 months. The US election is coming up as well as a potential rate hike in the US. His strategy is 20 Canadian names and 20 US names, but he has been two thirds in the US since January 2012.

Lifecos? If looking for safety, the large insurance names are going to give you that. However, there are easier ways to make money in the market. In some of these lifecos, investors have been waiting year after year for either rates to go up or for the stock price to improve. Prefers US insurance names. (See Top Picks.)

Markets. He will be watching the debate tonight. There is a 51.8% likelihood that Hillary wins. They are neck and neck. If Trump is seen as a clear victor tonight there could be more market volatility. The Saudis would like to pump as much as they can. There is no chance they cut. They are not going to give up market share. He thinks Oil is below $40 before it is above $50.

Educational Segment. Currency effects on your portfolio. Over the next decade, average returns are going to be lower. When you invest globally, currency is the most important consideration. When the CAD$ is getting weaker, you are making money. However, when it gets weaker, it reduces profits. With ETFs you can control the currency. Currency explains about 70% of the difference in returns when investing globally.

Markets. Equity markets in the States will see increased volatility due to the debates. It is a buying opportunity because we could be in a stronger position by year end. Clinton is a know entity. Trump is such an unknown. We have had various ideas floated by Trump in an inconsistent platform. There is no leadership in his background so we have no idea how the markets would respond if he won.

Market. It is really, really tough to find yield, and he is telling people that they have to look at things like emerging market bonds, because traditional bonds are just not paying anything. He wouldn’t be surprised if a person investing in traditional bonds, actually realized a negative yield of return over the next half decade or decade. The risk/reward ratio is clearly tilted in favour of reward. Virtually all of the governments globally are not likely to go bankrupt, so in terms of the solvency of the underlying debt issuer, there is no problem. He wouldn’t be surprised that if a generation from now that we could still be talking and waiting for an interest rate hike to normalize. Ultimately, if you are a dividend investor, you are investing in stocks. That is a slippery slope and suggests you deal with these with caution.

Explain ETFs. If you understand what a mutual fund is, an ETF is a hybrid between a mutual fund and a stock. You get the diversification of a mutual fund, as well as the ease of ownership and benefits. They trade like a stock and you can Buy them like a stock. ETFs are generally a fair bit cheaper than mutual funds.

Behavioural Finance? We are all guilty of heuristics, basically shortcuts. Making quick, snap decisions, as opposed to longer term stop, wait, being thoughtful. If you can become more self-aware of the biases that you might have, hopefully you can rein them in a bit and do better.