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

Resource Stocks.

Gold. No one expected the move on gold last year, and we are almost replaying that again this year. 98% of people are saying that there is going to be a Fed rate increase in December, so gold has been selling off. In Jan-Feb the TSX gold index was up 40%, and he expects we will see this again. Thinks there is going to be a lack of further interest rate increases, it will be sort of a hesitation by the central bank when they don’t know what the Trump administration is going to be doing. Also, Trump talked about spending money and cutting taxes, and typically that is inflationary, which is good for gold. Also, in the early part of the year you have the Chinese New Year and a restocking of gold. Seasonally, up to about the end of February, is a good time to own gold. Expects there is another month of weakness to go in gold, another 10% down. During that 3-4 week period, this is time to start buying back in. He typically buys gold stocks, the ones that have the good commodities that aren’t affected by currency run ups and are in safe jurisdictions.

Crude oil. We will know in about a week’s time. OPEC is having a meeting, and whatever comes out of that is going to drive the commodity forward. If they come out with a positive statement that they are going to cut oil by 1 million barrels, mid-$50 is about where we would stay next year. Canada has to work on getting pipeline access.

Gold. This is a currency and is sentiment driven. Expects there will be a very volatile year next year. We have had the Trump election, which scared everyone. Europe is going to go through all this next year. Germany has an election and there is a lot of opposition to Merkel. There are the problems with immigrants coming in causing a lot of problems and people are upset. France is the same thing. Could the European union fall apart? Britain was the first domino. Other countries see that and don’t want to be left. Gold is not a long-term hold; you trade on the rallies.

Markets. You have to focus on growth. One of the big industries is infrastructure. Industrials also had a big surge. A lot has to do with military and the build out of America. The financial sector is pushing back on excessive regulation. The 10 year government bond has increase dramatically in the last 10 days. Trump will drop taxation and streamline regulations in so many industries. Cash repatriated by companies can go into infrastructure.

US Banks are enjoying a spread that is widening. The banks are going to make more money. Deregulation gives a fantastic stock market boom.

Silver Long Term. It correlates with the price of gold. It goes up more and corrects more than gold. What is attractive is how it is used in solar panels. He thinks it will continue to be a unique class.

Copper. It was taking it on the chin until recently. This infrastructure build out will need copper for wire. It is a key. There is possibly a correction coming because it had such a surge. There is a big headwind in terms of the supply of copper.

An ETF recmmendation that is truly infrastructure related. He does not have one. CAT-N took it on the chin because of the pull back in mining. They would be a beneficiary of the build out.

Market. This has been an eventful week. It seems as though investors have really looked to the pro-growth side of things, and have become more optimistic about president elect Trump focusing more on initiatives, such as corporate tax reform, infrastructure spending and deregulation, and less on immigration and trade reform. In the near term, things have gotten a little ahead of themselves. We have seen a major rotation of the defensive type of areas, yielding oriented type of equity stocks, into the more cyclical areas. Feels we are a little ahead of ourselves. His focus is more on financials, industrials and parts of the healthcare sector, and even the energy side. Those are the beneficiaries under a Trump Administration. Would probably be a little underweight in the areas of consumer staples, telecoms and real estate. He sold into the “Trump bump rally” taking some profits a couple of days ago, mainly of financials, which are technically overbought at this point. He is about 15%-20% cash at this point.

Oil? Has about 10% weighting in energy names. He likes more of the large cap names in the US such as Exxon (XOM-N) for its size and its ability to buy other names that are in trouble. In Canada, he likes Canadian Natural Resources (CNQ-T) and Encana (ECA-T) which has done extremely well with the move up in natural gases. He likes Pembina Pipeline (PPL-T) for its very consistent dividend yield of just under 5% and steady growth.

Gold? With the US$ going up and a reflationary theme around the world in trying to get prices moving higher, he thinks gold prices and precious metal prices are going to be laggards. Doesn’t think gold and silver are going to perform extremely well.

Markets. He stepped back from markets long before elections and has a good cash position. He is taking a cautious approach after the election. From a sector point of view, you can say that a sector might do better, such as energy (materials) but lumber might not under the new administration. He is increasing his US exposure. He is 40-45% geared to the US. He feels the US dollar will do better going forward.

Lumber companies with 50% production in the US. Livestock and lumber trade with the US will be re-evaluated by the Trump administration. Companies with US assets should do better. He feels other sectors are more favourable for investment.

Market. It has been a bit of a roller coaster at certain points. The US yield curve has just steepened, and the Cdn 5 year got dragged along with the US bond yields. In the short term, this is very volatile market, giving a very interesting opportunity. The big question is, will there be a long-term movement to a significantly higher rate. They would have to move up significantly for them to be financially damaging. The interest rates that affect REITs are due to the debt level, so it is more comparable to a 10-year bond as opposed to an overnight rate.

Market. He uses a number of different indicators. Started the year on defence, and moved onto offense around March, and has stayed in offense all throughout this period. During August, September and October, he saw a little weakness in momentum indicators, but in the last couple of weeks has seen those increase and improve. About 60% of US recessions start in the 1^st year of a presidential cycle. He likes to track the ISM, because both the manufacturing and services side gives him a really good gauge on what is happening in the economy. Those are longer-term ones. What he doesn’t want to see is below 50, which would indicate that the economy is contracting. He really gets concerned if we get to the 46 level on manufacturing. Anything below 46 pretty much gives you a 100% probability of a recession over the next 12 months. On a shorter term basis, he likes to track the Citi Economic Surprise Index, which will ebb and flow on a shorter-term wave basis, which will give him what is happening with the ISM.

Market. He doesn’t believe that Trump is going to be able to deliver, even close, on everything that he says. The market is taking all the positives of infrastructure, building, re-spending, re-inflation of the economy, and that interest rates don’t matter. On the trade agreements, you are already hearing stuff out of China and Saudi Arabia. There is going to be a quid pro quo out there. Donald Trump can’t go off ripping up trade agreements and saying that everything is coming back to the US, without some retaliation. Emerging markets are off more than 5% because they can’t handle the strong US$. Some of the US stocks that rallied the most are the ones that will also be hurt. There are a lot of things going on that are more to do with the short-term flow of money than the fundamentals of how you look at this down the road.