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

Canadian Banks? All the big 5 banks right now are reasonably valued. He would be averaging into them slowly, take a 3^rd position now, maybe another 3^rd 2 months from now, and the final 3^rd 6 months from now. These are oligopolies that have reduced competition that allows them to have profitable businesses. 4% yield roughly.

Market. There is still a great uncertainty. We are seeing gold move higher, after a long run of going lower. Investors are going there for the safety it represents. Markets could be volatile for a bit going forward. This is not a day to be changing strategies or to be jumping into the market one way or another.

Markets. A strange turnaround from last night to this morning due to the US Election. He was surprised by the strength after rallying Monday on the idea that Hillary could be elected. Investors just like certainty at this stage. You might want to wait for clarity on certain policies before committing a lot of money. Markets will probably grind higher from here. There is execution risk as well as headline risk around these policies. A lot of names that were particularly strong today were also probably heavily shorted and short covering was taking place. The lower for longer trade is fading.

Market. If Mrs. Clinton wins the election, the knee-jerk reaction will be to sell Pharma stocks, and that will be a great buying opportunity. He likes buying stocks that are out of favour, and Pharma has been out of favour for a while, expecting this.

Market. Most of the positioning he has done has been happening over the past 6 months. He would argue that the vast majority of individuals have really set themselves up rather defensively. There is probably an avalanche of cash ready to come into this market. You have to remember that the markets were adjusting, really since last June, even when Trump announced. November was a big turning point for healthcare, and has been nothing but downhill ever since last November. He has had cash in his portfolio for quite some time, and is not afraid to have it because if Trump wins decisively, there are a lot of investment houses that think the market will drop 7%-12%, and a lot of people think that a Clinton win will have the market rise 3%-4%, and those are not the kind of risks/rewards he was hoping for.

Natural gas? The natural gas markets have had a really good run, and have just come back a little. He is not an expert on the natural gas market and the ins and outs of supply and demand. Has owned Peyto (PEY-T) for the whole year and it has been a great move, but has come off quite a bit lately. Thinks there is a little bit of positioning when you look at all the positions in coal right now. He would be quite happy to pick up Peyto at this time. Has had a tough time playing natural gas through an ETF.

Medical marijuana? In the US there are 4 states that have a ballot on marijuana. He doesn’t take this issue really seriously. The problem long-term, is when regulations start coming in. When utilization comes in, you then have forces in place that are going to cause excitement to wane a little. Then from a few enjoying the fruits of this early move, it becomes more broad. This is going to be more about a trading approach to these names than anything fundamental. If you see things going parabolic, take a little bit off your investments when you are looking at it as being too good to be true.

Markets. It was clear when the FBI update came out that Markets really want to see a Hillary victory. The best case in his view is that republicans control all three parts of the house. Right now the senate is a toss-up according to polls. He thinks CEOs would wait 6 months before making any capital investments if Trump wins as they see how it goes. The rest of the world outside the US is questionable on growth. There is an asymmetric risk like in Brexit because the market is not priced for the potential that Trump wins. Polls seem to hit more people with home phones and that live in cities. Markets are priced for a Hillary win and not a Trump win or a house sweep, but it is that close. You might think of using a volatility based ETF as a hedge in the short term.

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Markets. The FBI released that thing on Sunday and it is a relief rally based on Trump not being president. We will see what happens. He is bullish on the US$. Turkey devalued recently. The pound devalued. China lowers the Yuan every day. The US$ will survive all this so he recommends the US$. He thinks we are on the verge of a bear market in all countries.

Market. Within 24 hours after a US election, the market has already anticipated. You normally get “sell on news” the 1^st trading day, which happens about two thirds of the time. After that, the markets move higher, because uncertainty has been taken away from the market. People are starting to think about what happens with the new mandate, and the market for the next couple of months goes higher. The inauguration is going to be on January 20, and people are then going to second-guess what they have done. The next 2 months, from around the middle of January right through until March, markets have uncertainty and move lower. However, after that there is one of the strongest periods in the 4-year cycle. It happens normally from March right through until around July. There is going to be a roller coaster. Some bad news, good news, bad news and then a really good move. By the end of next year, we should be significantly higher.

US$. There are 2 times of the year when there are very strong seasonal characteristics of the Cdn$ relative to the US$. Historically it moves higher, relative to the US$ from around the middle of March each year right through until May of each year. From around the beginning of November right through until the end of the year, we normally see the Cdn$ being weak relative to the US$.

Dividend Stocks. Dividend growing stocks tend to outperform dividend stocks that keep their growth pretty stagnant. This is particularly important if interest rates start moving up. The dividend yield is important, but even on a short 1 and 3 year basis, the growth of the dividend has a 2.2 to 3.4 times greater impact on total returns than just the static yield. Most investors, unfortunately, reach for the highest yield, but it is usually high for a reason; a lower underlying growth rate. He looks for dividends that are reasonable, but more importantly rising free cash flows which can end up increasing that dividend over time.

Market. He has never seen a more bizarre election than what we are seeing in the US now. The rhetoric has been over the top, but at the end of the day, come Tuesday or Wednesday morning, he wonders if those people who thinks there is going to be a calm after it is all over, are going to be sadly disappointed. We are still going to be facing the same problems. What if neither candidate gets enough electoral votes? Beyond that we have all these other worries. His main worry is that globally there has been an uprising in sentiment on anti-globalization, ant-free trade, etc., all the things that have produced the profitability and standard of living that we have had since the 2^nd world war. Politicians are taking advantage of the unrest and the dislocation that the population is feeling from changes in technology, changes in trade patterns, the opening up of other markets, etc. They are exploiting that and pointing fingers at free trade. Feels people don’t realize what the effects of isolationism could be and the costs that it could be to them.

Markets. If we get another taper tantrum we could get big losses in REITs. In the spring of 2013 you have talk of normalizing rates and there was a subsequent sell-off in interest sensitive equities. December is the next potential rate hike. You could be looking at 20-30% decline in REITS in a rapidly rising rate environment. People have overbought defensives as a place to hide so this rate increase could cause pain where we least expect it. The election is in the forefront of all the decision making. He is reducing risk and protecting capital. The US dollar is the global driver of macro trend. If you assume growth comes from the US first and leads the world in normalizing interest rates, then the US dollar should be relatively strong.