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

Markets. The S&P 500 was stuck in a holding pattern a year long and then broke out. Now it is stuck again. If we break the new support you then you start to look at lower levels of support. As you come into an election it can be quite volatile (Sept and Oct) which are also seasonally low. September did not move lower this year, however. Right now the odds are greater for a market correction than not. Put your cash to work during the fear trade before the election.

Gold. $1250 would be the support level. Old resistance becomes support. If it doesn’t hold $1250 it could go down to $1200. We have to wait and see.

REITs. He sold one of his two holdings to raise cash recently. The new mortgage rules will affect some REITs and not others, depending on whether they hold residential apartments. XRE-T looks a little bearish right now as it is trending down.

When to convert from US$ to CAD$. The US$ is in a tight trading range. It is not going to sell off any time soon, but it is not going to take off. If oil got to $62 it will put upward pressure on the CAD$ but raising interest rates could put upward pressure on the US$. He would keep an eye on oil prices as they will have the biggest impact.

Market. He doesn’t obsess about broad market conditions, but the US election is hard to ignore. It is clearly one of the biggest elections in years. Regardless of who wins, he thinks it will have a big outcome on equity markets. On top of that, there are a lot of other things going on. The UK has announced they are going to formally exit the EU in Q1. China is flexing its muscles in the South China seas. There are issues with Syria. The way he invests, he can largely ignore these things because he uses a lot of pair trading. When he is Long and Short, it allows him to essentially to take out the movements in the market. Instead of worrying whether the market is going up or down, he just focuses on the individual companies.

Gold. Believes the gold price fell today because the US$ was strengthening. The global economies are picking up and he sees more confidence coming into the system. As the economies move forward and the US gets stronger, golds have a smaller role to play. Thinks this will continue throughout the fall and that the US markets will begin an early rally here.

Economy. The US is looking stronger. Consumers have been a little bit choppy, and some of that may be related to the baby boomers not spending as much and millennial’s not catching up, but around the world, the US is probably the best and most liquid market. Valuations are reasonable. Consumers have not come back yet, but the industrials are starting to come back. Both US parties have indicated that infrastructure spend is a priority, and that will do well for the US economy. Durable goods were up in August. There will be periods of volatility, but that is the norm now. Commodities are going to be a tough place to be until India industrialize, and that’s a long way away. US PE multiples are a little higher than where they ought to be given where the interest rates are, but there is wiggle room if interest rates go up.

Markets. OPEC soft agreement: The Saudis have never within the last decade been able to stick to their quotas. Almost assuredly it is not going to happen. He thinks prices will go lower before they go materially higher. He would not trade this story unless you are among the most savvy day traders. We had Brexit and the markets have said it is no issue, but actually it is a massive issue and we will see what it means in the first quarter of next year. Nothing has happened yet.

ETF to short Europe. The problem with the European banking system and negative interest rates is not over. There is no ETF that trades in North America and shorts Europe. EFZ is an ETF that shorts non-North American markets.

Recession in next two years – what to do. He has reduced equity exposure in non-growth funds he manages. He is net short the market in his long/short strategy. He is positioned defensively. He likes ZPW and ZWH in the US. The combination of the two of them yields a little over 7% while you wait for volatility to play out.

Educational Segment. Today's educational segment was pre-empted by an announcement by the federal government on housing.

Markets. This is a stock pickers market. We have been through the easy part of the market since 2009. Canada has shined. Now what do you do? Economic growth is slowing. It is going to be multiple expansion or earnings that drive the market. He favours gold and REITs. Gold is an insurance policy. People are buying bonds for capital gains. We are seeing massive currency dislocation. Gold is the ultimate defense. Interest rates will be lower for longer.

Negative Interest Rates in Canada? He learned never to say never. The Canadian economy is struggling. Don’t rule out negative interest rates.

Where to go for income (dividend/interest). You can get 1% with no risk. He has abandoned the bond market and moved money to the preferred market. He likes 5 year fixed rate preferreds. You don’t get the day to day volatility of the common stocks.

Market. There are 4-5 things coming up this quarter which are going to be very important for people to watch in the market and respond to. For people who run macro type strategies, that focus on volatility, etc., is really about as good as it gets. Long-term equity oriented investors may have some challenges, given the volatility he expects to happen. This is very much an interconnected global world. Everybody is obviously focused on the US elections. He views it as a bit of a referendum on the Fed. Trump, if he got in, would be much more hawkish on trade and on the Fed, and thinks the market would sell off. In this environment, he is looking for revenue guidance from companies going forward for 2017. While there could be a lot of beats on the numbers, the reality is that the stock market is extremely expensive, especially on a GAP basis, but even on a non-GAP basis. We have the average median stock trading at 22X-23X, which is really, really up there. From a probability standpoint, making aggressive bets in Long equities is probably not the best idea.