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

Educational Segment. Negative Interest Rates. The yield to maturity in the world in bonds is 1%. The central bank in the US controls short interest rates as well as to supply and drain liquidity from the marketplace. Quantitative easing is a more permanent operation. He believes interest rates will stay low for some time. US debt to GDP shot up during the Ragan years. Then in the Lehman moment, they borrowed 9 trillion dollars.

Markets. For the small investor, you can’t “trade” in these markets. You can’t Buy on a Monday and Sell on a Friday and make money. You have to look beyond the noise. That can be painful at times, the same as it is for professional investors. Focus on companies that have enduring qualities that will be able to sail through the turbulence. Try to avoid turbulence in both directions, whether the market is going down or up. Focus on companies you want to hold for 3-5 years, and that hopefully you are going to get a triple over 5 years. Over the last few years, he has been investing in knowledge based industries. His weighting in the different areas has been fairly consistent over the last 12-18 months. Has about a 10% weighting in energy, but no other natural resources. Also, holding about 10% in cash. Other than that everything is in technology, healthcare or financials.

Canadian Banks? Thinks the outlook for banks is solid, if not getting better. The biggest issue overhanging them right now would be concerns on oil/gas loans going soft. With a rebound in oil now, it changes dynamics quite significantly. Most of their mortgage portfolios are insured. Dividend yields average 5%-5.5%, and we are basically in a zero interest rate environment. He likes Royal (RY-T).

Readings. For viewers who like BNN, Jason would recommend the book “Market Masters” by Robin R Speziale, which will give you an inside view on how the Experts on this program think and look at stocks.

Economy. He is not looking for a strong period of economic growth, and thinks it is going to be more of the same. We have to recognize that the great recession is a lot like the Great Depression in that it takes quite a while to work its way through. We are a long way in, and growth is still not there, until we get some of our debt problems sorted out. However, so far we are not doing badly compared to what happened in 1929 and the 30s. For investors, why not buy a nice dividend paying Canadian stock, and just collect your dividend and not worry about the ups and downs in the market?

Utilities? His favourite is Emera (EMA-T). Fortis (FTS-T) made some big acquisitions and has run up and ran down, and is probably back into a buying zone. These are stocks that you can add to your portfolio, but maybe not more than 5%-7%. There is not a huge potential for growth, but the dividends are well covered, and are increased on a regular basis.

Banks? He would put TD (TD-T) at the top because it has good US exposure. Bank of Nova Scotia (BNS-T) because of its international exposure. Bank of Montréal (BMO-T) because it does have some US exposure. All have good dividends. An ETF that covers banks and financials would probably be a relatively safe way to edge into the market. The banks individually have quite different performances so far this year. (See Top Picks.)

Gold? Canadian holdings have been reduced to almost zero, but China and Russia are holding on. Thinks the bank is wrong on this and that the rest of the world is right. You should always have some gold in your reserve. Gold in general has perked up in the last little while. The basic theory on gold was that unless you had inflation, gold was sort of an afterthought. However, negative interest rates are out there, so that if you invest your money it actually cost you some fixed income investments. Why not hold gold because it at least holds its value? You really need inflation to have gold really running, so this recent run could a short-term phenomenon.

Markets. The economy is indecisive, mostly in the US. For every good number there is a bad number. If we look in Europe they are looking at more stimulus and Japan is turning into a catastrophe. China looks to be collapsing, so the weight of the world is on the US. With the stock market itself, it seems it is taking its cues from the price of oil as a proxy for how things are going. The price of oil HAS to go up. If you look internationally the convictions are not so strong. We have to wash through this whole period. In the near term the markets all depend on the price of oil. Markets are not particularly cheap and he likes cash as an asset. Let things unfold. At times like this the markets come to us, rather than we having to chase it.

Canadian Banks. You can buy and hold and not worry. There is a lot of fussing by Americans about our banks regarding oil and real estate killing them, but in truth they are uniformly conservatively run and they are quite reasonably valued. The dividends will be growing and the balance sheets will be growing. The banks are a good investment.

Canadian dollar. We are not going to $.80 because it would imply a large move in the price of oil.

Gold Reserves in Canada going to zero. The bank of Canada has always held little or no gold. This does not affect the stock market. We are a gold producer and if they want it they can get it. Inflation is there, even if the numbers suggest there is none.

Markets. In Canadian Small & Midcap sector, he really likes the Tech sector right now. Since the beginning of 2016, any kind of more growth oriented stock has been really hurt over the last few months on the kind of “risk off” attitude. There are some good growth companies in the Tech sector in Canada, and this is where investors should be looking, especially those that have been beaten up. Consumer Staples is another interesting sector, but is tough in Canada because it is a very thin sector. Another sector would be healthcare. He covers about 70-75 companies right now, and 90% of them would fit his check list of stocks he likes. The other 10% are just companies he wants to show members that are bad and should be avoided.

(Green energy companies?) Not a sector he usually focuses on. Brookfield Renewable Energy (BEP.UN-T) acquires infrastructure green energy businesses and pays a very nice dividend. Also, look at Valener (VNR-T) which has done well for themselves. Have a joint partnership with a utility provider in Québec.

Markets. S&P 500 had a short, sharp rally, but doesn’t think it has legs and it has taken stocks into overbought territory. In mid-February he started to see the market really bottom. The correlation between crude and the S&P right now is extremely high, the highest it has been in years. Doesn’t have a terribly bullish view of crude, but it has had a nice bounce here. With this little bounce and the high correlation to the S&P 500, this is one reason he can start to see things petering out. While we have moved into a secular, very long-term bull market, you always have cyclical pullbacks. That is healthy. Credit has not confirmed this rally, so he is starting to see overbought territory, and believes we are in for another pullback.