N/A
Market. EU elections don’t mean much to the markets. He has said for 20 years that the whole EU project does not work. We have to watch Italian bond spreads. We have to watch Italy in the next year or so for volatility. He feels there is a fundamental difference in the way China views the world and the way the US views the world. Theft of intellectual property will not easily be addressed. It is not going to be easy and will go well into next year. The markets are completely complacent about the volatility risks to world trade. There is a lot of talk of international people shorting the banks, but over the last couple of years there has been no growth in the Canadian banks. He would not buy them until they get back to the discounted levels of 2015/16. He thinks at best we will chop sideways for a couple of years, or perhaps an event takes us down the 15/16 levels.
COMMENT
He likes equal weight. A swap is when they own a money market type of investment whose return they swap for some sort of index. You should not have to worry about it too much. In the phase of the cycle where interest rates are cut, REITs do well. When people start losing jobs and you go into recession then REITs do not do well. Look at XRE-T to see how it plays out as you approach a recession.
DON'T BUY
There are lots of ways to play copper. COPX-N is a preference for playing copper. If you believe copper is the play, then buy the whole sector and don’t try to focus on one specific stock. He is not sure this is the play right now because he does not like the base metals. China has surplus copper right now.
COMMENT
They find some of the best healthcare stocks and then write options to increase the returns. He likes what they are trying to do. The more volatility in the sector there is, the higher the option premium will be.
COMMENT
China controls about 90% plus of the rare earths market. It looks like there is a bottom developing. You need to see a breakout above $17.
COMMENT
It is not a replacement for fixed income. They are very interest rate sensitive. There is a covered call overly to bring the yield up to 6 or even 7%. It is not risk free.
WATCH
He does not know the company well. From a chart prospective, it is bad until February but seems to have been building a base since. You need a catalyst in order to catch a bottom. You need some fundamental good news. You will need a significant break out before saying it is a turnaround situation.
COMMENT
A lot of the preferreds have moved to reset preferreds. Preferreds are not as defensive as they were historically. They are not as low risk as people traditionally think.
N/A
Educational Segment. What does he like today. He is looking around the world like Japan, South Korea, and the UK, that have been hurt some amount. He looks for capital gains, the yield and what will the currency impact be. The UK market, currency adjusted, has made no money for a long number of years. After BREXIT, you have the potential to make about 20-25% on the currency alone on the UK. People have too much money focused on Canada.
N/A
Market. He has worked in the auto industry in manufacturing. The auto industry is the scale industry. You lower costs when you build cars on platforms. Alliances and mergers help this. Fiat Chrysler's merger with Renault would be an example of this. Renault has electric cars out there, but he does not know if they will be one of the winners. There are controversies in the electric car space. Internal combustion engines have to become a lower percentage of auto sales.
BUY
He owns both V-N and MA-N. He prefers MA-N a little because it is more exposed to international travel and it's more exposed to credit as opposed to debit cards. They are more future proof because of investments in alternative payment systems. He thinks a recession will not affect their business materially because of growth in electronic payments. But the equity will probably go down in a bear market. He does not predict a recession in the next 12 months.
DON'T BUY
It is a good and well managed company. It is a protein company and there are problems with protein pricing due to epidemics in livestock recently. He thinks it is 'too-hard-to-do'. It is too risky.
BUY
It is big and liquid and has a solid balance sheet. They have an improving margin profile. The 365 initiative involves paying monthly or annually instead of upgrading whenever they remove support for old versions. They are a major cloud computing enabler. This gives them lots of recurring revenue at high margins. To some extent they are turning the company into a utility.
DON'T BUY
He has not been an investor in steel distributors. He is concerned that as the market improves, you are buying more inventories. It is hard to have a steadily increasing dividend policy. A lot of the margin has to do with selling prices going up. He has not been a fan of them as public companies.
WAIT
It is a fine company. It is on his watch list. He does not own it because of his concern with regulatory issues. They have so much share of search that it attracts the attention of regulators. He anticipates the separation of YouTube from Google Search and that would not be good. Wait for some clarity from regulators.