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Market. There are weak economic numbers in Germany. You had BREXIT, Chinese trade, general slowing of world exports, rising interest rates and an inverted yield curves, and now we are seeing more and more of that showing up in real economic data. With Germany being so export driven you are seeing the lowest numbers in a decade in terms of German output. None of what the European central bank has done in terms of QE, and negative interest rates, nothing is going to solve or fix these economic cycles. Trump started a global trade war and contracted the global economy but it won't fix any of that. We need resolution of the trade issue to get through this. As long as Trump is running this we will not see any resolution to all this.
BUY ON WEAKNESS
It is long bonds (federal government). Longer duration bonds as things fall is one of the best things you can own in your portfolio. It is not as attractive today but is a buy on dips. He thinks there is more of these interest rate dips to come. This is a tactical, rather than buy and hold kind of thing. When we see the recession starting to hit you want to get out of this because it is all priced in.
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COMMENT
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Market. No one can predict the future but there are going to be lower returns in the future. Valuations are quite high and interest rates are low but that is because growth has been slow. He has over a 10% exposure to real estate, which is higher than the TSX. This has benefitted from low interest rates.
COMMENT
In light of potential trade wars, could this rail come down? Both of our rails are great moat businesses and incredibly well run. They are cyclical and are capital intensive businesses. If you look at the long term, their maintenance capital is higher than they book for depreciation, so their earnings quality is lower. Lower commodities would impact the bottom line. They are highly owned by US shareholders.
Transportation
BUY
Some of the outlook for the auto sector which is negative is reflected in their price. MG-T gives you a more diversified part of the car. LNR-T is mostly drive train components and these are still needed for electric cars. The parts don't change as much as more cosmetic parts so when you tool up for a part the investment lasts far longer.
transportation equip & components
HOLD
It is a very well run company. They run it like a private company. They are very focused on the return of incremental capital. They have never had dilution in share capital since the day they went public. They are not cheap but these companies usually are not. It is a little overvalued at present.
packaging
containers
