A Comment -- General Comments From an Expert (A Commentary)
DON'T BUY
BitCoin's future. He thinks it is worth basically zero. You can trade it. You can speculate on it. You can't invest in it, however. One of the solutions in the world to debt is to move to entirely electronic currency. There cannot be independent currencies. Governments will legislate them away. It is an asset and he has no issue with buying it, but it has no value.
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Educational Segment. The income statement looks good but the balance sheet does not. There is $7 trillion dollars of corporate debt rated as triple B. 2000 companies. In the next economic downturn, a huge portion of the capital in triple B will move to double B. Look at HYG-N, the high yield bond ETF. The spread over government bonds is expanding quickly. If you are in high yield bonds, beware. This is the biggest risk he has ever seen in them.
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Market. There is a lot of commotion in the markets right now. Beware of headline risk. Separate the short term headlines from the long term story about China. The domestic policy in China is more important than trade wars. China started reflating in the middle of last year and it is now showing in the data. The more trade wars flare up, the more China stimulates. It is very positive. China is moving from an export-led economy to a consumer led economy. Investors should not get sideswiped by the trade wars. China should be speeding up in the coming months. The Chinese consumer is the biggest macro story of our time.
COMMENT
Canadian REITs. REITs in general are good in the portfolio but he would not go 'gaga' on them. Canada has had inappropriately low monetary policy. In general Canadian real estate is very expensive. It is an okay building block because of the income potential. XRE-T groups the Canadian REITs. But there are better opportunities around the world.
COMMENT
How much leverage does the US have in the trade negotiations? They have greater leverage than China does. China isn't going to sell US treasuries, as that would make their situation worse. China owes a lot of US debt, and they can't sell it or it would destroy their own economy. Problem is that Trump negotiating through Twitter is backing China into a corner, and China is very proud. It will work its way through the political process, and people will forget all about the recent dustup.
COMMENT
Buy the dip? He doesn't pay a lot of attention to day to day markets. The market's not trading at outrageous prices. Profits will only be down 1.5% this year. The sky is not falling. This is not a positive, and we don't know how investor psychology will affect the markets, but Americans are spending money, so it's not the end of the world.
COMMENT
Opinion on Canadian banks. Canadian banks are fine. Good dividends, reasonable valuations, well capitalized, earnings have grown rapidly. Only real issue is probably can't keep growth rate going. Growth rate in mortgages and consumer credit will be slower than historically. But it doesn't mean they're bad investments. Real estate valuations are reasonable, despite the big centres like Toronto and Vancouver.
COMMENT
Asset mix in a TFSA. Capital gains are the most useful tool in a TFSA. If you put 100% in equities, with a 5-year view or more, you'd do better than putting it in fixed income. Buy 2 or 3 stocks. Don't worry about the timing too much, as long as you can stay disciplined. Treat it as you would buying your house.
COMMENT
Market Outlook Uber has gone public now and is trading without a hitch -- especially during the worst week in the market this year. Its market cap is already huge. For the market as a whole, trade fears with China have reemerged. The odds seem low that the trade delegation will have any major positive announcements this week. The markets appear to be taking it in stride, but we should expect to see some continued downward pressure. The US has a strong economy and the upper hand on China, he thinks. President Trump is also trying to pressure another rate cut.
COMMENT
"Sell in May, go away" strategy. The market actually trades higher over the summer months. Sell in May strategy gives 64% less of a return than just buy and hold. Gains tend to be larger from October to May. Lower your risk during the summer, by owning sectors such as healthcare, agriculture, staples, utilities, REITs, energy. Have to be more tactical in the off-season.
COMMENT
Analysis on oil. Was bullish on oil from end of January to a couple of weeks ago. Strong demand fundamentals were driving the price. Overhang is a supply glut. Expects to see price supported at $60-62 and then a move higher from there during summer driving season. Demand is there and should support it over the long term.
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