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

The US Midterms--happening today--are usually bad for the incumbents. Tomorrow, we could have a rally because there's so much liquidity given the U.S. tax cut, artificially low interest rates. If the Democrats control both houses, liquidity would diminish and be bad for markets though. Also, there could be gridlock ahead in Washington but good for markets, because there'd be no interference from either party. Commodities should rise on a valuation basis. The commodities complex id priced near/at the price of production. Also, commodities are also economically sensitive--we are in the 9th year of an economic recovery and he can't see this lasting. Also, Americans and Canadians make the mistake from looking at the world economy through an American lens. We should consider MANY parts of the world instead.

How do you reconcile the difference between the spot price of gold and gold share prices? In the last bull market for gold from 2000-2010, the gold price rose $250 to $1,900/ounce, but earnings declined. Until management teams can effectively turn the gold price into cash flow, you'll see the gold share prices languish vs. gold prices. The companies that have the best leverage to gold are the inefficient producers (high costs). We need gold companies to show the same financial acumen as companies in other industries.

Why own gold? It's a hedge against collective stupidity, government and currency depreciation. It's like an insurance policy.

Market. He expects consensus in the US mid-terms where the house goes to the democrats. The republicans may gain a couple of seats in the congress. That may be the best case scenario. If the democrats sweep both that would be the worst case. Markets might get excited about another tax cut for the middle class. If tax reform is pushed back it might be a kind of a yawn. After that focus turns back onto China and trade. It could take years to reach an agreement. The theft of intellectual property is not easy to solve. We are late in the investment cycle and we are going to see the European bank stop buying 10 year bonds. There will be credit stress there next year.

Recession. When is it coming? Caller sites Larry predicting it later and later from 2017 through 2020. The average bull market is 5 years so that long after 2009 a correction seemed increasingly predictable. Since then it has a lot to do with what has happened with the interest market. An inverted yield curve is the best foreshadowing of a recession. Mid-2019 is his best prediction of when the inversion will come. Nobody knows. This is the longest expansion in time that we have had a bull market without recession in history.

If you own something that you owned for a while, you should think about it as: Is there something out there that I could own that would be similar in risk that will do much better? He has been nibbling here. He used ZPT-T for preferreds. ZWU-T has a similar risk and gives you a nice dividend.

Gold stocks. are trading at about a 35 year low. In the future they may do better than other equities. He is not a gold bug but he would play US and Canadian gold ETFs. He is overweight in gold right now.

Market. The market needs to hold the February lows or we could see it go lower. The overall markets are tricky right now, as has the whole year. We are not seeing too many tradable trends. RT-T is a good indication of what the banks have done.

The U.S. Midterms tomorrow won't make a difference. The market is very high and tired. But if the Dems win the House (not Senate) will be a relief, because it'll stop Trump from doing dumb things. If the Republicans win, then Trump's tax cuts will go through. The markets will go up either way in a relief rally. But if the Dems win BOTH houses, then we'll have a real stalemate in Washington. Women of all stripes and ages are turning out to vote. This looks like bad news for the Republicans. Trade (US-China tensions) is an issue, but really the market is expensive. The fundamentals, including earnings, are slowing down or flat. We're not seeing big growth or whether that value is coming into the market. The market is carrying overvalued stocks which have lately come down. Markets simply get tired of carrying that load, then say, "Forget it."

Where do you see the S&P 500 going? It's right between 2,550 and 3,100, a nice trading range. The S&P will stay here, unless there's a setback. He hopes there's more downside so he can buy stocks cheaper. October is traditionally bearish, and this one was. Powerful resistance on the way down and powerful support on the way

He feels the S&P is at fair value and has another 30% of upside. He feels the Canadian dollar has more weakness to come. He expects the Republicans to win more seats in the House during the Mid-Terms, which would cause a substantial rally in the US markets. October has always been a seasonally weak month, so he expects a quick rebound in markets. Autos, consumer discretionary and other sectors have been recently decimated and are great value if the market is able to side step a major recession in 2019. He believes President Trump is correct in going after China as it pertains to the massive trade surplus with the US.

This morning the U.S. wage increase scared the market, because this means the US Fed will likely raise interest rates. ETFs and index funds exacerbate volatility at the end of the day. Add to the Trump, the US Midterms will be Tuesday. If the Dems capture the House, then Wall St. won't benefit as much from deregulation Next April with Q1 earnings, corporations will no longer benefit from the tax cut, when we will likely see reality. He forecasts only 5-10% earnings growth, so he can't justify current high multiples. The Fed wants the interest rate to be 4-5% for wiggle room during a recesssion. The riding USD is pressuring currencies in emerging markets leading to a global slowdown or American companies exposed to EM (i.e. tech stocks) which are getting hit now. We saw this in the 1997 Asian Contagion, then two years later the tech bubble burst. Investors should be conservative now. We could get anything from a 20-50% correction down the road. Having no more than 20% cash is necessary, giving you downside protection. Remember that dividends will always pay, regardless of the price of the stock. Look for dividend growers.