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

The 10-year U.S. bond yield is now below 3% has to do with recent volatility, US trade issues and Italian bonds. He always thought the curve would normalize away from near-zero rates as the economy recovers. He doesn't think inflation will be an issue, because there's over 3% global growth with historically low unemployment. But isolated events put strain on the economy, like dropping money supply, the technological distruption with AI replacing huiman jobs; and debt, both corporate and consumer. These will push the Bank of Canada to raise rates this year once more, but not tomorrow. The curve will range-trade. He doesn't see a 4% yield, because that would constrain the economy.

Market. We have had the strongest quarterly results since 2010 and the market said 'Blaw'. The earnings per share growth has been 26% year over and the revenue growth 9%. It could be a tired equity market that just can't keep going up. The PE in 2017 was rather high. The recent pull back brought back PE from 21 to 17 and so now the market is no longer overvalued. Trump's approach has always been to go in hard and heavy and then to reach an agreement. The goods impacted by tariffs is actually relatively small. The trade wars with China are actually patent wars. These fears that are keeping the markets down could be addressed and then what would be keeping it down?

Educational Segment. Hedging Credit Risk. He is concerned about the level of debt in the world. A high yield instrument involves taking the worst quality corporations out there. When the economy turns, and we are getting close to that, these things can get pretty nasty. In 2009 about a third of the high quality bonds were rated triple 'B'. Today it is almost 50%. Corporations have put their balance sheets in a place of high risk. In '08 government bonds did very well and corporate bonds did not. He is concerned now about corporate bonds. You can make money when bonds come off by being in the right fund, such as the SJB fund, which is an inverse ETF.

Market. The Ontario Election. He is disappointed in all the parties. Two of the parties don’t understand the fundamentals of economics. We cannot keep running deficits. Over the next couple of years the dollar could drift significantly lower if the liberals maintain a federal position and the NDP wins in Ontario. In the late '90s the loonie got into the .60s. The Italian president will not put in the anti EU prime minister. It looks like the current government will fall soon. There may be a more anti-EU leader coming out of that election. Italy and Europe are fragile due to political uncertainty and it is not good for economic growth. He thinks there will be no move this week by the BOC.

The Loonie. If you can wait 3 or 4 months there is a good chance oil prices will pull back a bit and the Canadian dollar should drift closer to 75 cents.

Logistics and transportation space recommendation for an ETF. IYT-N is the DOW transportation space. There is not one for logistics in North America.

Oil falls below $70: he still has hope in Canada, even though geopolitics haven't improved and foregin capital hasn't returned here. If you buy Canadian oil, buy stocks with exposure to the U.S., like Vermillion. Saudi Arabia still has
power over the oil sector, as does Russia, and now America which now has an export market available to them. Canadian banks' mortgage books will be scrutinized going forward, though wealth management continues to deliver returns. Consumer debt is a headwind but it's offset by corporate lending. He's used volatility to trade HMMJ (the cannabis ETF) at a profit. The party's not over--these companies have to turn a profit after legalization,.

Defensive sectors offering big yieds and some growth have underperformed of late, but they're starting to look okay, especally if you have a long-term view. However, consumer staples are the worst sector, stocks like P&G and Colgate.
But he likes Couche-Tard. He owns only two Canadian banks, TD and Scotia, because they are the least "Canadian" banks given their foreign operations. The banks have been discounted given rate hikes and the cloudy real estate market in Canada.

Market Outlook. Looking ahead for a positive return for the TSX for the year. 6-7% and half of that dividends so no enthusiastic. The economic background is positive. We haven’t even seen the economic impact of the tax cuts in the US. With the new depreciation rules – writing off everything – would be surprised to see growth below 4%. On NAFT he changes his mind from day to day on what is going to happen. But in North America things are OK. Europe is another story. More concerned about what is going on there. He wouldn’t be surprise if the whole Brexit s turned and the UK decides to stay.

Holding ETFs vs individual stocks. The ETF advantage is that you are getting diversification. The problem is that they have multiplied like rabbits. So many now that you have to be careful. Stay with the ones that give you representation to the larger space.

Market. There is uncertainty with the discussions between the US and China. He thinks investors should just dig down to fundamentals. In Canada almost 57% of companies matched or beat on earnings and 59% beat on revenue. Companies are looking strong and Canada is looking interesting. The Canadian dollar is stable although weak so our exports look cheaper. [Today's show started late, leaving room for only one opinion before Past Top Picks.]

Market Outlook. We are seeing a seesaw pattern with the markets Very solid economic numbers coming from around the world. Fundamentals look good. On the other hand, we are worrying about interest rates coming up. We worry about geopolitical tensions. We worry about a potential trade war. The long-term side of the yield curve is going to get close to the 4% level (he thinks). Stocks are going to continue to outperform bonds. Canadian banks continue to roll on nicely. With Trump there is always this pattern of big words, angry words and negotiations afterwards with much calmer policies. Keep a big bottle of salt in your cupboard because you have to take everything with a grain of salt.

What is a half position or a full position? In equities if you have 20-25 names and you have equal weight you are going to have 4 to 5 % on each name. That is a full position. Half position is 2% to 2.5%. He just goes for full positions. He does a lot of research.

Market. The Financial sector in Canada has been underperforming the TSX since April. The last three interest rates hikes have not proven as good indicators for the banks, despite expectations that it should be supportive for them. Although they can make more money it is impacting their mortgage business negatively.

Sell in May. From May 6 to October 27 tends to be the weaker six months in a given year. This is the time de-risk a bit and accumulate cash to look for opportunities.