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

Model Portfolio for 2018 Look at individual companies, specific fundamentals, and individual drivers and build a portfolio that’s diversified across industries, sectors and around the world when appropropriate. On the margin, they are generally seeing better opportunities in Europe and Asia. Opportunities like the UK who are undergoing their negotiations for Brexit is where a macro event is creating some specific opportunities. Tax packages in the US are definitely going to be a tailwind for earnings in 2018.

Industrials Impact of the Technological Revolution Industrials are one of those areas that the benefits of technology hasn’t been fully felt yet. He’d rather see a diversified portfolio across a number of different industries and sectors. Financial Technology is also influencing the banking sector.

U.S. Dollar The Canadian dollar is probably getting closer to fully valuated and it's hard to see sustained upside. He favours U.S dollar at this time. Sees upside interests rates in the U.S. and sees the economy moving in the right direction. Leaning toward seeing 3 interest rate hikes in the U.S. in 2018.

U.S. Market Outlook He has been long & overweight on the U.S. market so he is very pleased with what’s happening in the U.S. Tax reform bill, proposal to repatriate several billion dollars in capital, low interest rates; the U.S. is becoming self sufficient on energy. What better things can you have for the market. He’s continuing to be bullish. He expects to see more of the U.S. market to trickle down, going to some of the smaller caps as well now.

Canada The problem with Canada is that we have to get those pipelines built. Can’t blame M. Trudeau for that, the Harper government had a majority and should have ramrodded these things through. He thinks we will be dragged along anyways. It’s just unfortunate they’re not making enough effort on getting the pipelines done. Build the pipelines and build as many as you can, otherwise we’re going to have an orphan resource, which could happen with the electrification of cars. We need to get that out of the ground.

ETF for European Asian Tourism? He doesn't know of a travel ETF, but you can look at Vanguard VGX. It’s an all European ETF. If there’s increase earnings as a result of asian tourism, that’s where it would be reflected. It’s very successful and quite large, and quite reasonably price with MER around 0.12 to 0.14%. That's one you can look at to capture some of the growth in the European market as a result of Asian tourism.

Binary Options Run from the idea. You can’t trade them in Canada. They are legitimately traded in the U.S. but there’s an awful lot of hype about this. It’s a great way to lose your money. There’s a huge difference between investing and gambling and that one is on the wrong side.

Leveraged ETFs suitable for day trading? He doesn’t touch leveraged ETFs because at the end of the trading day, there is always ajustement in price and you can be correct on the ETF but still lose money because of the adjustment on the price. He would look at the ones that aren’t leveraged. He would look at the inverse ETFs but not the double inverse ETFs. You can day trade with ETFs, depends if you want leverage. He doesn’t like leverage in general, he wouldn’t take a client that has a home equity line of credit (HELOC) for investing.

How to decide when to sell an ETF if you don’t have a manger? That is some of the risk an individual investor takes. If you are uncomfortable with that, then you should get an advisor. You either got to do it on your own or pay someone to do it for you. There's the robo advisors. He likes the robo advisors. The good thing is that it keeps clients out of the mutual funds hands and opens up an opportunity for them to get a managed portfolio. The problem though is that he has gone to some of the robo advisors and pretended he was someone else and some of the advice he got were quite frankly dreadful. He likes the robo advisors and thinks they have a role to play and they keep the fees low which is great.

Bonds and utilities. He knew a push from Central bankers was coming about 6 months ago wanting higher rates. Recent data indicates that some of it bears higher rates, but some was more wishing for animal spirits. For the last 3 days, bonds and utilities kind of crashed, which is pretty significant. That sort of confirms the 6-month watershed. Around July/August, it was noticed that relative to other sectors, bonds and utilities were starting to get weak. The price proceeded to go higher as we had a couple of data points that were rough in September/October, but in the last 3 days, there has been a real fall off. This push for higher rates is eventually going to weigh on things. For now, it's full steam ahead on everything for pro growth.

Seasonal Investing. The best time for seasonal investing is the 3 weeks starting in mid-December. That is the strongest time for the S&P 500 and the TSE. During the last 27 periods, the TSE Composite has gone up 23 times with an average gain of 2.4%. That period is the end of tax loss selling pressures. There is also diminished institutional activity where companies close operations in the middle of December.

How do you use Bollinger bands? Bollinger bands give you a range for a security to trade within 2 standard deviations. Most stocks will trade within those bands over a long period of time. This stock is an interesting one because, for a long period of time, it has been coming way down. Bollinger bands have been getting tighter and tighter and then, all of a sudden the news came out that they were going to reduce production and uranium oxide immediately went up 15%. Using Bollinger bands can be very useful except when there is specific news that comes out on a company like this, which can have a significant impact. Seasonally, it has done very well from November right through until April of each year. It hasn't done that for the last few years. This year, we might have something going for us, and it looks like the stock could expand beyond its Bollinger bands for a period of time.

Market. Long Island Ice Tea is contemplating a switch into block chain. It seems people will buy anything with the ‘B’ word in it. (LTEA-Q). The stock shot up. If there is no substance behind it then people will sell the stock down. With the .com bubble people understood what was going on. Valuations went crazy but there were price-to-sales figures. These companies do not have revenue from block chain. It is a gambling casino. Eventually governments will realize they are missing out on taxes. Small caps have lagged 6 of the 7 years. The TSX has been a terrible laggard these last 7 years. Small caps were only about 1.4% compound growth on the TSX. Oil prices have stabilized and copper prices are breaking out and this bodes well for Canada. It should outperform over the next couple of years.

Small Caps. These have lagged 6 of the past 7 years, and some of the numbers are quite staggering in terms of how much the US has outperformed Canada. Canada has compounded at about 6.5%, while the US has compounded about 14.5%. However, over the last 20-25 years or so, they’ve had close to similar returns. The compound annual growth rate returns on Canadian small caps for the last 7 years is only about 1.4%. From 2000 to about 2007, Canada actually outperformed by a tremendous amount. He is hoping for a reversion to the mean.

He is “reluctantly bullish” on the market. He’s been saying for a long time that the market is overvalued, there’s a lot of good companies doing well, but the valuations have to come back at some point. They just passed the tax bill in the US which is a reason to be bullish. The tax thing sounds great in the short run. But when you get ballooning deficit and interest rates looking like they are going to go higher, that's not great for the market in the long run. He thinks a pull back of at least 20% has to happen sometime within 1 to 2 years.