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

Energy and Oil Generally bullish for the next year. When looking at it, stock by stock, they do look pretty good generally speaking. Exploration companies are good, full integrators are good, and the last ones are kind of the services. Looking at his past top picks, one was a fully integrated and the other was a services company. It doesn’t surprise him that the services didn’t performed well. On two picks if you’re going to get one wrong it’s probably going to be the services. They are more volatile.

Resources Sector He does like this sector. We’re a bit of a bottom-up though. But when looking at them over and over they notice the entire industry in general is improving.

Will the DOW stop its straight up path? There are some good companies doing really well, buying back shares and doing a lot of good things, but at some point this valuation is going to catch up to us. The tax bill in the US is good in the short term but the ballooning deficit it’s going to create is going to be a problem down the road.

Pull back in January? January is probably not going to have a pull back. You need to weigh all the goods and the bads, and the tax thing in the US is so much bigger than people cashing out some gains in January. He doesn’t really pay attention to seasonal factors, he’s really into fundamentals.

Market. We are going to see a gradual increase in interest rates. Doesn't think the financial system is ready for a shock of a 2%, 3%, 4% increase in interest rates, but expects the process is going to be 25 basis points, which the economy can sustain, another 25 basis points, etc. We have to bear in mind that Japan is still effectively in QE, Europe is effectively talking about getting out of it. The next country that would be out of QE would be the UK, if it didn't have BREXIT. Thinks it is going to be a slow and steady process.

Market. The US has had an unbroken run of economic growth since June 2009. The characteristics that it is best known for its length, but also it has been shallow. We haven't had the breakout type of growth that we normally get in a cycle, which has led a lot of people to think it is going to be long gaited. As investors, we have to be prudent and have a plan in place, and make sure it is being acted on. From a planning standpoint, check your asset mix targets and make sure you are coming back to target. With a very strong equity market, the mathematics are that you are likely to be a little overweight in equities. If so, trim them back to your target levels. If we start to see some economic indicators where we might be rolling into a recession, on a company specific basis, you will have to get a little more defensive.

What sector for new money? The one area that will have staying power is technology. Valuations are not extreme now. Many of these companies are growing at a faster rate than they have in the past, and the valuations are at a lower level than they have been in the past. Technology is not as economically sensitive as it once was.

S&P 500 or DOW From seasonal perspective, the DOW and S&P have the same seasonal period from October 20th to May 5th. The DOW has done particularly well this year because of the large caps. He can’t say anything negative about it all. Technically, it’s strong. Seasonally we’re still in the period for it as well. In the fall-time, it’s typically DOW that tends to perform a bit better. Small cap tends to perform better at this time of the year so the S&P 500 might be a little bit better but they are both in fairly good shape at this point.

Market. They slipped some things into the US tax reform package at the last minute. Capping salt (state and local property tax and mortgage deductions) will impact markets like California. Most of the tax cost of the package is going to benefit corporations and the top 20% of earners. Over 10 years he understands they will pay more tax under $75k of income. It looks terrific now if you look at the numbers, however. Corporations won’t build more plant and equipment if they don’t see demand going up. He thinks people won’t get paid more.

India ETFs. There are two he really likes. They trade in US$ so you have the currency risks. SCIF-N is a small ca play on India. This in where a lot of growth will be. INDA-N is another one he likes. Because of the time zone, there are liquidity problems resulting in wide spreads. He is looking to add on pull backs.

Gold stocks. It has been selling off recently. He backed up the truck in exposure to gold in the last dip. He can’t see it getting out of the trading range we have been in over the last couple of years: $1200-$1380. ZGD-T is the one he was buying. ZJG-T is junior golds. He has been buying on the weakness.

Educational Segment. Forecasts for 2018. Looking back on 2017, he was looking for a disappointment, but the market has not been. He has been running portfolios very defensively. His global dividend strategy is almost 9%, which is not bad. He focuses on better risk adjusted returns. Should we step on the gas now with the US tax bill. No, 8 years into a bull market he will remain defensive. In the last couple of months we saw a dramatic downturn in the western Canadian select oil compared to WTI. Pipelines are not getting enough oil down to the US, so all of a sudden we can’t get enough our landlocked oil to Asia, due to a lack of east/west pipelines. Canada should underperform next year. The housing market and rising interest rates will start to cool, which was the biggest contributor to GDP. He does not think we get a recession next year. 2775 is his target for the S&P, a 4 to 6% return, and less for Canada. You should focus on dividend strategies for next year. He expects a 5-10% pull back next year. We are in for some bumpier markets in the next couple of years.

Market. He just turned more bullish on Natural gas. He has always said to buy on weakness. He finally went bullish. Tax loss selling ends this Friday. He thinks there will be more downside until then. When he was on Nov 9^th, he cited specific companies that were down 30% on average. Natural gas is down 9% on Nynex on the year. On the year many gas stocks are down more than 50%. Everyone is taking a pessimistic approach to what natural gas is doing, but it has good draws this year. We are below inventory levels of last year, and below the 5 year average in terms of 5 year average. Inventories are now lower. You can’t give up on winter now. There is going to be more demand based just on LNG processing – it is about a 10% increase in demand in the last couple of years. He sees a 25% demand for our export of Natural Gas. Cold weather always helps and we benefit from it.

Drillers. PD-T vs. ESN-T. You are talking apples and oranges. The big upside in PD-T is the US business. ESN-T is the largest coiled tubing player in Canada. They are very different in size. There is more debt for PD-T. $7 target next year. He likes both of them. TDG-T is preferable to both, however.

Market. Thinks there will be 2, maybe 3 interest rate increases in the US in 2018. It's not a big deal, and has very little impact on the longer end of the yield curve even to this point, which has been flattening. What they are trying to do is to bump rates at the longer end, and if investors don't see inflation they are not going to believe they need higher yields at the longer end of the curve. The Amazon affect is a huge reason. If you think about the consumer Price Index, you are really talking about retail prices. Amazon has been in so many segments of that economy. Prices have been falling in the retail space, right across the board. Amazon is not making money. Their margins are being squeezed They are looking at a 1% margin on their retail products. They make their money on Amazon Web services, which allows them to do this, but at the end of the day, the consumers are benefiting, which is really affecting the inflation numbers. Also, wage inflation is almost nonexistent, and is somewhat surprising.