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

Market. We are into tax loss selling which will put pressure on the upside going forward. People are becoming very wary of valuation levels. Since 2008, we haven't had any really significant setback in the markets. The underlying geopolitical factors are still at work. There are tensions in Europe but have been most predominant since 2008 with the debts of Italy, Portugal, Spain, etc. That ultimately led to the BREXIT vote. There are also tensions in Asia. The US itself is a big unknown right now because of NAFTA, which has been of particular concern in Canada. Despite that, the market has continued pushing ahead. He is in higher levels of cash than he was a year ago. That's about the only thing a prudent investor can do at this time.

Economy. This economic expansion has been slow. We are in the 8th year of a recovery. The US economy bottomed in Q3 of 2009, and the cumulative GDP growth is 19%, whereas the historical average is 26%, so there is still a lot of headway. We are only getting 2.5% GDP growth and in the 8th year of recovery, and when you think of all the accommodation the Fed has put into the system, we are in an environment where we will be lower for longer. Now we are getting other economies, the euro zone, Japan, China and emerging markets kicking in, which is helping the global economy. The Canadian market has really lagged, particularly since the composition of the TSX includes a heavy weighting of energy and mining.

Market. The new Cannabis for 2018 is Bitcoin, but he likes to think it is Block Chain upon which Bitcoin is based that is the new Cannabis. Block chain, people are beginning to realize, is very serious. Everyone has suddenly woken up and realized they have to take a hard look at it. It will make easier transactions over international borders. It is being used all over the world real time already. It is a software/hardware situation. He bought in a year ago. There are new companies coming into it daily, although only one is publicly traded in Canada. People are focused on the frenzy of the amazing gains and maybe someday there will be an amazing tumble in Bitcoin. People may not take all the profit this month because they will have to pay the tax man for the capital gains. Cannabis is going to carry on and the high fever of Bitcoin will continue. He only invests in Block Chain though, not Bitcoin.

Market. Bitcoin futures. The initial expectations were that you would see bears start to raid it and sell it aggressively. In fact it seemed to go the other way. When you look at the volume of a futures contract, we don’t know the amount of open interest. It may be the same people trading them back and forth and back and forth. He would wait to see the liquidity and the depth of the market before stepping into it. Larry prefers Gold to Bitcoin as Bitcoin has no intrinsic value.

He thinks there is a good chance Trump will break NAFTA.

Bitcoin Options. The underlying volatility is massive. The puts and call premiums are going to be huge. He does not believe there is an underlying derivatives market. It is not a mature market.

Gold. He is a value investor and has been nibbling away on gold. Don’t make it all of your portfolio. See his educational segment.

Educational Segment. Bitcoin vs. Gold. Bitcoin was seen as possibly a gold disrupter. The biggest cost of investing is the volatility in order to take the position. Is Bitcoin appropriate? He thinks it is a bubble that will break because it is worth nothing. If you want to add it to your portfolio you have to understand if it will help you or hurt you. Gold does not do the same thing as equities do. It gives you a diversifying effect. If you adjust it for risk and then compare to Bitcoin, there is a daily volatility to Bitcoin of 10% and so it is hard to add this to your portfolio and improve your chances of an increase to its return. If you can stomach the ups and down, then maybe Bitcoin is appropriate for you. He thinks Bitcoin is close to zero in value and it is just a bubble. Block chain is a different story and has no relation to an investment in Bitcoin. Don’t trade futures in Bitcoin because of the leverage. Leave it to the professionals.

Market. There is a lot of speculation on Bitcoin, Crypto currency and Marijuana, where valuations make no sense and this is a sign of a top. Lots of money is going into ETFs with companies that may have no earnings. Once a manager gets too big they become the index and so cannot beat it. There are a lot of smaller managers that can easily beat the market over the long term. He is holding more cash in his funds than normal bit he is seeing a lot opportunities as money moves into ETFs and out of mid and small cap stocks.

Market. We are in one of the greatest Bull Markets of our lifetime. Valuations have been increasing, and thinks they can still go higher. In the 60’s had low interest rates for a long period of time, and we saw stocks getting into the 40, 50, 60 PE range, which were high quality companies. If you had bought them, even though they got badly slammed in the 70’s correction and the higher interest rate yield in the inflationary time period, by 2000 you had your money back. We could be in for a repeat of that.

Gold. Which company would you invest in? He doesn’t believe in investing in gold stocks. Most gold stocks are run for ounces produced, rather than profitability. We always get into trouble when the commodity prices dip. If you have to own gold, buy the high-quality ones. Franco Nevada (FNV-T) has been the best play in the sector, because they are not producers, but just take X% of the production and have no costs.

Market. For him, this is the best time of year. A lot of people wait until the end of the year to Sell their losers. It’s the simple law of supply and demand that puts more supply out there, therefore the price generally goes down. He gets to take advantage of that. This year there is going to be less tax loss selling because stocks have done well. He isn’t looking to buy a lot of stocks, perhaps 3 to 7.

Markets. He doesn’t see systemic risks or gross overvaluation, but does see a premium valuation in the markets. That means he has to be a.) a little more selective in stocks he owns and b.) if he does get a little more cautious, how does he migrate the portfolio to a more cautious stance. To do this, he starts to look at larger cap names instead of owning a bunch of junior or intermediate companies.

Lumber stocks? The time to buy these is when there’s blood in the streets and everybody is negative and lumber prices have collapsed. Currently, the picture is very rosy. He can’t buy the stocks right now knowing that lumber is a very inherently volatile commodity. Wait for a pullback.

Market. Every month this year the S&P has been up. Since 1987, we have not had a calendar year with 12 consecutive positive months on the S&P. It seems like it is a little more on the radar these days. You have synchronized global growth creating greater global output. This tightens the labour market. It attracts capital investment. He thinks we are getting increasing productivity that could surprise to the upside. However, we know we are closer to the end of the party than the beginning. We have to be careful about it. He thinks inflation is coming. If rate hikes are coming, he likes the slow and steady policy. Every end to a cycle has its own flavour. This one has rates going up. There could be more increases in futures in 2018. The market is pricing in two increases. It could end with compressing valuations as well as decreasing bond prices and decreasing liquidity.

Market. We’ve had a very brief pause in the markets and they’re starting to move up again. There was a little rotation out of technology and it is starting to move up again after a couple of days of moving down. He remains very constructive given that global economic data continues to expand and corporate earnings is accelerating. Expects global economic expansion to run through 2018 and lift global markets to new highs. There are some risks ahead. We are going to see Central Banks tightening throughout 2018, probably twice in Canada and 3 or 4 times in the US. Stock valuations are a little elevated, so we need to see earnings push forward in order to keep markets higher. If we see potential for more geopolitical disruption, that is going to be a risk for the market. Buying the dips is a strategy you want to continue to use. A lot of people are afraid because of the long run without a major correction or even a minor correction, but fear is something never to be trusted.