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

Market. There are fundamentals driving the market. The US economy is clearly improving, and starting to accelerate a little. The Trump bump wasn’t so much about that, as it is that US companies are starting to make money, and doing a quite efficiently. If the tax reform doesn’t go through, that is really bad, but on the other hand it will get rid of the Trump bump temporarily. That would be a buying opportunity. He still likes oil long-term. A lot of Canadian producers have become a lot more efficient, which is allowing them to survive with prices at these levels.

Energy. We’ve been told that Canadian Oil Sands is one of the highest cost producers globally with a breakeven point of $60, $70 and $80. How can they make money when they are selling it for about half of what it costs to produce? These companies have become a lot more efficient and have been able to cut the costs of production. They can make some money at these oil prices.

Covered Calls? A covered call is where you are selling an option which gives somebody else the right to buy the stock. If the stock is at $50, and you sell a covered call, and if the other person has the right to buy it over 6-month period, they have to pay you a premium for that, probably $2-$2.50. One person might not want to do that as they might miss out on the upside of the stock, which is quite true. An investor has to decide whether they want income or the growth in the stock. The cost is a little more for covered calls. The Bank of Montréal website has a good explanation of how these work.

Deep in the money Call Options on momentum driven stocks? This is when a person is trying not to pay too much in premium value, which is the time value of the option. When doing it “deep in the money”, and the stock is at $54, you are buying it at $50, intrinsically worth $4, the time value is going to be compressed. It’s a good strategy, provided it goes up.

Market. Industrials, technology, financials, and materials are showing decent relative strength. The advance/decline lines have been a stubborn holdout, but this week it has turned. Everything else was already moving. When comparing the index to the advance/decline lines, it was still negative, but has flipped and gone positive this week. Signs point to a pretty good run right through to 2018. With higher rates, he believes the consumer and businesses gets us well out into 2018.

Market. He is christening this “The Year of the Repetition”. Feels we are going to see oil and gas pretty much the same. Oil and gas stocks have not really helped the market, but the rest are doing quite well. Mining is humming a bit. It’s at the lower end of things because we don’t have big mining companies any more. Banks will just plow on, so don’t bother to trade them.

Market. WHY-X put out a news release that suggested someone would buy their deposit in BC. The company surged and was halted, then the deal fell apart. You have to be careful about this. He cannot believe the kinds of things that go on in this market.

Market. Overall, it was a very, very strong quarter. Thinks it’s a prelude to a pretty good year to come, and continuation of this grudging bull market we’ve been in. While we are getting a few divergences on the valuation front, which is creating some great opportunities for active managers, overall things are looking very, very good, and he is optimistic going forward. Economically, things are very good. The US central bank is now unwinding the quantitative easing that they’ve had in place for about 5 years. Interest rate increases will probably continue.

IPOs? With these, you have to do a lot of homework. There is no background in the public market. For the average retail investor, it is tough. There is also another aspect. It’s the way shares are delved out to people who have asked to get them. The average person is at a disadvantage, as there is a bit of a network among dealers. His general rule is to avoid them.

Energy. He made the decision to leverage up earlier this year and buy some oil stocks, on the belief that the macro for oil was and is continuing to improve with the continued drawdown in the oil glut. With the passage in time due to strong demand growth, compliance by OPEC and by faltering US production growth, means inventories will draw, and would normalize towards a more normal oil market. At the end of October, the OEC inventory glut fell by 60% and should continue. Oil is up on the year, and yet his fund is still down 38%, a huge disconnect between the commodity price and stocks. This is because energy has been the worst performing sector on the planet. There is an OPEC meeting on the 30^th and an element of uncertainty as to whether the agreement will be extended to the end of 2018. Oil is up 2 days ago, making a two-year high. Inventories are falling at the fastest pace in history. He is hoping that in the next couple of weeks buyers will come back, recognizing the opportunities that are available.

Market. At the moment we are in an intermediate up leg, a very short-term type of correction. As a result, there is a rotation going on from more cyclical stocks into the consumer staples and utilities. There is a 90% likelihood interest rates are going to be raised in December, and typically everyone is concerned about rising rates being bad for stocks. Historically, that has not been the case. He is quite positive on stocks for the next 12 months.

Economy. The world economy is pretty well a synchronized growth right now, and the markets look good through to the end of the year. Not since 2007 have all major global economies been growing in tandem. It really creates a virtual circle for the economy. Investors needn’t be too concerned going into the holiday season. You have a strong Canadian consumer and a pretty strong Canadian economy, so holiday sales should be pretty strong. You need to be focusing on earnings, etc. in the 1^st quarter of 2018. 2017 was such a strong year with strong results, that year over year comparables are going to be much tougher to beat in 2018. The growth rates may be slower than they were in 2017.

Marijuana. Doesn’t follow specific companies, because he can’t get to the valuation they are trading at. The Constellation Brands investment into Canopy Growth has sparked a lot of interest, but this was done more as a defensive position. It was an interesting move and expects there will be a lot more institutional money flowing into the marijuana sector. He couldn’t justify this as an investment at this point.

Market. Earnings were very strong across the industries, and went a fair distance towards justifying the rally that we have seen in equities in 2017. The Fed Chairman is dovish on interest rates and for good reason. As economies around the world have strengthened, Europe is probably doing better now than it has in the last 10 years, we are seeing no signs of inflation anywhere.

How do ethical questions involved with owning marijuana stocks compared with those involved with owning tobacco stocks? Has an aging client base in part, with no fewer than 5 who have Parkinsons. 3 of them are taking medical marijuana which is alleviating their symptoms. He has nothing against the ethical use of marijuana for medical purposes. Also probably doesn’t have much against non-medical uses for recreational purposes.