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

Canadian Banks. Their year-end is October 31, and we haven’t seen results yet. He predicts the Canadian banks have all made a bunch of money for their year end, and a number of them are going to raise their dividend. There should be pretty good trading revenues in the 4^th quarter. You have to own Canadian banks.

Market. GE-N announced a dividend cut. It is not the company it was years ago. It was like IBM 25 years ago when they reengineered it. There will be tax loss selling to come and the dividend cut is probably not the first to come. At some point it will probably be a bargain. They won’t rebuild the dividend any time soon. If this goes down to $15 then you are back to an attractive dividend. We are starting to have to deal with BREXIT. It will be disruptive. All trade deals being broken by Trump will be so also. The US is being very disruptive and this will be a negative for the world. Tax reforms in the US: It will be difficult to reconcile the state vs. federal taxs. It will be a disappointing bill that will give you a sell-the-news affect.

Educational Segment. Bitcoin: He thinks it is speculative. It is a crypto currency. It is money: a store of value, a unit of account and a medium of exchange (the definition of money). The intrinsic value of Bitcoin is nothing. It is more likely to be zero than anything else. GBTC-N is a fund that trades in Bitcoin as the underlying asset. From a risk perspective, it is the highest risk category you could imagine. GBTC-N trades at a 49% premium to the underlying currency. Expect volatile ups and down. He is negative on the outlook. It could keep going up for years but it is a speculative vehicle and you should leave it alone unless you are a big risk taker as you are not owning the underlying technology. It has no underlying value.

Market. He likes stocks that don’t need the markets to go higher in order to provided returns. There is a lot of opportunity to make money in Canada. We have seen a lot of good things happen in the markets. We are piggy backing a little on the things going on in the US markets. We have seen energy markets bounce here in Canada. There are positive signs here in Canada but also things to be concerned about. The US congress and the president may not get a tax deal done. Whether or not there is a hike in rates that will make more difference.

Market. We are in the midst of one of the great bull markets, but we worry and worry. We hear worries about higher interest rates, Donald Trump, Hillary Clinton, North Korea, etc. In the meantime, the GDP of the world is doing just fine. Work is as strong as it has been in the decade. US numbers are good. Canada is doing very well considering where resources are. There has been pretty good strength coming out of Asia. Background for higher equity prices is there and corporate confidence is extremely high, and most companies are having positive earnings surprises. You look at the companies and at the fundamentals, see how they fit into the environment and try and pick your spots.

Blockchain companies? Crypto currencies are a phenomenon right now. The great thing is that you are outside of government control. Bitcoin has gone from nothing to $6000-$7000, but he wonders how you sell them. Nobody backs this. Highly speculative.

Markets. Earnings have been decent, but it needs to go on being strong to propel stocks higher. Third-quarter US earnings have been reported and are almost complete now. They came in better than the expected 5%. Coming in around 8%-9%. Indices are trading above historical averages, so she is not expecting any more multiple expansion to keep markets going higher. They really need that profit growth to keep going up.

Market. For now, earnings are justifying what you are paying for stocks. We are trading at about 20% premium to normalized valuations, but you have to look at the backdrop, and that is fairly friendly to equities. We are in a continuing low interest rate environment, and corporate earnings are very, very strong. As long as that backdrop continues, there is a relative equilibrium from a valuation standpoint. If the Fed follows through with tightening, that is a signal to him that the economy is healthy.

Market. Some energy names may fall victim to tax loss selling. This year the big caps were up on the year but the average is down about 9%. CPG-T, for example went down greatly in 2014 due to tax loss selling. This year the WTI is over $57 and the index is down about 9%. The companies that are down are more into gas. Service stocks are down 47%. These stocks are all going to face tax loss selling. He suggests for tax loss selling, roll over into a different company.

Natural Resources. What is working in natural resource markets isn’t demand creation, but rather supply destruction. The price has been so low for so long that in many industries, producers have deferred sustaining capital investments, so are losing their ability to produce, a very messy process. But what is interesting is that you match up supply and demand with supply destruction, the industry can’t respond to price signals again, because it takes a long time and a lot of money to bring that stuff back online.

Markets.It is very difficult to predict the top of the market. Markets have steadily climbed. There is so much investor fear driven by headlines of "Is this the market top", "Should we be taking money off the table", etc., and the markets continue to grind higher. Since Trump's election, the Dow had gained 28.5%, the biggest one-year rally since FDR was re-elected in 1945. We still have relatively low growth, versus historical expansionary periods, and valuations are at highs. It is important to have a portfolio focused to high conviction, reducing the number of stocks, and able to target different parts of the market actively, as opposed to the broader market. Markets are now focused on the tax plan and what comes out of that.

Market. Has a top-down process where he is always trying to figure out whether he is offense or defence. Came into the year on offense, and moved into defence late spring/early summer. Recently a lot of his technical indicators have improved again, so has moved the portfolios back to offense around the beginning of September, and went from having a fairly high cash position to being fully invested. One indicator is "sentiment" which is hitting highs. Sentiment is a contrarian indicator, so he is always watching this. When it gets pushed to extremes, either to the downside or the upside, it tends to be a signal. You can't really time off of it, so you can't time a portfolio and decide now is the time to go to cash. However, it can be an alarm or a warning that there could be a bit of a pullback in the future.

Market.She is more constructive on the US market as there will be benefits to be had out of tax reform. That affects Canadian companies doing business in the US. When you talk to strategists and people who spend all their time deciding on where we are in the cycle and what is going to happen next, they say it has been such a different cycle that you can't anticipate what is going to happen next. In both Canada and the US, minimum wage increases will affect companies that are already struggling. That is going to exasperate how poorly it should continue to be doing next year.

Shorting stocks, and relative weighting of Short versus Long?It depends on the market. She uses Pair Trades in a market such as the current one, where it is very difficult to get a good Short because the market is obviously very buoyant. In a pairs trade, she has $2 Long for each $1 Short, so that she is net Long. If in a Bear market, she has naked shorts, meaning they are not paired with anything. In a Bull market, such as now, she tries to find stocks that not only have poor fundamentals, but also an ugly balance sheet. It is very difficult to do in a Bull market if you are not religious about looking for companies that are bad and have a really ugly balance sheet. Right now, she has hardly any Shorts, but individual Pair Trades are about 2 to 1.

Market. If you look at the big names in The Paradise Papers, it is like a year ago when a similar list of offshore account holders was released. It should not be surprising to anyone that people with lots of money look to minimize tax burden. When the government starts taking more than 50% in total tax, it is not ‘fair’ anymore and it tells you governments are not efficient and take more than they should. This does not mean much to the markets but the governments are going to have to dodge this one. The issues in Saudi Arabia will have implications for those doing business in that part of the world. If you look at the ETF KSA-N it trades into Saudi Arabia, it is unchanged although there was volatility over the weekend. In 3 to 5 years he feels oil will still be anchored to $50 so he would sell oil.