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

Market. We pretty well have a globalized synchronized growth period now. Brazil and Russia have turned around because of oil prices. Greece, which has always been the problem child until about 2 years ago, will probably put the strongest GDP growth rate in the Eurozone in 2018. China and India are the main drivers of global growth, but with all the other developed nations doing their part. We are seeing that in strong earnings, consumer confidence, unemployment stats and the stock market. He’s been allocating a little of his North American exposure into Europe. The US has been a great place, but thinks they are in the 8^th inning. Tax reform is coming, which can give a little more of a melt-up to the stock market. There are still some nice tailwinds on earnings growth coming from the US, but he doesn’t see a multiple expansion happening. In Europe he sees earnings growth, similar to the US, probably 8%, but there will probably be an extra turn in the multiple, and a possible 15% next year in Europe and only 8% or so in the US. The next NAFTA meeting is around November 17, so be prepared to get some noisy headlines. The bigger card in Trump's poker game on world trade, is China. That could be a 2018-2019 story, and he can't deal with China if he is lackadaisical and bends over with NAFTA and the south Korea trade partnership. Don't be surprised if we get a more negative outcome on NAFTA in what the market is anticipating.

If I sell Canadian Banks, where should I put my profits for income and a little growth? This may crystallize some capital gains which you have to look at as a factor. He likes Canadian banks for the long-term. They have a good control on less volatile earnings than we have seen from other banks globally. However, valuation is a little stretched and he prefers European banks that trade around BV. NAFTA could be a headwind in the next while, and that could hurt general Canadian markets and there could be a selloff. In addition, there are new housing rules coming in January. Keyera (KEY-T), Pembina (PPL-Y), Inter-Pipe (IPL-T) have sold off and give you a mixture of good yield and some growth. You can also find some growth and income in some of the REITs.

2 Market Halloween Scares.

1. According to some polls, Pres. Trump's approval rating has dropped below 35%. When a president falls below 35% and the market is hitting new highs, the average performance of the S&P 500 is -1.6% the next month.

2. You need widespread participation across the market. If it is only being led by a few stocks or 1 or 2 sectors, you are often in trouble. Effectively, we are being led by 5 stocks on both the S&P 500 and the NASDAQ. If you look at the broad market, a lot of stocks are not doing as well as those 5. With such narrow leadership, if the steam runs out in any or all of them, you could be in for some interesting times.

Market. New highs but the TSX has been lagging world markets for a considerable time. We are heavily weighted in banks and energy. The banks bounced back and we had some GDP growth. Curbing the growth in housing is going to be a huge problem. Oil will stay at $50 for 5 years so there is not a lot of optimism for growth. It looks like in the US we are going to get a vote on the tax bill in mid-January. This will not solve any of the problems the US economy has. AMZN-Q is destructive. The stock has been the best stock for the last 15 years (38% over the last 15 years). They lost almost a billion dollars in their core retail operation. They are only great at disrupting so where is this going to go. As a value investor he does not get the story.

Uranium as a contrarian Investment. It has been a value trap for many years. Look at URA-N. It does look like there is a longer term bottom forming. He likes it. This is a speculative area he would be okay having a percent in. He does not have any right now. We are getting close to this.

Energy. He does not like the energy sector. He likes what they are doing for fracking over the next 5 years but he is not company specific.

Gold. He thought we could get to $1300 where he is a seller and he is a buyer at $1100. He is adding to his exposures at $1250. It is in a trading range. He does not see it breaking for the next year.

Educational Segment. The Canadian Dollar. It has been on a roller coaster ride this year. The 2 year spread between US and Canadian is the highest correlation to the Canadian dollar. Our bonds usually yield more than the US. But back in 2015 that changed. Short term this is a negative factor. In the futures market, speculators in the Canadian dollar shorted this year but now are net long. That potentially has some downside for the dollar.

[Three Guests] Market. [Groff] The 16k number is a nice physiological number but does not affect what he does. He is bottom up. There are parts of the market that are fully valued. And parts that aren’t. [Rohinton] The risk reward is not in your favour in banks today. He does not think this is the day for this opportunity. He prefers US banks and others outside of banks such as the payment sector. [McNamee]. He does not think there is a bubble in the FANG stocks. He has owned names within that group and still likes names like Google. CSCO is not a name he has invested in. He looks at other value players like MSFT-Q that are into new technology transitions such as ‘Cloud First’. [Groff] There are pockets of real estate that are fully valued.

How do you evaluate an opportunity? Looking at Tech stocks: The customer has to like the product. The company should be continually gaining market share over the years. Then they can continuously grow. [Rohinton] A finance stock has to give you comfort over the downside. You have to look through the balance sheet to understand the risks. Then he looks at the upside. [Groff] Avoiding losses is important, especially when markets are hitting new highs and there is complacency.

Canadian Bank Splits. Don’t worry about splits. Today we are at a 25 year high in consumer credit in Canada and banks are at an all time high. A US footprint is a good ideas but looking at US banks directly is even better.

Insurance Companies US and Canada. Long term they are a great business. Intact (IFC-T) is a great business in Canada with a good management team. Chub (CB-N) is excellent, but focus on these two primary insurers and stay away from reinsurance companies because it has been commoditized. Climate change adds more volatility to the industry.

Market - There hasn’t been a lot of volatility. We are through the meat of the Seasonal period where we sort of expect some hiccups. The VIX, being as low as it is, has been pretty darn low for quite awhile. That said, even in early November we are susceptible to a couple of spasms, due to some geopolitical or North American political issue. The economics and the general structure of the market, being very pro-growth is pretty positive. He sees this for the next 6 months. The chart for bond yields (IEF-N) shows a bit of a break, but generally there is a trend moving up.

Market. We are just stepping into the time where stocks do well over the next 6 months. They’ve done well over the last 6 months also, but can still do well. The new highs on the TSX, S&P 500, NASDAQ and the Dow today is a bullish signal. There has been an underpinning of some key sectors in the market. Technology has led the market for so long, and continues to do well, that is a good sign for the market. We’ve also seen support from the financials. If financials participate in a rally, that is a good thing, because it is showing we are perceiving the economy as doing well. However, energy and materials are still down at around 9% from the previous peak, but there’s still time for them to participate. The TSX has done well versus the US, over the last couple of months, but from this time in October and into November and December, it is usually the US that does well, about 73% of the time from 1950 to 2016. That is because of the sectors. Oil tends not to do well in Nov/Dec and gold tends to be weak in October.

Market.The TSX got back to where we were in February. If it breaks out from here, it could show some Run. We have enough underlying factors, particularly if oils start to react. A lot of the oil stocks are trading well under their BV, and he could see oil at $60. Banks are doing OK. We could hit some good territory.