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

Gold.Exploration has been falling from its peak in 2012 at about 20% a year. Most of this was due to falling commodity prices. At one point, in the late 90s and early 2000s, Barrick spent 8% of their revenue on exploration, and are now spending 3%-4%. They seem to be less interested in exploration and more interested in optimizing their current assets and are focused on their core assets, which worked at lower gold prices. He is looking more for those assets that work at $1200, which are not being found, because no one is doing exploration, especially grassroots exploration.

Market.This is supposed to be the season of volatility, but where is the volatility? It hasn’t spiked in September, which is supposed to be the weakest month of the year. It looks like the S&P 500 is going to go with a 2% gain, and the TSX is even better at 3%. This just speaks to the fundamental backdrop in the economy right now. We are seeing phenomenal manufacturing numbers, and are reaching a point of full employment.

Energy. We are beyond the period of seasonal strength, which just ended recently. Between the middle of August to mid September is the period of seasonal strength. We are getting into the maintenance season. Hurricanes have always played a role at this time causing supply disruptions, which tends to drive the price of oil higher. We might not see this come back until November, which is the end of their historical maintenance period. There could be some volatility. He would be cautious.

Consumer Spending. This is showing the weakest year-to-date performance in decades, and we are also seeing that in terms of vehicle sales. Vehicle sales and restaurant sales are the most discretionary items of consumers’ budgets. Has also started seeing weak housing numbers as well, and that predates the hurricanes. We are coming into the 4^th quarter, which is heavily driven by consumers spending. If we are not seeing it coming into this period, is it really going to materialize? He would avoid the sector or at least market weight it. Certainly wouldn’t overweight it. Look towards industrials and materials, the things that will really benefit from that manufacturing push.

Markets. If you look at Canada, we are trading at quite a discount to the US. If you look at the Copper price, and oil price, over the last number of months they are starting to move up. In 6 of the last 7 years small caps have underperformed. These sectors should start to do better. A lot of bigger energy names got added to the small cap index. They will probably start to move their weights up.

Market.Everybody is concerned. High valuations, the US is at record highs, lots of barometers are saying that investors are very complacent, Yellin is a little more inflation concerned, there is a Trump agenda that is uncertain, North Korean fears. Because of all these reasons, people are calling for caution, but there is something much stronger going on. There is a global reflation trade happening. You’re getting improved economic data in all key regions. There are improved top line earnings, bottom-line earnings in the US, the emerging world and in Europe. We are still in an era of low interest rates. In this environment, stocks might be expensive and might be counterintuitive, but they are still a lot cheaper than bonds. This is a market we are going to have for some time. You still want to be picking away at good stocks. There are a lot of really good overlooked names on the TSX, that are starting to look really nice right now. Canadian financials and Canadian lifecos are cheap. The dividends are great. US financials are very cheap. Technology continues to be good. A lot of these areas are going to pay you 3%-4% just to wait.

Gold?Technically, this looks really good. You throw in inflationary pressures with wage inflation, gold sells off a little, but not that much. Thinks it is basing. It has the capacity to surprise to the upside.

Market.Since last year’s election, the message has been clear. Trump is trying to push a pro-growth agenda and it is having an effect. They’ve had some difficulty in getting legislation through the 3 houses, which is always the case in the US. On the executive branch, he is pushing the regulation and helping to get things approved, as opposed to holding things up. The market has had some pretty decent growth, and we are seeing economic growth and earnings progression in companies. Even though there is a lot of conjecture back and forth, we are now into a slow tightening cycle on the monetary side. In this interest rate environment, the multiples on a lot of the stocks look pretty reasonable. For investors that are looking for individual securities that are fantastic companies and trading at really, really low valuations, this is a great environment. There are great opportunities.

Which bank would you buy based on earnings and dividend growth?His favourite Canadian bank is Toronto Dominion (TD-T), which has had the best execution over time. They are well positioned both in Canada and the US. In the short term, there is probably more upside in a number of the US banks, and he feels the US economy is going to be stronger than the Canadian economy. In that case, something like a Wells Fargo (WFC-N) or one of the mid tier US banks would be a good opportunity.

Gold bullion? One key thing you have to look at is if you are dealing with an MER (Management Expense Ratio) and what it is. Also, it is better to buy into certain companies, rather than buying into a whole smorgasbord of companies through a fund. Gold is not cheap, but also not particularly expensive. Thinks that a lot going forward is going to be via the US$, which he thinks is still too high. If it comes down, the price of gold should go up.

Oil/gas service sector? When oil was $30 a barrel, he was predicting it would be over $60 by the end of 2018. If that happens, that is going to help the whole sector. He does almost all his buying in Nov/Dec, and has a number of companies on his list in the sector. One major problem is that a lot of companies have bigger debt loads than he likes to see. A lot also have a lot of upside potential, and a lot have insider buying. It’s a good space to look at. There could still be more tax loss selling towards the end of the year. Hone in on what you are looking for, and have reasonable valuations.

Market.He is seeing cracks in the Trump scenario. A lot of things we were expecting such as lower taxes and increased infrastructure spending didn’t happen. The only thing that we kind of got was a move to reduce regulatory red tape in Washington. As investors, we are not as aware of the risks as we should be. There has been a real complacency. Last week, the S&P 500 had the least volatility it has had in 45 years. On average, earnings came in okay, not as good as expected 12 months ago in terms of growth, but were okay. However, if you missed, you got nailed. In this kind of environment, he wants to have a little more cash than usual, to buy those kinds of dips. We haven’t had a correction though. This market has gone on so long without having a material correction.

Markets. Trump was not focused on North Korea over the weekend in Tweets. But North Korea is suggesting that previous tweets were a declaration of war. Markets have dropped slightly. At some point the market wakes up. In Germany, Merkel was re-elected but with fewer votes. The Euro has dropped. Governing in Germany is going to me more difficult. Eventually the European project starts to break apart. The risk factor is there. Unwinding of countries’ balance sheets is another market risk present. Caution should prevail in the markets right now.

Lithium ETF Recommendation. LIT-N has had a great run up and is tremendously over bought. He would wait for a pull back into the low $30s before buying.

Fang Stocks ETF Recommendation. FNG-N. See his educational segment today. When we go into ‘Risk Off’ you will see a lot of profit taking happening.