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

Investing in the current market? The challenge is timing the market, which you are not going to be able to do. You have to feel comfortable whenever you buy, so that when times do get bad, you can look at your portfolio and know that you know the business and are comfortable. If there is a correction, for the most part it is widespread and you are going to see a haircut on all names. In a high cash weighting, you sit on the sidelines and watch the market continue to go higher and higher, which has gone on for the last 2 years. The market is expensive if you look at it purely on a P/E basis, compared to where it has been for the last 30 years. However, through stock picking, you can build the portfolio that has a lower P/E ratio than the overall market. Secondly, when you compare the P/E ratio of the market to the last 30 years, it is really only one part of the story, because we have never had interest rates as low as they are in the last 30 years. To quantify how expensive or not expensive the market is, you can look at what the 10 year is paying, and what the average dividend yield of the market is, and see the spread above what you are getting as a yield on the S&P 500 or the TSX, compared to the 10 year. It is quite wide. Leg your money in, which helps you get dollar cost averaging. Also, understand the businesses that you buy.

Market. The market has been sliding off. Small caps have been particularly static or worse, and large caps not much better. We’ve had strength in the Cdn$ for some time, and that has now rolled over, at least temporarily. US stocks seem to do nothing, but go up. He tends to maintain a view that if a stock does brilliantly well for half a year, it cannot usually do as well in the 2^nd half.

Gold. How do you know when to get in or out as a safe bet? You can’t. There is no way of knowing ever.

Markets. He has gotten out of more companies in the past 4 to 5 months than possibly ever before. He is taking some great profits. His picks today are down in value and have a long way up to go. When markets are up so high it is worth taking money off the table. Don’t get greedy. At some point there will be a blow off, but the trend right now is upwards. North Korea, he does not think is quite as significant as some people do. He thinks volatility can be his friend.

Markets. We are seeing an equity rebound as we saw nothing over the weekend. Nobody knows what the odds are of a much larger correction. If you look at the Cuban Missile Crisis, the market was down over 20%. This is the best example that is similar to the North Korean Issue. In all likelihood we are not going to get to the crisis, but the markets may react. Europe has started to underperform because of the strength of the Euro. Their index hit a key technical level last week. (See UUP-N). In all likelihood the US$ gets a technical bounce. He thinks we will settle into a new trading range. The Canadian dollar will probably not get too much stronger than it is now.

Education Segment. Market Sell-Offs. Every time we get a pullback we make a higher low followed by a higher high in the S&P. The Russell 2000 has been testing support. Until it breaks $133 we won’t have a technical breakdown. The average stock is weakening, but it is not until the market breaks support that we will have a problem.

Market. Regarding the rhetoric between Trump and North Korea, it is incredible how little it takes for people to react. He saw some pretty big increases in the Put to Call ratios and a pretty big spike in option volatility. He considers those things to be bullish. People getting nervous is actually a bullish sign, at least for the intermediate term. He likes consumer discretionary, technology and healthcare. Healthcare in particular is quite interesting because it went through a nearly 2 year time out between Hillary’s tweets and the recent increase and the relative strength of the healthcare sector. That does require some stock picking. We are dealing with a kind of market where ETFs and index solutions are not going to get results that people want, because indexes contain both the winners and losers. You need to pick stocks that are going to work, which is why he is focused on building portfolios with no more than 25 companies in them.

US$ over the next few years? Thinks it will be going up. There was a very special set of circumstances from 1970 until 2012, which was the US buying more and more imported oil as the economy grew. In 2012, the US started dramatically increasing oil production, and are currently exporting a million barrels a day, and can export a lot more. Although he thinks the US$ is going up, it is going to fluctuate.

Market. The TSX is back to where it was 6 months ago. New York is holding its own, but with political things up in the air, you really have a hard time making predictions. Doesn’t think either of the US parties are that predictable, so it is probably a good time to keep your head down, but keep calm and carry on. From a technical standpoint, it certainly looked like the TSX had bottomed and starting to edge up, until the North Korean situation came up. The Canadian side is probably seeing better value than the US. A fair amount of Cdn investment money has gone into the US, and he expects some of that to come back. Thinks 2 years from now we will still have no inflation and low interest rates.

Gold? Historically you stepped into gold if inflation started to raise its ugly head. That is not happening. Also, you would buy this when there was political uncertainty. Right now, it is just about at a resistant point, so it has already had a reasonable run up. If it breaks through $1300, then you could have a hard look at this.

Emerging-market ETF? He’s in the process of looking at the sector. The background is definitely improving. Things have improved. Interest rates have gone up. Liquidity has improved. Money looking for higher returns is beginning to sift into those markets. Worth looking at.

Markets. We could well see a pause in stocks. Typically August, September or October you have a check back. One out of 10 leads to something worse like a recession, but he does not see us close to that. We are due for a 5% pullback. Something will always cause sellers to come out of the woodwork and we are due for that. Oil moved back a little. If it goes above $50 something will be done to pull it back. The US$ is helping commodities, with it having come off a little.

Market. The problems between Trump and the North Koreans has certainly caused problems, which the market doesn’t like. However, we also have to remember that we are just coming off an all-time high in the US market. That, in itself, is a pretty good indicator for markets. The market has gone up so much, that investors are questioning if it is coming off. It is hard to take the headlines and say it is going to derail the markets. It has been a decent earnings season. Given where valuations are, and where global growth is, it is hard if taking a passive strategy. That is not going to work. She runs focus portfolios of 15-25 stocks, which is the way to go. Just having broad market exposure is not going to work for you going forward. Feels people are way overdiversified. Diversification is good, but you don’t want to be where people are today. She focuses on companies that have strong catalysts, where ebbs and flows of the market don’t seem to affect them as much.

Market. He is negative on Canada, and prefers where the risk/return balance makes sense for his investors, because he is capital reservation first, always looking at risks, so sometimes it makes sense to avoid an area. The backdrop for Canada, looking forward, is just not as rosy as the 4%-4.5% GDP growth would have you believe. We are probably in the midst of a policy error by the Bank of Canada. The problem is, we are nowhere near the inflation target and all his factors don’t suggest strong growth going forward.

Economy. We are seeing some real improvement in the global economy. When looking the statistics, you are seeing better global growth. There are low interest rates which is going to take a long time before going up. Also, there is relatively low inflation. The quandary the Fed has is that unemployment is going down and inflation remains relatively low, which is a very difficult situation if they want to increase rates. All those things bode well for the stock market, and earnings are very good.