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

Market. Since last February, we have been in a very productive equity market. We are having a little pause right now which he doesn’t think will take very long. There has been a great focus on passive, low fee investing and being an index investor, at precisely the moment when correlations, or the degree to when stocks and sectors behave the same, is at its lowest level in 15 years. The opportunity to target specific themes and companies is really an outsized opportunity right now, and he hopes people will be able to take advantage of it. From 1966 to 1982, the market travelled sideways in a series of advances and declines. The late 70s was when Vanguard got its start in Index investing. That was the last time managers had been stupid for the previous 15 years. The S&P 500 from 2000 to 2013 travelled sideways in a series of advances and declines, and many managers had a hard time beating it. The topic now is index investing/passive investing, but that is looking backwards. Today, we have very strong clear themes in this market, and the opportunity to target and be an active manager has not been better in 15 years. The market bottomed in 1981, and by 1985 no one was talking Index investing.

Stops? He uses Stops on all positions he invests in. Half the battle is knowing when to Sell. Doesn’t use automatic Stops, but monitors a stock for when it gets close to an exit price. He uses “point and figure” price charts, which help him to recognize inflection points where behaviour is changing in the security. For a longer-term investor, they could use the 150-day moving average.

Market. We are in the very constructive environment. Globally, the economy is doing very well. Germany is doing well, China is coming on, India is doing well. We are in a healthy global economy, just coming out of a 10 year, following the mortgage crisis. However, with long bonds at 2% and equity risk premiums at ranges of 4%-5%, we are seeing bond substitute companies like Coca-Cola selling at 25X earnings. Valuations are fine if interest rates don’t move. We are in a very healthy environment and thinks growth stocks are fine.

REITs. REITs have been more stable than the broad market because of the income component. A lot of that has been aided by lower interest rates over the last 10 years. Returns for the next 10 years will not be as strong as the previous 10. There will be a little more volatility, so you want to Buy dips and Sell peaks. Focus on your yield and you will get that plus a little bit.

Market. Today’s market was definitely to the side of the downside, and Goldman Sachs was probably the big catalyst. There were pretty good results out of City, Bank of America and even Wells Fargo was okay. There were disappointing trading revenues, up only 1%, particularly in the fixed income and the commodity side. Equities wasn’t great either and that really hurt. When you look at the move in the Dow, in particular, Goldman is such a huge component in it, for 35%-40% of the move so far since the election. A huge mover. He still likes the financials and it is a good place to be, but this didn’t help.

Gold/Silver stocks that will have the biggest potential in the next 3-4 months? He would just stay with gold stocks. If we continue to have uncertainty and the US$ continues to be weak, then you want to be in gold. Silver will also benefit, but so much of what Silver produces is also zinc. It is very hard to get a pure play silver. He would stick with the larger caps.

Markets. North Korea is not worrying markets. Trump has shown his willingness to use aggressive force in recent weeks. The risk metrics are giving you warnings signals, but the stock market does not care. Some key trend lines are being broken globally. He would not want to put money to work right now. The French election outcome could be bad for markets. The rally is starting to break. Gold should see resistance at $1300, but $1350 would be where we struggle. He would sell in that range. China has been the biggest currency manipulator for 35 years. With Trump saying his dollar is too strong and he wants it lower it is playing the same game. For the banks, net interest margins have improved, but the capital markets side just isn’t there. The leadership sectors have rolled over. He thinks some kind of correction is coming.

Where to put US cash to work in ETFs. There are a bunch of ETFs with a .U after them that trade in Canada, but in US dollars. He would wait for a pull back of at least 5% before putting money to work.

Why is Gold going in the opposite direction to gold stocks? He does not agree. Look at the XGD-T. You have some resistance from the highs of a few months ago and will see natural selling there. If gold gets to $1350 there is potential for more gains. He thinks we need to break above that, however.

Educational Segment. Hedging the Canadian Dollar. Currency explains about 70% of the difference in returns between markets. In Canada, the US$ is key. Currency differences are caused by imports, exports and interest rate differentials. We are range bound to 70-80 cents for the next few years. You want to hedge when the Canadian dollar is at the low end of the scale (.73 or below).

Markets. He used to buy only companies that were very low in valuation, but this meant that sometimes he missed wonderful companies that had years and years of growth ahead of them. So now he thinks you should have a bit of both in your portfolio. A Company that is expensive can maintain its growth so be a good investment. Lack of a dividend is not necessarily a deal breaker. He never buys companies with terrible balance sheets that don’t pay a dividend. Negative sentiment only makes you look dumb for a short time. Don’t get wound up about themes that may not come to pass, e.g. Potash over the last few years, where the world has to ear.

Lumber prices have gone parabolic, but there is a softwood lumber dispute with the US. This is pushing up and yet holding back stocks. We don’t know what the US government is going to do. The last softwood lumber dispute turned out to be nothing.

Market. Feels the market is pretty benign right now. The concern many people have is that valuations are a little high. Doesn’t think that another year like 2016 is going to repeat itself anytime soon, but also there is no reason for things to pull back either.

Assessing a financial advisor? You should ask what their credentials are. How transparent are they regarding how much they are paid. How much do they care about you? Are they really trying to solve your problems?

3 equal percentage ETF’s portfolio, including Canadian, US and international. Good strategy? He generally prefers the Vanguard products because they tend to be the cheapest and tend to have many, many hundreds of stocks that make up the ETF. He would look at Vanguard Canadian (VCD-T), Vanguard US Broad Market (VUS-T) and ??? VUD.