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

Market. A lot of correlation has been made about the market move and Donald Trump, but he has been calling for an increase in interest rates flowing some money back towards the equity market. Economic fundamentals are strong. If rates rise a bit more, some of his favourite stocks might go on sale so that he could add to them on a dip. We are 9 years into this economic expansion, the second-longest expansion on record in terms of a business cycle. However, it has been a tepid expansion, so it could go on longer.

Markets. He is not sure we will see anything significant coming out of the Trump/ Trudeau meeting. If you X-out all the commodities we export to the US, there is a pretty balanced trade between Canada and the US. If they target specific industries those industries could get hurt. He did not see softwood lumber on the agenda for today. Trump’s idea of fair may be very different than Trudeau’s idea of fair.

Paying the S&P-500 – Pullback possible? He thinks we will get some disappointment risk on execution. The tax plan is probably not being implemented until 2018 now. He thinks there will be a buying opportunity coming soon with a 5-10% pullback as there is one every year. He would not be a buyer of the S&P-500 for the long term right now, but it is good for a trade.

Canadian version of ZPW-T? He does not think there is one coming because there is not the depth to the Canadian market.

Gold. He was buying XGD-T, ZGD-T when gold was around $1150 a month and a half back. He has since sold out of XGD-T. He trimmed GLD-N last week. He does not know if Trump will be bullish for gold or not.

Educational Segment. Using Stops. The value approach looks for a range of support and how you buy into it. Anchoring is a behaviour where you want to try to get your money back. That is the wrong way to think about it. You should think about where you should put the money in a losing stock. Get out of a position if it is not working. You should have a plan on when to get out.

Markets. Trudeau and Trump should be talking about the economic issues that both countries share, rather than how to deal with refugees and so on. NAFTA is important to both Canada and the US. Energy and financials have upside potential. You need to see some action being taken for the stocks to move higher.

Market. It was interesting to see the $20 trillion mark on the S&P 500. The US government is going to go through a level of $20 trillion worth of debt as well. He is reducing his positions in financials and materials. He is not finding a lot of things to buy in this market. Valuations are too high, and there is not any fear out there. Volatility is low, and no one thinks anything can go wrong. There is a time for caution. Volatility is low and people are not worried, and that is the time when you should be worried. Economic growth is OK, but he questions if it can get ahead of inflation which is coming a little bit higher. The game of low interest rates is somewhat over. Valuations are excessively high and bullishness is high. Once you get to thinking you are missing the party, the party is almost over. There is a lot more risk to the downside than there is to the upside in the short term.

Energy? Canadian oil stocks have been under a lot of pressure this year. A lot of that was US selling on the basis of taxes, royalties and changes in Canada, so they have been dumping Canadian stocks. He is not a real Bull on oil long-term. Thinks it is stuck in the $50-$60 range for a period of time. Shale production in the US and global production is going to limit price gains. Has been picking away at some of the names in the past week or so, buying on some of the weakness.

Energy. OPEC is following through on its cuts for a 6-month period, but that has always been a murky issue. He thinks they are really going to try to do it this time. Looking at the world supply/demand balance, we are getting fairly close to being in balance right now. We have had growth in China and the US. Oil consumption is going up, and you are seeing that in agencies like the IEA, which are actually backdating some of their demand.

Metals. Copper had some supply issues because of a possible strike in Chile as well as with some troubles with the Indonesian government that is renegotiating a contract. China just had some good import/export data numbers that were very strong for all materials.

Gold. Thinks there is going to be enough noise throughout the year, which will keep gold elevated and investors interested. There are numerous elections in Europe, which could possibly sway things. As well, there are always middle east concerns.

Markets. TWTR-N is under tremendous pressure today. He stayed way because of high selling pressure. They don’t understand how to get their advertising revenue. They are only growing users at 4% and so seem to have topped out. They have $5 in cash (1/3rd) so he would not be surprised about a takeout developing. As the stock price falls the investment case gets more compelling. The cash on the balance sheet is starting to make this stock look more attractive. Be wary of the high US dollar in investing generally, January was strong for the S&P and fundamentals are on pace to grow 5% this year. The jobs number continues to come in strong. The economy is going in the right direction. The market is rewarding Trump on coming through in some of his promises. Healthcare is the only sector that got a negative return in the US last year. This is the best value in the market.

Semiconductors. You have to be careful because they are commodities. They are chips and each company is on a race to the bottom of the pricing. He likes QCOM-Q which gets 50% of sales from mobile chips and the licensing for the CDMA technology. They also have NXPI-Q that have APPL-Q pay.

Market. Equity values are at stretched valuations, so if there are disappointments on the policy front, we could be in for some trouble. His strategy is being long financials, industrials and energy. There is still a lot of risk out there. The principal risk is in valuations. The US has really been a magnet for a lot of the world’s investable capital, and as a result we are getting a pretty bifurcated market right now. He is bullish on Japanese shares, but his caveat is to be hedged, and he is Short the Long Japanese shares, a play that has got a lot of folks interested again, partly because the Japanese monetary authorities have changed their policies more towards targeting yields. As a result, you typically get currency going down and the stock market going up. France is also very interesting. On the debt side, he is starting to see the spread starting to move out quite a bit from where the German Bund would be on the curve, as well as some skittishness in the equity market. He hopes to take advantage of volatility that will come out of the election. He’s been Short the Cdn$ for quite a while, but has it on a fairly short lease because it has been probing the $.70 level on a couple of occasions, and has been bouncing in a range of $.75-$.77. The issue here is partially a hedge against growth continuing to slow. If the Trump bump doesn’t manifest itself the way the market thinks, or doesn’t have the repercussions globally, he expects the Cdn$ and Australian $ will both be under pressure.