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

North American Oil. With Trump turning on the spigots there will be a lot more investment in the oil area. Despite the oversupply, there is still a lot of money to be made in fracking. They are getting more efficient every day. It will be a great growth area. Buy dips in this area.

Educational Segment. Smart Factor ETFs. Research affiliates. He showed a graphic depicting smart factors that look at momentum, volatility, liquidity, profitability, etc. If you calculate excess returns, on average over history about 40 years you average about 2.4% in excess return. The average volatility is mostly less than the index. A second graphic looked at cross correlation of factor returns. If you put two together in a portfolio you get diversification.

Markets. They are having trouble getting access to pipelines. Gas is huge in North America. An exciting part of Western Canada is Gas. But you are having trouble getting your gas taken away. When gas supply came off last year, the price went up. Now Oil and associated gas is going to come on line. Companies are being asked to commit for very long terms for gas transmission and they just can’t commit to the current transmission prices that long (10 years). So companies now just can’t get all their gas to market.

Market. Technically, the market looks good, and thinks we are going to do good on the earnings side. On the right side of the ledger, you have all of these political issues including possible protectionism. Also, the French election and BREXIT are going to be huge issues. He is starting to take advantage and bought some energy today. Doesn’t see energy as being involved in protectionism. Looking at the trade balance between the US and Canada, it is very equal. It’s the trade with Mexico and China that the US wants to go after. Volatility is also going to go up, so you want to be positioned in a few areas for that. Gold is one area you want to have a little bit right now. Also, technology will do well as well as the energy infrastructure space.

Dividends split companies? These will basically have a capital stock that doesn’t pay a dividend, and another piece that pays a dividend. They arrange this by using leverage, and usually invest in underlying entities that pay a dividend or generates cash flow. Depending on what you are invested in and how much leverage there is, and how the market performs, that is really going to determine how the split share does.

Market. The secret on seasonality is that you Buy on the rumour and Sell on the news. Historically, during the first 4 months after a president is elected, the market has a tendency to reach a fairly important short-term peak right around inaugural day. After that, it tends to go sideways for a time. Once you get your executives into power and Congress starts to do things, then the market moves higher. Historically, the Canadian market has done very well from approximately the beginning of December right through until February of each year, and there is good reason to believe that that is going to happen again this year. There is good reason to believe that 4^th quarter earnings by Canadian companies are going to be very strong. In fact, the top 60 companies in Canada are expected to show a gain of 8.3% on a year-over-year basis. By the end of the year, markets will be significantly higher.

Markets. We had a lovely lead up until tomorrow (Inauguration), and the market has said that this is really wonderful. Trump’s tweeting rather changed the rules of the game. Now we are going to find out if and when some of his programs can be put into place. Interest rates are going to wend their way upward. This year will tend to be a value market with high momentum stocks running out of gas. You have to pay attention this year to the values of what you are buying.

Market. He tries to make investments in companies that will do well irrespective of political considerations. Feels people have been paying a lot more attention to news events, than they have been to fundamentals. There has been disparity since the election, where people have been taking Trump at face value that he can solve all the problems in the world, and they’ve jumped on the bandwagon of buying cyclicals, industrials and financials. This has left some pretty good companies behind. He focuses on long-term themes such as information, technology, education, healthcare, etc.

Market. The market is not grossly overvalued or undervalued. If you like a company and you like the stock, Buy it. He doesn’t try to predict the market or the economy. If you can get a good company, it will still be a good company in a bad economy. You want to be an investor through the cycle. Watch what management does. You don’t want a management trying to massage their stock for the quarter, but you do want a company that can execute well. Basically, that means a company can’t over promise.

Market. He is constructive. Everybody is waiting for a pullback to happen from this really big move. There is now the uncertainty of what Trump will actually do. However, we have improving economic data, a rosier outlook for S&P earnings, and when you combine all the Trump friendly policies for investors, it is going to be a pretty good year. Investors want to be buying the reflation trade, and he likes to do that with dividend stocks that are going to pay him to wait.

Market. We have a simple problem called Valuation. Markets have run up from about 11 months ago. Their lows in February were up about 30%, but since the election we are up close to 10%. The question is, are these valuations sustainable. The NASDAQ hit 5 record highs in 6 trading days last week. There are some significant headwinds including interest rates, up nearly 100 basis points from last summer, the strengthening US$ given that US multinationals get up to half of their revenue from overseas, corporate earnings had a solid month in Q3, and thinks they will come through in Q4, but what are they going to do going forward.

Healthcare. He is bullish on this sector. People on both sides of the political aisle are scared to death, because healthcare costs are just jumping double digit percentages, and questioning what can be done about that. His analysis is that the downside risk, should they repeal Obamacare and do nothing about it, is probably less then if they repeal it, put a new name on it, prop it back up, and it is business as usual, it would have tremendous upside. Valuations are far more tempting than they were a year ago.

Markets. ‘Closet Indexing’ is when a manager buys an underperforming stock that is a large part of the index, but in a portion less than what it makes up in the market index. A study has found that 37% of the Canadian market is subject to ‘closet indexing’. The study only looked at mutual funds. She thinks closet indexing is designed to underperform. She feels managers should be more selective.

Tweets controlling the market? It creates volatility and buying opportunities in good companies.

Markets. Brexit news is coming tomorrow from Britain. Brexit is part of the shift to the right and it shows that people don’t want globalization any longer. You have to understand what it means for growth and volatility. It is a headwind. It will be good for British exports, but if you invest in the UK, you better buy the hedged version of the ETF. Trump is protectionist. We are just beginning to see what this means on a trade basis. He thinks it will allow not more than 2% growth in the US GDP. The banks have had a big run up and he sees a sell-the-news happening soon. There have been some misses and we have to watch for those. Inauguration of Trump happens this week and you have to look at seasonally patters for the last 60 years, post inauguration day. You don’t have much growth on average for the rest of the year. A lot of news is priced into the market. You have to play defense. A post inauguration correction is expected.