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

Silver Long Term. It correlates with the price of gold. It goes up more and corrects more than gold. What is attractive is how it is used in solar panels. He thinks it will continue to be a unique class.

Copper. It was taking it on the chin until recently. This infrastructure build out will need copper for wire. It is a key. There is possibly a correction coming because it had such a surge. There is a big headwind in terms of the supply of copper.

An ETF recmmendation that is truly infrastructure related. He does not have one. CAT-N took it on the chin because of the pull back in mining. They would be a beneficiary of the build out.

Market. This has been an eventful week. It seems as though investors have really looked to the pro-growth side of things, and have become more optimistic about president elect Trump focusing more on initiatives, such as corporate tax reform, infrastructure spending and deregulation, and less on immigration and trade reform. In the near term, things have gotten a little ahead of themselves. We have seen a major rotation of the defensive type of areas, yielding oriented type of equity stocks, into the more cyclical areas. Feels we are a little ahead of ourselves. His focus is more on financials, industrials and parts of the healthcare sector, and even the energy side. Those are the beneficiaries under a Trump Administration. Would probably be a little underweight in the areas of consumer staples, telecoms and real estate. He sold into the “Trump bump rally” taking some profits a couple of days ago, mainly of financials, which are technically overbought at this point. He is about 15%-20% cash at this point.

Oil? Has about 10% weighting in energy names. He likes more of the large cap names in the US such as Exxon (XOM-N) for its size and its ability to buy other names that are in trouble. In Canada, he likes Canadian Natural Resources (CNQ-T) and Encana (ECA-T) which has done extremely well with the move up in natural gases. He likes Pembina Pipeline (PPL-T) for its very consistent dividend yield of just under 5% and steady growth.

Gold? With the US$ going up and a reflationary theme around the world in trying to get prices moving higher, he thinks gold prices and precious metal prices are going to be laggards. Doesn’t think gold and silver are going to perform extremely well.

Markets. He stepped back from markets long before elections and has a good cash position. He is taking a cautious approach after the election. From a sector point of view, you can say that a sector might do better, such as energy (materials) but lumber might not under the new administration. He is increasing his US exposure. He is 40-45% geared to the US. He feels the US dollar will do better going forward.

Lumber companies with 50% production in the US. Livestock and lumber trade with the US will be re-evaluated by the Trump administration. Companies with US assets should do better. He feels other sectors are more favourable for investment.

Market. It has been a bit of a roller coaster at certain points. The US yield curve has just steepened, and the Cdn 5 year got dragged along with the US bond yields. In the short term, this is very volatile market, giving a very interesting opportunity. The big question is, will there be a long-term movement to a significantly higher rate. They would have to move up significantly for them to be financially damaging. The interest rates that affect REITs are due to the debt level, so it is more comparable to a 10-year bond as opposed to an overnight rate.

Market. He uses a number of different indicators. Started the year on defence, and moved onto offense around March, and has stayed in offense all throughout this period. During August, September and October, he saw a little weakness in momentum indicators, but in the last couple of weeks has seen those increase and improve. About 60% of US recessions start in the 1^st year of a presidential cycle. He likes to track the ISM, because both the manufacturing and services side gives him a really good gauge on what is happening in the economy. Those are longer-term ones. What he doesn’t want to see is below 50, which would indicate that the economy is contracting. He really gets concerned if we get to the 46 level on manufacturing. Anything below 46 pretty much gives you a 100% probability of a recession over the next 12 months. On a shorter term basis, he likes to track the Citi Economic Surprise Index, which will ebb and flow on a shorter-term wave basis, which will give him what is happening with the ISM.

Market. He doesn’t believe that Trump is going to be able to deliver, even close, on everything that he says. The market is taking all the positives of infrastructure, building, re-spending, re-inflation of the economy, and that interest rates don’t matter. On the trade agreements, you are already hearing stuff out of China and Saudi Arabia. There is going to be a quid pro quo out there. Donald Trump can’t go off ripping up trade agreements and saying that everything is coming back to the US, without some retaliation. Emerging markets are off more than 5% because they can’t handle the strong US$. Some of the US stocks that rallied the most are the ones that will also be hurt. There are a lot of things going on that are more to do with the short-term flow of money than the fundamentals of how you look at this down the road.

Market. Trump was a person the markets did not like. The market was up 500 points a week ago Monday when they heard that it was likely Hillary was going to win. The stock market futures were down a huge amount overnight, and then all of a sudden he made a speech that was more conciliatory. From Tuesday through today, the markets believed everything he said and doesn’t believe that he is going to be a wild animal. He is not so sure, and is looking to take advantage of opportunities where markets have overreacted. Investors should take a close look at interest rate sensitive investments like bonds. US interest rates are up a full 1% since early July, and about half of that move has occurred in the last week, since Donald Trump won the election. All of a sudden today, you can get about 50% more interest on a 10-year treasury rate, then you could in July, so he is going to take a look at extending his clients’ bond durations a little longer. He is also going to take a look at REITs which have a little higher yield, but he isn’t quite ready to pull the trigger today.

Gold? There have been a lot of questions lately about gold, because a lot of people fear the worst for this president. Gold has become the anti-dollar. What is most predictable about gold is that if the US$ goes up, gold is going to go down, and vice versa. The reason is that there are countries around the world that have reserves, and most of their reserves are invested in US treasuries. When the $ goes up, they are happy with their treasuries, but when it goes down, they are unhappy and they start looking to diversify their reserves, mostly into gold. It is not so much an inflation hedge as it is a way to hedge against the US$ going up. He finds that to be terribly unpredictable, and therefore he would prefer not to take a position in gold.

Market. Potentially, the 33-year Bull market in bonds is over. REITs have spiked up 40 basis points over the past week, but 10 year treasuries are back to where they were a year ago, so we actually haven’t done much in this one year timeframe. Everyone is now focused on the pro-growth policies that Trump has announced. Those should be positive for equities, but there is also his no-growth policy of protectionism, anti-trade and decreased immigration, which could potentially increase inflation. Going forward, we have to monitor what he wants to do, both good and bad, and how that is going to impact the interest rate inflationary outlook. Markets are saying that we are going to get higher growth, which would imply that rates should slowly move up. Going forward, if we do get faster growth, that should imply a higher inflation. If we do get faster growth, potentially we will see money flowing out of bonds and into equities. Interest sensitive names such as the utilities, telcos, REITs were hit quite hard this last week, but she feels it was overdone, and those stocks now look attractive and the ones she would be focusing on.

Markets. He has said many times over the months that he thought Trump would win. His expectation was that the markets would sell off. He was right for about two hours. The reality is that congress is not going to let Trump spend and cut taxes like that. Larry does not see this playing well on Wall Street. You have this extreme movement to the right and he sees this as a head wind. Once infrastructure has been upgraded, the economic impact is gone. All yields going up is not good for the economy. It won’t give net interest margins for banks. Iran is going to keep pumping and it will not come back, but fracking will come back and the supply story is not going to back off. Oil should back off to below $40. The oil stocks are not selling off nearly as much so the energy sector needs to sell off 10% still. There is too much optimism in the energy stocks. OPEC probably won’t be able to do anything at the end of the month.