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

Stop losses? These are very important, as they are a discipline. He uses them because he is trying to recognize a change in behaviour. A security has its own personality in the way it trades. Prefers point and figure charts, which help in a black-and-white way to recognize a shift from higher highs to lower highs. You could also use a moving average. A longer-term investor should use something like a 150 day moving average. He looks for $3 worth of upside for every $1 of downside that he takes on.

Health Sector? We are 3 weeks from the US election. Those who have been concerned about a Democrat in the White House, have probably been sellers through this period, so there has been recent pressure on the group. What has been happening has been creating some great opportunities. He would probably not be a seller at this point.

US Market. Feels the market is heading towards a peak, even if you think in terms of cycles. Our last downturn was in 2008-2009. Before that it was 2000 into 2002. Before that it was 1993. The current market has risen for the most unbelievably absurd reason of all, i.e., nobody can get yield safely, or income safely by just putting your money in the bank. Everyone, in Europe, Canada and the US, have been forced into equity markets which is very dangerous. Think about what companies have been doing. They haven’t been improving their Earnings per Share quarter over quarter. It has actually been decreasing in single digits, but it has been a negative number each quarter. Companies are not making money. They have been increasing their dividend yield, and have been borrowing money and retiring stock, so it makes their Earnings per Share look better. We haven’t seen where we have had real true growth. Instead it is a lot of financial engineering.

Market. You would think that with the bad day China had, it would have a negative impact on the Shanghai index. However, one of the strongest indexes of the developed countries right now is the Shanghai index. There has actually been strength in the index for the last couple of weeks, and has to do with seasonality. Historically, all major markets in the world, have a bottoming seasonality right around now. Markets tend to go higher from about the middle of October through to around the 1^st week in January. Yesterday the Dow and S&P 500 both came down very sharply and broke key support levels in early trading, but then seasonality started clicking in and both came roaring back, ending in a small profit. During the last 20 years, both the Dow and the S&P 500, have hit their low on October 15th. This year there is good reason to believe that we hit the low yesterday. From here on, markets will go higher. Historically the election has caused volatility right through until just before the election itself, and then markets go higher from there.

Markets. TCK.B-T is up four fold this year, but it will not continue. It is heavily influenced by coal demand. Chinese coal production can come on quickly, but oil stocks are not attractive. The yields have come up recently in Canada and the US, but the 10 year is off today and he sees no reason for the yields to go up more in the short term. Even if the Fed raises rates in December, we are still in a period of low rates. There is a play on the US where he sees continued strength in the US with stronger economy and jobs getting stronger. The US election is a wild card. He thinks Clinton will win. Polls are indicating this. The market was worried about Trump winning when Hillary was ill, but now it is favouring her.

Canadian Bank Preference and When to Buy. The rate increase in the US causes him to like those more focused toward the US and he prefers TD-T. They will benefit from a rate increase.

Gold Preference. Even in the face of interest rates increase and a strengthening US dollar, he would point to continued strength in gold. G-T had a few missteps and he would buy that one.

Market. One bad statistic from China and the Dow is down 180 points. However, as the day went on, things calm down a little. There were stories about the recapitalization needs of the big Chinese banks, with very scary numbers, starting with a trillion. China had fewer imports, and people naturally started thinking that the transformation of China into a consumer driven society might not be going as smoothly as we would like it to see. The world is aging. One of the most interesting things about the US election is that nobody has mentioned that the Americans now have the lowest fertility rate in their history, fewer babies being born per woman. The population is getting older. One way to grow the economy would be to have more immigration, perhaps letting in a few hundred thousand 30-40 year-olds that will have more babies.

Markets. Markets have been treading water since August. Third quarter earnings season is starting. It should be an infection point for the S&P 500. The strong US dollar has been a headwind, as well as energy. Consensus is negative year over year, but she feels we may get positive year over year earnings growth. You can argue for the higher PEs now based on the low interest rates. Interest sensitive sectors have pulled back, but a rise of 25 basis points in the US will be more of a rounding error. There are some nice entry points in these sectors.

Artificial Intelligence Recommendation. She wants to see strong balance sheets and visibility of earnings. She likes well established tech companies. GOOGL-Q is investing in all leading technologies. GIB.A-T in Canada would play into this as well.

Canadian Banks. She likes the group. TD, BMO, RY are the ones she owns. They may all pull back with new mortgage rules. If we have seen the lows in energy then it would be a positive. She prefers BNS-T. Buy a little bit now and then add on a pullback.

Markets. The minutes of the last fed meeting suggested they were being data dependant and that is what we will see going forward. There was nothing shocking. We have a few more employment reports between now and December. It is up in the air right now as to whether we see a move in December. He thinks the fed policies have failed and it has to come to an end. He does not know if markets can handle it. You will be better in the high quality names, but everyone is hiding there. The defensive sectors have become expensive. Luckily he runs a hedge fund and can go short in the market. There is a lot of cash on the sidelines. He does not want to be dragged kicking and screaming to buy something that is overvalued. A little extra cash in the portfolio (20-30% cash) is not a bad thing.

Preferred Canadian Bank. He would lean more to BNS-T because of foreign assets and for a valuation that is a little cheaper than the rest. They are less tied to the mortgage risk in Canada. He thinks there will be a day of reckoning in the Canadian real estate market. There are still short positions from the US on the Canadian banks.

He is short oil. OPEC oil production came out for September and it is the highest ever. Russia is not cutting back. The US is not cutting back. The others are also going to go at the highest levels they can. He thinks it is setting up for a fall back to the low end of the range. He has been selling his stocks.

Getting back into Gold. He is not as positive on gold as some. You have negative interest rates. He finds it disappointing. It is probably a good hedge in the portfolio. The midsized companies will have more upside.