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

Markets. This is a stock pickers market. We have been through the easy part of the market since 2009. Canada has shined. Now what do you do? Economic growth is slowing. It is going to be multiple expansion or earnings that drive the market. He favours gold and REITs. Gold is an insurance policy. People are buying bonds for capital gains. We are seeing massive currency dislocation. Gold is the ultimate defense. Interest rates will be lower for longer.

Negative Interest Rates in Canada? He learned never to say never. The Canadian economy is struggling. Don’t rule out negative interest rates.

Where to go for income (dividend/interest). You can get 1% with no risk. He has abandoned the bond market and moved money to the preferred market. He likes 5 year fixed rate preferreds. You don’t get the day to day volatility of the common stocks.

Market. There are 4-5 things coming up this quarter which are going to be very important for people to watch in the market and respond to. For people who run macro type strategies, that focus on volatility, etc., is really about as good as it gets. Long-term equity oriented investors may have some challenges, given the volatility he expects to happen. This is very much an interconnected global world. Everybody is obviously focused on the US elections. He views it as a bit of a referendum on the Fed. Trump, if he got in, would be much more hawkish on trade and on the Fed, and thinks the market would sell off. In this environment, he is looking for revenue guidance from companies going forward for 2017. While there could be a lot of beats on the numbers, the reality is that the stock market is extremely expensive, especially on a GAP basis, but even on a non-GAP basis. We have the average median stock trading at 22X-23X, which is really, really up there. From a probability standpoint, making aggressive bets in Long equities is probably not the best idea.

Europe? On the equity side, in the last 6 months or so, it has been one of the better places to park money. That is due in part to Pres. Draghi of the ECB. He did a good move by focusing, not just on government debts for their QE program, but also corporate debts. He has had a meaningful impact on both lowering the cost of capital for European companies, but also in kick-starting the consumer lending business again. That is the good news. The bad news is that all of the things that have sort of plagued Europe, are still there and unlikely to go away. It is still sort of a “jump ball” in Europe. He is Short on markets like Italy and Spain in particular. On the next global slowdown, which he sees happening in 2017, those markets will have a tough time.

Emerging Market Stocks. Up until January of this year, emerging market stocks had a very tough time. In large part, it was because we were expecting a rate hike from the Fed, and money was going back into US and Europe, as opposed to emerging markets. Since then, they have far outperformed their developed counterparts. This is because Central bank policies remain relatively benign. Also the BREXIT vote really highlighted that political risks can occur anywhere. Even with the rally that we have seen to date and the strong outperformance, she sees a lot of value.

ADR? This stands for American Depository Receipt. A US investment bank will create ADRs, which essentially buy foreign securities, allowing North American investors to buy them.

Market. There are 3 broad themes that really haven’t changed. Interest rates, forthcoming election and valuation. The interest rates and forthcoming election are really problems that are going to deal with themselves over the next 3 months or so. As they get nearer, you are going to have more volatility and a lot more uncertainty, but he really views this as an opportunity for investors. If these events create a pullback, it would be a good time to be adding to your portfolio, and even picking up some interesting names from your watchlist. Valuation is really the million-dollar question. On an absolute basis, stocks are more expensive than what they were based on historical multiples, but he thinks there is more to the story. Interest rates and inflation are very low right now, which means your real returns can still be acceptable even with equities at a premium. Stocks are your only game in town. If you are prudent, pick your spots and invest for the long-term, and you will do okay in the markets right now.

Markets. This is the first year in 5 that small caps have outperformed. He expects that to continue throughout the rest of the year. There is more of a sector rotation and more into small caps than large. Mining stocks have done extremely well. Small and mid-cap energy stocks are outperforming the large. In Canada there are more small and medium cap companies that are in the oil space than elsewhere. People are looking for more outside of resources as well.

NO SHOW TONIGHT. The show is a repeat of last night's show with Rick Rule. I didn't hear any announcement, but presumably BNN Market Call Tonight must have had a problem.

Maybe the slated guest couldn't make it???

Bill

Market. As far as the macro things go, earnings are sort of done, there is no catalyst, the US election is coming up and the market is just waiting. There have been the cross currents with BREXIT. The defensive part of the market including Internet senses has sort of fallen, but has started to pick back up in the last little while.

Energy. Thinks energy is range bound between $40 and $50 for the next 18-24 months. He is near term bearish, because there is a surplus. Globally it is estimated that it takes about $60 a barrel for the industry to break even, including cost of capital. Right now they make the stuff for $60 and sell it for $40 and lose $20 a barrel, and try to make it up on volume. If you look 2-3 years out, the supply destruction that will take place in the marketplace will push prices substantially higher. Thinks Canada is in relatively good condition. Canadian producers did a better job than the Mexicans and Venezuelans of making sustaining capital investments over the last 10-15 years, and have done a very good job in the application of technology. He is near term bearish, but longer-term bullish. $65-$70 would be easy to see in 3 years.

Gold in Colombia? The troubles are really not over in Colombia, only officially. Rural Colombia will continue to be a tough place sociologically. If you can stomach the risk, the exploration prospectivity is spectacular. There are a number of Canadian Juniors exploring, and it is a wonderful place to look.

Lithium? The lithium equities market seemed to do pretty well for reasons that are completely foreign to him. The lithium battery contains about 3% lithium, and is actually a nickel battery. The world’s 4 big lithium producers have about 100 years in reserves in place. The world is substantially oversupplied with lithium.

Platinum and palladium? He is very attracted to these markets. They are precious metals, but precious metals that have industrial uses. The trade-off going forward in platinum and palladium is that we make it worldwide at below the cost of production, and they are essential to the air that we breathe. Thinks the price has to go up and that it will go up.