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Transcript: Straight Talk – Episode 4 – Risk vs Volatility

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Rob: Welcome to Straight Talk, I’m Rob Tetrault from the Tetrault Wealth Advisory Group. Today, we’re looking at risk and volatility. What the heck do they mean and how are they different?

Let’s start with risk, risk is the likelihood of your investment in a specific company going to zero or effectively you losing most or all of your money. Think of a mining company that’s in Northern Alberta, they’re down to their last few hundred thousand dollars or their last million and they’re drilling into the ground, they need to strike gold. If they don’t strike gold, that company is going belly-up. If they strike gold, great! Maybe they’ll go from eight cents to 12 cents or 24 cents but if they don’t they’re going bankrupt. We believe that’s a significant risk, that’s something we want to stay away from, you might as well go to the roulette table if you’re gonna do that. We believe that volatility is a natural occurrence based on world events and consumer behavior that not only is good for the markets, long term, but also presents a great opportunity.

Think of Brexit in 2016, overnight the Brits voted to exit the European Union. Volatility took over in the market, people started selling equities, stocks. In the morning the news hit and then more people sold. Next thing you know we got a thousand point negative day. Reality sets in, people realize these are the same companies with the same profits, same management. Nothing is fundamentally changed about these companies, so what happened? The prices came back, naturally, fairly quickly in fact and the people who sold made a decision based on emotion obviously lost out. We actually believe that volatility can be a very good thing for portfolio managers, such as myself, to take advantage of market inefficiencies and re-balance of a portfolio.

Take a look at what I said in February 2016 when the market had fallen almost 25 percent in North America.

Video Clip

BNN Host: What is interesting to you right now in this crazy market environment Rob?

Rob: Well I’m really interested in oil, I really like financials. Somewhere near here in my mind there will be a bottom in the next… whatever it is, three, six, nine months. I do know that long term, I’ll be happy that I bought financials around this time.

Rob: Alright, here’s the straight talk on risk versus volatility. At the Tetrault Wealth Advisory Group we believe that, one, risk is a four letter word and it’s not one that we like. Two, risk does not mean the same thing as volatility and three volatility can present opportunity. Thanks for watching.

Transcript: Straight Talk – Episode 3 – When to pull the trigger on stocks

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Rob: Welcome to Straight Talk, I’m Rob Tetrault from the Tetrault Wealth Advisory Group. People often ask me, how do you decide when to pull the trigger on the stocks and how you evaluate companies that trade on exchanges? Let’s take a look at that question and get you some answers right now.

First of all, how are stocks measured? Well they trade on exchange, if more people are buying than selling the price goes up. If more people are selling than buying, the price goes down. The price that you see on the six o’clock news is the price of the last trade of the day.

Stocks have historically over time, traded based on a multiple of revenue or earnings. That’s why earning always drives stock price. Historically, they’ll trade anywhere from five or six all the way up to 20 and sometimes even significantly more than that. Senior companies, the companies that has been in this country forever and have solid growth and always profitable, they trade generally at a lower multiple than companies that are growing. For example, if we compare the financial sector, banks, insurance companies in Canada they will historically trade at a lower multiple, somewhere in the 12 range than grow sector such as technology, health care, those will generally trade on significantly higher multiple. Why? Because there’s a perspective future in growth. They might grow significantly more than banks next year. The market is willing to pay for that potential growth and that’s why the multiples will be higher.

The key when you’re looking at all these different sectors and all these different multiples is you wanna make sure that these companies have a solid backbone. And what’s that solid backbone? Well for us, we wanna make sure there’s strong management. Well established record of being able to generate profit continuously, year after year. We also want a company that has access to capital. Now whether that’s to the capital markets or the financial markets, we want a company that’s able access capital, strong management and is able to continuously drive earnings forward. So if we have that, that’s a very good road map for the stock we wanna own. So at the end of the day, we want to own companies that are profitable and are growing their profits year in, year out. Now if that company is doing that, every year it’s growing by 10 or 15 percent their profit, long run, the stock will reflect that, the price will show that. Now, today, tomorrow and next year it might be down but that’s noise. In the long run what we want is earnings growth and that’s what we focus on.

At Tetrault Wealth Advisory Group when it comes to pulling the trigger on stocks here’s the straight talk. One, we don’t listen to headlines and we don’t get trigger happy. Two, we focus on fundamentals. Three, we have a plan in place ahead of time so we can prudently execute when opportunity comes knocking. Thanks for watching.

Transcript: Straight Talk – Episode 2 – Speculative Asset Classes

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I’m Rob Tétrault. Welcome to Straight Talk. Today we’re doing trends, crazes and manias. We’re going Dutch! Let’s go back 380 years, 1630s. We’re in the Netherlands. People are buying tulip bulbs. I just bought a tulip bulb. I sold it to someone else. I doubled my money. Fantastic news! I tell my neighbour about it. He’s upset! “How come I’m not making money?” You know what? Just go out there, mortgage your house, borrow some money and buy some more tulip bulbs. He made money. Now, Fredericks made money. Eugene made money. Everyone is making money. The next guy out there says, “I want to get in too.” So how do we do this? Let’s create a market where we can speculate and buy future delivery of tulip bulbs. Well, next thing you know everyone wants to buy tulip bulbs. He’s buying tulip bulbs. He’s buying tulip bulbs. We’re all buying tulip bulbs. Price goes up. Price goes up. Price goes up. Everyone’s in. What happens at the end? There’s nowhere to go but down. Fredericks lost his shirt. I lost my shirt, so did Eugene. We’re all broke. Nothing left. We’re bankrupt. That was the tulip mania of the 1630s.

Fast forward 380 years and we’re seeing a lot of the same mistakes made by Eugene, being potentially made by people on this planet.  Asset classes such as Bitcoin may very well do well. It’s possible that everyone’s going to start adopting Bitcoin. We’re going to see it being used at Walmart and that Canadian Tire or Tim Hortons. It might happen, but for the valuation that we currently see, we need to have adoption across the board. And I don’t think that’s happened. In fact, I was on the Business News Network as a guest host in December 2017 and I said, “Don’t do this. It will not end well.” And we’ve seen this before. You guys remember the Dot Com bubble? It was crazy time. Everyone’s losing their mind, losing their shirts, buying Dot Com companies that had nothing but a domain name. Stocks were trading at 50, 500, 1000 times their earnings and eventually what happened, my cousin bought some Dot Com stocks. He made a lot of money. My other uncle, he also made money. Buyers, buyers, buyers, buyers. When there’s no more buyers, Eugene lost his shirt in the Dot Com bubble. Eugene, I know you’re out there. I know you’re listening, so I’m going to give you this straight talk.

1. Be wary of emotional, speculative assets such as Bitcoin and other euphoric bubbles. If your cousin told you that he sold a snowmobile and was able to double his money overnight, is that really an asset class you want to have? What I would ask you is, did he tell you about all the losses he had as well?

2. Eugene, if you’re going to invest in speculative asset classes such as Bitcoin, do it responsibly. No more that 5 to 10% of your portfolio. Make sure it’s money you can afford to lose, and please, no leveraging. Don’t go mortgage your house to buy a bitcoin or a tulip. It just makes no sense. You’ve paid that debt down. It does not make sense to speculate like that.

3. Own quality. Here’s what we do at Tetrault Wealth Advisor Group. We take away the mania, the craziness, the euphoric attitude and the emotion out of investing, so you don’t have to panic and stress out about that. At the end of the day, if you own quality, if you own companies with strong balance sheets, good management, good corporate earnings, your assets will grow. And over time you’ll be happy you own quality, because if there is a correction, your assets will be protected and that’s what we believe in. Don’t be a Eugene. Thanks for watching.

Straight Talk – Transcription of Episode 1 – Canada’s New Tax Changes for 2018

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I’m Rob Tetrault, welcome to Straight Talk.

What we’re talking about today is the proposed taxes changes from Trudeau and Morneau. Now they announced this earlier this year, and in kind of a big brouhaha and kerfuffle and they used words such as closing loopholes, making sure the rich pay their taxes and bringing fairness to all taxpayers. In reality, the only people they targeted here were business owners and business owners are the lifeblood of our country. They create jobs, they make the market move, they create wealth through their own businesses and through the jobs that they create.

So let’s actually figure out what they have done here.

Income sprinkling

So income sprinkling means if I want to pay dividends to my kids, my wife, my grandkids, and they are shareholders of the corporation, they can receive dividends. And they are paying dividends at a favourable tax rate. Now income sprinkling is on the way out according to the government. So they are no longer going to let you pay dividends to those people.

So if I’m a shareholder at Tim Horton’s or at Canadian Tire, I don’t need to actually go serve coffee in order to collect my quarterly dividend from owning that stock. I don’t need to sell hockey sticks to get a dividend from Canadian Tire. Now in privately held corporations, like business owners across this wonderful country, they can no longer do that unless the wife or the kids or the husband is actively involved in the corporation, which is ridiculous in my mind, and in fact it is the only place in the world where they are going to have a reasonableness test for dividends.

Holding passive investments in a corporation

Now this is the second thing that they wanted to attack. So if I hold a corporation, I have a holdco, I can take the excess capital and I can grow my net worth and I pay a smaller tax rate there. Because remember, we don’t have pensions. Business owners don’t have pensions—They have to fund their own pensions. Well this is one way to even out the playing field. Well, they attacked that. The good news is that they did decide that they were not going to follow through on that. The only ones that they will attack are corporations that have passive income of $50,000 or higher. That is good news.

Three. They took a look at the capital gains strip.

The capital gains strip is an effective strategy to move an income to a capital gain thus reducing tax payable. A lot of people are doing it at a high net wealth level. They decided that they are not ready for it, they brought some measures forward, it’s not happening at this point.

So here is the Straight Talk.

With respect to dividends, if you are currently paying your children or your spouse dividends and being taxed at a low rate, continue to do that aggressively. Why not. The tax changes aren’t coming yet and when they do come, then we are going to want to consider potentially other strategies, such as an IPP, which is an individual pension plan, or other high-level tax planning strategies.

Two. With respect to passive income in a holdco or in an investment company, you want to get that passive income as high as you can before the tax changes come into effect, because they are likely going to grandfather any previous income.

Three. You’ve got to be aware of any and all potential future tax changes that are going to come. And for that, make sure that you are on top of things when Morneau or Trudeau announce anything, likely in 2018 or potentially in 2019.

Thanks for your time.

Transcription: Buying and Investing in Bitcoin

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Paul: What are people saying in Winnipeg about Bitcoin? And what are they saying about you?

And what are they asking you?

Rob: Well they’re certainly asking me, And I certainly get a lot of inquiries , And it’s something that I didn’t think I will feel as many phone calls or texts on my phone or  emails about but it’s wrapping up lately obviously which brings us back to the old what do I tell the clients.

Well I tell them one that’s extremely speculative, obviously everyone who comes on the show says that.

Anyone who’s got any kind of background in economics, I think, would say that.

I tell them, I strongly encourage them not to participate, to stay away.

And then I also monitor on my own side, I monitor a couple tests , just to keep track of how bubbly I think we are and how close we are to the end.

Paul: What if they are insistent, what would you say to somebody who is insistent they want some bitcoin in their portfolio, how much of a … what kind of weighting would you reluctantly advise them to take on at these 17 thousand dollar bitcoin.

Rob: I would actually refuse to do it, I would refuse to participate in any way and I would go on record  saying “I’m not going to advise you to do that”, and if they’re going to do it elsewhere or on their own or whatever, I would strongly advise them that it has got to be speculative, it’s got to be less than 5% of your portfolio at the absolute most, it’s got to be money you know you can lose because this is like going to the roulette table and there’s no number that wins, you’re taking your 15 thousand dollars/17 thousand dollars you’re putting it on a number that isn’t on the wheel in my view, so I feel that strongly about it.

And one thing I monitor Paul, I monitor a couple of tests that I kind of created over time.

One is the client inquiry test – so how many inquiries am I getting per day on my phone, on email of people reaching out to me saying “Hey, I want to buy Bitcoin” and what I’ve seen is it’s very similar to the curve of the price of Bitcoin, so now I’m getting multiple asks per day and I track them and I keep tabs of how many people are texting me per day, how many random people in the streets, you know everyone has heard about the taxi driver asking you about a stock tip, you should stay away from that stock – you should sell it.

Well the same thing with Bitcoin, now how many people are asking me and I still think though, for what it’s worth, that there’s a little bit of room here In the Bitcoin yet.

Paul: People want in because they’re seeing it as a high growth potential asset, if you’re steering them away from Bitcoin, if they want growth in their portfolios, what type of assets would you direct them to?

Rob: I preach quality, I’ve preached quality since day one to all my clients, I like to understand the cash flow, I like to understand how the company’s going to be profitable, I look at dividend growth.

My dad always says “I’ll buy Bitcoin when it pays a dividend”.

But realistically, it’s something that I would much rather own, if you’re going to go growth there are a whole bunch of sectors that exist that you can get growth in that are gambling but like tech or healthcare, there’s a whole bunch of growth sectors that exist in the US more than in Canada.

But if we get back to Bitcoin just for a second say “Ok, so how many people are in right now, we want to measure how close we are to the end of this bubble”

The bubble us going to burst, the bubble WILL BURST, mark my word folks, and when it does burst how much time do we have left so I think there’s still a little bit of time left because not everyone is in yet, Paul.

Paul: That is Rob Tétrault on Bitcoins, up next today is top business headlines including Hunter Harrison forced to take medical leave from his job as CEO of CSX, you’re watching The Street here on BNN.

Transcription: Linamar to buy Macdon for 1.2 Billion

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Paul: We’re back with Rob Tetrault, he’s a portfolio manager at National Bank Financial. He’s based in Winnipeg. He comes to Toronto every now and again and when he does, we ask him if he can sit in with us. It’s a great day to have you here because Linamar, one of the biggest auto parts companies in this country and indeed on the planet, has made an acquisition outside of its core business, which of course is auto parts, into the agricultural sector. It’s purchasing a company called Macdon, which I had not heard of prior to today because it’s not a publicly traded company but you’ve heard of it because it’s a Winnipeg company.

Rob: It is. I love coming on here and talking about Winnipeg stories or Manitoba stories. I’m a proud Manitoban. This is a great story. This is a family-owned business. They’ve been in Winnipeg for 70 years or so. Very successful. A lot of people work there. It’s one of the big players in Winnipeg. I actually know some of the executives there and they sold for a billion dollars. Obviously, for them, we don’t know what the multiple is. We will never know that. It’s a private company but obviously, if they decide to sell a family-owned tightly held company, it must have been a good price. I also like it for Linamar as well.

Paul: Why do you like it from Linamar’s point of view?  It’s clearly a diversification play by Linamar out of the core market segment. Linamar does have an agricultural segment already. It’s based in Hungary I believe. These operations are going to be combined in a corporate way with the Hungarian operations. Why do you like it from Linamar’s point of view?

Rob: Two reasons. One, obviously it’s a creative and it’s immediately adding to cash flow. They will be able to obviously…and I hate that some probably Winnipeggers might lose their jobs long term, but they will be able to add to the bottom line simply by economies of scale. Two, the big one. Anytime I see a deal, Paul, I always look at the metrics, “Did they issue debt or did they raise capital?” They did not raise capital for this, they issued debt, which means they’re paying 4% or whatever their rate is, probably in the four and a half range. They’re getting something a creative at the 10 to 12 percent range so that’s going to be a multiplier. I think that’s a great deal for them.

Paul: You like the fact that the shares are not being issued and the share base is not being diluted down.

Rob: Correct. We don’t want dilution.  If I’m an owner of Linamar I don’t want dilution, I don’t want to dilute 10% just to get 10%. I want to be able to pay with debt. Provided the leverage ratios make sense, and I think they do for them, I think no dilution. Likely a very good play.

Transcription: Rob gives his insight on the marijuana market

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Paul Bagnell with guest host Rob Tétrault

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Paul:  We are back with my guest host Rob Tétrault. He’s a Portfolio Manager at National Bank Financial. He’s based in Winnipeg, but we’re lucky enough to have him right here in Toronto today. You told me during break that you get all kinds of phone calls from clients who want in to the marijuana stocks. I guess they’re asking you which ones are the winners. What do you tell them?

Rob: It’s kind of a phenomenon right now. We’re getting a whole bunch of phone calls. In Winnipeg where I am a proud Manitoban and proud to be from, Delta 9 this week, a CEO John Arbuthnot…actually John, great guy, he used to work for me and got into the business as a cold caller, now he is a CEO of an IPO listed company, $60 million company on the TSX Venture. That fueled some news in Manitoba. So, people are picking up their phone, they’re saying, “Wow, I want to be part of this. I want to be part of this.” People think you know, “If I had got on to Tech early how much money would I have made?”

Paul: Yeah.

Rob: So, a lot of people that don’t necessarily understand what he sector looks like and how it works, but I’m getting a ton of phone calls and you’re right, they’re asking me which ones to buy.

Paul: What is your response? You see risk here.

Rob: I do see risk. I think it’ll happen. I think there’s going to be retail recreational marijuana. It’s going to be sold. I do think that the provinces are going to control distribution. I think it’s the only way it can work. I think in Manitoba, my view is, we’re going to see Manitoba liquor and lotteries. You know, in Ontario it’s going to be the liquor distribution.

Paul: It is.

Rob: And I think the other provinces will follow suit. Maybe Alberta and Quebec won’t, maybe they’ll do private. But regardless, now at the end of the day you’re simply a farmer. You’re simply growing these plants to bring them to someone to sell. So, we know how big that market is. Much like the liquor market in Canada, you know, the gentlemen at the Seaport Motor Hotel in Churchill, Manitoba can only drink so many beers and the individual who’s, you know, smoking his marijuana is only going to smoke the same amount of marijuana he smoked last year. So, if you’re making that assumption, the Market Cap, if we’re spending $200 a year on marijuana, the Market Cap, the total Market Cap in Canada for recreational marijuana, should be a six to ten billion dollar valuation somewhere in there. If we look at the top, call it five stocks on the TSX, Canopy is at 3 billion, Aphria is at 1…I want to 4 or 5, and Aurora is at another 1.3. Just those three companies are already at that Market Cap.

Paul: So the sector you’re saying is overvalued?

Rob: I am saying the sector is overvalued as a whole. Now something needs to work itself out. Maybe Canopy will be the best player in there, maybe it will be Aurora. The thing is we don’t know the rules of the game yet. We don’t even know what the rules are going to be and yet people are already assuming that they are going to have all those profits. They are not even producing this marijuana yet. So, that’s a concern of mine.

Paul: There is a marijuana ETF. It’s called, The Horizons Marijuana Life Sciences IDX ETF ticket symbol HMMJ on Toronto. Is that a better way to play it if people insist on getting into this? Would you guide them towards an ETF rather than trying to pick individual stocks?

Rob: Yeah, because we don’t know the management right now. Whenever you’re looking at a company, it’s always important to look at the management, the track record, what the leverage is, how they’re doing, and what their vision is for the company. We have very little indication as to how they’re going to play it, the large players. These were very, very small companies that became large very quick. Canopy is a three billion dollar company. So, the ETF, you get everything. You get the small ones, you get the big ones, if you want to play the sector that’s what it’s going to be, but in my view, in five years when this whole thing is setup the whole sector will be worth 10 billion. That’s my view. So, if you’re buying Canopy or one of those, you’re either of the view that they will outperform their competitors, or maybe you’re of the view that Canadians will start smoking more marijuana, I don’t know, that’s possible, or you’re of the view that these companies will get a higher valuation than for example, the liquor equivalent. So, one of those things could happen, but if you’re doing that, that’s what you’re expecting.

Paul: That’s Rob Tétrault on the marijuana stocks and the risk he sees there.       

Transcript: Projected budget surpluses for provincial and federal government

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Paul Bagnell and Robert Tétrault

Paul: We’re back one more time with Rob Tetrault. He’s Portfolio Manager and Vice President at National Bank Financial. You’ve got some interesting thoughts on building surpluses. Surpluses that are building at the provincial government level and many provincial governments, and at the Federal level as well, and how that’s likely to be dealt with by those governments, how it may play into Canadian GDP.

Rob: Uh hm. The GDP numbers are – I think – are going to come out tomorrow. I think they’re going to be good, 3 1/2, 3.6, something like that. The surplus spending has caused a ton of dollars in the coffers, taxes now in the government’s coffers, both provincially and federally. They have a built-in buffer, if you will, of about 3 billion federally and 2.5 billion provincially, and in addition to that, we’re looking at anywhere from 5 to 10 billion in addition surplus. Now remember, the annual deficit is only 28 billion federally. So if we’re talking about, you know, maybe a $10 billion buffer that we can do there, the question is always, what have governments typically done? Do they put this to the bottom line or do they spend it? So obviously if they put it to the bottom line, the debt gets reduced, but in my view, we’ve done some research historically, and there’s actually a reverse correlation as to whether or not they actually put it in a growth market, whether or not they actually put the dollars towards the deficit or whether they spend it. We would expect them to likely spend it on infrastructure or payments to the provinces.

Paul: And do you expect that to further drive elevated GDP numbers? 3 1/2% is a pretty strong number, and that is the consensus call for tomorrow’s GDP winner.

Rob: These are very strong GDP numbers, and if you’re adding. It’s the ball that keeps rolling. If you’re adding another 5 to $10 billion, yes you’re going to create spending and GDP number increase.

Paul: Well, Tetrault, thanks a lot of being here. Please come back soon.

Rob: My pleasure, Paul.

Paul: That’s Rob Tetrault of the National Bank financial.

Transcript: Market Performance after natural disasters BNN

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Paul Bagnell and Rob Tétrault

Paul: We are back with our guest host Rob Tétrault, Vice-President and Portfolio Manager at National Bank Financial. You say that volatility goes away by the end of the first week after a natural disaster. What have you seen in the past as we continue to track Hurricane Harvey? It’s obviously the human tolls taking, but also the market’s impact.

Rob: Yeah, and I’m not trying to understate the human toll, it’s obviously significant, but again when I sat this weekend thinking about this and looking at this disaster I said, “How is the market going to react this week? So, I did a little bit of digging and there was a great article that was a research paper that was put up by Ed Sollbach, I want to give him some props. I understand he’s writing. But basically, looking at the past, call it eight to ten natural disasters, there’s been a bit of a trend. Initially we see a drop off as you would expect, and that’s a risk-off and appreciation in gold, but over time, and specifically by the end of the first week, and I actually sent this piece to my clients yesterday. I thought it was so relevant. We see a small gain of anywhere of about ½%. More importantly in the month after because I think that becomes a little bit more relevant. We see a gain of about .7%. So, that’s looking at eight of the natural disasters in North America and that includes earthquakes, I should say in Latin America and North America, earthquakes, floods and hurricanes specifically.

Paul: What would your advice be to investors who might take up positions in say, energy stocks and they have come off on this news or energy stocks that may have even risen on this news? 

Rob: Well, first of all I would suggest you know, I know a whole lot of the viewers at home here do this themselves, and they’re experts in this and they’re mine for sure, but generally I would suggest you make sure you leave this to your advisor, your portfolio manager because I think it’s not that easy to play this world because there’s a lot of emotion happening right now. The sell-off is likely based on emotion but if you are trading on your own the energy sector actually has a multiple in terms of sectors right now in Canada. It is trading at the lowest multiple of all the sectors in Canada. So, if you believe in the long-term, by the way, I think the energy play has stabilized itself. I think we now know that we’re in a world right now in Canada where oil is going to be whatever, 45/50 bucks for a while. So, if that’s what it is and we’re able to be profitable there, I don’t mind the energy play actually. As a potential, be ready for the volatility but there’s a lot of upside there.

Paul: If an investor should not focus on things like natural disasters or geopolitical tensions, what should they be focused on?

Rob: The key for investors is, most investors should be retirement, financial planning. That’s the majority of our clients. That’s what they care about. And then we have the tax planning and the corporate planning for our business owner clients. We have a state planning which I think is very, very important for everyone because tax rules change as we see with the Trudeau Government. Tax rules are ever changing so, that will where you left everything to a trust where the trust is now going to…maybe that’s not going to be taxed the same way now. So, those are kind of the big picture things that I think clients should keep their minds on and the smaller minutiae of the day to day, “Do I buy energy on the Monday after a natural disaster?” Don’t bother with that? It’s going to keep you up at night. Let us do that. Let the Pros do that.

Paul: What’s the market trading on right now if you leave aside things like North Korea and the disaster in Texas, earnings or earnings supporting the market now?

Rob: I think everyone who’s been on the show has said it and I’m kind of echoing that statement. Earnings have been really good. I think the job numbers in the US, they’ve been unbelievable. Canada, we’re seeing consumer spendings. So, I think that the Canadian GDP numbers that are going to come out tomorrow, I think they are going to be very impressive and I think we’re on pace for a 3% year if you can imagine that. When we sat here last year if we would have thought we’d have a 3% GDP year in 2017 you would have said that that’s impossible. And now we’re staring in the face, even with a trade deficit and even with reduction, or not with the infrastructure spending that we thought we’d get from the government, we’re seeing a potential 3% GDP year in 2017 for Canada.

Paul: Rob Tétrault, he’s my guest-host today and he’ll be with us for the remaining hour of the program.

Transcript: Oil Price Outlook from Rob Tétrault

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https://robtetrault.com/oil-price-outlook-from-rob-tetrault/

Paul Bagnell and Robert Tétrault

Paul: We’re back with our guest-host Rob Tétrault Portfolio Manager at National Bank Financial. Based in Winnipeg but we’re lucky enough to have him right here in Toronto. Today you think crude oil is going to $60 U.S. rail. That would be a good thing the Canadian stock market. What do you think get’s crude to sixty this year?

Rob: I think crude gets to sixty in some sort of negotiation/pact that will and I feel has to happen. I think we’ve seen a lot of inventories go up in the last while, and that’s somewhat worrisome for some investors. But we’ve been in that range between fifty and fifty-five and you could see around this fantastic chart your that your wonderful team has put up. And last time I was on the show here, oil had fell to forty-seven, forty-eight and I was of the “you’re going to get back to that trading range. I think once we break on a technical bases through that fifty-five the next trading range is naturally fifty-five to sixty. If we see the Opec agreement if we see it kind of come to fruition and I think we will, that will provide range to move from fifty-five to sixty. Long-term I’m bullish on oil, and short-term I’m mildly bullish.

Paul: What about stock markets generally driven of course by the election of Donald Trump over the past five or six months but cooling off recently as it looks like some of the bloom coming off the Trump rose.

Rob: You know what I’m excited about? I’m excited about the fact that there are people predicting the end of the world and there are people predicting you know, we’ve got another ten years in the bull cycle. I love seeing that. I love seeing the opinion on both sides because that means the market will not surprise us. You know in 2008, in 87, in every significant correction that we’ve seen, every opinion was on one side of the ledger and that’s a bullish opinion. So right now we’re seeing some on both sides. The market will not surprise us. We might see a small correction but I don’t think we’re going to see anything drastic like some people are saying. I anticipate a kind of moderate to good year in terms of gains in the TSX somewhere in the 6…call it 5 to 10 range, which will be fantastic for portfolios once you put the dividend in there, and the valuation I think are somewhat reasonable given what we’re seeing in forward innings.

Paul: What kind of waving do you have in equities compared to historical levels? Are you at the high end of your range on equities?

Rob: Well, fixed income is almost impossible these days so yes, I am at the high end of equities and we’re always looking at alternatives, and whether that’s equity linked GICs in the fixed income space or even mixed mortgage investment corps or whatever that may be. The fixed income space is very, very tough right now, even the new crafts are good, so whatever we can get away from the 2% ten year bond, right?

Paul: And cash position, where are you in terms of your cash holdings right now?

Rob: I don’t believe in holding cash very much. I’m a firm believer in being fully invested. If we do a tactical shift we go from one sector to another, so, very low on the cash side.

Paul: Canadian stocks versus U.S. stocks where do you see most opportunity?

Rob: I like the Canadian sector right now. Specifically we’ve kind of trailed a bit this year. I think there’s an opportunity oil does come back. I think we could see a nice rally in Canada. I think we’ve been lagging, and I think eventually some movement in Canada.

Paul: Thanks a lot for coming by. Great to have you on the show.

Rob: Thanks for having me, guys.