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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: Oil Price Outlook from Rob Tétrault

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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.

Transcript: Introduction to Rob Tétrault

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The story begins when I watched my wedding video for the first time, and in it my mom makes a speech to the groom. She says, “Rob, you’re so talented. You can do whatever you want in this world. Just make sure you’re always passionate about what you do, and you’ll enjoy your work every single day. So, I had just completed a Finance MBA and at that point I knew then what other business to do than to follow my dreams and my passion which was helping people through managing their money.

When I started my business I knew I’d be successful if I just followed the values and principles of my parents and grandparents who had taught me about business, that is honesty, transparency and hard work. We started having success. The team was growing. I added some key members, operations, administrative support and client management. We added an estate planner and a financial planner, but who better to add to that team but the person who taught me the values that I built my business on…my father. My entire life I’ve wanted to be the best at whatever I do. Whenever I do something, I’ll have to be the best at them. I brought that same approach to this business. I became a Portfolio Manager with the sole purpose of being The Best Portfolio Manager in this entire country.

I’ve always known that I’ve done right by clients in managing their money, but to have the Wealth Professional Institute give us the award best Portfolio Manager of the Year really validates all the hard work we do on a daily basis for our clients. Every day I wake up following my passion, following my dreams, and that is building a business which offers its clients world class wealth advice, service and investment solutions.

Transcript: Sizzle Reel

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Rob: The market has traditionally been overblown on both sides. We know that when there’s blood in the streets, we should be buying. Warren Buffett’s been saying it forever. I’m a firm believer of that. And whenever we see an oversell, which I think is what we had 2015 and in January and in February, it’s time to buy, it’s time to come in. And I believe that long-term again, we’re going to be happy we bought in February, March.

I don’t want the dividend, honestly! Don’t give it to me. Invest it, invest it, invest it. Take care of it and make me more money than I can make with my 1%.

I’m a Manitoban. I’m a homer at heart, that’s why I cheer for the jets. And I’m certainly not a bottom picker, because I do enough of that at home when I change the diapers for my 3 kids. So this is not something that I want to specifically pick the bottom for. We just want to reduce risk.

What you should care about, Rovinescu is all your investors, whether they’re short-term, long-term and medium-term. You need to care about everyone, anyone who owns a stock at that particular moment. And he clearly slapped them in the face today. And they called his bluff. And you know what? The stock’s down 10%.

To me, it strikes of trying to go all in, in a poker game with a pair of 6s, when you know you’re beat. I just don’t like that move at all today.

Its problem, after problem, after problem, and my dad used to tell me, “Where there’s smoke, there’s fire.” So…

If that’s a play you want to make, I mean, just be aware that it could go severely south, but there’s obviously a lot more upside. You can’t have it both ways. You can’t have your lunch and eat it, too, right.

I’m concerned about the stimulus, for sure and I’m concerned about the budget to be frank, because I feel its partially imprudent spending. It’s a lot of billions of dollars that we’re going to be short. And how are we going to pay it back? I don’t like, as you mentioned that there is no roadmap. When are we going to pay it back? When are my kids going to pay that back?

Michael: That’ll be the question for finance minister. Thank you, sir.

Rob: Is it keeping you up? Is it something that’s affecting your health? And if yes, get out. If you have a well built portfolio, if you have a diversified portfolio, you will be fine. One holding will not ruin your portfolio. Get out, cut ties, and move on.

Anyone who’s panicking, anyone whose losing sleep over the market right now, it’s time for you to call your advisors to make sure that you know what some of the amazing buying opportunities are out there.

Sometimes you’ve got to get on the train, right? If it’s running away, you’ve just got to get on it and go for the ride.

Go jets, go!

Michael: Rob Tetrault, the portfolio manager at National Bank Financial, joining us from Manitoba.

Transcript: 3 Canadian stocks that could see more upside – BNN

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Andrew Bell and Rob Tétrault


Andrew: Back with our guest-host Rob Tétrault Portfolio Manager and Investment Advisor and National Bank Financial. You have a couple of stocks for us. Boyd Group Income Fund and they are the crash-repair outfit.

Rob: Yeah. You’d think it’s not a very sexy business, but you know, people are always crashing vehicles. Insurance companies are their biggest asset, and a very, very, very strong balance sheet. So it’s a stock that I have been personally owning, and telling clients about it for a while. I was on here in December and I was asked for a target and I said something along the lines of, “This is going to be an $80.00 stick in 2016” which was, I think, a 25% gain or so. I think yesterday it was trading at 80 bucks. So it’s done that. I think it’s poised for more growth yet, for a couple of reasons; they don’t do equity raises. So to raise capital they don’t dilute the shares. They do forgivable loans with their suppliers. I really like that.

Andrew: Forgivable loans…sorry, how does that fit in?

Rob: So, if they buy enough products it’s a loan that’s forgiven, right? So it’s really fantastic for balance sheet bottom line. Now it’s forgivable at a specific rate, but its issuing debt basically. So they’re issuing debt on none equity, so. That and New Flyer. New Flyer is another Manitoba companies. I guess you could tell I’m a Manitoba boy, and Artis Reit’s one has been beat up lately, Artis Real Estate Investment Trust. I really like the management, the Martens family. They know what they’re doing, and specifically New Flyer’s CEO Paul Soubry there, they keep, keep getting orders and growing.

Andrew: The bus maker.

Rob: The bus maker and they’ve acquired Motor Coach Industries, tons and tons of synergies there in my mind. The market is underestimating what those synergies are going to be, and Soubry is a great CEO and they’re doing it the right way for sure.

Andrew: Just one thing on Boyd; I mean it’s still an income fund technically but the yield is only .6%.

Rob: Here’s the thing; the dividend yield used to be 4 or 5%. Stock was in the penalty box for so many years because they almost didn’t make it through ’08, ’09, and now the stock has rallied significantly at say, 80 bucks. They were doing new issues raises 4 – 5 years ago in the 5 – 6 dollar range, so the yield is not the play here.

Andrew: Okay.

Rob: The yield is not the play. The idea is that they will pay less, use it to acquire mom and pops so you know, Joe and Jim’s Auto Collision Repair in Memphis, Tennessee, that’s what they’re buying. They buying up that and they’re paying for assets and not client revenue so they’re busying stuff for 50 – 60 cents on the dollar and they’re applying their own model it. They have a strong relationship with the insurance companies so insurance companies want to deal with them because it’s simple, it’s clean, there’s a process, it always works, so really, really impressed with their company. I think there’s poise for a lot of growth there, even though it’s trading at a fairly significant multiple.

Andrew: Yeah, car repairs. That’s an industry that’s ripe for reinvention sometime, but anyway.

Rob: Self-driving cars or something perhaps?

Andrew: Well, yeah. But the information is symmetry. I go in, they say I need a new component, I’m like okay.

Rob: You need a new Johnson Rod, right?

Andrew: [Laughs] Right. Rob thanks very much.

Rob: Thank you.

Transcript: The Close for Friday, Apr 8, 2016

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Michael Hainsworth with Rob Tétrault

Michael: One other factor, the Canadian Dollar, almost a full Penny popped today as Canada created four times more jobs than estimated in the month of March. So the question becomes, “How do you put that into an investment thesis? How do you play that? Or do you? Natural Bank Financial Portfolio Manager Rob Tétrault joins us now. Good to have you with us.

Rob: Great to be here Michael.

Michael: Panic is overblown, you’ve been saying as of late to your clients. Why?

Rob: I feel that given the valuation that we’re seeing now on the market, the market has traditionally been overblown on both sides. We know that when there’s blood in the streets we should be buying and Warren Buffett has been saying it forever. I’m a firm believer of that and whenever we see an oversell, which is what I think we had in 2015 and in January and in February, it’s time to buy. It’s time to come in. And I believe that long term again we’re going to be happy we bought in February and March.

Michael: The Economist told me today that the strong jobs data could be a blimp, one month does not a trend make. Do you concur?

Rob: Well, those economists are smart, for sure so I’m not going to disagree with them, but I will say this. I think it’s going to be a signal or maybe even a TSN Turning Point, sorry, a Sportsnet turning point in the fact that the –

Michael: [Laughs] Thank you for playing the media game.

Rob: [Laughs] In the fact that the people have been on the sidelines. There’s been a lot of people on the sidelines in the past. There’s a lot of people on this show that come on and say, “I’m going to wait. I’m going to wait. I’m going to get back in later. I’m going to get back in later. Well, those people on the retail side, they’re all on the sidelines. They need to be callous for them to get back in and I think this job support may send a bit of a shiver through the people that are out. They may be saying, “Wow, it’s time for me to get back in and we may see bigger volume I think.

Michael: So, shake out some of the shorts, whether it be actual shorts or just the mental shorts.

Rob: The mental shorts, which is the people I deal with right on a day to day basis.

Michael: Oh okay. So, where would you be playing if in fact the trend is our friend, if in fact we break through that glass ceiling as I called it on Crude Oil of $40, if in fact the jobs data is improving in Alberta led us in the month of March? Where do we go?

Rob: What an amazing report on Alberta, hey. It’s just, I’d say stunning. So, where do we go? Again, if we’re going oil, you and I have had this conversation before. I believe you should be sticking to large caps. If you want to gamble, if you’re in that mood, the small caps, some of them may go belly-up but now at 40 bucks.  Michael. We’re a long way from where we were when people were panicking at $26. Aren’t we? Some of those companies are now for sure going to be profitable. I think we are breaking through that $40 ceiling and I think we’re going to see companies that are just financials. I like financials. I think we’re going to see the consumer staples are going to do well and I think we’re going to see the large cap oils do well in the coming year.

Michael: Staples? Isn’t that kind of an overplayed? I’m just going to pull it up while you give me a take on it. Largely because I thought that the run was basically done in the staple space when you look at on say a price to earnings basis? We traded 21 times even current earnings.

Rob: Yeah, I mean, again I’d like to be in the large cap sector now. I’d like to be in some quality names, such as specifically on the financial side. Why would you want to own a bank right now, right? Like why would you want to own a Royal, or even a CIBC, sort of those large names?

Michael: Or a New Flyer industries. We’ve talked about that in the past. It’s now up a 161% over the last year. Is $36.79 an entry point for the bus company?

Rob: Not for me right now, but I loved this and I’ve been on your show before and I’ve said how much I’ve loved this company. I think that acquisition of Motor Coach is going to be significantly profitable. I think there’s going to be a huge economy of skills in the coming quarter. I don’t think the market is anticipating how much it’s going to be. I think we’re going to see some cost reduction and think we’re just going to see the margins improve. I’d like to wait. I mean, it’s been running and running and running. I’d like to wait for a pullback on that one and then get in again if you don’t own it.

Michael: Well, I’m looking for some sort of sign at least from the tacticals that suggest there is an entry point at a cheaper level than now at some point in the future. But relative strength index shows the herd is fully bullish on this in a very big way as it trades now at a 52 week high.

Rob: Yeah, I feel like every time I’m on it, I’m pumping the stock at an all time high, but last time I was on it, I talked about it at $27 it was at an all time high there too. So, sometimes you’ve got to get on the train, right? If it’s running away you’ve just got to get on it and go for the ride.

Michael: Okay, so $36.79 street consensus as far as where the stock is 12 months now, still some equity upside, but largely this is more about, it looks like a dividend added to it, giving you a 6% total overturn. Does that drive with your view?

Rob: Yes, and I think we’re going to see, I think the margins are going to be better than the street thinks.

Michael: Okay. I’ve got the finance minister in the hopper here. When it comes to the stimulus spending that they’ve allocated, they’re okay with the numbers, the economists are okay with the numbers. What the moneys guys such as yourself don’t seem to be too pleased about is the lack of a roadmap to getting back to break even on the budget. Are you concerned about that, or is now the time really to be focused more on the stimulus side and worry to paying the bills later?

Rob: Well, I wish the stimulus was a bit more…I’m concerned about the stimulus for sure, and I’m concerned about the budget to be frank because I feel it’s partially imprudent spending and I’m concerned about that. I do like the fact that we’re spending and you know, we want to grow the GDP that way. To me it’s a bit of a short sighted measure. You know, it’s a lot of billions of dollars that we’re going to be short and how we are going to pay it back. I don’t like, as you mentioned, that there is no road map. When are we going to pay that back? When are my kids going to pay that back?

Michael: That will be the question for the Finance Minister. Thank you Sir.

Rob: Thanks Michael.

Michael: Rob Tétrault is a Portfolio Manager at National Bank Financial. When we come back, Finance Minister Bill Morneau.