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

Holy cow, what a ride! We've had a country taken over, we're still in the midst of a major war, now there's stuff going on in Iran, the Fed is in discombobulation, tariffs are on, tariffs are off.

He can't recall having gone through anything like the last 3 months in terms of geopolitical volatility.

Unquestionably, it's this Middle East conflict. We still can't even begin to think about the unintended consequences (second- and third-derivative effects) of what's gone on over the last 30+ days.

Ships that were moving crude, nat gas, and fertilizer and left 37 days ago are now in ports. But there's nothing coming behind them. What's that going to mean for global crops and production of all kinds of things? Gasoline prices in small and emerging economies? They're really hurting.

We can estimate how much this will take off global GDP, but we really don't know at this point.

This ceasefire is very fragile. He wouldn't want to handicap an outcome.

As an investor, it's easy to get caught up in the noise. But when you think about it, what has happened?

Everything else being equal, oil prices are going to be higher moving forward. Insurance won't cost the same as it did in February and before. Will there be tolls? We don't know. They're talking $2M per ship that goes through. That'll just increase the price.

Put all this stuff together, oil prices are now higher. That has an impact that will carry through, but we don't know to what extent.

Take the semiconductor industry. They need helium. What is that going to mean?

It's really hard to know the exact impact but, basically, global costs have gone up. So growth implications have to be ratcheted down. The market hasn't factored all that in yet.

Hard Assets, Low Obsolescence. 

In this kind of environment, cashflow is king. Best cashflow comes from hard assets -- you can look at them and determine their value in terms of what they're producing in terms of revenue/cashflow/dividends.

Low obsolescence means that they have somewhat of a moat (as per Warren Buffett) around themselves. Nobody can replace it in the near term. It's not going away. 

Those are the kind of assets you want to hold at certain times, get paid with that dividend. If growth comes, that's great. But it's going to be there 5 and 10 years from now. You're not worried about 5 days, 5 weeks, or 5 months.

These things survive all kinds of uncertain times. And we're in one now.

Precious metals should be in every portfolio as an insurance policy. It's a diversifier. He uses bullion as that play. Then you have the leverage on bullion, which are the shares (for all practical purposes).

In between, you have something like SII that runs an ETF. Or you could have a streaming company that collect royalties off of the operating companies.

There's a hierarchy -- bullion, miners of bullion, royalty companies, then a Sprott who's an asset manager. He's owned them all.

His position today is that he's trimmed back his gold position dramatically by reducing names. For example, AEM was a 10% holding but today it's at 6%. Same thing with all the names in the portfolio.

Gold hasn't performed over the last 35 days, but it did its job over the last 2 years. He'd be a buyer today. His clients should be at 10% for the insurance component; today they're not quite there at 8%. The equity component is about 7%. So 8 + 7 = 15% in golds today. His gold plays are AEM and FNV.

Preferred shares have been spectacular fixed income investments. At his firm, they look at how much cash is generated for returns and at the growth profile.

There are so many options out there, so he's hesitant to recommend a specific one. His portfolios have held Enbridge preferred shares in US dollars for a long time. Wonderful yield, better than the common shares.

If you can buy a preferred share at a discount ($22-23), you have some upside potential should it be taken out. A lot of preferred shares have been taken out.

You can do an internet search to look for names. In the space, he owns pipeline and financial names. Yields can be 5-6%.

His clients have about 10% in producers, all with a gas bias. Natural gas is a long-term solution to all the green problems in the world. Stability comes from market demand from data centres, etc. Perfect intermediate fuel between today and nuclear power.

As an investor, your head will spin trying to figure out what the price of oil is doing today. First thing to look at is the futures contracts. Specifically, look at December -- price has gone down for the last 2 months. It's not discounting a high price going forward. When an investor values companies, they're valuing them off that long-term price than off the spot price.

His team likes hard assets, low obsolescence. So they both fit. They think longer term. Natural gas is a long-term play, and Canada really benefits from that. If he were to "bet", he'd guess oil is going to $80. If it goes to $120, all bets are off everywhere.

Gold is an interesting play from an insurance perspective against geopolitical concerns. Those tend to be more financial-related -- interest rates and deficits. Hard to handicap. His "bet" would be that the next move for gold is higher, not lower.

His portfolios are 15% gold exposure, and a little under 10% in oil & gas. Hard to tell what's going to happen in the next 3 months.

Can't yet, but it's coming and it'll be hot. Need a good broker to get access to it. He can't get a fundamental handle on what Elon's done. Not sure he'd want to pay the valuation it will attract. 

Looks very expensive. There are other fish out there.

Zooming out to the 10,000-foot view of portfolio construction, they have very well-diversified portfolios that are built to be resilient in all weather conditions (including wars). This gives them room to not react in a knee-jerk fashion to headline risk.

All year long they've been, more or less, fully invested in equity portfolios. Business as usual has involved "culling weeds from the garden", where things haven't worked or the original thesis has been negated. Also partially trimming winners. Selectively introducing new ideas, including some dip-buying.

His team gets that the world has its hair on fire, and understandably. But their practice is not to let it rattle them, while still being nimble and open to opportunities. When it comes to investing, you should always do it from a place that's calm, cool, and collected, with ice in your veins.

Still likes it. Has a double-digit weight in both of his firm's equity mandates (Momentum and Dividend). Diversified basket between the miners and royalty companies. In a strong, multi-year, secular uptrend. It's really the only non-fiat currency.

The younger generation would call him a dinosaur and say that bitcoin is digital gold. Yeah, not so much the last 4-5 months ;) Gold is doing what it's always done -- serving as a store of value, an inflation and geopolitical hedge. Lots of the move underpinned by central banks buying it hand over fist. The bloom has come off US treasuries.

They've been buying on dips in the last month.

Today is a fast-moving day with a lot of moving pieces. Pullback in oil is due to "TACO Tuesday". Have to see if the ceasefire holds. (One piece of non-investment advice is to fill up your gas tank while the getting's good, as we don't know how lasting this truce is going to be ;)

He owns no telcos, though doesn't think they're in secular decline. The serve a need, not a want. Won't be technologically obsolete anytime soon. 

However, revenue is driven by price and volume. Volume headwind is that Canada is restricting immigration. Which leads to a price headwind of lowering prices to compete for market share.

The next 24 hours are significant that will effect the direction of the market. Since the US-Israel-Iran war started, we've seen violent moves in the market, but also rangebound up and down, from hour to hour. Seeing a lot of big swings. Once we hit Trump's deadline to Iran, then what? In a few weeks, earnings season could also effect--we'll see what companies say about how the war is effecting the economy. Sectors he likes: energy, steel, chemicals, utilities. These are defensive. With more confidence, metals and industrials will bounce back.