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

How to decide when to sell? That's the difficult part. Take an unemotional view. How does it compare to its own history, its peer group, and to all of the opportunities out there? He likes it trading at or below its historical norm in terms of valuation metrics. It should be competitive against its peers and the market.

How do you participate in this market? He uses a barbell approach. He does own some FANGs, but also value stocks like JP Morgan, CVS, and Raytheon.

Market Outlook Investing when interest rates are zero are driving up bond values. Ten year US treasuries are down to a yield of 0.6%, down from 2.0% a year ago. Interest rates will likely creep back up a bit as central banks take their foot off the gas, at least a little. This is expected to reduce the valuations of bonds soon. He expects the global economies will recover eventually after this. In ten years time we think of this event as a distant memory. Don't get used to mortgage rates being this low forever. His free website is steinbergwealth.com.

BoC interest rates? He thinks the Bank of Canada is following the footsteps of other central banks. We have probably seen the last cut from the BoC and we are in a good position now.

Canadian banks? He has a Canadian dividend fund they started this year and it holds a lot of Canadian banks. When some bank share prices tumbled as much as 50%, they still did not cut dividends. The share price could be volatile and since they offer tremendous value in the long run and are well capitalized against loan losses, they are a good buy. The Canadian government is doing all it can to ensure the economy will survive. And the dividends are secure.

Energy into Gold? He is not a short term trader. He does not know the timing in a short time period to bet that gold will go up versus oil. It is more a gamble than an investment. It is easier to think of companies you can buy and hold for 5 years that he would be happy with. Neither sector has done well over the long term when you look historically at their capital allocation strategies.

Blackrock Municpal Bond Trust? Muni-bonds are only attractive for Americans, because of the favorable tax treatment. It does not make sense for Canadians.

Silver? Both silver and gold have been in vogue lately because of low interest rates. A number of countries are struggling, so when currency is declining people want protection through metals. These have been poor investments over the long run. Silver will likely under-perform so many good companies going forward.

The stock market has had a V-shaped recovery, but the economy hasn't as people need time to get used to say, going to a restaurant, or heading downtown. This will eventually effect the stock market. Who really knows what 2021 earnings will be? Those projections will likely drift down later this year. Invest in specific areas of the market. Be cautious and patient. Own asset-light companies with good balance sheets and low debt.

Dividends safe for Canadian banks in the coming years? Like the US banks, Canadian ones will have difficult quarters, but they have lots of capital to protect their dividends. Don't expect share buybacks though. Loan loss provisions will increase until the economy returns to some sort of normalcy. Eventually, the headwinds will turn into tailwinds. The dividends are sustainable.

We're pushing conditions like those in 1999 with high valuations. The global pandemic has created a bifurcation in new economy vs. old economy stocks as central banks support markets. It'll be interesting how this plays out. He sees a gradual, L-shaped recovery, not V-shaped. The world economy has shrunk 5%, there's double-digit unemployment, a change in behaviour (in videoconferncing vs. working in an office) and a massive $9 trillion in emergency stimulus from world central banks. Make sure to have true diversification in your portfolio. Can you handle another downturn? companies like Microsoft and Visa are trading at lofty valuations--everything has to go perfectly to receive a payoff from these stocks. Is future growth reflect in current valuations? That's the $64,000 question.

US ETFs hedged and not hedged to the USD? Buy hedged as well as non, half and half. Both.

Market Outlook The market is close to valuations of 2000. When the market is peaking, this may attract a new wave of investors that creates a mockery of valuation metrics. There will be a flood of financial reportings in the market next week that will undoubtedly lead to a substantial move in the marketplace. It was similar market conditions back in 2000, before the market finally let go and collapsed.

Market top still 3150? The 3150 level for the S&P500 is his estimate for fair market value. There has been a radical change in the outlook for the market based on government stimulus. His fair value is now 2600-2700. The technical price-to-book metric he follows projected 3400-3600, the last peak in 2000 before the collapse -- that is about 4 times book value. There will be 500 new balance sheets coming into the market next week as earnings are reported. This will cause the market to move substantially.

Gold He sees an extreme loss of confidence in the paper currency market sometime in the future. He recommends holding at least 20% gold in your portfolio. His gold holdings have crept up to become 40% of his portfolios and he has no intention to reduce that -- he is letting them run. This is not just as US problem, it is a global problem as the balance sheets of all the key economies are of concern. He thinks we may also see a rebound in inflation as well. He is not a gold bug, he is a balance sheet bug.