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

Gold seasonality. All commodities have less robust seasonal trends than other stock market sectors. Late December into February and then early July into late September are its periods of seasonal strength. Longer term the fundamentals are good for gold. He would look at it in a month or two.

Market Outlook He would not be surprised if the market re-visits the March 23 lows. He thinks tech stocks will benefit from the work-from-home trend. The cloud, hardware, data centres, social networks, telecom and e-commerce companies will benefit. Internet networks have held up as utilities have ensured there is enough electric power available. The real estate industry will need to adapt, but it is too early to judge, but commercial real estate will have to adjust for sure.

Spread your bets in high-quality asset classes, a departure from his concentrated portfolio approach in these times. As debt to GDP ratios get close to 90%, growth starts to slow. He's holding government debt though. As central banks expand balance sheets, this will debase their currencies--the last time was the 1970s. So, favour hard assets like gold and real estate, and less so financial assets. Gold is in a sweet spot, performing well in deflationary and inflationary times too. Also likes silver. He owns Kirkland Lake, for instance. 15% of his portfolio is in gold, 10% bullion + 5% Kirkland Lake. IAU IS good gold ETF. Not all ETFs are created the same, though.

What will a growth stock be in the New Normal? What metrics to look at? He could talk hours about this. We will get back to normal at some point, like driving, taking kids to school, vacations, etc. He looks for high margins, high returns on capital, low debt; excellent capital allocators (generating excess cash and buyback shares, paying down debt) for 5-10 years, etc. How does the pandemic effect a company's outlook, like CSU-T or Royal Bank--is their business model broken? He doesn't think so. Anyone who says they know for sure what'll happen in the future is lying. No one knows for sure. But he expects in a few years from now, this pandemic will look like a blip just like other crises we've seen in past decades.

Market. Over the prior few years it was one of the best performing stocks on the TSX. He has dumped the airlines due to the pandemic and will never buy an airline stock again. Their management has done a terrific job and airlines have been strong in terms of load factors. The world has changed dramatically. He is concerned how it will do over the next years and their balance sheet is destroyed. It is hard to rationalize how airlines come out of this.

American Equities. Currency concerns are short term and he looks long term. He is looking to own the best quality companies that have strong balance sheets; capital-light business models; huge re-investment opportunities; and run by smart management. He will buy them in whatever country he is comfortable to own them in. The majority of these business models are found in the US. He does not see the CAD$ jumping in the short term. He is a long term investor.

He is not a fund manager. He builds a portfolio based on many different companies he wants to own. He does not like gold or commodities, nor capital intensive companies. Attractive companies are beaten down the most and have upside potential.

Market Outlook He is skeptical about the monthly rally -- since March 23 the TSX is up 32% off the lows. The economic data continues to worsen, as he has expected. Corporate earnings are confirming weak results and he expects them to worsen in Q2. He does not think we are out the woods yet. Bear markets are more often a process, so he thinks we could retest the March 23 lows or go lower yet. A retracement seems more likely now. Oil stock holdings have been high-graded in his portfolio -- lightening up on any higher cost producers. Look for companies that have a competitive advantage and are surviving in this virus related market. Shell's decision to cut its dividend should be a signal that a lot of other companies will consider doing the same -- now is the time. You should be evaluating the likelihood of dividend cuts in all the holdings you have -- look at payout ratios, whether they have in the past, their leverage, etc.

Market. We have seen tremendous volatility. Real Estate was not left behind. When we came out of March we saw 40% discounts in net asset value, but private markets have not traded back that much. He thinks stocks have priced in too much discount. We have seen unprecedented stimulus by global governments and interest rates should remain low.

Market Outlook This is a difficult time in the market with all this uncertainty. Economies around the world are beginning to reopen and he wonders if that will be successful. People are hopeful the virus may be behind us, but we have to be on watch for wave two. When the lows of March in the market were made the fast plunge likely means we won't make new lows on a pullback. There has been so much done by Central Banks to keep if from happening again. Markets could trend lower, however. When the 2008 financial crisis occurred, it was a crisis of the banking system. Today, the banks are much stronger.

The current rally in the early phase was down to short covering, but also the market looks ahead of the news; eventually, economies will reopen. Investors are slowly piling back in, but they should be cautious. We don't know how long this will last. Some businesses will not recover at the same rate. This is a stock-picker's market, better than buying the index. Keep some powder dry. There could be a second wave later this year. We're in unknown territory. No, we're not in a depression, because of all the efforts of central banks and government stimulus. The recovery will be slow. This is not a normal recession. Recession-proof businesses like movie theatres were shuttered overnight and will take a long time to recover. Also, human behaviour has changed and will last a long time (the lockdown). Some industries will snap back, others may never return to past strength (airlines, hotels, cruiselines).

Market. The volatility has been extreme, both to the downside and the upside. Investors need to know what they own and how well they are doing. You needed a risk control strategy on the downside in the beginning but now you need it on both the downside AND the upside. You can't tell if we are going to get back to the March lows. Perhaps we won't see a retest, but looking at past history of epidemics then you have to be prepared for the market to react negatively.

Market Outlook He was disappointed with a negative outcome for a vaccine being worked on in China. There are over 1000 companies working on the solution. There appears to be a turnaround for gold and he has started buying into some producers due to all the government buying of debt. COVID-19 impacts are still uncertain, with some analysts calling this a buy of a lifetime. A technical analyst he follows sees this as a 1987 event that has not impacted the underlying fundamentals of the economy. Negative interest yields could continue, which would be great support for gold. He sees the government buying of assets, adding liquidity to avoid a credit crisis like in 2008. Be selective, look for companies with rising cash flows. Some companies are awash in new business. He remains very optimistic.