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

He's a long-term bull, but needs to see a COVID vaccine and a lower U.S. death count. He expects a slowdown after July 31 when PPP ends in the States, followed by weak demand there. During the pandemic sell-off, he recommended buying across the board. Since then, it's been overdone on the upside. He expects another pullback in the next few months, so investors should get ready and buy. Tax-loss selling at the end of the year will be another buying opportunity. He expects $50-60 WTI oil in 2021, and even higher after a vaccine is produced when oil demand will spike. However, he expects WTI to fall below $30 before this in the next couple months, because oil inventories are rising and the Saudis and OPEC have not met their oil production cutback goals. Expect supply-demand oil balance over the winter.

Market. P/E multiples are near record highs. Look at the last bull market. The S&P increased 16% annualized. There were some strong tail winds that don’t exist now. The market will probably be lack-lustre for several years. 40% of the upside in the last bull market was from multiple expansion. 25% of the gains were from pre-tax profit margin expansion. There were tax breaks contributing 10%. None of the factors contributing to these exist now. Consolidators should do well going forward. The economic pie is not going to grow that much. Disruptors should also do well. Both are taking more of a pie that is not growing.

Collateralized Loan Obligations. They are similar to sub-prime securities causing the financial crisis. They are low quality debt. When a recession or downturn occurs, these could suddenly find their ratings go down and prolong the recession. Look for banks that have long term track records and are conservatively managed and Canadian banks do this.

Market Outlook He thinks oil demand is back to almost 90% of pre-pandemic levels. Although he thinks it may not be quite that high, it is the path upwards that he likes. There was a 5 million barrel per day surplus over the past month, which he thinks is not as bad as the market thinks. Traffic is going back up in major metropolitan areas, and flying is showing an inflection as well. By the end of this year he thinks demand will be close to pre-pandemic levels. There are many energy stocks still down 60-70% so he thinks there is good support for a recovery in energy stock prices. The market is near not as loose as he thinks the markets believes.

Market. AAPL-Q is closing some stores. The market is ignoring the persistent increases in COVID cases. As soon as they open up again, it could spread. There are going to be persistent challenges due to COVID. The only reason the economy is performing is all the programs the central banks have. We are in this liquidity trap for perhaps decades. We need another valuation correction.

Corporate and Government Bond ETFs. The older we get, the more fixed income we should have, but the yield has never been lower. Stagflation over the next decade will be bad for bonds. He prefers quality corporate over governments for the yield, but it is riskier.

Do Dividend ETFs or Non-Dividend ETFs preserve capital better in a TFSA? He would not use a TFSA as a defensive part of your portfolio. It should be the growth part of your portfolio.

What to use as a hedge? He sells a call to pay for a put to provide protection over the whole portfolio.

ETF with Tech companies for the long term. TDIV-T is the one he recommends once the correction comes.

Educational Segment. The current profit margin forecasts do not support current market valuations. He has never been more bearish in his life. He is worried that the central banks in Europe literally have to print money to keep things going. Profit margins have far more to fall after a recession according to history.

Market. This too shall pass. March was a panic period. We are going to come off the COVID lock-down and some sectors will be heavily beaten down that have great value. There will be opportunities to let some investments go that make no since in a post-COVID environment. The key is if investors will read through the horrific results from during lock-down. When it comes to an end, we could see a quick recovery of profitability; however some companies will not have handled it. Fixed income is going to be a large challenge. Capital will be pushed into the equity markets. Companies that have high return on equity and don’t need a lot of capital will be well positioned to grow. Cyclicals will do well too.

Market Outlook He likes that the government has stepped in during a time of crisis, but not it is time for transparency. Are taxes going up, will we see cuts in some programs? He thinks taxes will increase as it appears unavoidable at this point. Although Canada is a better financial situation than most countries and interest rates are low to service debt, higher taxes are about the only way to go. The recent market rally is discounting a good outcome of the March 23 lows. Twenty-five percent of the market cap is in five companies. He is shocked at how wide the breadth has been on the recovery. He thinks value is now coming in. He is using a barbell approach -- buying the big 5 and value stocks.

Physical gold? People like gold as a hedge to their core holdings. It has worked reasonably well in the latest days. When he buys gold for client as a small holding of their asset mix, he would buy through an ETF. The thought of holding physical gold brings on the thought of Armageddon. You may not be able to deal with gold under that scenario -- you sure can't eat it! When it comes to owning gold producers, the correlation with gold prices is not great. A lot of those companies are not good at running their operations.

No, we won't return to March's lows, but investors must fall the situation carefully, like how restrictions are lifted and how consumer behaviour changes. The market got way ahead of itself in April-May, partially due to massive government stimulus, FOMO, vaccine hopes, etc. He's sitting on 10%, holding a lot of utilities and telecoms. This retracement from the rally is normal. Watch for Q2 results in July-August--we will really see the impact of this virus. There will likely remain little corporate guidance. He's cautious. Pick your sectors and individual companies carefully, not broad indices.

Market. Companies don't have a lot of assets. Tech companies don't really make anything. We should have been more overweight tech. He is sticking with the big ones. Companies that have huge cash flows and terrific balance sheets are the ones who can tap the marketplace and take the business. It is not the dividend paying stocks that drove his returns over the last 10 years. At the moment China is not taking all our commodities. Teck has gone nowhere. He needs structural tailwinds for growth going forwards. BBD.B-T is coming out of the Blue Chip index, but this is only significant for one day for the stock price. However it never really recovered from 9/11.