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

Gold. One of his favourite asset classes. It's a great hedge for market uncertainty and volatility. He sees it going even higher.

Share buybacks. He sees buying back stocks as a form of financial engineering that compensates the C-suite tremendously. He is a critique of share buybacks. He thinks that companies that have bought back stocks will have regulatory restrictions, such as the aviation industry.

USD Reserve Status. Looking at the cycle of the reserve currency economies of the world, there is a shift with the US and China battling for trade. These cycles take place in decades and centuries. Looking at the Chinese yuan, in the last couple years, the government has devalued it tremendously. The broader US Dollar index is still within the average range. Bottom line, countries will be printing money and taking on debt. Right now, you have to like gold.

Caution doesn't apply to every stock? That's right. Most of the averages are capitalization weighted. The very large companies are doing better and driving the indexes higher. So, while the indexes are at record levels, the average company is 10% below its record level. Worries include high valuations as well as Covid.

A sense of unreality in the markets now? Market looks into the future, and it's telling us that there is an end in sight. The risk is that the market gets it wrong. By "market", he means the cumulative weight of all investment dollars. The market has a strong record of getting it right.

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.