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

Is there really a V-recovery? For most U.S. stocks, like the banks, they haven't seen a V recovery. Remember that stock markets look to the future, so some investors are optimistic, while others are more cautious and expect a slower recovery. The market does not reflect the economy, necessarily. Tech stocks, like Amazon and Google, are driving the markets, while other stocks remain 20% down. This is a bifurcated market. Nobody really knows what the recovery will be. Also, remember that fiscal stimulus lasted 3-4 years after the recession, and there was slow economy growth. Don't be surprised if this happens again. Does your optimism about the recovery match the market's?

Market. We went through a number of phases since we went to market lows at the beginning of the pandemic. The market has looked at support from governments and so on and now we are in a re-opening phase. We need to see how that goes into June. Markets are a little bit too optimistic about a 'V' shaped recovery and he is encouraging clients to take a bit of money off the table. The market could continue going higher through June if COVID numbers don't overwhelm the healthcare system. At some point if the market is not getting guidance from companies on earnings then it could take money off the table by the fall. Investors are gun shy about putting money to work in the banks. The banks are providing some value right now.

Market Outlook He thinks there are two classes of stock out there -- the strong and the weak. He is confounded about how this market continues to rally back. Those strong companies continue to thrive, the weak are struggling. Companies are re-tooling and this may make some companies stronger. Although there may be fewer companies at the end of this and this may not be the best scenario for consumers. He is also hearing that some companies are looking to expand their scope of business, so it will be very dynamic. Earnings are being priced out beyond 2021 and almost zero interest rates are making stocks look attractive. He thinks gold's recent rise is on the back of higher debt levels globally, which are highly correlated together. He prefers to own physical gold.

CAD $ ETFs in other countries? It depends on your view of the Canadian dollar. He is not bullish on the CAD. He would not be afraid to buy the US dollar equivalent for other country ETFs. He would caution about being too clever about moving away from the US markets, which have a good thing going.

Market. They EU is going to back a Euro bond. It is yet more effort from government to put unprecedented support behind the response to COVID-19. The world is awash in debt and they are throwing more debt at it. They will eventually have to monetize it. There is the battle between the US and China and between China and Hong King and these are just more hurtles to get over. China has dropped its economic growth plan.

Bonds. There is not much yield left anywhere in the world and if you factor in inflation, you have negative yield. Once we get through the deflationary effect of COVOD over a year or more, we are going to have a massive run of inflation. The Fed is planning on buying all bonds above a certain amount. The bond market will be owned by the Fed.

Copper. COPX is a basket of copper miners so you are not buying the copper commodity. Buy on the next step down.

Gold. It is extremely unlikely it will drop dramatically in the short term. He would buy into the dip. It is headed higher for years to come. When bond yields are zero or negative, then gold has no competitor.

Educational Segment. Comparison of present economic situation to that of the early eighties. At the beginning of the eighties Regan had some economic tailwinds behind him. Today we have grossly underfunded pension funds, healthcare and have a massive need for infrastructure as well as major concerns about the environment. There is a tragic demographic in the form of the ratio of people of working age to the young and old which will get worse for decades to come. There is also a massive decline in the output of labour. These are all headwinds they did not have in the early eighties. In investing, quality will be one of the most important factors.

Market. It is certainly a concern that people will not resume going into the office after the pandemic is over, impacting office REITs. He feels, though, that the world will return to more normal than not. There are a lot of things we cannot do effectively when we are not working together. 2-3 years out we will return to some sort of normal. SHOP-T will reassess in 2021 as to whether to have everyone work from home any longer. Even if a portion of the workforce has to work from home, social distancing will dictate that more office space is necessary as we resume normal life.

Big 5 Banks. He likes the banks and is adding to them as he was underweight previously. These measure to be the most resilient and strongest businesses in Canada. These things are like utilities. He does not feel they will cut their dividends.

Floating rate reset preferreds with interest rates going negative. Negative interest rates are not good for a floating rate preferred. He does not think our government will send rates into a negative territory.

Market Outlook He thinks global crude oil inventories should begin to draw in July. When oil demand collapsed, it was estimated production was about 98 million barrels per day (bpd), whereas demand had shriveled to 65 million bpd. He expects oil demand to recover to 86 million bpd by then. In Q4 he expects demand back to 94 million bpd. Gasoline demand recovery was a little disappointing in the latest statistics, however. He thinks oil price recovery may be a little ahead of itself, because it is not until the second-half that we should see oil prices hit $40-$50. He expects 10 million bpd storage builds in May and 4 million bpd builds in June when storage availability is low. This could cause oil prices to plunge once again soon, perhaps below $20 for WTI. He is telling investors to hold off buying now, because he expects a retracement is yet to come for energy stocks. Be patient.

Oil sands differentials? The differential has widened back out towards $10 /bbl. If WTI prices drop below $20 again, like he expects to happen shortly, heavy oil producers will really struggle. He believes global oil stocks will again begin to build sharply when there is limited storage availability. It is not until Q4, when he expects oil demand to recover, will we see WTI get back towards $40. He does not like the comment against KXL by Biden, which makes him worried about this project. Canadian exports to the US have been dropping along with demand declines. He is not as optimistic on heavy oil as he is on light oil and condensate.

He's finding the right point to switch to aggressive stocks during this disruption. During bear markets you get lucrative buying opportunities in order to offset lower returns. The strategy is to gradually buy stocks that fell 50%, but will return to previous levels, rather than stocks that declined 10%.