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

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%.

Dividends for safety, to sleep at night. Also look at Canadian bank stocks which have sold off 19-35%. Factor dividends and stock appreciation for consistent returns. In 2010, they endured without cutting dividends. They haven't cut them since 1940. He isn't worried about the headwinds, like a weak real estate market.

Are the Americans still shorting Canadian banks? These shorts are quite limited, but attracted media attention. This won't be a short squeeze. He's not worried. The banks have a tremendous track record and did well in the 2008 recession. Post-recession regulation has made banks around the world stronger, including Canada's.

Market Outlook It is amazing to think oil was trading above $40 a month ago. The build in inventories around the world are starting to slow as demand is slowly recovering. Demand had been down 32 million barrels per day. This may mean it will take a lot less time for things to normalize. Apple tracking mileage in the US shows travel is down only about 9% from a year ago. OPEC members too are struggling for survival. Global offshore is going into stagnation due to loss of capital investment. As bad as thing were, the outlook for 2021 is incredibly bullish. Using $50 oil prices, share prices could potentially quadruple. There are estimates that total oil stocks globally went up 450 million barrels, about half of what the IEA had predicted. June WTI futures go off the board next week. He feels it is much less likely that it will settle negative like the May contract.

Market. There is a new cold war developing between China and the US to be fought on the trade front. We expect more of this. Semi conductors took a bit of a hit on this and there is a lot more to come. Equity markets did not like Trump tweeting that he was tariff man back in 2018 and they won't like this. The exuberance from March is running out. The average stock is very much in a bear market.

Just buy covered call ETFs? You should be more diversified including being diversified globally. When you are getting those dividends, remember that they can be cut. He has no other issue otherwise.

Own corporate bonds rather than equities since they will likely be backstopped by the fed. In the US there are several ETFs for corporate bonds. LQD-N is a good one (liquid corporate bond universe) but there is some interest rate risk. You pick up 350 basis points on this. This is not a bad play right now. The FED started buying it last week. Don't broadly jump into junk bonds here.

Real Estate. He would look at apartment dividend equities. Canadian for taxable accounts or globally for registered accounts. ZWE-T is a recommendation for international dividend payers.

Educational Segment. The role of government and how we measure economic success. He is concerned about the path the world has taken to try to fix the issues. We have thrown easy money at them. 6 stocks make 17% of the US market. It is inequality. We need a fix. There is an OECD better life index that looks at how society is doing. He thinks we should measure quality of life. FED funds futures are pointing to negative interest rates. We are going to a money printing world.

Market. We are still in a long term bull market but this is an interruption along the way. Realistically we have a lot of work to do in this market. Longer term we wind up okay. There were no declines where you had a 'V' shaped bottom. Some sectors' performance will be dependent on how long the restart of the economy takes and what hiccups occur along the way. This is a valuable phase for investors because we get to see where the real strength is. This will go on for several weeks dependent on the news flow.

He is short office REITs. He thinks when his lease comes up he will end up needing 55-65% as much space. He thinks it is possible that office space will be a tough sector, as well as retail space. It is a good idea to be short REITs in general.

Market Outlook The market is pessimistic following comments from the Fed yesterday about how long the market may take to recover, fiscally and monetarily. Add to that health experts views that re-opening the US economy may be challenged are causing a pause in the market. She has certain stocks that are defensive in nature. She is avoiding deeply cyclical sectors, like oil and gas. She likes companies that have strong balance sheets to better survive an economic down turn. Technology stocks have participated during this recent rally, but they are too expensive to buy into now. She would recommend waiting to buy in on a pullback.