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

Gold. Bitcoin is taking quite a bit of market share. The rates of return in the gold group is non-existent. He is not putting substantial parts of his portfolios in it.

Markets. A wild ride this week. Over the last 40 years, there have been 23 corrections of 10% or more. It's not abnormal. Start to pick away and buy some bargains. We may take a pause, but the economy won't derail.

TSX closed because of a technical glitch. Not the first time it's happened, not the last. Volume caused the system to break down. It'll be back to normal. We have a bigger sandbox to play in south of the border. It's panic right now. Be fearful when others are greedy, and greedy when others are fearful.

Bargains - buy in now or wait for stabilization? When the VIX gets to the 40 level, that's when markets usually turn around. Not sure if the next 5% move will be up or down, but he's pretty sure the next 20% move will be up. Looking at things from a longer-term perspective, this is a good time to buy.

Coronavirus has jumped the pond, causing consumers to stay home. They'll just shop online. Outbreak procedures are a lot more orderly now. Judging by history, markets drop off, and then they go higher.

Where to position in all this uncertainty? Don't chase long bonds at this stage. He has bond ETFs. Don't chase gold. These are overbought asset classes. If you're looking to park cash, he recommends a short-term bond strategy, like BMO's ZST with a 2.1% yield. The ZST'L is even better, as you accumulate the units. Or PMNT, the Pimco global short-term. Don't bail on equities at this point.

Disconnect between gold and the miners and producers. Doesn't own gold miners or producers, as there are always issues. Gold is overbought. He doesn't own either.

Market Outlook He thinks today's move up is a relief rally. It is good news that the market has taken a pullback, he feels, thanks to the Coronavirus. Building a base is healthy. Getting defensive and raising cash makes sense right now. Longer term, 12 months out, he thinks this will be far past us. Use the cash to take advantage of buying value. The lower markets go, the higher the probability we get closer to the bottom, so stepping in in increments makes sense to him.

Not everyone is selling during this steep sell-off. Some are buying like him, albeit selectively. Not all companies will be impacted the same by the coronavirus. There are great compounders out there, but the pullback has reduced their valuations to reasonable levels. Central banks are awaiting more data before they decide on cutting rates. Also, banks have fewer bullets in their chambers, because rates are already low. He doesn't know how markets will play out, when markets will bounce back. But some great names got hit hard. Big names like Apple and now Microsoft (after hours) are guiding down. Every sector and company will be hit, but transportation will be effected the most, followed by energy. All companies will issue earnings warnings, though it's a matter of how much. The credit card companies are a good example. Cruiselines, airlines and hotels will be especially hit. In contrast, other companies like Microsoft will buyback shares during these dips.

Sell Canadian banks and buy American? Sit tight if you own Canadian banks. They're generating high-quality earnings and pay a nice 4-5% dividend. Doesn't know about transitioning into US banks, which he owns. He sees more value in Canadian banks. On a pullback, look at JPM or US Bank Corp. Canadian banks pay half their earnings in dividends, whereas the American ones return 100% (in dividends and share buybacks).

Monetary policy-makers have been responding to crises over the years (i.e. trade wars). Economic growth should stabilize in the second half of 2020. Don't be skittish about the current sell-off and virus outbreak. Keeping looking long-term and buy the dip. This is the first pandemic during social media (not even SARS); history tells us these are short-term crises, and we live in an age of so much information. China, you could say, has over-reacted (which is good). The bond market has gone crazy as investors flock to safety, but bonds are priced for stagnation. Crazy flows into bonds, partly because of a hangover from the 2008 recession.

He's not worried about the sell-off today or yesterday. The markets have run up with rich valuations, after all. Markets always look for a good excuse to correct. A health scare is one of the least fearful market events; the 2008 recession was worse, because the problem and cause were systemic. This outbreak will come and go like past ones. Markets are reacting badly because we don't know where the virus will go. Remember: the Spanish Flu epidemic of 1918-19 killed many more people than this disease--this disease will eventually pass. Scare-mongering is part of the human condition. Breaking news: Disney's CEO is stepping down. He owns their stock. The news surprises him and the market. Bob Iger did a fantastic job, but there's no need to panic over his departure. The market will digest this news and accept it.

Market. Bernie Sanders jumped up to the commanding lead for the US democrats. Even if he can't work, his policies are so draconian in terms of risk that it is a bigger risk than the corona virus affect on supply chains. A study Larry read said that about a third of good consumed in the world touch China, Japan and South Korea once. If those supply chains are broken… Half the people aren't working. The supply chains are broken and right now they are eating through inventory. He thinks it will be months before this all plays out in the world. Lower interest rates cannot help this.

Perpetual preferreds are down today. One issue can be that the basket of shares are being sold. Perpetual preferreds are more like bonds. It could also be credit spreads.

Gold Exit Strategy. Gold has a long runway here but will not go straight up. You could scale out when it reaches highs. He thinks previous highs will be tested. The world is headed to a place where they will literally be printing money to pay for things. Reduce your position to gold and then buy into dips.