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

A phenomenal day with the oil crash on top of the coronavirus. Everything got washed out. The TSX plunged over 10%. Phenomenal. Usually in pullbacks, the TSX outperforms Wall Street because of the yields in Canadian stocks, but not today. The consensus trade of going long oil and short treasuries got wiped out today. The unwinding of bullish bets and hedge funds can take down the wider market. When markets hit all-time highs, the technicals didn't make sense. Today we saw massive breakdowns in key levels of support, like $42 for oil. Be cautious. Industrial production is trending below average. If we don't get the push higher into spring, markets get vulnerable which we're seeing now. Seasonally, we're supposed to be positive now, which is not the case at all. The S&P is below the 200-day moving average, and you don't want aggressive exposure when this happens. 2,800 was support, but we broke below that today. Charts are looking like the Dec. 2018 lows, especially the TSX. As long as we're below the 200-day, there'll be volatility. Don't be aggressive, but nimble.

Buying gold during this chaos? Yes, it has been a good buy during this volatility. Gold has risen as a classic hedge to volatility. Gold is a classic hedge in Jan-Feb when volatility rises. Seasonality ends in late-February. The trend is still higher, though gold is close to its $1,700 target, so he's not rushing to buy it. Next seasonality is late-July to late-September. Other times, gold underperforms while cyclicals do well. Cash is king. He holds 40% cash. Take your profits and hold cash.

Cruiselines? Now--and after--the virus you don't want to own cruiselines. Buy stocks that have held up during this pullback, instead.

Market Outlook OPEC and Russia have unexpectedly failed to come to terms on continued oil production cuts. This may be the end of OPEC+. The short term Coronavirus uncertainty is reducing jet fuel demand by about 1 million bpd globally. When you take a step back how can this be anything but a short term drop in demand? Oil supply is already slowing -- Exxon announcing a slowing of 65,000 bpd in the Permian next year. As the US is the global swing producer, this slowing of growth in supply will begin to take hold as the Coronavirus issue subsides. By July-August of this year the Permian will be negative in production. Since January last year, energy stocks are down by 46% on average, whereas oil prices are relatively unchanged -- this can't continue.

Market. Real estate is being impacted by fears just as with the broader markets. Fundamentals for real estate are still strong however. The supply and demand fundamentals have not changed since CoVid19. He goes long where he sees discounts to net asset value and goes short if they are overvalued. XRE-T has experienced tremendous volatility but today it closed a lot of the gap. Has CoVid19 really chanced the global GDP in a way that impacts long term commercial leases? Fixed income capital is flowing into alternatives including real estate.

How to process these whipsaw markets? Market narrative is quite negative. If coronavirus hits the US in a meaningful way, it will ultimately cause a recession. US is not as prepared as other countries are. Fed cutting is a really negative signal. Central bank policies are doing more damage than they need to.

BOC cutting rates and the housing market will go back to normal. Problem is the data does not hold up. Not sure what BOC was trying to achieve.

Where are you finding buys right now? Interesting spaces are certain portions of tech, medical technology. Oil is the perennial weak candidate. For energy, the preferred trade is outside of Canada. Some of the shipping names look good. Too early to buy airlines while there's still blood in the streets. The time to buy them is after any government bailout.

Strategy for putting money to work in this downturn. We're not in a bear market just yet. Narrative of the market is generally negative. High beta areas like shipping and technology are under pressure. If you're looking for opportunity, wait a little bit yet.

Sell technology gains? If you think the narrative's broken, take money off the table. You can always lighten up, and then go back and buy it later. It's never bad to take a gain, as you won't go bankrupt doing that.

Market Outlook The uncertain nature of the Coronavirus is causing uncertainty in the economic outlook. The most vivid resetting of the investment picture is the where the 10 year yield has gone -- below 1% for the first time. This will provide good support for good quality income paying securities. Interest rates could one day in the next decade drop below zero, he thinks.

Gold It is hard for a long term investor seeking dividend income to buy into gold. He thinks the longer term cut in Fed rates is more significant than the Coronavirus. You simply don't get paid to wait holding gold. Instead, he would buy dividend payers and get paid to wait.

If the US drops, should I hold a Canadian gold, not American, ETF? When gold goes up Don't worry about the currency. Gold will do well. At PDAC this week in Toronto, many gold companies have reported cutting costs while gold has risen above $1,600/ounce.

The cruiselines are suffering during the coronavirus. The long-term demographics will support this sector which will bounce back. But you need to wait for the virus to fade. Meanwhile, there will be cheap cruise deals for travellers.

After complacency, markets are now volatile. Markets were breaking new highs just two weeks ago as the coronavirus was spreading. Up 4, down 3, then the Fed rides to the rescue again. However, this is not financial--it's biological. The virus doesn't know what the Fed funds rate is. The Fed has cut too early and too large at 50 basis points. What happens if there are more ill effects from the coronavirus. Frankly, if you haven't taken some profits already, you should in this relief rally and now that we're out of correction territory again. Have diversification, like bonds. Rate cuts are unsustainable. Expect more inflation. It's destroying the business model of high street banks and insurers with bond yields below 1% or negative; they can't make their profit targets. This is dangerous long-term.