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

Market. The market was looking for a reason to go down and that is what we are seeing this morning. His view is that stocks are expensive but there has been risk taking and speculative behavior. It has been driven by liquidity from central banks. It can be dangerous behavior. He still looks for good businesses that are cheap but he is taking a bit of a defensive approach right now. The market has been pricing in a Trump victory. He does not think a loss is priced in. The British are moving ahead with BREXIT. There is geopolitical risk. It is as if nobody is paying attention.

Oil. There are a lot of headwinds. It is not acting well in the way it is trading. A lot of investors are avoiding oil and gas stocks from an environmental perspective.

Sector Allocation for this year. Bonds are not a good proposition, equities are expensive, so there aren't a lot of cheap assets out there. He focuses on defensive businesses that are not priced at a high multiple.

How long can the coronavirus pain continue? He doesn't know, but usually these things don't have a big impact on markets, but there's a gap before doctor declare an emergency and investors sell. We're entering correction territory, with markets waiting for a sell-off, then the virus came along.....But troughs tend to hit in the gloomy third week of January (cold, dark). We could see more downside, though there are good deals in energy and base metals now, like copper. Oil chart: $50 is key with the downtrend over after finding a footing. Look at the producers like Suncor, Cenovus and XEG to know where oil is heading. For copper, seasonality is kicking in.

Market Outlook He thinks Q1 will only see a small global crude oil inventory build if OPEC cuts back 500,000 barrels per day (bpd) of production as promised. If current demand trends continue, this will lead to four of five consecutive quarters of global inventory draws beginning late in 2020. Current low prices are insufficient to lead to increases in production, it highlights the necessity to see higher oil prices. He is expecting WTI oil prices will rise towards $67-$82 by Q4 of this year. He thinks the latest development in the Coronavirus may led to lower oil prices initially -- perhaps a low near $50. Overall, he expects 2020 to average around $70 for WTI. This would translate to the Canadian energy index dropping back down to the lows seen last August (XEG-T equivalent trading back down to around $8.00)-- this will be a table pounding buy, he thinks. The time to buy will be during the next downward turn in the market.

US Shale Oil? He thinks the US production of 13 million bpd will rise, but not as high as other analysts (maybe only to 13.4 million bpd). The rig counts are 24% lower than a year ago, so he is conservative on production growth. Companies are working to spend less of the cash flow and improve their balance sheets and buying back shares.

The sentiment isn't great, but it's not any worse. Most of Canada is operating on Toronto and Southern Ontario. Calgary hasn't transitioned yet, but it will eventually because the infrastructure is good. It's one of the youngest, educated workforce. Highest median income is still the highest in Calgary.

The sell-off is because the market was looking for a reason to sell-off. It's been straight up since September. He doesn't think the sell-off is due to the coronavirus. China seems to be better prepared than when SARS happened. They can close down cities.

He still sees 2020 as still going up, though not as up as in 2019. He's bullish on a strong 2020.

Market. The whole renewable cycle will happen but play it over decades. Millenials are going to be the next portfolio managers and energy stocks may just fade away. It is a sector that needs some help.

Market environment. He's very optimistic, only because he sees so much uncertainty as we head into the election. Lots of noise in the system, which will add uncertainty. Look at the bigger picture. The big news this week wasn't the impeachment, real story was Trump's speech at Davos about the shape of currency reserves. Also, Fed has new members. Trump is going to come out stronger. He's setting up a totally different system with trade deals with individual countries. This will reshape the global economy, and gold is part of that.

Why isn't gold moving significantly higher on fears of Coronavirus? He'd argue that gold is holding up extremely strongly. China and Asia aren't participating in the futures market this holiday week. Plus, an overwhelming amount of shorts in the futures contracts. Gold is set up to break through $1560 because of global demand. Bigger opportunity is in the producers to move higher.

Copper. Keeping his eye on it. Near $3, and sometime it will get a break. At that point the inflationary trade will be on. The Coronavirus issue should be monitored, but it's just short-term noise for the market.

Trump bringing back manufacturing to the US. He can't do this without really killing the dollar, because the cost of labour is key. Big manufacturing won't come back to the US with the dollar where it is. But if we get a correction, and some kind of monetary adjustment, then everything is off in terms of economic activity. That's why copper is the barometer of economic activity, it's ticking up, and he sees that as bullish.