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

The rise of ESG in 2020 Asset managers are facing more pressure to invest in ESG in 2020. ESG is responsible investing, and this is becoming a big thing. Are companies you invest in doing the right thing? This will be a big theme in coming years, because climate change is so prominent.

This is a good time to be in the markets, following the Santa Claus Rally, then continues to do well into May. But expect volatility and a pullback(s). Recent chart movement bodes well. January means the small-cap effect when they outperform large-caps into February, but this isn't happening this year. Large caps still rule. Cannabis hasn't bounced back yet, which is surprising, following December tax-loss selling.

If the Dow drops down to 27,500, then the bull market for 2020 is off. The wild card of the Iran-US war is something to watch closely.

This year will be interesting as this is the year that Trump will try everything to get re-elected. However, he doesn't think there will be direct conflict as there is too much to lose. It will likely be a surrogate war.

Last year, there was volatility with the US-China war that has made a lot of money for those that have rode the waves. The Feds are on the side of Trump in the sense of quantitative easing. The phase I deal is to be signed but there is scant information.

Market. Geopolitical risk was as high as it has ever been prior to this most recent event. That even creates uncertainty but it is not a reason to buy stocks on dips. We are in a political world and Trump elevates that. Will he make a choice to do something that would keep the impeachment out of the headlines. People may be discounting this event too much and it may become more of an event than people think. In the US it is show me the money time and unless there is meaningful growth in earnings, then there is no reason to buy the dips. Interest rates are low but it does not make stocks a bullish bet. Gold has received a big lift. See his Educational Segment. If we can break out from these resistance points it could mean $1800 or $1900. The US/China trade we should get a signatory event but we should not get a phase II this year and maybe with a different leading in the US. He thinks Trump will not win the election.

Shorting Corporate Bonds – An ETF Recommendation? The riskiest part of the market is the high yield market. SJB-N is the riskiest of the corporate high yield bonds – junk bonds. The challenge is that you have to pay the yield when you are short – about 5% on average. It is expensive to be short high yield.

Sleep at Night Portfolio – If Larry retires, is it safe? If the market went bear, his portfolios would not go down. When the markets are at a high point and don’t look good, his fund goes down but not as much as the market. When he retires, there will be a strong team in place to replace him. His intelligence is being taken into an artificial intelligence process.

Inversion of interest rate curve and does that now reduce recession risk. When the FED starts to cut rates that will uninvert the rate curve. If we were worried about recession then long rates would be skyrocketing and they are not. They are relatively contained. It speaks to economic weakness. The economy is not going to be rip-roaring strong here.

Educational Segment. When he is building portfolios, he is looking for assets that are uncorrelated so he can reduce risk. This is the most important thing if you are taking the sleep-at-night approach. Gold still stands out to him as one of the best asset classes of 2020. He thinks gold still has some upside potential. Monetary policy has not worked well in driving economic growth so it will shift to fiscal policy which will demand that more quantitative easing will have to occur. Jewelry demand is an offset to demand. ETF (investor) demand and central bank demand for gold are the two main points. Investor holdings are the biggest demand for gold. We are back to the level of 2012. That was sparked by QE2 and now we are back to that resistance. If we break through that, there is no resistance to above $1800. He loves the asset class here. Equities give you a 2:1 upside to the commodity price.

Market. We had a list of concerns going into the new year. Trump is not the normal protocol and adds risk relative to norm and we are seeing it play out early in 2020. It is a low interest rate environment and so Mr. Bushell likes dividends. There is no impetus to inflation. You want to be overweight equities. Typically banks don’t underperform for two years in a row, although he thinks that will become more common in the future.

He doesn't follow geopolitics, though he has personal concerns about Iran. Point is, it's noise and it's not a factor in his investing. Gold does well in times of perceived and real war. Gold has had a strong day. His market concern is systemic. The Shiller PE Ratio: PE today is the same as before the market crashed in 1929. The market is frothy, 30% overvalued in Canada, and 50% in America--way above historic averages. "Irrational confidence" explains the current market which is expensive. There's real risk here.

A protection strategy assuming a 20% correction before spring? Things can get ugly before they get profit. First, take profits after a fantastic 2019, then reposition your stocks/bonds ratio, buying more bonds to make your target mix (i.e. 70/30 stocks/bonds). Himself, he's moving a third of his equities into inverse products--like an ETF that rises when markets fall (see his top picks). Investors really feel the pain of a drawdown--people are emotional and irrational. So, probably in the next two years, the market will fall and an inverse product will go up. This is playing defence.

Cannabis stocks already corrected, but you say markets are 30-50% overvalued. So, what'll happen to weed stocks? If the market drops 20%, few stocks/sectors will survive that (most will fall 20%) and cannabis likely will too. It's still early innings for cannabis.