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

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.

Educational Segment. The Corona Virus. People have no idea how this I going to play out. Unlike SARS, we are at market highs. Corona is way bigger than the market thinks.

Market. For the past few years it has been buy the dips on these kinds of reactions. The market is expensive so you will never be able to catch the bottom. The market was looking for an excuse to blow off some steam. You might want to nibble a bit but it is probably not over yet. The volatility will probably persist. He would be careful of companies with too much dependence on China. Defensive names, telecom, renewable energy, and utilities could be bought on dips but it is on a case by case basis.

Each correction is different, depending on how deep it goes and for how long. In the past month, sure we've hit highs but below that things are murky. The TSX held up better because of our big financial component. He doesn't see the TSX correcting that much. Gold went up, but the US dollar failed to and is starting to roll over. Oil recently bottomed and today it sold off, but its outlook is looking better. Gold has spiked and went up today, though there wasn't a rush to the US dollar. After gold's spiky move of late, he expects it to come back a little. He expects another wide market sell-off Tuesday. Doesn't expect more QE, because the market fundamentals remain strong. The US treasury yield hit $1.37 today which is the floor, the September 2019 low. Based on past bottoms, the yield should rise from here.

What indicators do you use for technical analysis? One isn't enough. Actually, some of the best traders use just one indicator like the 200-day moving average. He likes the RSI vs. the index, a simple--is my stock rising against the index? He also likes the Williams %R (https://www.investopedia.com/terms/w/williamsr.asp). If one indicator works, then that's fine.

He wasn't concerned about the coronavirus, but now he's seeing more stress in the global supply chain. Everything's being produced in China and it's being cut out. There will be some supply chain issues that will arise. It will be good for gold since it will be a slow-down.