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

When do you decide to hold more than one company in a sector? When there's enough idiosyncracy within that industry to warrant having two names. Or when there's enough exposure in the market overall that you ought to have more than one. For example, in a place like banks or the consumer space.

Market Outlook The market is betting that President Trump will not follow through on the attack into Iraq. However, any attack on US soil could be very detrimental to the market. Oil is down over 4% intraday today, testing $60. Shale decline rates may actually be much higher that originally thought, making the US not as self-sufficient as President Trump believes. Valuations in the markets today are based on investors chasing growth stocks. This may begin to change. Low interest rates has spawned very high levels of debt (consumer, corporate and government). This could make things precarious going forward.

CDN vs US financials? He thinks in terms of valuations it is in favour of Canadian financials based on price to cash (9.9 times for Canadian vs. 12 times for US) and yields (4.3% for Canadian and 2.7% for US).

Canadian vs US Large Caps? Last year the US outperformed Canadian due to energy being held back. The US is strong in industrial and consumer staples -- Canada is lacking that. In the current environment, global economies have been lagging and there is growing interest again in materials and energy. This could lean things back towards Canada perhaps.

We had an incredible 2019. If the Fed, EU and Japan keep interest rates low, the markets will chug along. Expect volatility, a rollercoaster, and earnings growth of 2%. Stock prices will rise accordingly. ESG investing will be a rising force in 2020 and years to come.

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.