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

Both stocks and gold are hitting all-time highs. Which is right? There are still value stocks out there trading at 10-18x earnings, with good businesses, good earnings growth, and increasing dividends.

Are people looking for yield in dividend plays? Yes, but there are lots of good companies with lower yields, but increasing them at more than 10%. Tries to mix his portfolio of stocks yielding 3-4-5%, with companies that are growing their dividends faster.

What are you expecting from the banks? It'll be slow, with an increase in credit loss provisions. Reasonable quarter, with stock prices down. He has a fairly significant position in both Canadian and US banks.

Market Outlook Markets seem like we are in a bubble. There are major problems ahead with corporate, personal and government debts. Interest rates at record lows are not helping. He thinks its a mistake to try to keep real estate markets inflated and does not believe a 2% stress test is enough. He thinks there should be more emphasis on creating jobs, but with unemployment rates so low it could lead to inflation. The CN Rail layoffs are a signal of the spill off effects and could lead to more unemployment ahead for the economy. He does not think the rail blockades should continue.

Canadian Energy? Oil and Gas is well out of favour, so he is interested. He worries about companies with high debt loads, but he is watching the sector closely.

Gold & Silver? Gold prices are now over $1600 per ounce. He thinks it should go up further. He holds two gold plays in his portfolio, one in Turkey and another gold company that holds no debt. Gold could do well this year and so could silver. He wished he owned more gold companies.

These record levels are acting as if we have contained this virus, but we haven't....A lot of sectors have piled into telcos for yield, some late and are suffering FOMO. (Telus announced an equity issue of $1.3 billion after hours.) This market is getting ahead of itself. The market doesn't recognize a negative headline anymore; it feels immune because interest rates will stay low. He doesn't think the US Fed wants to continue propping up the market, but investors don't believe rates will rise. There's a little more time left in this rally. The Fed will be on hold until the late-summer before the election gets near. Volatility will return in the summer, especially if Trump is shaky in the polls and the Democrats/Bernie Sanders are gaining.

Why do companies buyback shares when they reach all-time highs? Should I avoid them? It depends on the company and their situation. Are they buying the stock too cheaply or overpriced? What will they do with their cash on hand? Investing it back in the business? Reward shareholders with a special dividend? Buy shares? You can't make a blanket statement. Buybacks are not necessarily a bad thing.

Apple guides down on the quarter due to the virus is expected. Will this be a one-quarter blip or drag on? He thinks it will be a blip and the virus contained, based on past viruses. The market resiliency is incredible during this crisis, because there's amply liquidity in the market. He isn't adding to his portfolio during days of weakness, but he's aware of market volatility. Oil: he's taken a step back and not bought oil. Funds are flowing into renewable energy, not fossil fuels, especially by younger investors. This is a permanent change.

Finance Minister Morneau just announces changes to the insured mortgage stress test The results: Banks will need to carry more capital on their balance sheets, and the changes will also impact housing prices (we have a limited housing supply already). So, this impacts banks' ROE, negatively.

It's surprising how well markets have held up given all the uncertainty: who the Democratic nominee will be and the election's outcome, the Canadian minority government and several minority provincial ones, like BC. BC's premier is in the crosshairs, because the gasline project there is under fire. Then, there's the coronavirus and its worldwide impact. All these factors may tip us into slow growth or even recession. Recalling SARS, that lasted from November through May. Maybe that's the timeline for the coronavirus. Can we buy dips? Looking at Air Canada, the price hasn't dipped because capacity is high, given the Airbus 737 Max ban. He doesn't know how long the virus will last.

Mutual funds There are so many of them that he comment or recommend a particular one, but generally a mutual fund gives you diversity and you're protected from downside by a particular stock. To see if those running the fund are thoughtful, check their long-term performance. The negative is that mutual fund charge a high fee (an MER of 2-2.5%). That's why ETFs are popular. But an active manager will choose the better-performing stocks and ignore the weaker ones. Also look at what's held in the mutual fund: do you know these companies?

Market Outlook He thinks another correction is on the way. Over the last 11 years, there have been 16 periods of 15% plus gains and 10 have been followed up with corrections of 10%. You still need to be invested. He holds 15% cash right now and also a 70% market equity short position. Technology stocks have a very high beta so he needs the downside protection. The Coronavirus and economic growth worries has been buffered by the continued liquidity injections by Central Banks. About a year ago $60 billion was being injected, that is now down to $15 billion. Once a half-trillion has been injected he expects they will begin to taper -- this could come by April.

Pullback post election? He thinks April could be when QE is tappered. The market retreated 15% in 2011, when this last happened. He thinks tightening of liquidity would be followed by the banks. He thinks the US Fed has telegraphed their plan and so a market pullback could happen before the US election.

He's quite bullish moving forward. Stocks, bonds and real-estate is at all-time highs. The US is 128 months into expansion and it looks like they might cut interest rates in Canada and US. There hasn't been inflation either. He expects that it will cool off, but the market is shrugging off worries.