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

There has been gross underspending in most commodities in the last decade. Companies are effectively streamlining in the sector. Today’s Newmont acquisition is a sign of this consolidation. Also, gold companies are starting to use oil and gas techniques of directional drilling.

There is a move out of utilities into cyclical stocks. He expects this bull market cycle to continue for the next couple years. Banks around the world, including the Federal Reserve are being supportive. Dividend yield for equities are above the yield of 10-year US bonds. When this happens, stocks usually continue to outperform bonds by 20% in the subsequent 12 months.

Market Outlook He considers trade talk issues the "cow bell" that is leading the market in and out of favour. He held a lot of cash in the summer and then on Oct 31 he increased his beta as he saw a buy signal. He now thinks the market is overbought as his "bearometer" is showing big money holding more cash, while retail investors are already all in. He expects near term volatility, but he does not expect any crash over the next few weeks. Market breadth is good so there is lots of reasons to be bullish. As soon as he sees the market making lower highs and lower lows he will be out.

Oil Stocks If we get a break above consolation, he will get back into oil stocks in general. He sees an ascending triangle right now with higher lows for oil prices currently -- good, but he will keep watching. He would need to see a break above $60, holding for few days, before he will get excited.

The market is a little expensive overall but he doesn’t pay attention to the wider market. Things are going pretty well. Industrial and healthcare stocks are struggling so you could find some good value there. You could find some good valuations right now if you look.

You could see a 10-12% correction, but he thinks there are good values now. There are also lots of areas that are fairly priced that you don’t have to worry about.

The principals are, you have to buy when people are nervous. Healthcare is extremely ingrained in this society, and you can’t change the whole system. There are opportunities in health insurance and on the administration side. It’s one area that he is looking into closely.

He doesn’t trade volatility but he trades facts. Don’t trade based on headlines and chose businesses that you want to be invested in the long term.

Market. The premier of Alberta is looking forward to working with Christa Freeland to come to some accommodation with the federal liberals to move forward on energy. They want to get moving forward on the TMX line. Takeaway capacity is an issue. LNG is moving forward. There is a delegation moving forward in China regarding facilities on the coast of BC. He thinks in 2020 we will be looking at higher commodity prices. Tax loss selling, however, could be nasty this year.

Is the lower market downturn today concerning? Slowdown today after several weeks of nice moves and new highs. Not surprising to see the pause. The S&P is at the higher range of a 10-year valuation. Not surprising that trade issues have caused a bit of a slide in markets.

Retail sector results are mixed. Some doing well, and others like Home Depot are not. You have to be selective in the space. Be careful. Be more defensive like dollar stores, or off-retail, Costco. Avoid luxury brands.

Comfortable getting back into equities? Rotation back into cyclicals coincides with yield curve being steeper. So investors feel recession is not in the next 12 months. He feels that rotation into cyclicals is a bit of a trade. Be well diversified. Have some value, don't be all in growth. Growth has higher beta and is more volatile. He errs on the side of non-cyclical. Watch valuations, as the defensives are expensive.

Has your view on the energy patch changed with the new federal Liberal cabinet? Liberal government needs to be more sympathetic to the west. But at this point in the cycle, energy tends to underperform, so he doesn't have any exposure.

Market Outlook When he was on in January, the end of 2018 was very weak. He thought then it was a correction in a bull market. Now, we have taken out 2018 highs, economically sensitive sectors like finance and tech have made new highs. This is not the sign of the end of the bull market. He thinks we have another 24-30 months of upside. Investors are not positioned for this as they have worried about Trump, trade wars, etc. Money has moved into highly defensive sectors instead like telcos and REITs. We are set up for a good run ahead of us.

Gold: producers are outperforming as he predicted. That said, have a diversified portfolio, but high net worth investors. We're facing a market rally because of cheap money and low interest rates--but also volatility. Physical gold is at an all-time high. Going forward, the producers--as seen in the GDX--are doing well. Smart money is coming into these producers. The breakout we've had this year is holding, which is good. He predicts markets AND gold will rise in tandem.