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

Educational Segment. Gold with negative interest rates. Gold with negative interest rates. Gold is an attractive asset class. GDX-N is an example. Gold peaked out at US$1900 in 2011 and there will be a lot of resistance at $1525. He thinks we have a date with gold at $1900 again. It's at a 35 year low and is a no-brainer. He thinks this ETF could double.

Oil. Thumbs down before it goes materially higher. We are going down into the $30s in the next recession.

Market. He is not concerned about the markets being off so much. This happens every August. You have trading desks lightly staffed and staffed by younger people who have trigger fingers. We have the dog days of summer right now. He expects that we are in a correction right now. Events always have an out-sized impact in August. The Yuan was a big deal. He always has a problem with them deciding to set their own rate. We have some leg room on the DOW for it to come down before getting nervous. The US 10 year yield has dropped. We are working through things.

Lots to worry about, starting with US-China trade tension. The market is worrying about it again, making it hard to trade day to day because you never know what Trump will tweet. He expects a deal to be reached at some point. Bonds are not attractive now because of low yields while high-dividend stocks are, especially those with potential to grow in the coming 10 years. He always holds some defence: this year he has been accumulating cash to 15% levels (which is high for him). He's also buying gold through ETFs (he's not a mining expert). He also has some short positions. He prefers gold to silver; he doesn't have a price target. Gold is a hedge to volatility.

Canadian vs. American banks in the coming 6-12 months It's out of favour. He prefers American banks, but the Canadian ones offer good value. Bad press about the housing market and shorting by some investors hasn't helped, but our lending rates are still low and the banks' trading multiples are still healthy. Since they're out of favour, now's the time to consider.

Sell Canadian banks now, hold cash, then buy in the fall sell-off to buy the U.S. banks or utilities? Hard to predict where the market will go. He can't advise selling the Canadian banks. It's also too late to buy the utilities (bond proxies), because they're run up to record highs. A Canadian bank pays a good 4-5% dividend. Anyone who's held them for 20-30 years has done well.

We're at the end of the bull market. Valuations have peaked and earnings are flat...China does manipulate its currency to some extent...Powell calls the latest interest rate cut an "adjustment" which is an insurance policy, but time will tell if it works....He prefers the US over the Canadian market, because the American one is broader and Canadian is narrower....Most Canadian consumer stocks are actually international like Alimentation Couche-Tard.

The allegation of the Chinese government manipulating its currency China supports the Yuan by pegging it to an official rate. The only way to push it down is for investors to sell the Chinese Yuan and demand the US dollar. But Chinese has so many currency controls about converting, so there's no real free flow. Meanwhile, international participants are wary about betting against China's next currency move. China has huge reserves of USD and can buy up their own Yuan.

Gold outlook He's not a gold bug and he owns none. His issue is that gold often doesn't react the way it's supposed to, though it is currently (market uncertainty). Charts of 10- and 20-years show gold going up and down, so he'd rather buy dividend stocks.

Key sectors are starting to see a bottom, such as energy and pot stocks. Starting to see consolidation as well as companies that have failed. It's becoming difficult to compete.

Marijuana. Will start seeing more mergers and acquisitions starting in 2020. There are some hold backs by the state but he expects large multi-state and national operators to emerge.

A recession is probably off the table for the rest of 2019, but who knows in 2020? The global economy is slowing. especially by the tariffs. However, he's still seeing improving economic and market technical indicators.

Market. As long as everyone is staring at the potential recession issue, then the markets are pricing that in. You should worry when everyone is buying and there is euphoria. If a recession happens, stocks will not do that great. Recessions and bear markets are 1 to 2 years, but people should have a longer term view. The gains in the good times are many times what the losses are in the bad times. The percentage of trading due to ETFs is too small to create a problem in a sell off.

Canadian Financial Stocks. You only need to own two of the Canadian banks. They are so correlated. These are all companies driven by the Canadian economy. He would have no problem owning CM-T but BNS-T has more diversification.

Unprecedented times right now? From a market point of view, not unprecedented. S&P has consistently come up against its FMV and backed off, for the third time. Where history is being written is in the fixed income market. We've never seen negative interest rates before. There's a widening gap between stocks in low and high valuations. Tells us that a big chunk of the market is overpriced, and a big chunk that's cheap. The last time that happened, in 2000, the expensive part got hammered. In 2000, Amazon went from $105 to $5. The profitless prosperity stocks like Uber are vulnerable. Drama will spread to companies buying back stock like Boeing and Dollarama. Paradoxically right now, both the bears and the bulls can be right.