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

Pipelines? Lower interest rates should be beneficial on these utility type stocks. Global investors are leaving Canada, that could be holding these stocks back. There is negative press over oil and energy development. Politicians are now jumping in. These companies are all good buys for the dividend yield.

Today Trump tweeted that he will decide, not China--nobody knows what that means. Trump clouds over every stock out there. He's amazed that interest rates are negative in Europe and parts of Asia. He predicts Powell will cut US interest rates by 25 points tomorrow, because Trump wants 50, but there's no reason for them to cut in the first place. The US has a deficit of a trillion dollars or over 4% of GDP--this is unprecedented. The US has ultra-low unemployment and good consumer spending. Housing starts and manufacturing numbers are weak, okay, but a 25-point cut won't make a difference. Cutting the rate will stop the US dollar rise higher. The German and US 10-year treasuries differ by a huge 300 basis points.

On Friday, Trump said maybe China won't do a trade deal until after the US election. The markets are very complacent now, though we are entering seasonal volatility. Trade is a big negative, one of his four risk factors. We're more likely to see what happened in Q4 2018 than a melt-up. The US Fed cut interest rates at full employment shows how weak the broad economy is. As the trade war persists, we'll continue to see downgrades to continue and it's only a matter of time before stocks reflect that....Powell risk is in presenting the US economy as weak, because that could turn into a self-fulfilling prophecy...The big selloff of the UK pound today is linked to a growing acceptance of a no-deal Brexit under new PM Johnson. Maybe don't pile into this trade now, but in 5-10 years the UK pound will turn out to be a great investment.

How did negative interest rates happen? Japan was the first in order to stimulate the economy. It doesn't work, because of demographics and debt issues that won't change. An aging population won't take advantage of lower rates to go out and spend a lot; a younger demographic will. In fact, an aging population wants a safe savings rate that is not negative. Policies that worked 50 years ago, don't work now. It's a different game. It's hard for banks to be profitable. We'll be stuck in a slow-growth world perhaps for decades, limited by so much debt. Central banks are printing money because they've lost control of fiscal policy.

How low will the US 10-year yield go? -1%. The British 10-year is -0.70%, so why can't the US go there? The old low, post-Brexit, was 1.35-1.60% It will be stuck in that range, depending on how bad the economy gets. He expects the US 10-year to fall to -1% and the 30-year will be -2%. He still likes bonds. We won't normalize rates for a while, unfortunately.

Educational Segment. The US-China trade war There's no trade deal right now (though we'll see what happens at talks this week), and maybe Trump is backing off on his tariff threats and will fight with Europe over cars. Who knows? With his pressure on the Federal Reserve, we're headed to currency wars. In 1987, the US and Germany were in a trade battle about cars and the Deutschmark, a main catalyst in the 1987 crash. In the Russell index pver 5 years, the broad markets are riding, but fewer and fewer stocks are lifting the market. This is troubling. The Bloomberg World Index shows that only the US market is making new highs, not the rest of the world, and this is unsustainable. As stock markets weakened in 2015-16, the Eruo and the Yen weakened in tandem well in advance. This is weakening again now. He wants to see a strong Yen here (he doesn't like Japanese bonds or stocks). A trade idea is Invesco Currency Shares Japanese Yen Trust (FXY-N) that exposes Canadian investors to the USD which is good in a downturn and long exposure to the Yen, too. We're heading into currency wars.

Market Outlook The US Fed is likely to decrease rates by 25 points this week. Central Banks globally are trying to avoid having the economy sink into recession. He questions whether they have that power to delay it indefinitely. The business cycle is coming close to the end and he wonders if President Trump is trying to create a trade war ahead of the next election. The US 10 year treasury yield has dipped below 2% and could fall into negative territory. As long as we are below 2.7% yields we are in a financial "repression". He thinks we are already in recession and the bond yields are already telling us this. We actually need a recession.

Time to invest in Canada? He has been down on Canada for the last 4-5 years. He has sold the Canadian dollar. He does like software in Canada. The energy sector has been an example of wealth destruction. Investors should be using cash to pay down debt right now -- the best return in this market.

US dollar He thinks investors will flock to the US dollar when the economy slips. This could be accentuated following the next US election.

Bitcoin? He just does not understand how people trust bitcoin, where participants are people trading in the basement in their underway. He favours participating in blockchain technology instead.

Wait and see for Powell's Fed announcement on Wednesday 2 pm. At the end of May, there was some talk about a rate cut and now it's front and centre. These are unprecedented times. There's talk of a cut of 25 basis points this week with more, maybe, later. But we're sitting at low unemployment. If 50 basis points are cut, then bonds fall off a cliff and everyone will move into riskier asset classes (stocks). This will lead to a melt-up--and this is frightening. Think about how to be defensive....Beyond Meat is selling off after hours, because management is selling stock; BM is the first in this space with others launching soon, like Nestle and Maple Leaf Foods. They just did a second offering in order to stay ahead of the pack with R&D.

Should there be 33 holdings in a portfolios. Generally 30. If you have 10, then if one of those goes down, it will impact your portfolio. Remember to equally weight those stocks, selling off shares to return to 3.33%. Re-balance. Sell into an increase (strength). You don't get emotional doing this.

There are two markets. Bond markets are going down due to a likely US rate cut because of slowing world markets. Meanwhile, stock markets are hitting all-time highs based on hopes for a trade war treaty and rising growth. It's a paradox. Real growth is slowing. We'll see if there will be two rate cuts and if both are needed. Consumer sales are sluggish, merely OK. We have a manufacuturing recession globally. We have expensive defensive sectors like utilities and REITs (and you should sell them), but materials have too much negative momentum. You're stuck in the middle.

National Energy Board rejecting review of Coastal GasLink pipeline. Longer term if we can get a better price for the products we have in this country it's going to be great for Canada. Building new pipelines is going to create new jobs and create new opportunities. We just have to do this in the right way. Hopefully this will lead to a better economy for Canada.

Canadian Energy Sector. Fundamentally there are 2 issues. One is on the coast, probably a lot easier to put together, the other one really across big jurisdiction and having a lot of opposition. Even if we started tomorrow, it would take quite a while to build those pipelines, 3-4 years, and quite an undertaking. He prefers energy names outside of Canada at this time.