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

Number one Black Swan Worry. A black swan is supposed to be something no one is thinking about. Trump's end of term would be one. But over the last few years we doubled the debt in the world without creating growth. The US and China have horrible fiscal positions – Japan also. This is the catalyst for bad economics over the next few years. This would be the Black Swan: a credit problem.

Educational Segment. Sleep at night. ZZZD-T was launched. A study of pension fund data yielded that returns were from asset allocation. It is not what securities you pick, but asset allocation that drives returns. Over the last year there is no return in the fund. The total world ETF and Canadian ETF performances are worse. He has been adding to exposure when it was dropping. He moved into ETFs with lower downside. He caught most of the upside. He won the Lipper award for best risk adjusted return. www.ZZZPorfolios.com.

Market. This is a little bit of a bounce. The market was oversold. This is a key time because we are going into earnings season after having terrible economic reports. When you have negative news and the market rallies that is good. But C-N today came out missing on earnings with revenue up. Seasonally this is a good time to be in the market but we are jostling back and forth. The TSX has been advancing nicely since the beginning of 2019. We have to get through 15,300 which is the resistance level. He thinks we will see some muddling around for the next few months.

Tax loss selling/Santa Clause Rally. Investors sell losers in December to offset gains and it drives that sector down temporarily. It was the energy sector this year. He usually sees a Santa Clause rally but it was late this year. People use the Santa Clause rally as an indication of the rest of the year.

US Banks – BAC-N and JPM-N. Seasonally strong until the end of April. BAC-N is expected to come out with earnings. This is a positive with C-N today. It is bank week this week for earnings releases. If we see positive action this will be good. BAC-N is up on good news with C-N. JPM-T has done well relative to the sector. BAC-N is at a base going back to 2017. He is favourable on US banks. However he is not falling in love with them.

2017 saw the lowest volatility and nowadays it is mean-reverting. We had 10 years of very low interest rates. When the central banks take away this liquidity, that results in a lot of volatility. Historically, when central banks pause (or reverse rates) it's scary, and central banks are doing that now. When the cycle turns (which he believes is happening now), who will buy the riskier assets out there? This worries him, referring to the October 2018 sell-off. He feels the credit cycle has tipped over, and in a year from now there'll likely be a Canadian recession, and within two years a global one. He expects more downgrades coming in the next earnings season. It's not the time to panic-sell, but when you see a rally in the market, lighten up your stocks.

Vanadium outlook China will be greatly impacted by U.S. trade policies. Until this is trade war is cleared up, numbers we saw last weekend are to be expected. It's underrated how China has been a huge contributor to global growth. Not only vanadium, but all the base metals will be effected by the trade issue. A free trade deal will help, but he thinks the credit cycle has turned. He's negative, but there could be a short-term pop if there's a trade deal between China and America signed.

Market Outlook He is 75% cash right now. He is glad the market is rebounding, but he does not really buy into it. He sees the economy slowing down still and black clouds are still forming. He is focusing on stocks that are not going to be impacted by today's market uncertainties.

Gold Strategy. It will always be volatile. He reads a lot of analysts suggesting this is the time to get back into it -- especially with some market uncertainty. He prefers owning bullion bullion rather than individual companies. He thinks it is hard to find companies that avoid accidents. He likes owning a basket of stocks.

It's been a good week. The selling was overdone, given record employment levels in the U.S. and other positive indicators. Corrections must happen. He'd like to see a base building, though. As long as there's a momentum happening, he doesn't see a recession, which may happen in 2020--and even that could be too soon. Trump as well as the Democrats have been talking about infrastructure spending, which could extend a positive market. China-US need to reach an agreement; it would benefit both especially China. Both countries are realists and he believes they are working towards an agreement. US Fed Chair Powell should go easy on rate hikes, and it seems like he is now.

When would you buy a gold stock? You buy these stocks when you expect currencies, namely the US dollar, to weaken, and when inflation rises, which eats into your assets. We haven't seen serious moves in gold lately, only minor ones.

Market. Since we got super oversold back on Christmas Eve, we bounced up. Base metals look good; energy, base metals and technology look really good. Around the 24th we saw a further rollover of the US$. It will support emerging markets amongst others. We should move ahead strongly at the end of January. The base metals move inverse to the US$ so as it is breaking down, we expect base metals to go up. He expects a multi-year bear market in the US$. The 10-year US note is falling with the price of oil. These yields should now continue higher.

US$. The billions of repatriation dollars are probably ending? There was a bit rush of money coming back in so we could start to see a fall in the US$ rate. The Canadian dollar has rebounded since Christmas. We will run into resistance around $0.76. You will probably see a continuation of the strength in the Canadian dollar. Resistance would be at $0.80.

Utilities vs. Telcos. Which Sector? He would look at a basket of them. XUT-T is a utility ETF. For Telcos he would get a basket directly because of the ETF's volume. In case rates go much higher he would not get a large position.

Market Outlook - The Market got oversold on December due to negative sentiment. Concerns about US trade war with China, flat yield curve flattening and oil price collapsing and a misinterpretation from the market on what Powell said about raising rates regardless of what was going on weighted on sentiment. Powell then talked again and he said that he was data dependent. The Bank of Canada said the same recently. That provided relieve to the market. The preliminary holiday sales estimates indicate that it was a strong season. Unemployment is still low. It is too early to say.