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

If you look at employment across US sectors, the only sector that had an uptick was healthcare. Everything else has been diminished or falling, and the only thing that's making it up is the AI boom. There's less residential and real estate construction, as all the demand is being taken up by the data centres. 

If we didn't have this AI boom, we'd definitely be in a recession.

Nice thing is that any Canadian ETF will be largely skewed to nat gas. He can't comment on the individual securities, but likes buying them as a basket.

If you're income-inclined, look to ENCC (one of the Past Top Picks for today). Very high yield of 15%, with some ROC. Get the higher income while you wait for individual names to trend higher, when you can start adding those names. Balance the two strategies.

If you're bullish on nat gas, then you're going to be bullish on the Canadian producers. XEG is another big one in Canada. We're going to need energy produced from all sources. In 5-10 years we're going to see higher energy prices, and that's when you'll see the benefit of your investment.

There are certain estate laws around a certain size of estate in USD. Check with your tax professional on that. US ETFs don't make distributions of capital gains, so there's generally not much of a distribution other than the dividend. You don't reap the capital gain until you sell. So a Canadian owning one is deferring capital gains somewhat.

Sometimes the US one is cheaper, but you have the currency conversion to deal with.

There will be more of this type of setup to come. We need nuclear. In order to kickstart it, this is exactly what they're doing. He has no concerns at all with the US government partnering with Canadian companies. There's sometimes a little bit of animosity on Canada's side. But we share technology on uranium anyway, so that's not a big deal for national security. It's a great idea.

Will be interesting to see if we can leverage off of what they're doing down there. If we're getting serious about nuclear providing power, the only problem with nuclear is that it can take a long time to greenfield (up to 15 years) -- especially in Canada, as the process is so slow.

If you can start to build these units and standardize them, as they're starting to do, then we can piggyback and work with the US. This will also be good for Canada.

Oil is usually a bit weaker at this time coming into the shoulder season. February to May is a much stronger seasonal period as we ramp up for the driving season. Sometimes it can start earlier, so it might start in December this year. But it generally tends to be weaker right about now.

That really goes back to natural gas. Nat gas has to fill in during the short term, and there's no way around that. Nuclear can then be there for the longer term, but nat gas will fill the gap for the next 10 years. We've seen it with PPL and META signing a deal just outside Edmonton. We'll see more of those setups as well.

AI is a demand for that whole cycle. We're coming into the colder season, and investors want to front-run that so they tend to move into natural gas positions ahead of that colder season. This move tends to drive up the price of both nat gas and nat gas stocks.

One reason that healthcare and other defensive sectors have been beaten down is because everybody's chasing tech. There's also a lot of policy uncertainty with the new US administration. Also pipeline concerns about drugs reaching the end of their patents over the next couple of years.

The sector's recently looked attractive from a value perspective. Starting to see hedge funds get into the sector itself, seeing a bit of a bounce. Could see the sector do well.

All these companies are investing in each other, which creates a circular relationship. Sometimes he thinks it might be a symptom of so much money, they don't know what to do with it. Capex is huge, $400B last year for the Mag 7 alone. These aren't straight-up, third-party, objective transactions. You can't really tell what's happening behind the scenes.

Take-or-pay structure, totally different from the exploration side. Seasonality can actually start before the energy sector. So if you want to get into energy, not a bad time to look at the pipes. Right now, stay away from the major oil companies, and look to the pipelines.

Natural gas actually does well at this time coming into the colder months of the year (before the cold actually hits). Companies can actually do well ahead of that.

Doesn't expect any substantial agreement before meeting in Korea. Instead, he expects it to take years and years to play out. During Trump 1.0 they had a bunch of handshake agreements, yet China didn't really deliver on anything in the coming years.

Trump is mindful of that experience. But his ego demands that he gets the big handshake and can say that he got something done. Then he'll let the team work it out in the background.

Both sides will claim some sort of victory, but the important thing the market likes today is any plans to curtail rare earths minerals being deferred for at least a year. That tells us that there's at least a year before we have something material in terms of a signed deal.

One thing he likes that Mark Carney said recently was that Canada should expand trade with the rest of the world. One of the best ways we can do that is through our natural resources, including more pipeline capacity to both the East and West Coasts. If that's what the PM has in mind, then he gets a handclap from Larry. But if it's something different, good luck with that. Most of our trade does go to the US, and a huge part of that is still oil & gas.

Foreign business investment in Canada is important too. It's so hard to get stuff done here. Interprovincial trade barriers, regulations, and on and on. We really need that dynamic to change. Carney understands that, but whether he can deliver on it is the question.

In this earnings cycle he's specifically looking for the investment in AI and what the capex is for a lot of the companies, not just in cloud development, but throughout their enterprises. 

In a correction phase. Could pull back to somewhere near $3400-3600. That's where he'd want to put fresh money in. Violent move up and correction in the last few weeks tells him that we've likely hit some sort of speculative peak above $4000. He wouldn't be interested in any gold companies, whether junior or senior, until we get more of a correction.

How sustainable and long-term is this play in gold? It could be years. But we've also seen historically where you get these speculative things, they ramp up, and then it's dead money for a decade. That's a real risk to think about for this sector. It's not a no-brainer. 

He missed this last runup, thinking it wasn't sustainable. (So don't listen to him, he was wrong on that ;)  But he is bullish long term, and would buy this type of correction. There are a number of ETFs to play this, and they're all basically the same.

Portfolio Buffers

It's a monster week. FOMC rate decision, Trump and the APEC conference, all these trade deals. But the Fed meeting is this week with another rate cut and, possibly, discussions about the end of their balance sheet rundown. That's a very important liquidity catalyst for the market.

To think that we're not in a speculative bubble here, a lot of the events this week including earnings could boost that bubble. We get $27T worth of reporting in terms of market cap this week on the S&P. Huge week.

The first chart he's brought (courtesy of the Federal Reserve-St. Louis database) shows the outstanding margin debt in the broker-dealer community. We're at a peak that we saw prior to what happened in 2022. Lots of speculative froth in the market right now. We don't have a really bearish catalyst, except extreme valuation. Extreme valuation is never a good reason to sell.

But we do have some bullish tailwinds. One of the newest is depicted in his next chart, which is the size of the Fed balance sheet. For the past couple of years, the Fed's been doing quantitative tightening (running down their balance sheet). The chart shows the Fed balance sheet as a percentage of the economy, with red-shaded areas being previous recessions. Every time there was a recession, the balance sheet expanded as a percentage of GDP. Now the Fed uses the balance sheet as a standard tool.

If they're going to stop selling down their balance sheet, they're going to end up net-neutral or net-slightly-buying assets because of the way the runoff is working. That's really a liquidity boost to the markets. He expects them to talk about this at the upcoming meeting, and give some ideas about when they might end quantitative tightening. A very bullish catalyst.

Next graph supports how it's way too early to call a top, even though the speculative froth and sentiment are both there. The point on the graph marks December 1996 of Greenspan's famous "irrational exuberance" speech. The S&P doubled from that point. So even though Greenspan felt that markets were irrational, he was 3 years early. No one can call a market top.

Though he's extremely cautious on valuation, there are enough catalysts to keep squeezing markets higher.

What you ultimately want to own are these buffer ETFs. When you're concerned about valuation, they still let you participate on the upside. But if markets correct as they did in April, you're going to go down a lot less because of the buffered protection. But if markets go up, you're still participating in the upside rather than going to cash and trying to time the markets (which he doesn't recommend).

Look at ZOCT or ZAPR.