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

Nobody likes a prolonged sell-off. Money managers, in reaction to clients calling them during this correction, are selling the baby with the bathwater. Today, oil went down 7%--uncommon--and there was a lot of negativity about Boeing, which is a barometer about China/US trade tariffs. Boeing called off a conference call, and investors want information about their companies. This selling stampede will continue and it's indiscriminate, then a rotation in the value names. The next few weeks will be telling. He has sold off and now holds up to 45-70% cash in some accounts. Investors are running to defence stocks. If the S&P can bounce off its 2018 lows from January and October, then that's positive.

Market. The conference this weekend was a bit of a surprise. It looked like they were making some progress. Theft of intellectual property is a big thing. He is doubtful that this will get solved two weeks from now in Argentina. The markets for the next little will find this to be a significant negative factor. The price of oil for the last 8 weeks has been making lower lows and lower highs. He does not see that it will collapse now. We will probably get a tradable bounce in the energy sector. As global numbers have come in the last number of weeks, purchasing managers are cutting back. The Fed is indicating they cannot raise rates as much as they thought they could do a month ago.

Oil and Natural Gas – An ETF for gas and light oil. There is a split between traditional oil production and natural gas. ZJN-T covers this in Canada. XEG-T is the broad Canadian energy market. ZEO-T is equal weight. There is no split between heavy and light oil via ETF.

Why are Natural Gas stocks dropping in the face of a boom? They are outperforming the oil stocks. When people sell an ETF they sell the whole sector including the gassier companies. These stocks should be going up. The market is considering this spike in natural gas as a non-permanent thing.

Bonds. You have fixed coupon bonds and floating rate notes where the coupon adjusts so the price does not. Floating Rate and Reset Preferred bonds are better in a rising rate environment.

Canadian Banks, BAC-N. See his educational segment today on Canadian banks. The US banks will make weaker lows before new highs. He is long on KRE-T (US Banks).

Educational Segment. Covered Call ETFs. All the ETF providers write Options differently. The Covered Call bank ETF vs. the non covered call variant were compared since inception. In 5 different periods, ZWB-T went down less in market downturns. In strong periods, you make most of your money. The covered call exposure significantly underperforms the non-covered call strategy.

Market. The Texas rail commission in the US used to mandate lower production to boost oil prices locally in the distant past. But today, the NDP government in Alberta will probably not do that. Governments should not do this and the industry created the differential in oil prices themselves. Some of the companies that brought on extra capacity don't have the refinery capacity to refine it. He has been bullish on Natural Gas. Some funds are having to unwind their trade on oil vs. Nat Gas and that is forcing the price of oil down. He is turning bullish on oil.

Oil. We are already seeing oil prices reacting to the cold weather. There may be only one or two more weeks of inventory build. We have a dollar or two of downturn in oil and then tax loss selling, but after that: buy, buy, buy oil stocks. He likes condensate, light oil and natural gas.

OPEC meeting in early December. They are talking about cutting back production but only one country will do it. Differentials will narrow as a new refinery comes online. However we need asphalt season next spring to boost the stock.

Another sell-off today: we will see a bounce, but we are late-cycle and investors have trade concerns and about interest rates rising by central banks. Now, investors should be defensive. If you have cash, you can find some opportunities to buy oversold companies. He can't predict the bottom. Instead, focus on companies you like, maybe buy on days like today, considering dollar-cost averaging where you buy a company over a few weeks (buy-wait-buy). He has 20-25% cash and has invested about 4% of that recently. This is a normal correction, not a bear market. As for tech, Netflix and Amazon are too expensive now, but Google is good now.

Global energy. We have endured the worst sell off in history in crude oil. The market has looked at Trump issuing waivers for 180 days to 8 countries. This allows certain countries to import oil or condensate over the 180 days when the market thought exports were going to zero. The major countries have reduced their imports. He thinks there will be a monstrous cut in production from OPEC on December 6. OPEC will do whatever it takes to balance the market. It is speculated that there was a fund long oil and short natural gas. But with crude selling off for 12 straight sessions and NatGas spiked about 50% in the last week or so that created pressure on oil. He is bullish on heavy oil. The WCS differential tightens over the next 3 months. Refining is coming up, crude by rail is ramping faster than anticipated and voluntary shut-ins being announced. The market is balancing by Q1 of next year. However, very few care about the Canadian energy sector, but that creates some real opportunities.

Prospects for heavy oil producers: He still believes we are in a multiyear bull market for heavy oil market. There has been a surge in US production that caught a lot of people off guard. OPEC will cut and tighten supply. Canada is out of pipeline capacity. However, government seems to remain inactive to deal with pipeline capacity. Our oilsand companies are working within very environmentally friendly manners. With the addition of Line 3, and ramping rail capacity, and voluntary shut ins, the market will balance by the end of next year. He remains bullish oil, and bullish WCS differentials.

Volatile time in the markets? Stocks that have been darlings have all sold off. This is the perfect time to look at names you’ve been waiting for.

Is tech way oversold? When he sees headlines like “death cross,” it gets his attention. This is where he gets interested in oil and NASDAQ stocks. Tricky to pick a bottom, you have to be patient. The closer we get to a bottom, the more volatility you see.