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

PDAC (Prospectors and Developers Association of Canada's annual mining convention in Toronto): the mood here reflects an industry in rebound after being on life support for a couple of years. There isn't ubiquitous capital like the good, old days, but the current market is not too hot, not too cold but just right. The so-called battery metals--cobalt and lithium--are the hot story this year because of strong demand for electronic components including electric cars. Also, lithium is a new, hot investment, so there is no past disappointing history of lithium for investors. Toronto also is the epicenter of precious metals financing, which encourages gold equities. Cobalt can command higher prices if there was more supply, but most cobalt is produced in the Congo which unfortunately boasts human rights abuses such as child labour. Companies in consumer goods are afraid of tainted cobalt and want to control the production chain.

Copper. He's cautiously optimistic on copper which has had a very good year. The price probably continues to rise during this tepid global economic recovery which hasn't translated into wage increases. He's also concerned about Trump's threats to derail global trade.

Gold. The disconnect between gold and gold stocks this year will resolve in the equities' favour. Why? Expecations of the gold industry are so low, they can only be exceeded. Forthcoming quarters should surprise investors to the upside.

Tonight was a special Talking Tax show. No opinions were recorded.

Market. He thinks Asian markets (ex-Japan) and Emerging markets offer growth at a discount. There is still considerable upside there. GDP per capita is the real upside in these markets. The developed world has its growth behind it. In the developing world GDP per capita averages less than $10,000 US, whereas the Developing World averages over $47,000 US. India is sub-$2000 US per capita. You can park your money in these areas.

Piplines Comment. There is an oil export pipeline shortage, but we are trying to get into a market that is already filled. The best thing Alberta could do is build refinery capacity. We are a small country and must think tactically.

Emerging Market ETFs. He likes the emerging markets and if you are in, stay in. He prefers to be in an emerging market ETF than the S&P. There are better individual stocks to purchase however, in his opinion.

Marijuana Market Comment – The marijuana market in Canada is not going to see the growth others believe, he thinks. The black market already meets current demand. In reality the capacity to produce in the legalized world will outstrip demand by 2x and will create a glut in supply. The Colorado market, as a proxy, suggests an annual Canadian market of 600,000 kilograms, while the market is projecting demand of 1 million kilograms and building capacity to that level. He does not expect a new wave of users to develop – only gradual increases. The black market will not go away, based on the Colorado and Washington State example. Prices in Washington State for marijuana have fallen from over $20 US/gram in 2014 to less than $5 US/gram today. He thinks it is all hype.

Market. It seems like a step back for free markets with the announcements on NAFTA today. It will hurt Canadian companies’ bottom lines but in a couple of quarters companies will figure out how to adjust. Companies should build contingency plans into their plans.

Market. Today’s drop in stock prices, especially American stock prices, seems to come from trade uncertainty. The extent of restrictions on imported steel and aluminum is still uncertain as is the state of NAFTA, and the recent rhetoric is causing volatility. He thinks that Canadian stocks reacted less to this because trade uncertainty has already been baked into most of the stocks in the Canadian markets. He thinks that the auto space and the rails are not yet pricing in the NAFTA risk. We are not yet in an all-out trade war with the United States, but we are in an uncomfortable middle zone.

Market. He expects U.S. shares to end the year higher, based on stronger earnings and the tax package.

Oil Sector. There is a hug discount on Canadian Select oil because of transportation prices. He believes that in the next 6 months to a year, the capacity issues will be improved and the differential will get smaller. He feels that the next year or two will be favorable to commodities and will favor Canadian oil after the capacity problem is resolved.

Market. He thinks economic indicators look strong still. Small cap holdings do tend to sell off harder during downturns. The recent Canadian budget announcement did not have any surprises in their opinion. Going forward, the “Sell in May” trend may have already begun – he expects another 6 weeks of volatility. From there it will depend on economics and earnings.

Market. Investors are worried that the American economy is overheating with inflationary pressure on interest rate hikes, particularly after the U.S. Fed Chair's Jerome Powell's testimony yesterday. Powell is adding to the overall uncertainty: will there be three or four interest rate hikes? Compare him to Janet Yellen who was straightforward with her intentions. Even if NAFTA is resolved tomorrow, Canada's economic prospects aren't as rich as America's which has more visible growth. In fact, Canada is unsure how much Ottawa will spend on infrastructure. Where's the major catalyst, like a pipeline, to encourage our economy to grow? It isn't here.

Canadian Oil. We have $60 oil, but the oil differential with Canadian oil is vast. We don't have enough pipelines, which we desperately need. Crude by rail was supposed to be a solution, but they've gone away. Now, that we want to return to rail, companies like CP Rail want more. We're stuck with oil that we can't move. She's very bearish on oil and so is severely underweight Canadian oil. Skeptical about the ARAMCO deal.