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

Short-seller Andew Left at Citron: Left is a good presenter. What bothers him is that Left has taken him out of some names (he got stopped out) like Shopify. Now, Left is attacking Nividia. It's bothersome, because there are over 30 analysts also commenting on these stocks. Why does Left get all the attention? Because pessimism carries a lot more weight than optimism. Pessimism sounds smart. Left's track record isn't that great.

Wild volatility these days, so to stay focussed buy companies with good balance sheets and growing dividends--and now you get them on sale. As a general rule, the safest upside has been companies that make the components inside tech devices rather than the big tech companies themselves. FANG remains expensive despite the current pullback. There is a changing pyschology in the markets. Value stocks and telcos were popular post-recesssion. Today, it's growth. Trump is taking big swings, but is playhing Russian roulette with a trade war, which is dangerous. The voter base supporting Trump will now feel the pain of his tariffs and moves. There will be challenges to the Canadian housing market, and we'll definitely see the impact of rising interest rates.

Canadian banks have been wonderful places to invest, but after the recession many banks have cut senior staff and hired younger staff. Do they have enough seasoning? He's concerned. Banks are a good place to hide now, but there are even better opportunies elsewhere.

Advice to weather current volatility: Trump is being increasingly irrelevant. Eventually, he will take guidance. Don't pay attention to the noise coming from the White House or his Twitter account. The market fundamentals count.

Canadian dollar 6-month outlook: In the past year, the Canadian dollar has been difficult to manage for investors. We'll likely see an interest rate rise here. The U.S. dollar should weaken as ours rises against other currencies like the Euro. If you're going on vacation, wait till the rate rise is done.

The market is in a quiet period ahead of earnings, when companies are blacked out from buying their own stock. Volatility has also risen earlier than normal this year. Investors have become lulled into a false sense of security and we should think of the recent volatility increase as normal. He thinks time will allow corporate fundaments of sales, earnings and cash flow to catch up with recent market peaks, so the recent market retracement is healthy. He has been reducing beta in his portfolio, which has created an opportunity to purchase good dividend yielding stocks recently.

Interest rate impacts on income stocks. Market expectations are for two more rate hikes for the Bank of Canada this year. Not all income stocks react the same to interest rate hikes. Those companies heavily laden with debt, like utilities, who might have refinancing risks could be at risk. However, dividend growth companies with lower debt and some REITs with growth opportunities will be interesting. This is where active managers shine.

Pipelines and no access to Asian markets? We are too late to the party, because of no pipelines. That leaves Canada stuck with the U.S. He likes pipelines, but we really need to get our resources to Asia where growth is going to happen. Our federal government has to take the lead in building pipelines. Ottawa has to take a stand. We need a national strategy. Maybe Justin Trudeau can benefit Alberta in contrast to Pierre who alienated Alberta in his time. The WCS vs. WTI spread will only widen, leading to higher inflation, and gold is a haven against inflation.

Market. He sees the potential for a nasty downside in the general market, on the order a further 10% correction. He thinks that natural gas has been beaten up badly but oil has not. Demand for oil will be lower in April/May/June than the winter. He expects a big increase in inventories and he thinks we will bust $60. If the market has a 20% correction, which he thinks is normal, then oil could drop below $50. He recommends holding off on buying oil stocks. He thinks natural gas stocks are cheap and that there will be a fabulous market for oil stocks at the end of Q2 2018, after we see the end of the coming oil shakeout.

Aramco. He thinks that they didn’t want to make disclosures and conform to accounting standards to the level required by SEC for American exchanges. So they are probably planning on listing just in Saudi Arabia or doing private placements with Russian or Chinese investors. ?

China denominating oil contracts in its currency is a game-changer, because of the convertibility to gold. History shows that whenever governments take on debts it cannot pay back, it resolves this by changing the currency reserve, which today is the US dollar, and in the 1930s was the UK pound. Now, it's the Chinese Yuan. This has massive consquences for the global economy. China thinks, all the infrastructure projects are in our backyard, so why do we need the dollar? It is re-monitizing all the gold it has taken from the west since 2008.

Price of Gold fixed to the U.S. dollar? He's working under the assumption that central banks have been manipulating the price of gold. Gold should be trading north of $2,000 and as high as $5,000, based on inflation and geopolitical events. If gold was this high, then investors wouldn't be running to the Dow as much. China has benefitted from this manipulation by buying gold in western and central banks. We should see a rise in gold's price in the future.

Junior Gold? At the recent PDAC he sensed a difference. All the producers he met are extremely well-positioned. Anyone producing now with low-cost production in quality areas has been making a lot of cash flow and balance sheets. The cost reductions of 2014-5 have since kicked in and those companies are now really benefitting. Now's the time for good stock-picking among all gold producers, including the juniors. His criteria: solid managment, low-cost production and geopolitical location of their properties.

Market. China is not hitting the soy bean market which would have been a bigger hit to Trump’s base. Theirs is a very measured response. It all has to get worse before it gets better. This is game theory. We are not at the brink yet in terms of pushing back against tariffs. Trump may get a better trade deal with China specifically. The intellectual property theft that China has been getting away with has to be addressed. Energy stocks disappoint him. Oil prices are holding up and he is disappointed in the stocks. And it is not just our landlocked oil – it is also the US.

LIBOR (London Interbank Offer Rate). It has spiked recently, because of technical reasons – repatriation, for example. When the LIBOR spread widens that usually means banks have little trust for each other, but not this time. He is monitoring it, however.