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

Why don’t oil producing countries cut production to get the price of oil up? Most OPEC countries over produce to try to reach their budgets. OPEC is not in a position to rebalance the market. There is a lot of production inshore and off shore in the US (the Gulf). There are a significant number of projects that are ramping up.

Housing prices. Historically to break housing prices, you need a spike in unemployment. He does not know when this will happen. There is only a small chance of recession in the US. CMHC has published concerns about the housing market.

Markets. Everyone wants to call an end to this run. We still have an accommodative federal reserve. Stocks are not cheap, but still so much cheaper than 10 year bonds and cheaper than real estate. People are still so nervous of the small or big gains they have had. People need dividend stocks. He does not see a high interest rate environment. Dividends are a staple in people’s portfolios.

How much to keep in Cash? [Caller had two of four kids in University]. You want to be mathematical about this. When these liabilities become certain you want to invest in things that cannot fall down. It depends on your temperament.

Markets. This Monday the Americans may give the green light to the XL pipeline. Oil stocks are still discounting this news. There is a backdrop of international oil companies exiting Canada. Playing XL can only be done through TRP-T and so on and companies that piggy back off them. He thinks we will see $60 oil this year. Any week we will see refineries coming back online that are undergoing maintenance. The market will still be rebalancing in Q3 of this year.

Overweight in the Energy Sector? He has almost no cash in his fund right now. The risk reward ratio in Energy is incredibly compelling. Everything is getting ready to move. It is a case of sector allocation, rather than stock selection. He has moved a lot into the oil services sector. Seasonality is in his favour. It all comes down to US oil inventories. We are days or weeks away from that number going negative. Collective light bulbs in people’s minds will start to go off.

Canada/US Country Allocation. He wants to allocate largely to the US. He is fed up of having to worry about takeaway capacity, phasing out of oil sands, and border taxes. He has two Canadian oil producers and five from the US. They have a higher growth rate.

Fracking Sand. It is not beach sand. It has to be the right size and round. These names have fallen greatly this month. These companies are finding customers are now begging them to add capacity. You can buy a company where the product has doubled in price and yet they have sold off to half their price. (See his Top Picks today)

Natural Gas is always a call on the weather. February was the warmest February on record. He thinks Gas will average $3, or no change. Now is a crummy time to own Nat Gas stocks. Until June there is not really a catalyst to get these stocks going.

Markets. The budget does not make him change how he wants to allocate capital. This is the second budget in a row they talked about this badly needed commitment to infrastructure, but nothing has happened yet. The government should be careful in the future. There was speculation the government would increase the inclusion rate on capital gains, which they did not. Advisors had been suggesting people crystallize capital gains, but which was unnecessary. Don’t make investment decisions be based on tax and legal speculation.

Where to park US cash temporarily. You don’t get paid much for owning US cash.

Market. The market has basically gone up on thin air since the US elections. Even if tax cuts and infrastructure go through, they take a long time to filter through to the bottom line. The market may be realizing that those things are more difficult to implement than initially thought, and is getting quite stretched. He doesn’t think any US policies are going to be able to create strong sustainable growth. We still live in a very slow growth world with some deflationary forces, aging population, excess capacity and we are going to remain in the low interest rate environment. The market has gotten way ahead of itself relative to the growth rate. He is sitting on about 16% cash in his portfolios, way larger than what he has ever had, and waiting for whatever triggers a pullback such as European elections. The best way to make money is to be patient and buy when things are cheap.

Tonight’s show was a special on the Federal Budget 2017. Viewers were to call in as to how the new budget would affect them. Out of the 3 panelists, only one, Christine Poole, was actually in the investment area. In the first 30 minutes, there were no questions on any individual stocks, and very little discussion on the market. Also, with 3 panellists, it was very hard to track and cover who was saying what. Because of this, I have decided to forgo doing tonight’s show. Bill.

Market. This is an expensive market. Of course, valuation is not necessarily a timing tool, but you do have to keep your seatbelt fastened. The market is up 10% since election day, up 15%-16% just in the last year. PEs are the highest they have been since the dot.com bubble. Dividend yields are trying to hold on to the 2% level, so by that level, things are pricey. We are in a situation where interest rates are going up. The Fed has hiked 3 times, and have promised to hike twice more this year. Higher interest rates are never a positive for the market. People have to be cautious here. Short-term traders are looking at what is going on in Washington. The market has grown like a bat out of hell since election day, on the hopes and prospects of very progressive policies from the new administration. However, that is not a slam-dunk, as the Republicans are not united. A lot of strategists are now looking at what is going on with Obamacare. If they feel the Republicans, who did not support Obamacare, are not able to repeal it, what does that mean for Trump’s success in getting the rest of his progress policies enacted anytime soon?

Market. We are in a bull market. When corrections come in a bull market, they are swift and can be painful for a few days, but are generally over pretty quickly. People have made a big deal about not having a 1% down move in over 100 days. If you look at history, this has happened about 10 times over the last 30 years, and the returns that came 3 months, 6 months, 9 months afterwards were way above average. When you have long periods of time when volatility has been low as it has been, and then you have that 1% day, people tend to think of it as a shakeout. The most difficult thing in a bull market is to stay positioned. As a market analyst, from a whole bunch of different angles, the market continues to look very constructive, and it would be healthy to have a few sloppy days. The key themes that are in this market, are firmly in place. In Canada, about 50% of stocks are in long-term positive uptrends that has been slowly rising. In the US, it is about 66%. In the last 2 months, when the market has been treading water, the average hedge fund has gone from 110% to 115% Long to 80% Long indicating there has been tremendous profit taking over the last 2 months. This tells you how strong the bid is under the market because there has been really no downside.