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

Gold? He often finds this goes up ahead of PETA, the largest mining show globally, but thinks it is being pushed right now by Donald Trump, who is creating a tremendous amount of instability. People are looking to gold as a safe haven, but he doesn’t believe it is a safe haven. When gold went from $850 to about $250, you just don’t have anything going down in value that much, and have it as a safe haven. Wishes he had more gold in his portfolio. It’s a trade that he missed. He likes companies that don’t have a high debt load, or no debt at all. To find good companies with good balance sheets in the gold sector is very, very difficult.

Copper? Generally commodities are going to go up in value, at least in the short term. There is a big question mark out there with global trade. If global trade changes a lot because of tearing up of agreements and BREXIT, that will mean the demand for commodities will sink, which could hurt prices. Commodities have come back from a pretty low base and thinks there is further to go.

Market. We are seeing some pretty turbulent times. Donald Trump has rattled the market 3 or 4 different times. A very macro driven type market right now. Initially we saw a rally in equity markets because there was a belief that a lot of Donald Trump’s policies were pro growth, US job growth, tax cutting, etc. which spurs the economy. That initial reaction lasted for about 6 weeks, and then things kind of went sideways when realization set in with investors that a lot of his policies are also very protectionist, which will actually hurt growth and create inflation. After going sideways for a while, we have seen a bit of a brief respite. People are waiting to see exactly what type of policies actually get into place. Sees the market being good for the next 6-12 months, but beyond that, it is very difficult to tell.

Gold? Post the election, his initial reaction was that the market would sell off and safety assets like gold would rally. That happened in the first 4 hours, and then there was a complete reversal. Safety assets like gold got thrown out, and as a result, the company’s leverage to them sold off even more than that. Coming into 2017, as people start to question whether or not these policies get enacted, we are seeing people come back to precious metals. Even as some of these policies do get enacted, they are going to be inflationary in the US. He would stick with gold. There is a lot to be said for it.

Markets. Trump’s immigration policy is not going that well. He says he wants the US$ weaker. Border taxes will almost certainly push the dollar higher. There are conflicting policies. At some point the market wakes up and realizes there will be execution problems. The US will be VERY well supplied with oil for the next 5 years with Keystone coming on. This will put downward pressure on oil prices.

Bear Markets. Inverse ETFs will go up 1:1 when markets to down. Don’t use leveraged ETFs. Utilities are best correlated to interest rates. Gold can rally in a bear market. You have to look at bonds because they rally in a bear market.

Cyber Security. There are two ETFs. HACK-N is one. You get access to all the companies playing in the space. It has been trending since day one. He would buy on dips as the ETF has been climbing since its inception. Risks right here are a little high, however.

Educational Segment. Measuring Risk and Reward. Within 20 years the vast majority of money in the world will be run by computers. The traditional portfolio manager will be gone. E.g. SU-T, 25% of the sector, a big player. Going back 10 years it has made nobody any money for 10 years. It is up less than the dividend. Buy it when it is cheap relative to the benchmark and the markets. Figure out how much you need in your portfolio. The price of oil is the most important factor in the stock price. Looking at the 5 year chart it is incredibly overvalued.

Markets. The US banks are overcapitalized greatly so expect special dividends, increases, buybacks etc. He is expecting more lending and so on that will make them grow. If the US economy grows overly, people will pile into the US $. Eventually all that reverses, but that would be a long way down the road. If we can get capital investment going again, that is all positive for the US$. It is positive for material stocks.

Market. The month of February tends to be a little soft i.e. choppy. On top of that, there is a unique formation. Last week the market hit a new high on a gap i.e. it opened higher than the previous day it closed at, and then it spent 3 days at a new high level, and then opened down without ticking down, an island. Since 1975, every time a 3 to 7 day island happens, we tend to get a 1% drawdown over the next 30 days. With February normally being a seasonally choppy month anyways, along with the “island reversal” he is going to give the market a good chance of being choppy over the next few weeks. However, we are still in a bull market. If the market dips low enough, it is time to Buy.

Auto parts sector? These tend to be choppy. They do tend to have a little bit of a pattern of moving up into the spring, along with industrials. He is cautiously optimistic.

Covered Call ETFS?

He likes these. He has 2 platforms. One is an equity platform that has a high turnover and which he trades frequently. He doesn’t pay a lot of attention to dividend stocks on this one.

The other is an income paying platform. It has some bonds, but it is 50% income paying stocks. In this, he has at least one Covered Call ETF, Canadian Banks (ZWB-T). He has also traded the utilities (ZWU-T). Both of these are pretty good products.

Currency? (You can also check out his blog on his website, ValueTrend Wealth Management.) A one year chart of the US dollar versus the rest of the world shows that it has recently broken down a little. However, looking at a 3-5 year chart, the US dollar is coming into a level of support. On a worldwide basis, he doesn’t see the US$ having a whole lot more downside. A Cdn$ chart will probably show a bit of short-term strength, particularly if oil picks up over the next few months. Over the long-term, he would be long the US$ versus the Cdn$.

Precious metals? As far as gold goes, the seasonal pattern ended around the end of the year. Seasonally, it tends to be neutral to flat, but also has a pretty strong technical resistance. However, silver tends to enter into a positive seasonal period right now. Also, the chart looks like it has done a bit of a bottom formation break out, looking like it has a little more upside and probably has 1 to 2 more months of upside.

REITs. It is hard to find screaming bargains as the sector looks pretty fairly valued right now, especially in Canada. He is not seeing a lot of income growth, so they are not able to raise the rents a lot. There is also concern of the interest rates. The yield is going to make up most of your return going forward. The market has been very counterintuitive and very challenging for investors. He is seeing more value in retail REITs in the US. If you can isolate the locations you think will be the “go to” shopping centres, there are good opportunities there. Simon Property Group (SPG-N) is a REIT that seems to pick these up.

There are a couple of Trump risks that do affect REITs in the US. There is the 1031 exchange which allows a sale of the property and then the immediate reinvestment of the gains into another property, with no tax having to be paid. This is a great benefit to Canadian REITs that are buying US properties. There is talk that it will be repealed, which will change the game significantly. Also, if Trump reduces overall taxes, there is a concern that it will put downward pressure on US REITs.