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

Markets. He has a list of reasons why he is bearish. There is always risk and always reward, depending on the market. The potential upside is 3-4% of the old highs. On the lower side there are the summer lows of last year. We are at the top of the lid on the market. We are in a high PE situation with mediocre earnings. The VIX is very low, showing that people are too complacent. He is hedging. And then there is the saying, ‘sell in May and go away’. He reduces each year and is doing so early. The transport stocks on the S&P are not matching the industrials. Look at CP. It has been in a downtrend.

Selling in May with respect to income stocks. He continues to hold the income stocks. He only goes to max 50% cash for the summer. He moves into lower volatility.

Market. We seem to be in a netherworld. On one hand you have the Fed trying to push rates higher, almost as if it’s a credibility issue, and Central Banks trying to use stimulus. In the next few months, expects we’ll see a rationalization between how much can the Fed lean into the wind all alone, and how much will data come back to them and get them back to talk again about their negative interest rates policy and all the things that have crept up in the last couple of months.

COMMENT. His targets are always in terms of a year. If you don’t get action towards them within the first 3 months, they probably don’t manifest themselves.

Gold? Right now there is a dichotomy of 2 opposing forces. The gold ETF (GLD-T) and the actual spot bullion. He has a much lower target for spot bullion of around $1,175. On the GLD he has a $163 target, which would translate to about $1,600. There has been a base from last November, which is quite positive. If we can get above $1,375-$1,380. There is a lot of air space to about $14. Producers will always lead the commodities, both to the downside and to the upside. Looks pretty good in here. (See Top Picks)

Markets. There were 2 bull markets after the 2^nd world War. Two charts comparing 1949-1959 and 2009-2016 show that markets work themselves higher, but in a zigzag fashion. We are currently in a consolidation period, similar to what we had 1949-1959. The market went higher in the 60s. It started below 80 and went to 1000. In this market move, we started around 8000, so we have a long way to go. In the 1^st wave people are very tentative because they don’t want to go through again where the whole market falls out of bed. Global GDP growth is all positive with an average 2.7% growth. You can’t have a bear market when the global economy is getting stronger.

US$. Feels that the rally for the US$ is dead now. In the currency markets you get long moves, we have had a good move in the US$, and he thinks it has topped at least in the mid-short term. There is going to be a rollover, and that is going to allow all the things that were negative, when the dollar was going up, to get reversed and get positive again. We should now get a relief rally.

Lithium? If Tesla’s Musk can come up with the battery pack, which was promised some time this year, that changes everything, including the automobile business, energy storage, etc. He would be from Missouri for the time being, until there is proof that it works. If it does, this is an area you want to look hard at.

Markets. 17 years on Market Call! We had a nice pullback on the US$. We have seen in it commodity prices. He thinks the US$ will retrace back to its previous highs. This is a long term story. The US really wants to raise rates, but the world and China especially is saying they can’t put up with a strong US dollar. We went from risk off to risk on in Mid-February. In risk off you want the safest assets. The US election is this year. Normally the election year is good and the president’s first year is a tough year.

EBV lines creator. The original work goes way back. He thinks balance sheets are way more important than income statements. He made the model price algorithms his own.

Markets. We are at a resistance point, but there is enough good news out there. We need something positive on the energy side and that would probably carry the TSX through that resistance point. He would hope to see 2%-3% in this next quarter, but we are in a slow growth period. You can’t expect equities to take off when we are talking about 1.5%. Expects we are going to be closer to 2% GDP growth this year. Has been disappointed in the banks this year. The big Shorts out of New York haven’t helped. There have been a lot of Canadian managers that have been red hot on US banks, particularly the regional ones, and he thinks they were wrong. The new rules on lending in the US are really hamstringing a lot of the regional banks. They are going to be dead for a while.

Gold? He used to be a gold holder, but doesn’t own any at the moment. He is a traditionalist in that you really get into gold when you see problems with inflation. He could see people getting concerned because of negative interest rates. It has had a nice run, but will probably have to give some of it back.

Market. The S&P 500 is in a zone, and has kind of broken through, getting into a resistant zone of $2015 - $2021. To break up through that would be very significant and very positive, but it is going to take a bit of time. We are coming into earnings season’s, tons of idiosyncratic risks, and a lot of things to pay attention to. On a positive note there has been the largest reduction in earnings estimates going into this quarter since the financial crisis, which sounds terrible, but if the market has held in and is in a resistance zone and you have set the bar low, that can be positive. The hardest thing to do is “nothing”, and sometimes that is the right thing to do. The earnings season is coming up, questions about the Fed raising rates or not in June, the UK staying in Europe. You also have the GOP convention coming up in July. These are very significant catalysts coming in the near term.

Markets. He looks at a number of different things, top down and both economic and market indicators. A couple of months ago he was fairly negative on a lot of the things he saw and had a fairly big cash position in his portfolios. He watches earnings closely and tends to be fairly active around earnings.

Market. The market does strange things during a US presidential election year. A chart showed that from the beginning of April through until the end of May, markets tend to go lower. This is because we don’t know who are going to be the final candidates prior to the convention. By the time we get to the end of May it is pretty well figured out, and the market goes higher through until September. By that time, we know who the final 2 candidates are, and they try to make nice and try to consolidate their party behind them. Everything is positive at that time. The conventions come at the end of July, and by September the brickbats come out. This year is going to be particularly difficult because they changed the US election laws and the super PACs are no longer limited at funding the advertisers. Early September until just before election Day the market goes down because of uncertainty. Then you have a president who has a mandate and people come behind him, and the market closes on the upside for the year. (Economic and earnings cycle looks much better in Canada than it does in the US.)