A Comment -- General Comments From an Expert

A Commentary

Market. Friday morning, 10am, is the only thing that matters this week. What is Powel going to tell us and the world about US monitory policy by the Fed. Last time he was clear that this was a mid-cycle course correction. There is hope that he says that maybe things are slowing and it is more than a mid-cycle correction. Nobody knows if it is the case, this is an experiment in real time. How do you get people to spend more money? Policies designed to stimulate work until debt levels get toxic.

Hong Kong Situation and Exposure to Portfolio. There is some tangential exposure through capital markets' risk. As a percentage it is pretty insignificant. There is probably non-financial systemic risk in it. But economical output coming from Hong Kong is huge and real estate values are the most overvalued market in the world. He is worried this represents an impediment to a trade deal with the US. There is some belief by China that the US is behind all of this. This is not going away any time soon. He thinks this is a big negative. Chinese stocks are amongst, however, the best valued in the world so he is increasingly looking at adding exposure after a broader market correction.

Educational Segment. Collapsing Bond Yields. He is looking, in his next road show, at the difficulty with these low interest rate environments. We have about a quarter of the world's bond universe with a negative yield. Negative debt in the world Tops $16 Billion ($15 Billion last week). We have now started to see conversations on main stream media about inverted yield curves. The 3 month to 10 years curve has been inverted since May. This has historically portended a recession in a year or two. We could be one foot into it. He is worried about inflation at some point.

Market. Trump and Powel have an on-going battle where Trump wants lower rates in his trade war with China. Trump is not wrong. The Guest thinks rates will go lower. He has a buy and hold approach. He has done a few tactical trades where you sell safer holdings and trade into volatile holdings, looking for a bounce. The first round of trade wars were things that could be sourced from elsewhere. He is buying this volatility when it goes down. Some sectors are probably in recession right now. It is possible that the recession people worry about is playing out right now. It just isn't playing out across the entire economy.

Clients are happy they're making money now. Shopify is doing well for him, though the FAANGs aren't right now. Yield inversions and the China-US trade war are confusing investors. We're not close to a recession. Over 20 years, the chart looks normal. US housing sales are losing momentum, but it's not out of the ordinary. Don't buy ETF's but individual stocks in the U.S.

Negative bond yields worry him, and predicts a crash. The markets are much different and complicated than investors realize. There's a lot of U.S. debt and monetary fiscal policy at play. He doesn't believe that things will far apart like this.

Which two Canadian banks to hold, sell the rest and hold cash until the fall sell-off. He's underweight the banks but likes their stability. RY is good, but BNS is the riskiest.

He's not buying the dips despite the market seeing an oversold bounce. Sweden's entire yield curve is below zero. Sinking interest rates point to zero or negative world growth in the future; and it's good for gold. He's very bullish gold. The stock market in the past few years have been in a bit of a bubble. He's slightly short the market. It's not too late to jump on the gold train.

If interest rates hit zero, will Canadian banks suffer like European ones? Canadian ones enjoy an oligopoly, so there is some protection. In a downturn, banks will struggle to make profits, but they won't plunge like Europe's. Regulators in Canada are diligent to avoid subprime mortgages among our banks, even though our real estate is very overvalued.

There is a lot of danger out there. After 2009, people were nervous, but after there were fiscal expedient things. Politicians have been boosting the economy and has run deficits. Lowered interest rates means that there is less ammunition to fight a recession.

A negative interest rate is not favourable, even though it boosts economy. Germany has negative growth, China is slowing, and it may lead to worse times.

People are too worried about deflation. Negative interests rate would be a shame, and people should be cautious right now.

Silver. Not as excited about silver right now, although there are some that say that the silver-gold ratio is growing.

Market. We are in uncharted territory and no one knows where it is going. The 5 most dangers words are 'this time it is different'. Investors are starting to get used to zero interest rates. The global economy has peaked and is slowing. Everything is based on valuation. There will be a recession sometime but he cannot tell you when. When stocks in a sector look weak, you want to lighten up on them. Focus on a long term time horizon. Go for quality and attractive valuation.

Oil. He is not a fan of the Canadian energy sector as they are terrible allocators of capital. They invest all of their cash flow and borrow money at the worst possible time. He has a zero weighting.