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

There is some panic buying in commodities. The world cannot work with current oil prices. It is recessionary and stagflationary. From a bonds and stocks perspective, it adds to the uncertainty. Do not know if last night was the high. Trimming exposure in energy on strength.

We have been in a reflationary environment which is turning into an inflationary one. Inflation erodes purchasing power. You can go to cash but need to own assets that will offset inflation. Commodities are moving into a new structural bull market. Investors are underweight materials and energy. It will take a while for them to re-position. The energy index was down 90% from 2014 to 2020. Could see a pullback but a year to 18 months from now prices should be quite a bit higher for metals and energy. Inflation and higher interest rates will discount future earnings which affects techs, health care and consumer stocks which do well in a dis-inflationary environment. This could go on for a period of time.

The question was on gold. It needed a technical set-up and has consolidated in the past year and a half. Now the upside in gold and silver is significantly higher and shares could go 50 to 100% higher in the next two or three years, along with other commodities.

Today's plunge on worsening news in the Russian invasion of Ukraine There's no bad weather, only bad wardrobe. The current market is not in the same as march/April 2020. Now, we're dealing with the the Fed's hikes, US midterms and the travesty by Russia. Throw in nukes into the conversation. This will be a tough year. You need dividend and covered call stocks to get through this and not rely on tech growth stocks.

Bull or bear? It's tough to call it now. He's cautious. The Fed offered a lot of certainty over rates this week, but he remains very worried about inflation. The VIX is above 30. Lots of headwinds in the short run. The long run is hard to say. It's a bad time to be buying. He's more bearish than bullish. The Fed will raise rates in 2 weeks, but US growth has already started to slow. In the second half of 2022 when the tightening cycle gets underway--and strong employment grows--supply chains should ease and he hopes will moderate inflation, which sets us up nicely int he second half of 2022.

Today's sell-off as the Russian invasion worsens The S&P is in a slight correction, around 10% from the high. In energy and materials, though you don't feel the pain, but if you're int he ARK tech stocks, you are. He's bullish; he's buying dips. The 38% of S&P stocks now in a bear market, well that number was much higher last year. Paramount and Cleveland-Cliffs both fell and those were buying opportunities--those are examples of buying dips. Paramount was down 20% on earnings last week and he called a buy--and he was right. (CC was down 10% on earnings.) If you're in the wrong stocks, you feel terrible now. Build a diversified portfolio! If you can't handle a 10% correction--which happens yearly in tech--then you shouldn't be investing. Look at jobs growth in the US (job numbers beat today). Covid is fading--we don't even talk about it anymore. People will return to offices and factories. He does not see a recession. America, not Europe, does not propel the world economy, and America is doing darn well.

Average Canadian energy company trades at ~1.5x cash flow (historically has traded at 7-9x). Massive opportunities being presented to investors. Current multiples on Canadian energy stocks cheaper than ever.

World currently in the middle of energy supply crisis (surging demand, exhaustion of OPEC capacity, end of US shale growth & investment). Energy supply crisis presenting generational opportunity for investors. Current oil price ($100), average Canadian energy company can privatize & be debt free in ~3 years. Excess free cash flow will be returned to shareholders. Not too late for investors to take advantage of energy opportunity.

Markets. Our complaints pale in comparison with the conflict going on in Europe, and our thoughts are there right now. This will be a tough time. We're in a bear market. Experienced investors suffer through bear markets all the time, stocks just don't work, and it's hard to see any light at the end of the tunnel. At some point, the market will price in a resolution, but he can't tell when or how. Same thing happened in 2009 and 2020. There's no playbook for supply chain problems, inflation, Fed that doesn't know what to do, a war on European soil. His best advice is to not do much. Don't chase what's working, don't get rid of what's not. Just be patient, and let things play out. The worst thing you can do is fiddle with your portfolio because you don't like the prices.

Bear market, but hasn't the S&P not done badly in the last week? This is the difference between index investing and active investing. So many names are down 20-40% from highs in November. Some of the bigger names have held up. In the US, mega-cap tech is not down as much. In Canada, banks, utilities, and oil companies have rallied. But no doubt, this is a bear market. Many are at 52-week lows, especially high growth or those that did well in 2021.

Canadian banks and splits. Banks are flip-flopping right now, based on interest rates and uncertainties about the global banking system. All the banks have lots of capital, so he expects more share buybacks, dividend hikes, and surprise acquisitions. A good place to be. They usually only like to split shares when times are happy, not when news is negative.

Investing advice. Take the long view. It's hard to remain positive when every day is a red day. In the short term, asset managers especially can look really stupid. He's not a trader. For shares he owns that are down, he's looking past the sentiment and accumulating. What was first will be last, and what was last will be first.