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

There is finally a structural bull market for oil. Goldman Saks and JP Morgans are now calling for $80 oil in Q3. The party is just starting. His fund is up 70% this year. Stocks fell so much last year that they are up quite a lot. Even at $60 oil, you can buy stocks at 2-3x cashflow. These used to trade at 7-8x. Best measure is free cashflow yield. Companies need to commit to meaningfully increase dividends and buy backs. OPEC will be out of spare capacity by the beginning of next year, global off-shore is in decline and US Shale hyper growth is over.

Gold and inflation. Gold is manipulated. It's about the fiscal deficit we're in. The longer it takes to get out of this mess, the higher the price will correct. Buy right and sit tight. He owns many gold and silver producers that have massive leverage to the price, which will have to go higher. Copper is signalling a lot of money devaluation. Copper above $4.50 is a bad sign. People think that inflation means things go up in price. What it really is, is things are constant but money is devalued. We're facing a bigger storm because of the currency reserve. Look at the CPI number today. With all the stimulus thrown at it, it's not a good number. We should have had a much bigger rebound. We're facing exponential money printing, which is bullish for gold, but not for the dollar. The currency reserve is in trouble, as the USD couldn't muster a rebound above 92.50, and yesterday's jump above 91 lasted only hours.

Interest rates. Rates are already rising. 1.69% is not a good number. To bring yields down, they'll have to print a lot of money. In history, whenever central banks are buying debt and producing debt, it's a facade, with very negative consequences. He'd rather hedge for the consequences. We're on shaky ground.

Gold explorers. Precious metals are the place to be right now, as they're trading at a ridiculous value in relation to earnings. Build a foundation with the producers first, and then look at the explorers. Once there's a big discovery in the States, a lot of US money will come into the sector and that could be bullish. You want 5-6 explorers to diversify the risk. A good explorer has good quality real estate with good potential.

Commodity supercycle. Three components. Demand, as the economy picks up. Lack of supply, as we haven't been exploring. Third, the key is devaluation of money. Best way to play the supercycle is with the ultimate hedge of gold and silver. Prices are depressed, so it's a good opportunity to get into these stocks. Impossible that copper's going higher and silver isn't. He continues to acquire the producers that will move once the price goes up. Silver has a number of supply issues. Put your money in silver first, then gold, and he's just added a bit of copper.

Characteristics for metal producers. Good quality management. Low cost of production. Resources on the ground. Where are they geopolitically. Geopolitics are going to get worse going forward, and investors really need to pay attention to where they're going to put their money. For example, he's worried about Mexico right now. He's not taking money out, but he's not putting new money in either.

Value in producers. These are value plays right now. Signals a massive opportunity with solid earnings upside and solid leverage to the price of gold and silver at cheap prices. No need to take risk with the explorers yet, if you haven't built a solid foundation with the producers. He thinks gold is going north of $3000. These companies are going to have an earnings leverage of 1500-2000%, never mind the dividend and reserves on the ground. The most amazing financial lifeboats you can buy. Money isn't coming in just yet, but eventually the light will come on. He'd rather buy now, when no one is buying them. Look not at where the puck is, but where it's going.

Market focus. He's staying put with stable companies not too much affected by the pandemic. Very little exposure to the reopening trade like banks and commodities. May lag the markets a bit, but still hanging in pretty well. Playing it really safe with companies that are still growing and making lots of money, with or without the pandemic.

Sector focus. As a rule, he doesn't invest in resource businesses. Energy infrastructure is still one of the undervalued areas. Companies like TC Energy, Keyera, ENB. Lots of bubbles out there like crypto and housing. Renewable energy has come way down, so it's a great entry point for the likes of AQN, Boralex, Innergex. Asset managers are really cheap, such as AGF, CI, Guardian. BCE and Telus are very reasonably valued. Industrials such as AGF and KBL, which just announced a big contract. Consumer staples like Loblaw. He's a value investor, doesn't chase momentum. Too many unknowns, and he'd rather play it safe. We really don't know when the Covid situation will end.

Canadian banks 12 years from now. Fully expects them to be higher than today. Dividends will be growing. Wouldn't hesitate to buy and hold. Right now, not a bargain, probably fairly valued. Pick one or buy a basket.

US President Biden's US$2.3 trillion infrastructure bill touches on many areas of infrastructure, including grid modernization, renewables and water treatment. (His definition of infrastructure is broad. It even includes Visa, for example, as digital infrastructure as we move to digital payments and less physical cash payments.) Biden's bill is good, because it will offer a fiscal boast as the US economy expands for years and replaces further stimulus which seems less likely. In Canada, we have fewer infrastructure subsectors, but we do have energy midstream companies, renewables and regulated utilities, though we lack sector such as towers (like American Tower).

Market Outlook. Believes we are in a speculative bubble due to cheap money. From the Fed's perspective, it is important for them to reiterate that there is no plan on taking away the stimulus. The economic data will be unreliable for the next year until things smooth out. Hard to make accurate forecasts.

Earnings. Should be good and better. There is lots of money coming into the system, economies are reopening, and companies are mostly beating numbers. Good for now but there may be higher taxes down the road, which upset markets last week. We will hear more about how the US treasury plans on selling the 2 trillion dollars of new bonds. This will suck a lot of money out of the system.