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

Earnings seasons and double-digit profit declines (i.e. Air Canada): earnings are dreadful or not as bad as feared, depending on your expectations. Anyway, he's conditioned for earnings to be down a lot, and forecasts were slashed earlier. It's a market of winners vs. losers. Winners: big tech mostly in the U.S. and Shopify here, and gold stocks. Losers: banks struggling with loan loss provisions, and oil given low prices. The gold rally is legit and it's onwards and upwards--gold rallies in troubles times and now certainly is. We'll see Canadian Q3 banks report later this month; banks will be pressured by narrow interest margins and of course loan loss provisions, though business loan deferrals may cushion the blow.

The stock market is going up, with the S&P up 8% ytd. It's a fallacy that the stock market and the economy moves hand in hand. The market is significantly undervalued taking into consideration the interest rates going to zero. Earnings for tech companies are growing, and he is bullish on good quality companies.

There is uncertainty with COVID, but there will always be cause of worries regardless. Looking at earnings being reported by companies like Apple, he thinks it is still undervalued. Chose good quality companies, and it should be alright.

US Debt. He believes it's been a long time coming for worries over US debt. If the USD wasn't the currency reserve of the world, it should be trading at AA-. They had to start printing money and it's been decades in the making. It won't mean much for market response until the rating drops by a couple firms.

Tech earnings. The market was delighted for earnings. For Facebook, the backing away of many companies from the social media site has not affected the earnings so much. The firms with data will be hit hardest by anti-trust, like Google or Facebook. He expects some pain coming.

Market performance. The S&P 500 was up 1.7% on the week. It's been an okay week. We now have 3/4 of the large cap stocks report. There is a 30-35% of Russell 2000 small caps reporting their earnings next week. The pain is more in the small cap.

Educational segment. Back in 2014, he said that gold was broken for a little while. Central bank money printing hadn't played out yet. In 2018, he changed his tune as the Federal Reserves rose rates. In 2019, we saw a breakout from $1,400. Fundamentally, for gold prices to go up, you need investment demands. There is an increase in investment demand and a massive decrease in the jewellery demand now. With real yield going negative, gold is a no-brainer. He expects inflation in the USD. He expects 10-40% upside on an inflation adjusted basis for gold. Lots of upside for gold.

Shares coming under pressure today due to drop in the US GDP. There's been a huge run up. US stimulus payments end today, and that's a challenge. People working from home, lower consumption of energy, and less restaurant traffic are taking a toll on the GDP.

Behaviour of US dollar related to recessions. Historically, the US dollar has been the standard for global transactions. But the Chinese yuan has taken a bite out of it. Plus fiscal policy has driven interest rates low. These elements are a structural bear on the dollar. The US doesn't have the healthy social safety net that its trading partners do. So the US will experience much deeper recessions than its partners. US dollar will continue to weaken if the full impact of Covid continues to affect the US.

Where to allocate capital? If currency were your only consideration, you'd redeem some of your US assets and put the money into areas like China, Hong Kong, and Singapore. Recovery in those markets will benefit you, and then you cycle back into the US when it falls to a low. Global investors cycle their money from strong currencies to weak.

What stocks on the Australian market can you recommend? BHP has done very, very well. Also South32. Also COH, one of the global leaders in hearing aids, though it's very expensive.

Many of the large cap stocks are trading above their intrinsic values. Rational investors must be careful and look at the fundamentals. He's looking into small and mid cap stocks that are still under valued. There is a large increase in personal investment accounts being open by new investors. These accounts hold investments in many similar companies because they are in the news, and not because of their investment worthiness. He is positive in the market still, especially with lower interest rates expected to hold for a while and government stimulus being injected.

It's strange times. Big question: What will the US Congress do with stimulus that's keeping the economy afloat? Will Republicans support working poor people? Many big tech names report on Thursday; it's like the Superbowl. These tech giants have reasonable valuations rooted in reality, so he has no problem with the price run-up of Amazon, Apple, Google, etc. However, Tesla and Shopify share prices are entirely speculative; maybe he'd buy Shopify at a third of the current price.