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

In 2008/9 there was a problem with the commercial paper in Canada. You couldn't redeem for a while. He does not expect that to happen this time round.

They want to steepen the yield curve. You are going to see a big supply response from the treasury. The bond market is already pricing this in. Don’t start trades based on this now.

Educational Segment. What keeps him up at night? It is the lack of corporate profits. For the last 7 years there has been no real growth in corporate profits.

Market. Lower oil prices are really damaging almost all economies of oil producing countries. He sees this as temporary. He is not a Canadian oil investor. It is hard to imagine that OPEC and non-OPEC producers are going to allow this to continue. He is about 30% in cash. When there is maximum fear and uncertainty that is the time to jump in. He chips away every day. He needs to buy things when they are on sale. We have been seeing negative yields in Europe and Japan for the last couple of years. The fed rate cut last week was a waste of time and a miss-fire. If anything, investors are hoarding cash.

Don't add to oil stocks. There are enough other great businesses to invest in. Canadian banks stocks would be preferable. Companies like RDS.B-N benefit even from low oil prices.

Municipal Bonds. They tend to be very small issues and are not very liquid. They are very inefficient to trade. If you hold them, leave them alone. They should be left to institutions.

Gold, how to buy? ETF? GLD-N is a gold bullion ETF. He has never invested in gold. You never get a dividend from gold. It is a difficult investment.

ETFs that let you bet against the market. Inverse ETFs are often dangerous in that they don’t react the way you think. The problem is that they reset every single day. You don’t get the long term behavior you expect.

A phenomenal day with the oil crash on top of the coronavirus. Everything got washed out. The TSX plunged over 10%. Phenomenal. Usually in pullbacks, the TSX outperforms Wall Street because of the yields in Canadian stocks, but not today. The consensus trade of going long oil and short treasuries got wiped out today. The unwinding of bullish bets and hedge funds can take down the wider market. When markets hit all-time highs, the technicals didn't make sense. Today we saw massive breakdowns in key levels of support, like $42 for oil. Be cautious. Industrial production is trending below average. If we don't get the push higher into spring, markets get vulnerable which we're seeing now. Seasonally, we're supposed to be positive now, which is not the case at all. The S&P is below the 200-day moving average, and you don't want aggressive exposure when this happens. 2,800 was support, but we broke below that today. Charts are looking like the Dec. 2018 lows, especially the TSX. As long as we're below the 200-day, there'll be volatility. Don't be aggressive, but nimble.

Buying gold during this chaos? Yes, it has been a good buy during this volatility. Gold has risen as a classic hedge to volatility. Gold is a classic hedge in Jan-Feb when volatility rises. Seasonality ends in late-February. The trend is still higher, though gold is close to its $1,700 target, so he's not rushing to buy it. Next seasonality is late-July to late-September. Other times, gold underperforms while cyclicals do well. Cash is king. He holds 40% cash. Take your profits and hold cash.

Cruiselines? Now--and after--the virus you don't want to own cruiselines. Buy stocks that have held up during this pullback, instead.

Market Outlook OPEC and Russia have unexpectedly failed to come to terms on continued oil production cuts. This may be the end of OPEC+. The short term Coronavirus uncertainty is reducing jet fuel demand by about 1 million bpd globally. When you take a step back how can this be anything but a short term drop in demand? Oil supply is already slowing -- Exxon announcing a slowing of 65,000 bpd in the Permian next year. As the US is the global swing producer, this slowing of growth in supply will begin to take hold as the Coronavirus issue subsides. By July-August of this year the Permian will be negative in production. Since January last year, energy stocks are down by 46% on average, whereas oil prices are relatively unchanged -- this can't continue.

Market. Real estate is being impacted by fears just as with the broader markets. Fundamentals for real estate are still strong however. The supply and demand fundamentals have not changed since CoVid19. He goes long where he sees discounts to net asset value and goes short if they are overvalued. XRE-T has experienced tremendous volatility but today it closed a lot of the gap. Has CoVid19 really chanced the global GDP in a way that impacts long term commercial leases? Fixed income capital is flowing into alternatives including real estate.

How to process these whipsaw markets? Market narrative is quite negative. If coronavirus hits the US in a meaningful way, it will ultimately cause a recession. US is not as prepared as other countries are. Fed cutting is a really negative signal. Central bank policies are doing more damage than they need to.

BOC cutting rates and the housing market will go back to normal. Problem is the data does not hold up. Not sure what BOC was trying to achieve.