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

Venezuela impact on Canadian energy? Setting aside the humanitarian issues, this has the biggest impact on Canadian heavy companies. They have struggled with PDVSA, the national oil company, suffering from a massive brain drain. Fields have been under invested for years. Even a change of government will not allow them to turn around production quickly -- it may take several years. As their production has been falling it has been bullish for Canada and has contributed to the $9 differentials now.

They kicked the can down the road by re-opening the US government today. Now, can the US solve the China tariff issue? Then, we can focus on the economy and fundamentals. We'll return to mediocre or slightly above average 3-7% earnings growth, but don't expect 18% growth as we did in 2008 right before that recession. This is good. Of course, some companies like Intel today will disappoint, but that's normal. Don't invest with your gut (emotional), but stick to the long-term. Investing is a marathon, not a sprint. When stocks plunge....do nothing. Nobody knowd what will happen, but we know what works over time. Be patient.

Market. Christmas Eve was the bottom for the energy sector. A massive amount of hedge funds where long oil and short natural gas. They were wrong on both calls. The FANG stocks were going down at the same time. He thinks it is not over and that there may be one more pull back in energy. There may be one more buying opportunity. He thinks WTI will get above $70 this year.

If the price of oil goes to $70 and then 80 or 100, it is about worldwide events. Enbridge line three will probably be put on. Heavy oil has more of a problem than lighter grades of oil. Lighter grades of oil have more to do with the worldwide price of oil. We could see bills get stalled in government that are supposed to stall the egress of oil.

Market Outlook - The 50 - 60% retracement of the massive drawdown of December makes your head spin. Where are we now? We are from an oversold position in December to a likely overbought now. If the TSX breaks the low that we saw in December, we are probably in the third wave and the market could get lower. He just raised more cash and now he is 30% cash which is very unusual in winter for his firm.

What is the difference between a log scale and a regular scale? A logarithmic chart shows the percentage change as opposed to a pure price change in a non-logarithmic chart. The proportionate change is different. Technical analysts use log charts because the dollar only charts is disproportionate.

Market Outlook He is optimistic about the Canadian market. If you look at last year's 10% TSX drop, historically the subsequent market goes up 12% -- good 90% of the time, he says. Canada is very washed out in the energy and financial sectors. Multiples on banks have come down a lot, which should bode well for them. He does not think we are headed to a recession, relative to earnings growth. If we can see some stability, we can see some catch up on values. Small caps got hurt hard last year and he thinks that means a healthy rebound in this space.

Volatility from 2018 will continue this year as the cycle matures. He doesn't think a slowdown is imminent, but it will happen. We've seen a nice rally since Dec. 24 and investors are coming back. Geopolitical concers are also easing. US labour and manufacturing numbers meanwhile have been good. The US economy is still firm. Maybe we won't see new highs, at least not until China-US resolve their trade war, and he's confident it'll happen. He's overweight the US and underweight Canada now, and zero in Europe, with some in Asia, which is getting cheap (maybe add there). Canadian banks and insurers will do okay in 2019. He doesn't see a massive slowdown. He doubts the US Fed will hike beyond once this year; they'll remain calm. Key here is US-China resolving their trade war.

2019 will be an epic bears vs. bulls battle that'll be a lot like 2018. Up 10% and down 10%, and in between you'll see fantastic opportunities because of volatility. Great for traders (not long-term investors). He won't say we're in a bull or bear market, just a transitional market with lots of volatility. But there is a bearish backdrop out there given a world slowdown. Between the bearish and bullish moves, you can bank some money.

Alberta oil refineries (the government announced today) are a good idea, but 40 years too late. Also, carmakers will be churning out more e-cars by the time those refineries are up. Audi just launched their today to rave reviews. As for oil, the US rig count slipped in December, but ultimately Canada needs pipelines to ship oil to market. The North American economies are too weak to warrant an interest rate increase. US housing is weak, for instance, and inflation is rising fast enough to warrant a hike. Outlook for US stocks: 80% of reported stocks in have been beaten the street--and earnings drive markets.

Market. Almost half of Canadians are very close to insolvency. Larry started working when he was 9 years old so he knows all about this. His family had massive credit card debts. The world is extremely fragile from a growth perspective. Governments need to help the bottom half. He believes the first $40k of income should not be taxable. There are political solutions for hard issues like this that do not put the owness on the bank of Canada. He believes Trump will be impeached. He believes it will be disruptive. He likes earnings season so far in the US. Banks missed on earnings but the market handled it very well. Markets should be okay for a couple of weeks. He was aggressively selling into last week's strength and he thinks there is a bear market coming and we are heading into a recession. China has been running a 15% deficit for the last 15 years. It is the biggest bubble building in history. Interest rates cannot rise very much as we cannot afford it.

Educational Segment. Horizons' ETFs. The active ETFs' space has really taken off. Total return ETFs have done well also. Horizons has 33 actively managed ETFs. They started with fixed income. Active ETF MERs are 10 basis points more than passive ETFs. Their active ETFs are primarily in the yield space. They have a suite of ETFs with a unique Total Return Swap. Beta is important to a portfolio. They use derivatives that give them the return of the index on a totally dividend-reinvested basis every day. The ETFs generate a capital gain. These ETFs don't add any benefit to a registered account.

Put Write vs. Covered Call strategies. Put write is the most defensive strategy. Buying long is the most aggressive. If you think there is limited upside you used covered calls. A put strategy is more defensive. You get yield off the market.

Alternative asset classes. Many stocks go up and down together. Gold and commodities tend to be an alternative asset class. This is a way to generate gains when things are going to be difficult.

In an average recession earnings tend to drop 20%. The S&P should go down to 1500, the breakout of 2000 high.