A Comment -- General Comments From an Expert (A Commentary)
COMMENT
There's a lot of complacency now. The market has been driven by a debt expansion. We've seen massive instability since October. If the economy isn't as strong as they think it is (driven by debt in reality), then liquidity is a problem. Be cautious. Things can come down very quickly. Like the 1930's, we're seeing market volatility, political instability, debts that cannot be repaid and populist movements. This creates chaos. Trim back. He's bullish on gold, the traditional safe haven.
COMMENT
2019 should be a good year. Back-to-back negative years are rare. The average return following a down year is +17%. In 2015, we were down 8% then up 21% in 2016 for the TSX. Oil pricees have bottomed and should do well in 2019 which will benefit the TSX. Canadian financials look very attractive at current prices. These two sectors are poisted to do very well in 2019. Q4 dividend payers like Fortis and BCE were up 5% vs. Canadian banks -17%. Surprising given good earnings results in November 2018; banks were punished unfairly and are now bouncing back. U.S.: he expects currency headwinds and for the FAANGs to struggle in 2019 with negative Q4 earnings. He'd reduce his American positions.
COMMENT
Losing the Brexit vote. Everyone was expecting that. Now we're in a void. Longer term danger is if Corbin forms a government, that's what the markets are afraid of. Brexit was threatening the fabric of the EU and throwing the world into uncertainty. Now the UK might prefer to stay, so this might add confidence to the EU. Overall, long term positive; short term volatility.
COMMENT
How does it look for 2019? Still seeing desynchronization in global growth. Signs that consumer spending, business investment, and general growth are slowing down. Shorter term, cyclical concerns. Overall, growth is still slightly positive. Last quarter of 2018, plus first couple of days of 2019 were scary, but now things have reversed. Don't get complacent. This year will have greater volatility than last year. Investors need to be choosy. Going forward, more focus on valuation and fundamentals. Will see more M&A activity this year, involving a great restructuring.
N/A
Market. The ZZZD-T ETF was launched today and Larry opened the TSX in celebration. This trade war with China started a year ago. Emerging markets have been under-performing until the last couple of months and now are reacting to anticipation of good news. This will motivate the US and China but will not resolve the theft of IP. Ultimately he thinks the recession is still coming. We had a lot of downgrades in earnings projections and that was why we had a down turn in December. Earnings will not turn down yet but will in the future. Except for the effect of tax cuts, earnings are not growing. The S&P is around fair value and so should stabilize for a while.
N/A
Number one Black Swan Worry. A black swan is supposed to be something no one is thinking about. Trump's end of term would be one. But over the last few years we doubled the debt in the world without creating growth. The US and China have horrible fiscal positions – Japan also. This is the catalyst for bad economics over the next few years. This would be the Black Swan: a credit problem.
COMMENT
Educational Segment. Sleep at night. ZZZD-T was launched. A study of pension fund data yielded that returns were from asset allocation. It is not what securities you pick, but asset allocation that drives returns. Over the last year there is no return in the fund. The total world ETF and Canadian ETF performances are worse. He has been adding to exposure when it was dropping. He moved into ETFs with lower downside. He caught most of the upside. He won the Lipper award for best risk adjusted return. www.ZZZPorfolios.com.
N/A
Market. This is a little bit of a bounce. The market was oversold. This is a key time because we are going into earnings season after having terrible economic reports. When you have negative news and the market rallies that is good. But C-N today came out missing on earnings with revenue up. Seasonally this is a good time to be in the market but we are jostling back and forth. The TSX has been advancing nicely since the beginning of 2019. We have to get through 15,300 which is the resistance level. He thinks we will see some muddling around for the next few months.
COMMENT
Tax loss selling/Santa Clause Rally. Investors sell losers in December to offset gains and it drives that sector down temporarily. It was the energy sector this year. He usually sees a Santa Clause rally but it was late this year. People use the Santa Clause rally as an indication of the rest of the year.
WEAK BUY
US Banks – BAC-N and JPM-N. Seasonally strong until the end of April. BAC-N is expected to come out with earnings. This is a positive with C-N today. It is bank week this week for earnings releases. If we see positive action this will be good. BAC-N is up on good news with C-N. JPM-T has done well relative to the sector. BAC-N is at a base going back to 2017. He is favourable on US banks. However he is not falling in love with them.
COMMENT
2017 saw the lowest volatility and nowadays it is mean-reverting. We had 10 years of very low interest rates. When the central banks take away this liquidity, that results in a lot of volatility. Historically, when central banks pause (or reverse rates) it's scary, and central banks are doing that now. When the cycle turns (which he believes is happening now), who will buy the riskier assets out there? This worries him, referring to the October 2018 sell-off. He feels the credit cycle has tipped over, and in a year from now there'll likely be a Canadian recession, and within two years a global one. He expects more downgrades coming in the next earnings season. It's not the time to panic-sell, but when you see a rally in the market, lighten up your stocks.
COMMENT
Vanadium outlook China will be greatly impacted by U.S. trade policies. Until this is trade war is cleared up, numbers we saw last weekend are to be expected. It's underrated how China has been a huge contributor to global growth. Not only vanadium, but all the base metals will be effected by the trade issue. A free trade deal will help, but he thinks the credit cycle has turned. He's negative, but there could be a short-term pop if there's a trade deal between China and America signed.
'%20fill='%23ffffff'%3e%3cg%20id='Pager'%20transform='translate(423.000000,%201755.000000)'%3e%3cpath%20d='M243.295367,17.286474%20C243.68919,16.9045087%20244.327703,16.9045087%20244.721525,17.286474%20L249,21.4361302%20L253.278475,17.286474%20C253.672297,16.9045087%20254.31081,16.9045087%20254.704633,17.286474%20C255.098456,17.6684393%20255.098456,18.2877274%20254.704633,18.6696927%20L249.35654,23.856763%20C249.159628,24.0477457%20248.840372,24.0477457%20248.64346,23.856763%20L243.295367,18.6696927%20C242.901544,18.2877274%20242.901544,17.6684393%20243.295367,17.286474%20Z'%20id='Path'%20transform='translate(249.000000,%2020.500000)%20scale(-1,%201)%20rotate(-90.000000)%20translate(-249.000000,%20-20.500000)%20'%3e%3c/path%3e%3c/g%3e%3c/g%3e%3c/g%3e%3c/svg%3e)
'%20fill='%23ffffff'%3e%3cg%20id='Pager'%20transform='translate(423.000000,%201755.000000)'%3e%3cpath%20d='M243.295367,17.286474%20C243.68919,16.9045087%20244.327703,16.9045087%20244.721525,17.286474%20L249,21.4361302%20L253.278475,17.286474%20C253.672297,16.9045087%20254.31081,16.9045087%20254.704633,17.286474%20C255.098456,17.6684393%20255.098456,18.2877274%20254.704633,18.6696927%20L249.35654,23.856763%20C249.159628,24.0477457%20248.840372,24.0477457%20248.64346,23.856763%20L243.295367,18.6696927%20C242.901544,18.2877274%20242.901544,17.6684393%20243.295367,17.286474%20Z'%20id='Path'%20transform='translate(249.000000,%2020.500000)%20rotate(-90.000000)%20translate(-249.000000,%20-20.500000)%20'%3e%3c/path%3e%3c/g%3e%3c/g%3e%3c/g%3e%3c/svg%3e)
