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

Global energy. We have endured the worst sell off in history in crude oil. The market has looked at Trump issuing waivers for 180 days to 8 countries. This allows certain countries to import oil or condensate over the 180 days when the market thought exports were going to zero. The major countries have reduced their imports. He thinks there will be a monstrous cut in production from OPEC on December 6. OPEC will do whatever it takes to balance the market. It is speculated that there was a fund long oil and short natural gas. But with crude selling off for 12 straight sessions and NatGas spiked about 50% in the last week or so that created pressure on oil. He is bullish on heavy oil. The WCS differential tightens over the next 3 months. Refining is coming up, crude by rail is ramping faster than anticipated and voluntary shut-ins being announced. The market is balancing by Q1 of next year. However, very few care about the Canadian energy sector, but that creates some real opportunities.

Prospects for heavy oil producers: He still believes we are in a multiyear bull market for heavy oil market. There has been a surge in US production that caught a lot of people off guard. OPEC will cut and tighten supply. Canada is out of pipeline capacity. However, government seems to remain inactive to deal with pipeline capacity. Our oilsand companies are working within very environmentally friendly manners. With the addition of Line 3, and ramping rail capacity, and voluntary shut ins, the market will balance by the end of next year. He remains bullish oil, and bullish WCS differentials.

Volatile time in the markets? Stocks that have been darlings have all sold off. This is the perfect time to look at names you’ve been waiting for.

Is tech way oversold? When he sees headlines like “death cross,” it gets his attention. This is where he gets interested in oil and NASDAQ stocks. Tricky to pick a bottom, you have to be patient. The closer we get to a bottom, the more volatility you see.

Are we close to a bottom? For the TSX, sitting on the 200-week moving average. Very appetizing to him. Especially if crude or gold catch on, would be a good spot to enter. US markets are going to go lower. They’re selling off more as they go up, which is a bad sign. He loves volatility, helps him see where support and resistance are.

Are you making changes to portfolios? You have to stick to the game plan, and take some wins sometimes as with tech. If a stock has run up, why do you still have it? It’s about the sectors, not just the market overall.

Market. It is like 2008 as we slide to a crisis according to people's fear. People sell a solid company for missing a quarter. Investors are looking over the cliff, but he looks at the company and finds it is a buy at that value. Be a long term investor, not a three month investor. If we get a recession or slowdown of, say 9 months, what does it matter if you have a 10 year time horizon? The scenarios and economic fundamentals are quite different now than in 2008.

The markets were up today during a period of late-cycle correction after a 10-year rally. Investors are getting jittery, some very, while others look at the long-term. Some are savvy, looking for opportunities, as he does. There are opportunities to the end of this cycle, he means, perhaps 6-12 months later. If you are a senior, an older investor, can you risk, say 30%? Beware of the risks. Canadian oil is still trading at a steep discount, so it's time to pick away at it. The valuations are attractive, like Suncor. Is falling oil a sign of a weakening global economy? He doesn't think so. Overall, be careful of what stocks you pick.

When do you expect a recession? We could see cracks in late-2019 and a recession in 2020, though it won't mean a 2008 deep recesssion, but an old-fashioned one.

Producers are already saying they are going to cut back their production. Capitalism usually finds a way to make it work, but would like to see if happen faster. We need to get a better price. Royalties and government revenues are going to be significantly down. This is not just an Alberta problem, but a Canadian problem. Albertans are very frustrated at lack of pipeline construction progress. If Bill C69 goes through in its current form, there will be few if any pipelines ever built again. Need more forward looking management and Boards in Canadian energy sector. She would like to see more 5 year strategic planning in the energy sector like you are currently seeing in other sectors.

1. Crude Oil Outlook: She does not see the renewable energy side taking charge for another 20-30 years. There has not been a lot of traction for non fossil fuel businesses. Weaning off fossil fuels is important but until there is a way to fix it, Canada has to continue producing fossil fuel energy.

The markets have entered negative territory because the Wall of Worry has broken down with fears over the US-China trade war, FANG stock weakness and rising interest rates. He's not worried about Apple; growth rates can't continue, because the iPhone is near saturation. Geopolitical concerns weigh on sinking oil prices. He believes that the overall market is seeing a temporary correction, because economies are doing well and unemployment remains low. He doesn't see anything to be really fearful of. Corporate profits will decrease next year, but remain strong. Stocks are the place to still be.

American banks He doesn't and wouldn't buy them. Why? He's a long-term investor. Citibank and JP Morgan have gone bankrupt in the past, while the Canadians have sailed through.

The trade war and the pace of US interest rate raises are key worries. The latter will continue because the U.S. economy is growing and healthy with unemployment at a 50-year low. It's difficult to determine what'll happen in the US-China trade war. In the Q4, though, US companies are starting to see pressure on costs (transportation, wages), so will this slow corporate growth? Tax cuts, that have helped corporations, will moderate next year. Earnings will continue though. We are at the latter part of the cycle, but she doesn't see a pending recession. Trade wars are not good for economies; they increase costs and inflation. In turn, the Fed could raise rates even faster.

Volatility continued today as oil plunged today. Corrections are normal. History tells us that we get one every two years. This year has been particularly volatile, because we've had two corrections in one year. Before that we had years of every little, which was not normal. We have to be patient (but not stubborn), and have a long-term discipline. With U.S. Presidents, there are always issues. Companies are the slaves of earnings--remember that. With dramatic rising earnings with an up-and-down market, to him, spells rising value in the market. He's a half-glass full guy. Be patient and diversified. And when you're wrong, can the confidence to make a move (i.e. sell a stock you own).