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

Gold has been down, but has been sustainable for centuries. It's wrong to dismiss gold today, especially during the current currency storm (Turkey) of which Trump is pulling the strings. Amid uncertain geopolitics, gold is stable. A
monetary reset is inevitable--the current system doesn't work. History teaches us that as currency systems break up, the dominoes will fall, starting with the weakest currencies to the strongest, the U.S. The ultimate currency is gold, which will see a rebirth.

Market. The market’s rise is long in the tooth. Markets come off their highs unexpectedly. He is increasing his cash position. At the start of a big drop, everything goes down. Then the value stocks start to shine, but they will drop a bit first, so he is increasing his cash.. The market looked more overvalued last year than this year because Trump’s tax cuts changed the profitability of companies. However, with recent rises, they are looking overvalued again. The tax cuts provided a temporary stimulus that will wear off as the year goes on and into next year.

Marijuana stocks. These rose parabolically and made people a lot of money for a while. This is in the same category of tobacco, alcohol, and casinos. Those industries have a small number of suppliers who make good margins. In contrast, there are tons of companies in marijuana, fighting for a share of the space. This will hurt margins. People don’t know what pricing or demand or margins will be. There are too many uncertainties and these are bringing the stocks back down after the elation of the initial rush. The easy money has been made, the insiders are fighting to get out and realize the value of their investments and that will drive stock prices down further. The marijuana companies have a long way to go down. The research reports written to promote investment in the industry are speculative and make assumptions that should be ignored by investors at this time.

REITs: First, look at asset allocation. He has raised more cash recently, especially from companies that raise cash outside Canada. But he's more concerned with currency within a portfolio, worried about a decline in the CAD. He's looking at American REITs or in REITs that hold rental properties. (Younger people need to rent.) Also, consider long-term inflation; any inflation-driven stock will benefit. He has reduced his REITs a bit.

FAANG stocks. These are growth/momentum stocks, and he is a value investor. These stocks are not for him. They have been great places to make a lot of money but at some point, the market will see them as overvalued. There have been other stock market favorites in the past. Looking at them provides a pattern: in the future, the FAANGs may or may not be the market leaders. People should enjoy them now, but only if they appreciate the risk.

Time to buy USD? As trade tensions continue, picking up some US dollars is a good idea.

Cryptocurrencies: He owns a little, because he expects cryptocurrencies will replace currencies and take the power away from the banking system and do a better job, in fact.

Market. Problems in Turkey causing flight to safe havens? Turkey has devalued 10-15% a year since 1990. Have to think we’re getting to global systemic credit risk. This is a big issue. So the US markets are gaining money flows, but this doesn’t mean it’s good. When US dollar gets stronger, there’s systemic risk to EM. Turkey is rolling over big time. The TUR ETF tracks Turkey, and it’s at same levels as at bottom of 2009 crisis. At some point it might look interesting, but not yet. EUFN tracks the European banks, and has been a range trade since 2009. We’re coming back to that level before things turn around. Markets are too complacent.

Time to move to cash? He can’t just say yes, because it depends on what’s appropriate for you. What if you’re wrong, and equity markets continue to rise another 25%? Still, he’s been playing defensively for 2 years now. Can still use ETFs to get yield and grow your portfolio, but take on a lot less risk. Have some cash, avoid the bigger risks, and look to buy safe havens like gold that are selling off now.

VIX volatility based ETFs. Problem with volatility futures is you have to be nimble like a brain surgeon. Or you could lose 5-10% a month. Would recommend shifting to more defensive holdings like ZPW to preserve capital. Gives you insulation on the downside, plus some yield. For the average investor, stay away from the VIX based ETFs.

Educational segment. NAFTA and the Canadian dollar. Looks like US wants a bilateral trade agreement. Thinks there will be a deal with Mexico before November. If Canada doesn’t take a deal, that adds to uncertainty. Trump will put the screws to us, and not sure there’s a lot we can do about it. A tariff changes supply and demand, and forces up the US dollar. When Trump got elected, he talked the dollar down. But once he started tariffs, the US dollar went on a tear, which is likely to continue. For the Canadian dollar, it’s been getting weaker since 2012. Around 1.38 (or 72.5 cents) is the downside risk for the Canadian dollar, wherever NAFTA ultimately gets settled. Energy will underperform, and Canada along with it. Doesn’t see it getting much weaker than that unless Trudeau government completely botches the trade negotiations.

Oil. Still cautious on price of oil. Still thinks oil will go under $60 after the summer driving season. Demand normally peaks twice a year, the winter months, and the summer driving season. With OPEC increase in production, and US production growth, should see inventory build up in the fall months. He believes price should breach $60 in September or October.

Natural Gas. Is bullish on natural gas. Storage is not building because of strong air conditioning season in both US and Canada. May see build up of inventory before winter however expects to see price increases when winter breaks with first cold snap. He expects companies may start hedging prices this fall. Very bullish for Nat gas going into 2022 and beyond if LNG Canada gets approved. He sees us going from excess to shortage.

Will a Natural Gas plant be built? He believes it will be built. Will have a decision in November. Almost everybody in the Nat gas sector in western Canada will benefit from this project. Question remains how long it will take to build. Will be a big job creator and a big tax beneficiary for the people of BC.

The strengthening US dollar this time of year usually weakens, but recently it has popped due to Turkey. Seasonally, there's always something this time of year that happens to hit the market, in this case Turkey. We see lower volumes this time of year. The put-call ratio now is really high. He sees the US dollar weakening a bit. Conditions are ripe for markets like the TSX to keep going, but the US midterms could pressure them. We may pause in October before a rally. The conditions, in general, are good for a rally.