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

Marijuana Space. There could be a flood of oversupply. The top ten players are going to be about 2000 tons. Demand will be about 800. And the black market is not included in that supply. The space is very interesting and it will be a commodity once the bubble washes out. Marijuana is perishable so oversupply will have to be converted to oil quickly.

Illegal growing of Marijuana. Every house has the ability to grow 4 plants. That is .25 to 1 lb per plant. It is the informal economy. It will be hard to police. It is an unpolicable grey market that adds to the supply.

The bulk of the Marijuana is produced indoor and requires electricity. You have to look at a company's mix of greenhouses and outdoor growing. You have to own the lowest cost producers.

Market. It looks like the extreme populous Italian movement and the national front party in Italy are coming together to form a government. This was thought to be the worst case scenario. It looks like it will be negative and the bond market pressure could ignite again. Spreads out of Italy are starting to widen. It will play out over the next couple of weeks. We could see an important technical level breached – see Educational Segment today. This could be as disruptive as Greece several years ago. Germany and France are not big enough to write a cheque for Italy. If this Italian government forms they will want a lot of freedoms that they don’t have in terms of austerity. NAFTA looks like it is in the final innings. Best case is that they agree on something new but it looks like we will not get anything, which adds uncertainty to the markets.

Educational Segment. The Bull Market in Bonds. The double bottom has one of the most efficacies of all. In the last couple of years we have gone down to the low single digit yields and experienced a double bottom in 2011/12 and then again in the last couple of years. 4.72% is the price target for 10 year bonds to go to. He thinks the world would fall apart of it ever got there. The world cannot handle higher interest rates in his opinion. He thinks 3.5% is the top. Late 2019 or 2020 the yield curve inversion is signaling a recession. As an alternative, he can see the bull market in bonds continuing as interest rates continue the previous down trend.

A pick up in Natural Gas over time is likely as the world moves to getting as clean a carbon footprint as possible. There is a natural floor on gas prices. We are very over supplied in North America and LNG distribution is slow to get going.

Oil market. The demand side of things is going to continue to shrink over time. For the next 6 months you could buy oil stocks, but oil and gas are not investible long term. On a long term, don’t chase the prices, but on a momentum play you can play it.

Market. Bitcoin could be called Nerd Gold. It is the next evolution beyond the Internet. Bitcoin is not subject to central banks. Gold has about $8 Trillion in market cap vs. Bitcoin having $150 Billion market cap. If there was a 5% reallocation to gold to Bitcoin, it could easily get to $33,000, from $9,000 today. The Marijuana sector is very overvalued. The three largest producers have costs of $2.01/gram vs. $0.35 to grow at home. As soon as US markets have gone legal, the price has fallen substantially.

Trading Crypto Currency. Coin Base in the US is the first place to trade. These are platforms that you just trade the 'alt' coins on. Binance is another platform.

Green Rush moving to the US? (Marijuana) There are states where it is viewed as a social ill. It will catch on state by state. This is not something that gets resolved in a year.

He just returned from the southern U.S. Trump loves to operate in chaos, but markets don't. His negotiating strategy is to throw a hand grenade into a room and walk away. Best to separate the bluster from the reality (i.e. trade tariffs which still overhang the market). Trump won't renogate NAFTA as badly as people fear. His bark isn't as bad as his bite. And this market could reach new highs. Option premiums have risen dramatically. The biggest theat is higher interest rates--and they are coming. Can consumers withstand a 4% rate on a US 10-year bond? At 3.5%, he'd sell more equities. In Canada, the debt ratio is a serious concern.

How does the VIX work? It meaures volatility on options implied on the S&P 500 (in Canada: the iShares TSX 60 ETF). Basically, the VIX goes up when equities go down. Short volatility--inverse volatility ETFs which happened in February--is a very dangerous game. Those investors literally went backrupt overnight.

Options strategy in current volatility? Volatility has increased, though it's not dramatic right now. Premium levels are higher than 12 months ago. He would sell that premium, because it's worth more than it was before. If you're buiying options, the tend to cost you more. If you're bullish on a stock, either buy the stock or write a covered call. He'd write options in this environment.

He doesn't think oil is sustainable and is priced too high now. Alternative sources of energy will continue to grow in the future. Saudi Arabia is selling Saudi Aramco and so is keeping oil prices artificially high. He doesn't think Iranian oil will come off the market. (That's Trump's bluster.)

CAD vs. Euro and USD for the next 6 months? The CAD is closer to its low than its high--he sees upside in the next 6 months. Oil will stabilize or continue to rise, especially if the politics make it more favourable to business.