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

Blockchain sector The price of BitCoin seems to dictate the level of interest in blockchain. However, they are very different things. He does not own cryptocurrencies and will not in the future. He thinks they are a waste of money. He thinks the technology behind it is very interesting and he has small positions in some of the technology companies. The big players like Amazon and IBM will create big blockchain-based systems for big companies, but some of the small companies might pay off well in a few years.

The strong Q1 reports (S&P 500 companies) have been overlooked. Fears include potential trade wars, rising rates and that the cycle has peaked. But she still sees earnings growing for the rest of 2018 in the high-teens and 20% for the years. Solid growth, not negative. She thinks rates will slowly rise. American and Canadian banks are
attractive; the Canadian ones have had a solid Q1. She's keeping an eye on geopolitical news, mindful that Trump talks big but doesn't execute (i.e. steel and aluminum tarriff threats).

Looking for a safe haven in the US during volatility? JNJ given their mix in pharmaceuticals, medical products and consumer products, with a strong balance sheet and a 3.5% dividend. Also, Abbot Labs (ABT-N): their medical devices doing well as are their nutritional products given strong global demand; it's diversified and well-managed; pays over 2% dividend with growth. These are products we all need, and with an aging population, there will always be demand.

Market. This week regarding Iran we are going hear if Trump is going to walk away from a multi country agreement. The oil market probably priced in $10 of premium in the oil price due to supply interruption. He sees it as a spike and not a revaluation of oil. Best case they agree to a deal just so Trump says he made one. He thinks we will see a recession in 2019/20 and oil will go back into the $40's.

High Yield ETFs as fixed income. It is a basket of junk bonds and the worst companies. The outlook for these companies is more linked to equity markets than bonds. In 2008/9 HYG-N dropped tremendously. Now is not the time to add high yield ETF's to your portfolio. He is shorting these.

VIX vs. Option Premiums. Last year was an anomaly. With VIX in the current range, we expect option premiums to go up at least 50%.

Gold. He likes to rent positions rather than fall in love. You are getting a very, very long term bottoming pattern developing. It has traded for 5 years with a good bottom and firm upper limit. He feels we are going to break out but does not think it will hold. He has been overweight gold for 4-5 months. He prefers gold equities due to more leverage if gold breaks out.

The Tech Sector. Over the next couple of years tech and healthcare will be the biggest growers. Canada has very little of these. He is underweight right now in Tech.

Educational Segment. The 200 Day Market Moving Average. We have a very interesting chart pattern in the broad US Markets. We came down to the 200 day moving average last week. We tested the 200 day and held. The number of stocks above the 200 day is turning positive and the number of stocks below their 200 day are down. The suggestion is that we go up before we go down. Some of the other market breadth indicators are more positive also. He thinks we will trade higher before we trade lower.

Market. He is not sure how permanent $70 oil is going to be. The best cure for high commodity process is high commodity prices. People will be producing all they can. There will be better value elsewhere.

US Treasury Bonds vs. The Petro Yuan. He would never bet against the US dollar, despite the increase in debt over the last few years. He does not see anything replacing the US dollar as the world reserve currency. He would only worry about US treasury bonds with higher interest rates.

Cannabis space. He is not in this sector due to the high market caps. He does not understand it.

Canadian Dollar. None ever correctly predicts trends against the US dollar. Oil prices are up and the Canadian dollar has not rallied. It is staying in the 75 to 90 cent range. He won't try to guess on currency moves.

The S&P 500 treading water these days signals a switch in market direection. Last year saw a steady ascent, but this year has been choppier. Stick with quality companies, but the market feels a general trepidation. Oil rose above $70 a barrel today, way above last winter's futures. Oil companies' profitability should be good in Q2, but the Canadian differential--and particularly, political delays over building new pipelines--is making investors here impatient.

General Market Comment. He sees several bullish indicators for energy. There are many geopolitical uncertainties along with good fundamentals. The Iranian nuclear deal is complicated as to how it will actually impact barrels on the market. It may take 200-500,000 barrels per day off the market. He thinks oil is heading to over $80 US next year. Demand is strong and supply is not growing quickly enough. The number of big supply projects falls after next year both in the OECD, non-OECD and OPEC countries and this supply shortfall will persist for several years. Demand does not really get impacted until prices rise above $70. If you are bullish on oil, there is 50-100% of upside in the Canadian energy sector – don’t get too cute trying to pick the bottom.