It is wildly unpopular to be positive in British Columbia these days. We are down, we feel down, we want to be down and down we are. Particularly in the real estate market, we like to wallow in our self-imposed misery. No matter what the positive news, no matter what the uplifting statement, it is always countered with a frown followed by a seemingly knowledgeable: Yeah, but… (Put in your favourite: NDP, Taxes, housing crash)

I find this amazing. In 1960, the average Vancouver home sold for $13,105. Thirty-eight years later (1998), the average sale price stood at $346,540. Assuming long-ago you had plunked down ten per cent or $1,310 as down payment and hung in there; you would now be gloating over a 26,455-per-cent return on that original down payment. And you have a roof over your noggin to boot. Amazing! Today that average SF house is $1,800,000! Exercise in fantasy but if this lift kept right on trucking for the next 25 years, by the year 2023 that $13,000 home will be commanding over $6 million dollars. And you will still have a roof over your gray hairs.

But at various times in our history, the Yeah, buts scare people out of their wits. In 2003, 2008, 2011 and now 2019 they are out. The naysayers with fur.

We are told that real estate’s day is gone; that this is a New World and that this or that factor will sink real estate investment. Of course, the Chinese have disproved that theory for 2,000 years; the Europeans and North Americans have founded their empires on real estate. In fact, ownership of even the humblest real estate has been the greatest wealth builder bar none for the average person. It has made the average North American wealthier than his counterpart in any other part of the world. In fact, it is the defining difference between rich and poor nations. But no matter to the naysayer this time it is somehow different.

Ok, what about now in 2019? The US tried QT…for 5 months resulting in a stock market crash. QE is back in Europe – will come back in US. All hard assets will be higher. But a new world is upon us…learn to love it…get involved…buy hard new hard assets. So many new opportunities.

Our future is shifting – learn about this. It’s here already…

• Cash less society,
• Paperless world,
• 4-day work week,
• Driverless cars,
• Everything online – everything next day delivery,
• Virtual and augmented reality,
• 3 D printing houses (your widgets?) just starting,

Be positive: The whole world wants to live here. YOU already do!

1. Foreigners will keep coming…Canada is rated No.3 for safety
2. Buy: Your own office/industrial/retail store. Always!
3. Buy: Strata office/strata warehouse
4. Buy: Inner city warehouses (next day delivery needs close buy storage)
5. Buy: Your house/your condo -haggle hard.
6. Yes, 50 developments have been put on hold. Great! That adds value to existing unsold inventory.
7. Understand you make the most money on the day you buy! That is when people run scared. Make stink bids. Buy that deal of a lifetime.
8. Buy cash flow, you can still buy hundreds of cashflow houses condos under $100,000: E.g. in May 2019: Kimberley Ski condo on the hill, fully furnished $79,500.
9. Luxury condos and house prices coming down…make stink bids.
10. Rent a luxury condo, buy a rental property where your money cashflows.
11. Ok, don’t buy: Timeshare, quarter share, Phase 2 condos, Hotel condos, ski resorts without golf.
12. A new phenomena: Lifelong tenants – rental buildings will do well.
13. Study, work, make offers, get the deal of a lifetime. Subscribe to the FREE Ozbuzz…live your life LARGE.

Forget the ‘Yeah buts’. We are thriving in BC. We have consumers that consume. We are in a cycle of growth. This week we had a record in job growth – 8 times the number for April expected. We need more labour. We have huge net foreign immigration (yes, still). We have a desirable high-tech industry, a roaring movie industry, exports and construction all combined to create a diverse and roaring economy. Our GDP expansion is best in Canada together with the lowest unemployment rate. We have the best stores in the world on Alberni St. The world is coming to BC. And not just the high end world: 70 percent of Canadians over 60 want to retire in BC.

Oh, my BC. My Love. Our BC has a majestic environment. outstanding climate and spectacular vistas. There is a very crisp quality in BC. Call it the fine mountain air or ocean spray, balmy sunsets, or clear blue skies that stretch to the horizon. Part of it is that special flavour of the West – an entrepreneurial, innovative flavour, a generosity of spirit, and open arms, an embracing of life in the outdoors and life where the individual can grow to his or her own future best. People from all parts of the world come here, bringing their individuality, charm, wisdom and business acumen.

To work here is a privilege. To live here is a true blessing. To study here is a benefit. To worship here is a natural. To love and hold here – this is paradise.

Credit Union Central says: Prices will double in 20 years

Ozzie Jurock at Real Estate Insider and ozbuzz.ca agrees!

50%+ returns on government treasury bonds? Is it possible?

Let’s face it, most investors only care about stocks. They want a great story and the ability to dream about great potential returns.  Congruently, when someone brings up government bonds, more often than not investors generalize them as a boring safe asset which is owned in a diversified portfolio to reduce risk and generate conservative income.

Let me offer you an alternative perspective.   When investors allocate a proper portion of their asset mix to treasury bonds during the right stages of a monetary easing cycle, they can perform extraordinarily well.  As an example of the type of returns an investor could make, an investor that bought 20+ year duration U.S. treasury bonds in the spring of 2011, would have found themselves up close to 50% by the summer of 2012.  Those are returns without using leverage.

Does that sound like a boring conservative investment return to you?

You might be asking the question – why or how can bonds make that kind of return?

That is because longer duration bonds are very sensitive to changes in interest rates and when an investor owns these bonds during a period of declining interest rates, there is an opportunity to make great returns as the bonds price in those lower yields.  I will elaborate on this further in a moment.

Now many investors may be skeptical because of the fearmongering preached from market strategists.

Have you heard pundits and strategists argue that with the rising U.S. deficits, that the bankruptcy of the U.S. government is imminent?  Or heard that China and Saudi Arabia are dumping all their bonds and will rocket interest rates higher forcing a huge funding crisis?

Often these doomsday sermons are given by strategist advocating the purchase of gold, crypto currencies and other alternative assets.  Or alternatively they simply are underestimating the ability of governments and central banks to manage these flows.

The bullish case for U.S. Treasury and Government of Canada bonds for the remainder of 2019

In order to make a bullish argument on bonds is about building the narrative for lower interest rates to come.  Let me ask you a series of questions for you to draw some conclusions.

1. The Federal Reserve and the Bank of Canada are done raising interest rates. These monetary cycles of raising and lowering interest rates are multi-year cycles and only very rarely is there a flip-flop in policy.  Do you believe the Fed and Bank of Canada are done raising rates?
2. Through history, central banks raise interest rates and tighten credit conditions until the economy stalls, often falling into a recession. Do you believe that we have entered an economic slowdown?

If you answered yes to the above questions, then positioning in treasury bonds is a no brainer.

It is our thesis that the business cycle has peaked, inflation will remain subdued and consequently interest rates have also peaked. As the economy slows, the central banks will ease to stimulate the economy and bonds will have the opportunity to be one of the strongest performing assets in your portfolio.

Best part, it will be a good diversifier for your portfolio as these are periods where volatility in stock portfolios increases.

How do you participate?

There are a number of long duration government bond ETFs available to be owned both in and out of your RRSPs.

Just to name a few:

• BMO Federal Bond Index (ZFL) – Canadian government bonds in Canadian dollars
• iShares 7-10 Year Treasury Bond ETF (IEF) – US government bonds in U.S. dollars
• iShares 20+ Year Treasury Bond ETF (TLT) – US government bonds in U.S. dollars

During the business cycle, there is a right time and a place for each style of investment.  It certainly is a interesting time to consider government bonds anticipating a new rate cutting cycle.

Thanks for reading,

Patrick Ceresna, CMT CIM DMS

Big Picture Trading

www.bigpicturetrading.com

To understand where there is potential for market gains over a 6 – 12 month time frame, it helps to consider the situation that we are in. Looking at the macro scenarios can give us insight on where to drill down for opportunity and understand risks.

Six months ago, the markets were concerned with the potential for rising interest rates and the stifling effect they might have on the global economy. It was one of the two main reasons for the correction that the market suffered in to the end of 2018. However, US Federal Reserve Chairman Jerome Powell rescued the market by keeping rates, and expectations for future rate increases, low. That started the recovery in the US Bond market, bringing interest rates down.

Below is the chart of the 20 Year US Treasury Bond ETF, TLT. This chart shows an inverse relationship with interest rates since rising bond prices mean lower interest rates. So, if the chart below is going up, rates are coming down.

Notice the break through resistance at $123 and the rising bottoms on the chart (as shown by the green line that I have drawn. This means bond prices are likely to continue higher until they hit resistance at $128 on the TLT, meaning interest rates are likely to stay low.

Low interest rates are good for the consumer eager to buy more stuff, including large purchases like homes and automobiles but also in consumer products as financing costs on these larger purchases drops, freeing up discretionary spending.

It is interesting that lower yields for US bonds has still allowed for the strong performance of the US Dollar, which has been in an upward trend since early in 2018, as they can often be inversely correlated. However, an upward trend is what the $US is in and it should be counted on to continue if the upward trend line that I have drawn in green on the chart below remains intact. I expect more upside near term, although we should anticipate some resistance for the $US when it gets back to the highs set late in 2016.

A strong US Dollar has some positive effects for the US based consumer whose purchasing power is improved on imports. In addition, it is cheaper to travel overseas.

Another important chart to consider is that for Oil which has been moving higher since its bottom in December 2018. Recently, it has shown some signs that a pull back is imminent as it recently failed to hold its highs. It is now threatening to break its very steep upward trend line, which if it happens, would likely lead to a topping out for Oil prices and perhaps even a pull back.

Finally, we have the US economy which continues to show improvement. Last week’s employment numbers exceeded expectations by a wide margin and unemployment continues to sit at low levels in the US.

So, we have several reasons to think that the current situation will benefit the US consumer and his or her desire to buy more stuff and go more places:

• Lower borrowing costs
• Increased purchasing power of foreign goods and services
• Lower fuel costs
• Increased consumer confidence

There is a wildcard, or perhaps a Trump card, that has to be considered for the near term direction of the markets. US – China trade was the second primary reason for the market correction in 2018 and the failure to arrive at a new trade deal will likely cause a sharp drop in stocks. Those that will be affected the most are those that have climbed the most. So, from a risk mitigation standpoint, I would avoid a heavy concentration of stocks that are already well in to their upward trends.

Some trading ideas based on these themes:

XRT (S&P Retail Spider ETF) – the group has broken the downward trend line and is building a base between $44 and $46. Buy signal on a break out through $46 on the weekly chart.

EXPE (Expedia) – buy signal if it breaks out of the pennant pattern on the chart below, moving up through $131 with increased volume.

AN (Autonation) – has recently provided a buy signal with the break of the downward trend line, look for a confirming signal on a break up through $43.

Tyler Bollhorn is the founder of StockScores and www.stockscores.com

MoneyTalks Spring Discussion

There are two investment themes we at BT Global would like to share with you this month:  US Cannabis equities and Canadian healthcare stocks.

If you are looking for outsized returns with limited downside you need look no further than the following few pages.  We stand behind these ideas as the two sectors each represent a maximum position of (net) 20% exposure in our Fund.

Let’s talk CBD and Cannabis opportunities in the US.  This situation is simply absurd.  The market is much bigger in the US, while the number of companies and their corresponding market caps are far larger in Canada.  It doesn’t make sense and will not last.  Our friends at Green Thumb Industries (GTII, great stock and a buy), put out a slide the other day at an investor day in Toronto which simply says it all.

We would recommend buying all the larger Multi- State Operator stocks Curaleaf Holdings, Cresco Labs, GTII, Harvest, Cannex, Ianthus, INDUS Holdings etc. and simply watch what happens as the market opens up south of the border.

We could go on and on about the additional long term advantages the American companies have over our Canadian players, including cheaper valuations, lower multiples, bigger markets, better margins, superior management talent etc.  But the real sustainable and key asset they have is the ability to build brands.  The Canadian Government views cannabis much like cigarettes and the freedom to develop a real brand is drastically reduced.  In the US the best and biggest brands will emerge with few restrictions and this will ultimately hand the economic benefit to US cannabis shareholders.  Our government has it wrong (again!) and their policies will eventually cripple the Canadian cannabis industry.

As investors we need to be aware and we need to react.  Fortunately, all of these US based companies are listed here in Canada and we have the opportunity to get to know the management teams and invest in the best companies before they list in the US.  If you don’t have time to look at individual names, perhaps you could simply buy the Horizon US Cannabis ETF (HMUS).  We think this fund will perform very well over the next 18 months, basically until Mr. Trump is tossed out or re-elected.

The next big play is Canadian Healthcare.  More specifically we like the companies that are listed in Canada but have the majority of their business in the US. Often these stocks trade at a significant discount to the multiples on US stock exchanges.  There are not many such opportunities but there are a few.

Viemed Healthcare Inc. (VMD.to) is our top pick and trades at an unusually low EBITDA multiple of approximately 7x 2020 estimated EBITDA versus US comps at 12 x or more.  The company published very good results recently and the stock is close to all-time highs.  This is understandable in our opinion and Viemed should continue to do well in the markets for many reasons.  They have no debt, are growing organically at between 35-45% per annum and are number one at what they do in America.  The company treats people that suffer from Chronic Obstructive Pulmonary Disease (COPD).  How big is this health issue?  Unfortunately, it is huge. It represents the third largest killer in the US, after cancer and heart disease.  They are an industry leader in providing equipment and services across more than 30 states and actually reduce the healthcare costs for their clients.  How long can it remain one of the cheapest healthcare stocks in North America?  If it were to trade only in Canada, probably a while, although the discount would certainly narrow over time.  The reality is that the company is going to list in the US sometime this year which we believe will only be very good news for shareholders.

When it comes to macro calls we find ourselves a bit less confident.  It is hard to predict with great conviction where things are going over the next 6-12 months with Mr. Trump in the oval office.  Regarding interest rates we would suggest the Fed is going to keep rates low for years.  The US dollar is the “king of the midgets” and has performed admirably well recently, mostly because other currencies including the Euro and Canadian dollar are worse places for your capital.  Our view is the US dollar will be relatively range bound.  We also believe a trade deal will get signed between the US and China and markets will bounce and then move on to worry about something else.

Few people expected the equity markets to rebound this well in 2019 and it has certainly been a good year for returns thus far.  We were fully invested until recently and expect the equity markets to have a pause here, perhaps over the summer, and yet trend higher into the fall and next year.  In our opinion, the US elections next year should ensure stable and rising equity markets.

Paul Beattie is a founder and Portfolio Manager at BT Global in Montreal

An exciting and new commodity cycle and lengthy bull market for commodity stocks is about to start. While our company is focused on the energy sector, we believe base and precious metals will also be very rewarding.

By the end of June, I see the Dow Jones Industrials Index breaking below the 26,000 level. We should then see a turbulent market during May to July, providing another low risk buying window.

Investors should become as informed as possible prior to this coming opportunity and be ready to purchase securities in these areas when they become bargains. Once or twice a year they go on sale so get your buy lists ready so you can pounce when stocks are being sold off irrationally.

The reason for a new commodity cycle is basically the lack of capital investment to replace declines. In energy it is a shrinking Reserve Life Index and a new entrant’s increasing demand that makes for a powerful cycle. In Chart #1 one can see that Japan affected the 1970’s cycle, China the 1999-2008 cycle and it is India impacting the 2016-2024+ cycle.

There have been only two major energy cycles in my 40+ year career so far, and the third one started in February  2016 when crude bottomed at US$26/b (Chart #2).

In the last cycle we saw WTI crude oil lift from US$10.65/b in late 1998 to US$147.27/b in mid-2008. In this cycle we see WTI moving from the low in early 2016 of US$26.05/b to a new all time high above US$150/b during the Euphoria Phase. Strong demand, low inventories and supply problems usually occur at the commodity cycle peak.

Stocks should move alongside the move in energy prices. In the last cycle the S&P/TSX Energy Index rose from 90 to 470 in eight years (Chart #3).

Stocks like Canadian Natural Resources (CNQ) rose from $1.81 in 1998 to $45.27 over the following 10 years. It was not an easy first phase. During the 1999-2003 bottoming period (Chart #4) or what we call the Skepticism period the stock was a Yo-Yo having six moves of 28-56% until finally breaking out in 2003.

This is the same scenario we see energy stocks doing now and we recommend buying during the shakeouts with a multi-year investment horizon. There should be many 5-10 baggers in the energy and energy service stocks this new Energy Bull Cycle.

We are currently in the Skepticism Phase of the new Energy Bull Market.  During this phase it will be bumpy with large market swings. Focus on natural gas and light liquids producers; but stay away from heavy oil, oil sands and thermal stocks for now. Hold some cash and use this next period of market weakness, likely this June, to raise your portfolios to your comfort zone.

Josef Schachter is a 40-year veteran in the investment business, a frequent guest on Money Talks and keynote speaker at the World Outlook Financial Conference and a regular commentator on BNN/Bloomberg’s Market Call.  The Schachter Energy Report provides comprehensive coverage on 32 Energy and Energy Service Companies as well as overall Market and Energy Sector Overviews. You can Subscribe at schachterenergyreport.ca  or go online to review sample copies of our Research and Market Update Tweets.