We remain overweight the precious metals sector through our considerations in gold and silver bullion, streamers, and producers. Since early last year this sector has outperformed because gold benefited from the decline of the Canadian dollar, taking gold from a low of $1,300 in late 2014, to a high of $1,725 this year,  greatly influencing the profitability of our Canadian based producers. In this sector I will hold the allocation steady and begin to rebalance some of the gains we have in our gold producers to overweight the silver producers by adding one more silver consideration to the portfolio.

While many are calling for gold to pull back to US$1,100, I do not share that pessimism and instead think that it will go sideways above US$1,200, allowing silver to catch up. In its recent move to $1,270 gold shot right through its 600 DMA (day moving average) of $1.222, a volume based move that will be hard to undo and might just signal the end of the correction. I think that this time the fundamentals for gold will be hard to deny in view of all the global economic, monetary, and political uncertainty. Think for a moment how negative interest rates have influenced Japanese investors’ appetite for gold as a safer alternative to paying for holding interest bearing vehicles.  Furthermore, it’s nice to see that star manager Stan Drukenmiller appears to share my views with his portfolio weighted 30% in the GLD ETF at the end of 2015.

Lastly, I have taken advantage of the recent bounce in the overall stock market to continue to position clients to participate on the short side. I think the markets will catch up to the ongoing global economic slowdown, and I think this recent bounce will be temporary as the markets continue on a negative trajectory which I plan on participating in. After reviewing several hedge funds in late 2015, I have chosen one that meets all my criteria; no use of derivatives, small in size, good management experience and track record. The fund I have chosen is for accredited investors only and I will be happy to review with investors on a one on one.

While cash levels are still high, I continue to rebuild the equity income positions we sold last fall and maintain a cautious stance. I think 2016 will prove full of surprises; Trump vs Hillary in the U.S., BREXIT in the U.K., inflation picking up (U.S. CPI currently at 2%), when will we run out of physical gold and silver, geopolitical issues in the Middle East and the South China Seas, terrorism in Europe, and so many other possible surprises.  All considering, I think a negative stance is warranted.

TOP PICKS:

Americas Silver Corp (USA.TO) 

I averaged down on my USA position throughout 2015 and have currently acquired a sizable position in what I think will prove a worthy investment in this sector, the company has a great management team, low cost of production, and properties in geopolitically-safe areas.

Veresen (VSN.TO)

While not without its risks, the Jordan Cove LNG project continues to move forward and when completed should add much value to VSN. However in the meantime I believe the higher yields are reflective of risks that VSN should overcome; there are questions about the div, which management has stated that they will not cut, and the fact that they still have to fund other equity projects. 

Rogers Sugar (RSI.TO)

I hold this as part of my agriculture content and feel that it should prove rewarding as inflation continues to pick up.

Past Picks: Mar. 6, 2015

Fairfax India Holdings (FIH_U.TO)

Healthcare Leaders Income Fund (HHL_U.TO)

Osisko Gold Royalties (OR.TO)

Total Return Average : -11.47%