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

He really focuses on earnings that came out overnight, as it often gives an indication of what's going on in the economy. Today was a big earnings day for a number of companies, including DIS. 

He looks for a feel of market sentiment. These days, we're in an environment of good news is bad news, and bad news is good news. Investors love bad economic news because it means that maybe the Fed will cut rates earlier. And if we get great economic news, with a strong jobs number, the market goes down because investors feel that a rate cut is a little further in the future (and they'd be correct).

He pays really no attention to it. Short-term movements, who cares? The global economy is slowing down. Rates will probably get cut somewhat by the end of the year. But if it's not until the first quarter next year, so be it. 

Investors and consumers who are hoping to see the rates we had over the last number of years will be disappointed. Those rates were an anomaly. Even mortgage rates today are where they've historically been in Canada for the last 50 years. In fact, they're relatively low by historical standards.

It doesn't. The optimism is really concentrated in the tech and communication sectors. Everybody's forgotten about 90% of the stock market. There are so many great companies today trading at really cheap valuations, with good dividend yields, with growth as well. But they're being ignored. Investors will have to get ready for a market that's going to broaden out somewhat.

Historically, not a great investment over time. Floating rate bonds tend to underperform over the long haul compared to fixed rate bonds. In an environment where we expect rate cuts coming down the pipe, you'd be much better off with a laddered bond portfolio of fixed rate bonds. So, locking in rates for 1-5 years or whatever you're comfortable with.

The closest we have to that in Canada is TD, which is the 10th largest US bank by assets. Not at 50%, but not crazily far off. He sees no indication of change coming. TD has other issues, so the US regulator may not let it make more acquisitions. Don't be concerned. 

In general, history of dividends and share buybacks in the O&G sector has not been pretty. They all tend to buy back shares when commodity prices are high and they're making tons of money. And then they have to issue more equity at lower prices because they have no cash left. He wishes they'd do the opposite.

He never bets on the commodity price to stay high forever. Be very cautious. A little bit of economic slowdown, a bit of global peace, and we could see a drop in energy prices and a significant decline in cashflow for these companies.

Stay away. Won't end well. Fees are high. Not very liquid. If you really want in, buy into a private equity fund run by a well-known manager, and understand that your money's going to be locked up for a number of years. He thinks of Warren Buffett's advice: if you don't understand it well, don't buy.

Not a proxy for bonds in any way. Bonds are nice and safe, and you know your return when you buy.

The sector could do no wrong for a while, and all the stocks went straight up. They paid too-high dividend yields. Lots of competitive pressures. Doesn't like the sector. Prefers secular growers.

Unsure whether the market has realized there might not be interest rates cuts. Believes interest rates are unlikely to move before the US Federal election. Real estate investors in Canada are realizing that rates might not fall - creating interesting dynamic in markets. Commodities (gold etc) not rising as fast as expected (due to Bitcoin). However, gold prices appear to be appreciating. Uranium appears to be strengthening as a result of demand for Nuclear energy. Record high US debt also making economy unstable. 

Believes selloff has already occurred given large selloff in the markets. Perhaps the worse of the selloff is behind us. Could be a good time to buy equities that have been priced well. Large tech names have already started to recover. Is a good time to buy FANG stocks. 

Weak job numbers last week are not indicative of overall strength of economy. US economy firing on all cylinders which will cause further inflation. US Fed in very tough position - high debt loads make it hard to raise interest rates. US Fed can't cut rates either, as will increase inflation. Higher jobs numbers and inflation will continue to fuel inflation. Expecting hard economic landing - just not sure when. Inverted yield curve is setting records on length. Recent earnings with tech, not very strong. Strength in economy is very narrow (tech). Warren Buffett trimming Apple indicative of strength. 

Alternative income becoming more important for investor portfolios. Alternative investment conferences planned for Toronto in coming weeks will be indicative of sentiment in private equity and private credit. Public debt is not creating enough yield to keep up with inflation. Investors must find better options in the private markets. Top sovereign wealth funds (CPPIB) have directed investment to private markets. 90% of investment universe is located in private markets. VPC is a good option to get exposure to private markets in the USA. VPC comes with volatility in public markets - so would still recommend traditional private investments. 

Preventing Investment Scams: Watch out for identity scams

The development of AI means this will be a far greater problem in the future. A grandfather might get a call from a grandchild saying they are in trouble and need money. They might sound exactly like the relative, with the scammers using AI technology to duplicate their voice and even image. We have heard of scams where a victim fears a relative has been kidnapped and pays thousands of dollars in ransom. Meanwhile, the relative is wandering about town just fine.

There is an easy solution to this scam: All families should have a verbal password of some sort. If there are any weird conversations, a password confirmation can help sort out identities. Or ask the caller a question that a scammer would not know. Be careful here as social media provides a lot of that information, so a scammer might know a lot of answers. Make the password or question highly specific, not something simple such as, “What is your birthday?”
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Markets appear to be recovering from weakness in April. Investors are cautious with under performance in tech since January. Will be interesting to see if trend in tech slowness will continue. Energy & industrial sectors appear to be benefiting from rotation. Defensive stocks appear to be the latest trend in investor tastes. Expecting strength in defensive sector as investors seek protection from "sell in May" traders. Will be opportunities in the spring/summer for stocks that have sold off. Four year election cycle will weigh on certain stocks - uncertain which sectors will benefit the most from spending by politicians looking to get re-elected. 

Preventing Investment Scams: Don’t answer that call

A lot of scams start with a random phone call. It could be someone offering you an investment or it could be someone posing as an employee of the bank you deal with. But think about it: Do you really think that there is a legitimate random stranger phoning you with a legitimate, safe, high-return investment opportunity? This is not how the investment world works.

Banking and other scams, on the other hand, prey on fear. A caller might tell you that your bank account has been hacked and your savings could be drained. But again, you need to use common sense here.

If your bank account has been hacked and the bank knows enough about it to call you, the easiest solution is to simply freeze the account until the problem can be investigated. You can go to the bank with identification to help solve the problem. At the very least, hang up and then call the bank back. Not on the number the scammer gives you, but the number you might regularly call or the main number from the bank’s website.
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