Educational Segment | StockChase
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Compiling comments that experts make about stocks while on public TV.

Educational Segment

Date Expert Opinion Subject
2017-03-13 Larry Berman CFA, CMT, CTA

Educational Segment: Market Drawdowns. What he calls “market noise” is a 5% correction or less. He looked at the peaks and the lowest lows in a 4-year business cycle since 1920. Looking at the drawdowns over the years, you can see the great depression, where 86% was the drawdown in US large caps. We’ve had several in the 50% range. However, the average surprisingly was 13.4%, and the average was only 10 months long. You tend to get a 5%-13% correction at least once a year, so it is pretty normal to get volatility in the markets. Drawing down a little further, he has a one-year version, which shows that we get more frequent declines. The interesting thing is, if we are down 13.4% from the previous peak, and we look out one year knowing that the bear decline is about 10 months, this is the time to start investing, to get aggressive once the markets are down. Your forward returns go up exponentially from a low point, compared to putting money to work at a high point. We are probably due for a downturn that is going to be about 24% at some point in the next year or 2, so he is playing defence because of that. Once we are down 13.4%, he’ll be thinking about buying.

2017-03-20 Larry Berman CFA, CMT, CTA

Educational Segment: Long-Term Investing. This is on geopolitical and global macro, because a lot of global hedge funds macro views and look for themes in markets. This week, Canada has their budget. Global investors look at things like this and look for what is diverging and what is different, and is it good or bad compared to others. The US is cutting taxes, both corporate and personal, while Canada is raising taxes. Global money follows the flow of funds. Canada has net outflows on capital account, net outflows on current account, so we run trade deficits. There is less money coming into Canada so the global investors see that Canada is vulnerable and if they Short Canada as well as the currency, will the Bank of Canada raise rates? Investing in Canada has a lot to do with oil, and as oil goes, so goes the TSX.

If the budget is as bad as he thinks it is going to be, in terms of taxing capital and savings, you use inverse ETF’s. HBP 60 Inverse ETF (HIX-T) is an inverse play on the TSX 60. While Canada is somewhat cheap this year, it is only going to grow at 1.5% a year over the next 5 years, and only because they are borrowing money.

2017-05-15 Larry Berman CFA, CMT, CTA

Educational Segment. He gets a lot of questions on hedging, and this is to show you his favourite indicators, and what are quite popular on the street for figuring out where the Cdn$ might go. A upper part of the chart showed the traded value of the Cdn$ over a two-year span. When it was going up, it indicated the dollar was weakening. The bottom part showed the interest rate differential 2-year US and 2-year Canada. As the differential was rising, the spread to US interest rates, the US yields more than Canada. Money tends to flow towards the higher yielding currency on average. With that in mind, the Fed is likely going to keep raising rates, which is a bit of a negative. However, compared to where the spread was when we were back at the extremes, we are now at the same level spread wise. The chart also showed the correlation of oil to the Cdn$, which pretty much followed. The chart also showed the speculative position in the futures market. Currently, we are at the highest level in terms of net speculative Shorts in the last couple of weeks. That tells him that there is an imbalance in the market. The loonie might be close to a bottom for at least the next 6-12 months. Going out to the end of 2020 on the futures curve on a crude oil chart, we are looking at pretty stable oil prices in and around $50 looking out 4 years.

2014-09-15 Larry Berman CFA, CMT, CTA

Educational Segment.  Liquidity trap.  October is the last time they are doing QE.  They are pricing in the first move by next June.  You have to understand what the fixed income markets are going to do.  We won’t have the liquidity from the FED, although Europe will fill in some of the lost liquidity.

2015-11-02 Larry Berman CFA, CMT, CTA

Educational Segment.  Retirement and an encore career – you leave the corporation, but keep doing lots of work, possibly part-time.  One of the challenges for this is the uncertainty of returns from investments going forward.  An encore career makes your money last longer in retirement.  People are living longer, perhaps 10 years longer than you expected.  Millennials are looking at living to 110 years old. 

2017-01-30 Larry Berman CFA, CMT, CTA

Educational Segment.  Smart Factor ETFs.  Reducing portfolio risk.  The trend between actively managed mutual funds compared to what capital is going into ETFs show money is moving that way.  You can do asset allocation with ETFs and that is by far the most important consideration.  The bigger companies dominate the NASDAQ.  Three sectors make up half the index.  It is very concentrated and heavily weighted into a few stocks.  All smart factor ETFs beat the index.  They all have different volatilities.  You should use all of the indexing strategies in your portfolio. 

2017-05-29 Adam Thomas

Educational Segment.  Demographics. You have two natural drivers of growth:  Growth from population growth and growth from productivity growth.  From the sum of the two we get about 1.3% growth in the world.  We have a growth problem, despite all the money being spent in the world.  We are in a low growth world.  The vast majority of the growth in the world is from China, India and Africa.  But China is near finished growing.  AFK-N and INDA-N are ETFs he likes.  Buy on pullbacks.

2014-01-13 Larry Berman CFA, CMT, CTA

Educational Segment.  Evolution of Investing.  In the last decade we found that it is all about what people think about the investment decisions.  A gold chart pattern shows a double bottom and a breakout on gold and shows it is a high probability trade:

  1. Would you sell the security
  2. Continue to hold because momentum is good in the gold sector.
  3. Tighten your stop so you at least make some money.

There is no right or wrong answer, but rather how the individual approaches the trade.  You have to understand how your mindset works and execute the trade accordingly.  Your return to risk needs to be at least 2:1.

2014-03-17 Larry Berman CFA, CMT, CTA

Educational Segment.  We are into the 29th month without a 10% correction- second longest rally ever.  This rally is in the category of extreme extended range.  Believes possibility of a 10-20% correction could play out.  Review his ‘sleep at night’ portfolio.  People should consult their advisors to see what they should do.  ZUE is the S&P 500, up 45% and ZWA is up 18%, both since 2011 lows.  ZWA is going to go down only about 70% of a correction, but you participate in any further rally.  XIU vs. bonds has done much better but would be impacted much more by a pullback.

2014-05-12 Larry Berman CFA, CMT, CTA

Educational Segment.  Smart Indexing or Smart Beta.  New improved ETFs.  Alphadex is a proprietary stock screening process.  Growth and value factors.  They eliminate the bottom quarter of the list and break the rest into quintiles to be weighted differently.  They beat their benchmark over 5 years. 

2015-01-26 Don Vialoux

Educational Segment.  He is at the largest ETF conference in the world.  Every ETF provider in the world is there describing their new products.  Greece is a hot topic.  He showed a chart of 10 year Greek bond yields. Yields have really come down.  The question of Greece leaving the Euro could lead to a rocky road in the markets.  What is happening in Greece is having an impact on your portfolio and you have to know how to handle it.  They are projecting the global ETF market will double to over 5 trillion dollars next year.  If Greece defaults on its debt it will have an effect even on North American markets.

2015-02-02 Larry Berman CFA, CMT, CTA

Educational Segment.  If you don’t understand the markets are going to go up and down then you are not ready for the markets.  The average investor’s return in the last year was 10% and the volatility was 10%.  The ideal portfolio gives you the highest return possible with the lowest volatility. 

2016-06-13 Larry Berman CFA, CMT, CTA

Educational Segment. Downside of negative interest rates. Negative interest rates are really stealing money away from pensioners and savers. Did a little heat map of the term structure of interest rates going 2 to 30 years in the various countries. Canada, US and UK still have relatively normal yield curves, although yields are pretty much as low as they have ever been. However, in Europe and Japan you’ve got negative interest rates. There are over $10 trillion of government yields with negative interest rates. Last week the ECB started buying corporate bonds, and there is a good chance that some corporates are going to be able to issue bonds with negative interest rates. He showed a 2006-2016 chart of the total returns of the entire US market comparing the history of stock and bond returns. When stocks go down, bonds are generally the offset. The problem in the pension world going forward is that interest rates are so low that in order to get that balance return of 6%-7%-8%, you have to use stocks, but only if you can handle the ride. The volatility is very, very different. If global bonds are going to yield 1%, in order to get your 7% in a balanced portfolio, you have to get 14%-15% in stocks. Where valuation is today, that is not doable. A passive “buy and hold” portfolio is going to be very challenging.

2016-06-20 Larry Berman CFA, CMT, CTA

Educational Segment. Brexit? Feels Brexit is probably not going to happen. Generally speaking, the undecided voter speaks for the status quo. What is happening globally is the anti-establishment vote. More and more people are upset. He doesn’t think Europe works in the common currency and in some of the things they are trying to do. Loves the idea of the EU and Europe working together, but the reality is that these countries did not meet their criteria and debt is a problem. A chart on the British pound shows that it broke down in January at about 1.48-1.49 when this really started to get in the mainstream. The long-term multi-decade support of 1.39-1.40 is the range. If the British pound gets above 1.49 or below 1.39 that is going to tell you how things are going to play out.

2016-06-27 Larry Berman CFA, CMT, CTA

Educational Segment. Brexit. At the end of every Bear cycle, if you are still bearish you make no money, markets rally. At the end of every Bull cycle, the Bulls have to feel some pain when things go down. Every correction we have seen in the last couple of years has been 1 month or 2, and then a recovery. Thinks BREXIT is enough of a catalyst, that this time it is going to be more painful, taking out the lows that we have seen earlier this year, and in the middle of last year. He showed the STOXX 600 Banking Index (European bank index chart). It showed the 08-09 lows, and lower lows in 2012. Today we are at about 6% from those lows of 2012. Those lows need to be tested and probably to be taken out at a minimum before we see people confident about coming back in to European banks. He then showed the STOXX 600, which is like the S&P 500 of Europe, a benchmark of all the European countries including the UK. Chart shows a long upward trend line from 2008, and we are sitting on the trend line now. If it breaks where do we go. Retracement levels are where you look for where the market might come back to. The trend line is almost certainly going to break, and that adds to the broader European markets of another 10%-15% downside. On fundamentals, looking at the last 5 years of the earnings, earnings have been going down. Negative interest rates don’t work, they are toxic. He doesn’t know how they stabilize things, and there is more downside to come. Fundamentally we have to go down lower, there has to be some pain. The US and Canadian markets are going to come down in sympathy. They probably retest February lows, and let hope it holds.

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