Charles Dillingham A Comment -- General Comments From an Expert A Commentary COMMENT Aug 08, 2012

Beware of online scammers. Someone is perpetuated a fraud under his name, promising returns and such. He would never do that on social media, except offering advice on YouTube. The Fed this week: What will they do about the future? Trump wants to take away their independence. Many expect the Fed to open the door towards a rate cut. He's not sure, expecting them to be more hawkish and September will be a coin flip based on data (job losses).

He loves alternative strategies, because these funds take no or little direct market risk. Instead, they pick the best ideas and go long, with leverage, then short some names to create the leverage of names they don't like. Few managers are good at this. A manager called AQR, in Connecticut, is one he uses and likes. He loves multi-strategy funds that will be huge in coming decades.

Population growth is based on net immigration and births minus deaths. 20 years ago, Washington forecast a 1.4% productivity rate. The actual growth to 2025 is 1.1%. We need a lot of growth to climb out of this current debt. We're creating jobs, wonderful, but there's a lot of talk of AI to steepen productivity. Getting a liberal arts degree won't cut it in terms of where the growth will be in the future. Rather, the economy needs people trained in STEM research, those who can contribute to AI.

AI spending is at an all-time high, the fastest in the history of any tech the world, including the internet. No, valuations are not excessive, and he's still invested. These companies remain the best-positioned, because immigration policies means a labour shortage, especially in small business whose margins will suffer because of a lack of cheap labour. Stick with the Mag 7.

He expects Fed Chair Powell to sound cautious. There are a lot of moving parts. The recent labour stats showed cracks. Another labour print before the Fed meets again, which he will want to see. Also, US inflation has been sticky, especially services. Expects Powell to say it's data dependent and won't show his cards. The bull market continues, still led by few stocks and sectors (communications and tech). Healthcare, energy and discetionary have struggled, though, but is not unusual. Bull markets get narrower as they mature. Small caps: he's had great success if you're a stockpicker. Lower interest rates favour small caps which are heavily levered.

Many focus on taxes, but lose sight of investing--to make money. Some want to avoid paying tax so much that they make poor investment decisions. Nobody likes capital gains, but they are a part of life.

Analysts come into the year perhaps overly optimistic. And we get to the end of August, and they say "Oh boy, I better cut back my estimates." Seasonally, we've seen a lot of weakness at this time of year. But that's in every year.

This year, analysts took estimates down pretty sharply in Q1 and Q2. They've now been revising up later in the year. That's one thing that's different.

Second thing is, the market came in on a pretty good footing into the middle of August. That makes it different as well. In years when the market's come in on pretty solid footing, Q3 doesn't wind up being so bad.

That being said, he generally comes into this time of the year with 5-7% cash. Global markets are behaving really well. Canadian markets are, too. But you have to address the fact that markets can be sloppy from the end of August till the end of October.

If you look at the revisions that have been taking place over the last month, a little over 60% of them have been higher. Revisions are going higher in Q4 of this year and in Q1 of 2026. That's positive. 

There are sectors where we're seeing that. Financials, industrials, tech, and communications show this trend. But healthcare is going the other way. So it's sector by sector. There are definitely haves and have nots in the market right now.

He's continued to add positions in global markets, as they look really constructive. And he has more Canada than he'd typically have. Canadian market is solidly outperforming the US. Breadth of stocks performing well is better in Canada than in the US.

In a bull market, you need 20-25 positions for a diversified portfolio. If you own a store and your inventory isn't selling, then you mark it down and get rid of it and replace it with stuff people want today. You only have so much shelf space. Same in your portfolio. When something isn't working, and there's no sign that you can find to say it's about to change, then probably move on and do something else. Because you only have so much capital.