Stockchase Opinions

Kevin Burkett A Comment -- General Comments From an Expert A Commentary COMMENT May 26, 2021

Gold. A great place to leave money in all but the most pressured markets. Gold has lost its lustre in favour of crypto, so that might be an opportunity. Not keen on gold companies, as they're perpetually expensive. To justify the price, you have to be really optimistic on the price of gold. Owning the physical commodity may be a better bet. Stays away from heavily promoted mid-caps. When gold prices move higher, so do costs. Likes the streamers such as FNV and WPM, and you don't have to worry about cost inflation. WPM has a narrower basket and is easier to understand. Not positive on gold in anything but short-term cases.
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COMMENT
Are investors less reactive to news?

There may be some evidence of that. It's been an eventful first almost-4 months of the year, and especially since so-called "liberation day". A better name might be liquidation day. People are catching on to the fact that the White House says one thing today and negates it the next, which might make investors less trigger happy. 

Hopefully, there's some longer reflection being made instead of knee-jerk reactions to off-the-cuff remarks. A lot of volatility for sure.

COMMENT
Q1 results for Mag 7.

Now it's really a disparate group of stocks. Not at all the way they traded for 2024 and 2023. He favours the ones that have recurring revenue. TSLA was the first to report, and it was a bomb on the quarter. 

GOOG skews more to the service sector side of the economy, which is distanced from tariffs. Very robust business, dominant player in Search advertising. He has no undue concerns about that. DOJ lawsuits are usually more bark than bite. 

Cloud business is growing nicely for all involved in it. 

COMMENT
Averaging down.

Not something his firm is all that predisposed to doing. One of the most dangerous phrases that gets tossed around in investing is "buy low, sell high". A better discipline is to "buy high, sell higher" -- that's the approach in their momentum mandate, and it works very well. Momentum is a force of nature not only in physics, but also in the investing world.

COMMENT
Should Canada strike a trade deal now, or wait?

There's a lot going on, and Mark Carney has to win first. We'll see what happens next week.

Carney is showing his hand a little bit and it's a good move. The Trump administration has put themselves in a bit of a pickle here, and they need to see deals. For this market to keep going higher, it needs clarity and a framework of agreement (without, necessarily, all the details). Both the bond and equity markets need to see that. 

Time is ticking against the Americans. Trump likes to be popular. And he wants to win mid-terms that aren't all that far away, especially if they've made this one goof move to put the economy into a recession. The #1 rule of governance is to not put your economy into a recession.

COMMENT
Tariffs and markets.

The medicine delivered on April 2 was really too hard for economies to deal with. The reasons we've had rallies since April 9 is because the US has kicked the can down the road by 90 days and has done carveouts for electronics. That 90 days can go by quickly, time is ticking.

Markets are clinging to hope that something will come out of weekend meetings between Trump and other dignitaries attending the pope's funeral. CEO's won't like it if there's no architecture on deals for months and months. People will sit on their hands, economic activity will slow, and the odds of recession will tick higher.

COMMENT
Asset allocation for retiree.

You want to diversify, don't bank on just one stock carrying the load. Look at a mix of fixed income, preferred shares, good dividend stocks with visible dividend growth, robust dividends. Places to look: energy infrastructure, utilities, industrials, financials. These sectors are all in Canada, as well as being in the US and globally.

Especially in markets like these, you want to inch in incrementally and slowly. Same approach with falling knives.

COMMENT
Gold.

Case for gold is great. Central banks continue to buy it. Interest rates are probably going lower. Weak greenback. But gold is not just about themes, it's about price. It's had such a huge move, you have to respect the chart.

COMMENT
Telcos.

Need to clean up the balance sheet. Capital intensive businesses. Poured a lot of $$ into capex, and then interest rates screamed higher. Four carriers instead of three. Less immigration. Asset sales need to happen as a catalyst. Still a tough time for wireline and wireless.

COMMENT
Evaluating stocks.

Know that anything can happen with any stock. But it's a matter of risk/reward and what scenario is more likely.