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

Multiples Needed to Breakeven from Drawdowns

One of the most often misunderstood concepts in investing is the difference in percentages from a drawdown against an increase. For example, if a stock declines by 10%, a subsequent increase of 10% will not bring the investor back to breakeven, but rather an 11% increase in the price is required to break even. For example, a $10 stock declines by 10% to $9, a subsequent 10% rise from $9 brings the stock up to only $9.9. Below we have listed various drawdown percentages in increments of 10%, and the subsequent percentage increases needed to break even, along with their respective ‘multiples. For example, a 90% drawdown in the price of a $10 stock requires a 10X to bring the stock back up to $10.
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It's difficult to tune out, as it's pervasive, loud, and global. His team doesn't exactly tune it out, but they're resolute in their commitment not to trade in a knee-jerk fashion to executive orders, tweets, and threats. Time and again, we've come to learn that the playbook is to start with big/bully/bluff bets and then to walk back.

The risk as an investor to trading on a steady stream of reliably unreliable information is the risk of being whipsawed. Market action in the wake of liberation day (aka liquidation day) is a great case in point. His firm has made some fine-tuning and some tweaks within portfolios, but no radical changes. 

It is probably a buy-ahead-of-tariffs situation. In fact the US had a negative print for GDP in Q1, and a lot of that was due to a massive surge in imports. The US recorded its largest trade deficit in history in the months coming into the tariffs taking effect. 

Households were stocking the pantry and corporates were stocking the warehouses, getting products onshore before whatever tariffs were imposed. We're still seeing the tail end of that.

Looking pretty good, and that's the real conundrum for investors. There's the hard data (measured efficiently), such as employment, retail sales, and GDP. For the most part, the hard data is coming in just fine. 

On the other hand, that's backward looking, so investors often rely on soft data from surveys of households or corporate executives. Purchasing manager indices are another good example. Those are coming in very squishy, not surprising given the noise surrounding trade, tariff, and policy confusion.

But as these relate to earnings specifically, in both Canada and the US we've seen the bulk of earnings reports come in. Just waiting for the banks, which we'll see next week. Most earnings are decent, showing growth YOY in high single digits or sometimes low double digits. So far, so good. Have to see what Q2 looks like.

Seeing analysts for both Canadian and US companies really ratcheting down growth expectations for remainder of the year. Now seeing consensus estimates of 6-7% earnings growth for the S&P 500 and the TSX, which has really come down a lot from the earlier estimates of 12-13%.

Hitting record highs, and his firm thinks it's going higher. There's been an American exceptionalism trade on for more than a decade, and some of the lustre's coming off. Capital is returning to other regions of the world, including Canada. 

Canada's uniquely advantaged by having one of the largest index weights in gold of any developed market in the world, and gold's been doing very well. That and a number of other factors under the hood advantage Canada, not the least of which is still a wide valuation disparity between our market and the US market.

Investing 101: Think in terms of years, not months or quarters

This one is so important and probably the one that gets ignored most often by investors. No one wants to wait 5 or 10 years to see their portfolio providegainss. We want it all now. Unfortunately, patience is key in a portfolio. Set up a structure that makes sense for the long-term and don't change it unless your situation sees a material change (or if it was inappropriate to begin with). 

Markets take time to generate returns and compounding takes decades to have the true power of compounding returns felt. It will be worth it though. 

Similarly, companies do not execute a strategy in three month periods. It takes years to change a large company and for its strategy to be fully rolled-out, so an investment in a company should in-turn be viewed in a matter of years and not quarters.
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Not his area. His associate is a CFA, and so they do use fundamentals at his shop. Whereas Keith pays attention to nothing but the charts. Even in April, the tape is going to tell you what's going on.

Everyone's concerned about tariffs. His firm is working around that by following their rules. He was very heavy in cash through most of the winter. Quantitatively, he has seen a couple of reasons for getting back into the market and has been stepping in over the past month.

There are also some signs from the fundamental side of potential slowing and recession, on both sides of the border. He doesn't want to step in aggressively. He's been buying value, but is still holding tons of cash. He's trying to buy equities that aren't correlated to the overall stock market.

Markets rarely make V bottoms. Covid in 2020 did do that, but that's rare over 100 years of charting. Usually, a market falls and then does some ups and downs before deciding to continue with the bull market. Unless this is another of those 1 in 100 years V bottoms, he's wary of stepping in too aggressively.

He has a quant model that tells him when risk is high. His risk model went into neutral, and then it moved ahead of the 50-day MA and then the 200-day MA, so he stepped in some more. Yet he's still over 25% cash.

If we take out the highs on the S&P, then he has proof that we are moving back into a bull market. But we haven't done that yet.

He's recently been talking about this on his blogs and videos. Right now, he prefers silver over gold (though he still holds it). Silver has a catchup trade to do, it's just getting started. Silver's still somewhat below its all-time high, whereas gold took out its high a year or so ago. 

He owns lots of silver, but only started legging in early 2025 or late 2024. Silver futures chart is in fine shape. Coming down to the trendline now, so probably a good opportunity. When things get overbought, he takes profits, and goes back in later at a lower price.

Bases are good, and they say that "the greater the base the better the case". He loves base breakouts; he wrote a book called Sideways on that topic.

If a stock breaks out for real, it needs to stay above resistance for 3 days to 3 weeks. And then you start legging in. There's tons of potential on a stock that breaks out.

Essentially, he looks for lower highs and lower lows. Also the 200-day MA and the 50-day MA. If these are breaking, he takes another leg out. It depends on how much cash you want to raise. He does a quant reading once every month, in the first week, and it's called the Bear-o-meter (see it on his blog). If it's neutral or bearish, he's going to look for more cash (though neutral would mean raising less cash). 

Usually, the amount of cash he'd raise each time would be around 3%, but could be 5-6% or more if things get really ugly. The economists always say "it depends", and that's his answer too.

He offers an online trading course on his website.

With oscillators, you have to be careful that you don't miss the forest for the trees. Breakouts are the most important thing. It all comes down to charts. Oscillators are just a side tool to help refine your trades.

It's actually quite healthy right here, because it's bounced back a good 20%. You'd think it might correct, but it's just consolidating, which is healthy. So they'll hang around here for a bit and then go for new highs.

In classic computing, programming is done with 0s and 1s. Quantum computing lets you do things with 0s, 1s, and a whole bunch of things in between that are called qubits. They allow the computer to run a lot faster and, therefore, to do higher computational things.

He's brought in a bullseye chart to help explain the ecosystem. The bullseye is the hardware, which provides the essential computational foundation needed for quantum calculations. Second circle is the software and algorithm development side -- translates hardware capabilities into actionable software solutions. Finally, you have the applications that deploy the software solutions to specific industries and sectors.

With qubits you can do faster computations and more of them. For example, a lot of medical experimentation is a series of tests and misses. If you can do this faster than you could before, you can shorten the timespan of finding the right computation to reach a medical solution. Another example would be supply chain logistics, and computing the most efficient route more quickly.