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

It'll definitely help, and we're already seeing some stability in the markets. February/March was a pretty rough go for investors. He's seeing fundamental buyers stepping in. Valuations are still really attractive. As long as we can solve this tariff issue relatively quickly, the setup for investors is very good from here.

When all this started, his team did a position-by-position review. They were looking for 2 things: direct exposure to tariffs (such as producing a product and selling to the US), and indirect exposure (such as a spike in unemployment leading to decreased credit performance). So go through your portfolio and critically analyze both of these impacts. 

Right now, given that there are so many good opportunities in the market, you don't really need to hold a stock where you're unsure what the impact will be or where you think there will be significant impact to margins. 

Investors really need to look at things from a bottom-up perspective, company by company. He's not a macro investor, so he's not going to try to predict what's going to happen with tariffs or rates. Instead, he looks at a company's fundamentals and picks his spots.

The recovery we've seen typically comes in bursts over a small number of trading days. Worst thing you can do in times like this is to be out of the market completely. Some investors can't stomach downturns and just panic-sell. Don't do that.

Very different market than last year, where you could have owned anything and done well. Now it's a market where you really have to pick your spots. If you don't have the skill to do it on your own, work with a qualified adviser or firm because this is a much more difficult market. But tons of opportunity, so you need to take advantage of that.

He's probably not the best person to answer that question, because he focuses exclusively on Canada. Within the Canadian market, and within the universe that he follows, he's finding tons of growth stocks at single-digit multiples. When you can buy stocks like that, the setup's very good.

Not a chance. Mark Carney has business acumen in terms of his positions at the BOC and BOE during 2 great financial crises. He understands fiscal conservatism and the importance of doing a good trade deal here for Canada.

But the issue is more on what does the US president ultimately want out of this. And that's not clear to Larry. Trump says that the US doesn't need any more oil from Canada. Is he kidding? Of course they do. The president says things, and you just have to shake your head.

So we're not going to get a deal in the short run, though we might get an agreement to have a deal. Everybody wants a deal to clean up the mess that Trump started. Historically, it takes 18 months to get a solid trade deal done. So in the next 45 days, before the 90-day window expires, a deal is extremely unlikely. Though there will be talks within that window.

Doesn't think it matters that current agreement failed to deliver dairy and lumber agreements that US wants. Trump's taken this tack largely for the implications against China. To say that this is an emergency because fentanyl is crossing the Canada-US border is asinine. 

There are some cases before the courts right now that argue that what he's doing right now is not legal in terms of his powers. That could be an issue.

S&P right now is 5600-5700. The gold bulls have always been painting this "gold's going to $5000" story. Gold falls into the category of base metals -- at times the performance will be great (like now), and then the performance will be terrible (possibly for years).

Right now, the trend is higher and momentum's up. On the short term, he's more of a seller here. But he's been saying this since it hit $3100-3200, so he's been wrong for the last 400-500 points or so.

So you won't see them cross anytime soon. He'd be buying dips in precious metals because of the dynamics in the world today. Don't chase strength, but buy into corrections.

Portfolio Style

Warren Buffett's retiring at 94 years old. Larry's in his 39th year as an investment professional right now, and he's jotted down some things he's learned.

Market timing is very hard. Buffett always makes fun of technical analysis and charts, but he does market timing through more sophisticated metrics.

Diversification is critical. Concentrated portfolios are much higher risk.

Periodic rebalancing is prudent. Buy when there's blood in the streets. When the economy's in a recession, he's looking to put cash to work. In 1998-2002, Buffett was putting money to work, but in value stocks and not what was leading the S&P. After the dot-com bubble burst and interest rates went to zero, Buffett started using a lot more leverage to invest. Only in the last decade or so did Buffett buy into AAPL and growthier names.

Long-term focus is needed, but hard to execute.

Most important is your portfolio construction.

In the current Buffett portfolio, we can draw these lessons:  leverage is relatively low (costs more to borrow now); cash is very high; seems to be waiting for some blood in the streets (saw a bit of that in April); better value internationally using strong USD to buy cheaper assets globally (bought a lot in Japan). He's being cautious. Over 20 years he hasn't outperformed the S&P 500, but he's done great compared to balanced funds.

The Difference Between Trailing P/E and Forward P/E

Both Forward and Trailing P/E involve the same two components: price per share and EPS. While both Forward and Trailing P/E use the current price per share of the stock, the timeframe for the EPS differs.

• Trailing P/E is calculated as: price per share / trailing 12-month EPS
• Forward P/E is calculated as: price per share / expected forward 12-month EPS

Let’s break down what the differences are between the trailing 12-month EPS used in the Trailing P/E calculation, and the expected forward 12-month EPS used in the Forward P/E calculation. The trailing 12-month EPS is simply the EPS of the stock over the most recent 12 months. On the other hand, the expected forward 12-month EPS is driven by analyst expectations of the company’s earnings over the next 12 months.

Since the Trailing P/E uses the EPS from the past 12 months, this metric tells the investor how expensive the shares are for every $1 of earnings as of today. Whereas the Forward P/E uses the EPS of the next 12 months, this metric tells the investor how expensive the shares will be one year from today. As a rule of thumb, if the Forward P/E ratio is less than the Trailing P/E ratio, this implies that the company’s earnings are expected to grow, and vice versa if the Forward P/E ratio is higher than the Trailing P/E.
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The "liberation day" global tariff regime kicking off bilateral tariffs would have been a surprise to anyone. The whittling down of the tariff regime incrementally over time is the other surprise. 

If we take a step back, what's interesting is that we've gone from speculation of a really tough tariff regime being fully priced in to the other direction, where a benign outcome is fully priced in. The truth is probably somewhere in the middle, where you have to have an eye towards caution but also towards opportunity.

Reading the tea leaves and listening to the rumour mill, it seems that China's let a few imports be exempt from tariffs and the same with the US. Think of it as a "Swiss-cheesing" effect on the effect of tariffs. This is either the way it will be, or just green shoots in the entire conversation.

The market's interpreting it as green shoots, whereas it might be building up domestic resilience for the longer haul.

The best way to think of it is in stages: initial euphoria, experimentation, and then implementation. In the midst of earnings season, the hyperscalers have spoken to strong demand for AI-related workloads. They've also stood behind their capex forecasts. 

So this earnings season, one of the big stories has been the big sigh of relief for those selling equipment to the big cloud companies. There is AI demand, but we don't know if we're at the stage of experimentation or implementation. As with any technology, it will permeate our lives to a greater extent with time. You have to know that you're buying companies that are relevant to that at the right valuation. Understand that profit pools in tech can be fleeting, just as in every other sector.

Seeing a major reorienting of global trade flows. Data on container shipments is already quite choppy. But over time, there was already a "China +1" strategy happening in global trade. For example, AAPL last night was talking about how they're building more of their iPhones in India. 

In general, this makes you less sensitive to one bilateral trade corridor. 

He's far less constructive on defense stocks than he was a few months ago. Europe is by far the best place to be in the grand scheme of things. European defense budgets are rising significantly, in a way we haven't seen in a generation or even two.

For example, Germany used to spend less than 2% of GDP on defense. Now moving closer to 3% and greater. He's chosen to play the space through RHM.

Regret Aversion: Buying Too High & Selling Too Low

The fear of buying too high when the markets are plummeting and selling too early when the markets are reason can both be attributed to what is called the regret aversion bias. When markets are rising, investors may become hesitant to sell some of their positions out of fear of regretting this decision later on, in the event that markets continue to rise. Conversely, when the markets are declining, investors can have a fear of buying too soon and regretting not purchasing at a lower price point. While both forms of regret (not selling at the highs and not buying at the lows) can be painful for an investor, there is a common belief that higher emotions are associated with financial loss than financial gains. To demonstrate this, a behavioural finance study concluded that investors prefer to avoid a loss more than acquiring an equivalent gain. The study used the example that when given the choice of receiving $900 or taking a 90% chance of gaining $1,000 (a 10% chance of gaining nothing), most investors would opt out of risking the higher gain of $1,000 and would take the guaranteed $900. Both outcomes are virtually the same ($900 vs. 90% X $1,000 = $900). On the other hand, when those same people were given the choice between losing $900 or taking a 90% chance of losing $1,000, most investors opted to take the 90% risk and attempt to avoid the loss.
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