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

Looking at this indicator, around 1 is flat, which is an even number of buyers and sellers exchanging puts and calls. Over the last couple of weeks, investors have been quite exuberant and buying far more calls than puts. It's really at an extreme. He's quite concerned, as this is what you typically see when things are frothy.

In theory, he's a momentum guy, so it's fine that we're seeing this kind of momentum. But concern comes because the market internals aren't really there.

Conversely, if we saw a lot of puts being bought, he'd be a lot happier about how the market internals look. He's nervous, and you'll see this in his best ideas later on. He just wants to be safe and steady right now.

Continue to let your winners run. But when it comes to putting new $$ to work, be cautious and wait for more of a pullback. If he's correct on the longer-term cycle work, there's going to be a greater opportunity either later this year or early next in terms of a bigger correction. He calls that a 4-year cycle reset, others call it a cyclical bear market.

Typically you see a 15% correction on price, lasting ~34 weeks. That's what we saw in 2022. We saw the same thing during the Trump administration in 2018. 

It's trying to find a floor around the 69 cent level. The next level after that is 67 cents, and big-floor support should be around 65 cents. Commercial hedgers ("smart money") are very long the CAD here. They're a good barometer, so we should see some sort of bounce. Political moves should be a tailwind for the CAD.

That being said, he was wrong when it moved below 70 cents, but it does look like it's trying to stabilize.

Anything that's a market driver should be priced into the market. Human behaviour is what drives a lot of his work. That's why technical analysts have such a tough time grappling with things like social media, as analysis wasn't designed to take into account that amount of crazy dopamine ;)  

The pandemic was definitely a curveball because it didn't fit into the traditional 4-year cycle work he does. The "4-year cycle" is just a fancy way of saying the business cycle. His team has been getting a lot of questions about tariffs. 

He'd recommend looking back to what happened during the last Trump presidency, 2016-2020. When he started, we'd just gone through a 4-year cycle reset, and we went through a truncated version in 2018. Broadly speaking, everything should be reflected in the price dynamics, so he should be able to monitor it. That's what makes the markets exciting, because every cycle is different.

The one factor that never changes is humans and human behaviour, and that's what technical analysis monitors.

As we get into the 4-year cycle reset, portfolio managers will rotate to the more boring areas of the market. Think staples, healthcare, and higher dividend payers. For the most part, managers need to be fully invested, so these areas are places to hide. Individual investors have the luxury of sitting in cash or looking at other instruments.

As we get into the latter stages of a correction, that's when you start seeing the baby being thrown out with the bathwater. So then you'll see utilities, really defensive staples, and healthcare being the better bid. A lot of those stocks will still go down, but if the market's down 20%, the defensive names might be down only 10%.

Since the 1980s, inflation expectations went lower all the way to the financial crisis in 2008. Then there was a Goldilocks environment up to the pandemic -- amazing environment for tech stocks, low interest rates, low inflation, 1 global superpower, supply chains working really well. 

Now inflation expectations are starting to tick up. Given the higher dividend yields on a lot of the energy stocks, energy names might be the next utilities. Interest rates going higher is going to put pressure on the normal bond proxies like telcos and REITs.

He thought there would be more of a consolidation around $2600, but it's broken out to new highs above that. Quite positive. Trend is up and to the right, and it's pointing him in the direction of something like AEM.

Week in Review

This week started off with the unexpected news over the weekend that DeepSeek, a Chinese start up, developed an artificial intelligence (AI) model rivalling ChatGPT with just US$6 million in capital. It was built with a smart workaround of technology because the export to China of the best GPU computer chips was restricted by U.S. administrators. DeepSeek engineers needed to make the less-robust chips work better. It looks like they succeeded, using a fraction of the computing power of their American rivals, and the whole world freaked out. The megabillions of dollars being thrown at AI data centres was suddenly called into question. Many stocks plunged on Monday. We can’t tell you how all this will play out. Certainly, it may change the direction of future AI spending. It may make AI devices faster, cheaper and more efficient. Your in-home robot butler just got a little closer to being delivered.
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Broadly speaking, yes, it does increase borrowing costs. But at the other end of the spectrum, you have to think about what's happening in credit spreads. Since 2023, credit spreads have contracted about 50%. So he thinks it's actually a pretty conducive market for financing costs right now, for both private and public markets.

He thinks transactions will pick up in 2025, which would be a great catalyst for publicly traded companies.

Broadly speaking, a sustained commercial real estate recovery is underway. Likes sectors that can act defensively, as well as those that offer growth. In the office space, he's looking for companies with trophy buildings, compelling supply/demand fundamentals, trading at discounts, growing cashflows.

The data centre sector is one he really likes, with really compelling demand factors and supply trying to keep up. Industrial warehouses are also a favourite, and the biggest sector allocation in his fund. Some slowing rent stats, but the gap between in-place rents and market rents is still very wide. Many positive secular demand forces on industrial fundamentals. Pockets of residential that he's positive on, such as manufactured housing communities. Grocery-anchored shopping centres have very defensive cashflows, with the most compelling supply/demand characteristics we've seen in many years.

#1 risk has always been oversupply. New supply inhibits the ability to raise rents and attract new tenants. Today, given where interest rates have moved to, it's been prohibitive for new construction. 

In the senior living space, both CSH.UN and SIA.UN have taken advantage of this environment, because they already have land where they can develop at a lower cost than competitors.

It's great for the space. Shows you how fast this AI revolution is happening, and how many are participating in it on both hardware and software. Think back to1995-98, when the internet revolution was going on, it took a long time.

The AI revolution is now just over 2 years old, and you can actually see some of the end-users out there on the software side using it. It's impacting their businesses, making things faster and cheaper.

You have to take it with a bit of a grain of salt when it comes out of China, and people are digging into it. It cost $5-6M, but it already had 50k chips from NVDA and the cost of those was $2B. So you have to get the full story.

He's been very busy buying this week. Took some profits at the end of 2024 and beginning of 2025, so he'd built up some cash.

Imagine 3 rings, set out like a dartboard. For enterprises around the world, the ecosystem protects sensitive information, manages user access, ensures compliance, provides comprehensive data security and governance.

The bullseye in the middle is all about data protection. The second ring is all about identity and access management (IAM), so the right individuals have access to the right data. Outer circle is compliance and data governance, which provides the framework for ethical and lawful data management.

It's a big, big space. May be a little bit boring, but it's so important.