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

When it comes to data security, he'd pick Octave, FTNT, and maybe SAP. This is probably an unexpected answer from him, but these names are just a bit cheaper and just as good.

The value of contrarian investing:

This is not our forte, not by a long shot, but it can work for many investors. The plan: Find a stock that everyone hates. Often, of course, said stock will be down, perhaps a lot. This increases investors’ anger with the company. Many will sell out of frustration, and give up on the stock. Institutional investors may sell because the stock has declined so much it is too small for them. Or, funds just do not want investors to see that they owned this loser when they report year-end holdings to investors. Such declining scenarios often see employees leave the company and also sell their stock. It can come to a point where sentiment is so bad that no one ever expects the company to do well again. Then, something good happens, and all the sellers are gone. At times, a beaten-up stock can soar just on some simple good news. It happened last week to Walgreens Boots Alliance Inc., a stock that has been in the doghouse for years. The stock had its biggest move in four decades on a sign that its turnaround is making even the slightest bit of progress.
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Prior to the weekend, he'd never heard of DeepSeek. As much as AI is front and centre, there are always the "unknown knowns". That is, you know there's going to be something to upset the market from time to time, but you can't predict exactly when or what it's going to be.

The market's a bit frothy, as we've seen recently, and a lot of the bulls will dismiss that. But something comes along, and people start asking a lot of questions. So there's the DeepSeek noise today. Then there's the Trump administration, where one day there's less tariff risk, the next day there's more, then less. 

A lot of uncertainty in front of us. For him, it's an environment where you want to be a bit more cautious than aggressive. A bit of de-leveraging in the next few weeks or months would not be at all a surprise to him.

We learned during Trump's first administration about his style. He can be belligerent in how he approaches the market, but it's a negotiating tool and it does get people to the table. He was pretty effective last time using that as a tool, which tells you that he's likely going to double down this time around to get what he wants.

Covid accelerated a lot of his bearish concerns about debt in the world. The US debt situation isn't getting any better, and there's no scope for it to, given demographics and government promises over the years. 

The idea of a DOGE and getting more efficient is great, but if you look at the numbers, they aren't going to be able to move the needle too much. All the spending that he wants to do because of tax cuts just adds more debt to the system. Eventually, the market cares; you just can't time it, and that's the problem.

When you're using factor-based investing, you're trying to filter for some of the attributes you want and exclude ones that you don't. The Fidelity ETFs are going to get rid of some of the companies that they believe are going to underperform. In theory, the Fidelity ETF should give you a better longer-term outcome. He likes factoring a lot.

The problem with lots of ETFs is the bond side. Helpful that interest rates have normalized. But, going forward, fixed income is just not going to give the average investor the best risk mitigation. He encourages people to look at the BMO line of buffered ETFs, which give you the potential of equities with the risk mitigation that most are looking for.

The problem with lots of balanced ETFs is the bond side. Helpful that interest rates have normalized. But, going forward, fixed income is just not going to give the average investor the best risk mitigation. He encourages people to look at the BMO line of buffered ETFs, which give you the potential of equities with the risk mitigation that most are looking for.

Two big factors when you talk about emerging markets. One is currency exposure. Some of these markets that have much higher inflation are going to see a natural erosion of the currency weakening every year, as they have to have higher interest rates.

If you look at what's cheap in the world, a lot has stayed cheap because their economies just aren't growing relative to the US. It's always a question as to when is a good time to get into a particular economy. Many have pointed out that EMs and Europe are structurally cheap compared to the US market. He likes them from a very long perspective, perhaps 5-10 years. But he can't tell you, with any precision whatsoever, when the market is going to realize that.

Today's not a great day for markets such as the US that are being led by big-tech, overvalued AI names. But they've been leaders for a couple of years, and that's not really going to change, despite today's volatility.

AI

On Friday afternoon, investment in AI by the mega-caps was making headlines. Chips were ripping on Friday, he was writing up his blog, and everything was wonderful.

Then today we have news coming out of China of some competitors. This week, the Fed meeting is not that important. Rather, it's what we hear about capex from big tech, as well as their comments about what we've heard today and the market volatility.

Take a look at the AIQ ETF if you want to play the sector. Looking at gainers and losers over the last year, NVDA and META are at the top of the pack. As is TSLA, which is crazy overvalued right now. The worst performers are those that aren't really kicking it in the AI space.

Look at a chart for the last 2 years, which is when MSFT made its $10B investment in OpenAI. It's still a great sector, with lots of hiccups along the way. Corrections have been buying opportunities. Today is no different. But the question is whether it'll be like August 2024 when we dipped below the 200-day MA, or will it be like the end of 2023 when we tested and bounced off? That's what he's looking for technically.

Watch the long-term trend lines to see if this is the catalyst that breaks the long-term trend. He doesn't think so, but a lot of froth does need to come out of the sector over the next month. Have to listen to how META, AAPL, and MSFT respond.

Very different from the dot-com days, when there were a lot of made-up companies that just added .com to their names. Now, there are a lot of real companies, with real earnings, doing real things that are going to boost global productivity in a big way. But make no mistake, there's a lot of froth that needs some consolidation.

Until the election last November, oil, cattle and corn were trading separately, but ever since have been moving up in unison. Garner says this is similar to the commodities rally in 2022 during rampant inflation. Just recently, though, oil has broken down, and the other two commodities could follow. In coming weeks, oil weakness could persist due to a strong US dollar, persistent inflation, lacklustre demand from China, bear seasonality, and economic weakness in the rest of the world. Meanwhile, OPEC can't stabilize the price with production cuts. And Trump's attitude to drill a lot is driving down the price. If oil can't hold current levels, it will fall to $60-65 soon. Then, could slide to $51. Live cattle: prices are roaring because of the lowest cattle inventory since 1951 thanks to droughts and very high feed costs. Meanwhile, buyers will accept any price--and this trend rarely ends well. In 2014, the market topped, which needed an entire decade to regain that level. Garner notes that recently, the cattle price is making lower highs and that any gains will be temporary. The cattle price could fall by more than 33%.

The Japanese Yen and the US 10-year treasury note have been moving in lockstop since last fall. Garner says such correlation are rate and unsustainable. The Yen suffers from a huge interest rate differential from the US dollar. A breakdown is inevitable.

The health care sector has under performed over the past two years. There has been a re-acceleration of growth across the breadth of the market. The health care sector started to participate in June through early fall. However headlines caused it to lag but the drivers are long term dynamics such as tech innovation. With the new U.S. government the biggest risk over the next 4 years is policy risk. Trade policy risk is elevated.
Many policies in health care under the previous administration have already been implemented because of bi-partisan support. Perhaps the vaccine businesses could be affected by RFK but the market has already worked this in as a risk

The question was investing in U.S. or Canadian stocks. Canadians can buy Canadian ETF's that have exposure to the U. S. in U.S. dollars. The Canadian market is about 1% health care so you should go the U.S. market for that space.

The question was on covered calls. They are quite complicated and his team is very experienced. They have strategies for covered calls that either go down or are in the money - there are a lot of variables. They can generate very attractive cash flows.

Clues on Investing: Companies that never issue stock

When a company never issues new shares, all of its growth is attributed and beneficial to its current shareholders. If a company is self-financing and never issues new shares, its stock typically can do very well. It can be very hard to find such companies, but they do exist. Constellation Software Inc., one of the best performing stocks in Canada over the past 20 years, has the same number of shares outstanding now as it did on its initial public offering. Many U.S. megacap stocks have fewer shares now than they did 20 years ago, so a long-term shareholder actually ends up owning more of the company (if they have never sold). Alphabet Inc., for example, with share buybacks now has one billion fewer shares than it had 10 years ago. Now, issuing stock for capital is the main reason for stock markets to exist. Companies need money. But companies that do not need money often turn out to be better investments. Since finding companies that never issue stock can be quite hard, when looking at a new investment try this: If you cannot even recall the last time the company issued new stock, you may be on to a good thing.
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