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

Really important to remind investors that investing is a long game. You wouldn't buy stocks, or a house, with the idea that if you don't like it you'll sell it in 12 months. You need to buy companies that are going to be around for a long time, and that will deliver growth and increase profitability for a long time.

Thinking about that, in the next 12 years there will be 3 presidential elections. In the next 5 years, we'll be talking about other things that might concern us. The companies that he invests in have stood the test of time. Most adults have lived through 9/11, the financial crisis, and the like, and here we are today. Though the financial crisis was only 15 years ago, it feels like 50, yet somehow we managed to get through it and come out even better afterwards.

Track record counts. Look back to how companies performed during down times, recessions and such. Companies that have been able to stay profitable through those times and, for example, pay their dividends, have been able to survive.

If you look at some of the world's great businesses, those large companies also have the capacity to hire the best. SBUX is an example, spending a lot of $$ to hire the guy who previously ran CMG. These companies have the capacity and wherewithal to be agile and make their way through. When Covid happened, SBUX and MCD morphed almost immediately to more takeout and didn't skip a beat.

We're going to have to rely more on the private sector, as government debt levels are close to all-time highs. Probably corporate tax cuts in the US. 

May get some corporate tax cuts in Canada, because there's basically a realization (no matter your political stripe), that Canada needs to be competitive. We're losing investment to the US. He heard a recent statistic that the US invests roughly twice as much per worker as Canada does -- that's one of the main reasons that our productivity is lagging so badly compared to our major competitor and trading partner. We need to fix that.

Doesn't make sense to play the hedging game. After 35 years in the investment business, he has yet to meet anyone who's correctly called the direction for any length of time. 

Plus, misunderstanding that just because something trades on a US exchange that it's purely USD. Companies like MSFT and MCD have revenues in currencies from all over the world. If you try to hedge, you may actually over-hedge USD exposure, and just guessing doesn't make any sense.

When you own equities, accept the fact that you have currency diversification and you're going to have some ups and downs due to currency moves.

Best option is to look for an international name that trades in the States as an ADR. You could get exposure to Europe this way.

Consumer staples are outperforming in the last few days, and that speaks to the advantage of having a balanced portfolio. Companies like KHC, UL, KVUE, and Nestle. It's not that they won't be affected (their costs would go up), but they're far less cyclical than other businesses. Earnings will be much more stable. Earnings could fall 10%, but not 50%. Dividends will be sustained.

Companies like Unilever and Nestle are huge in NA, but huge globally as well.

Whatever happens in the US affects the rest of the world. He wouldn't recommend emerging markets, as they tend to underperform if/when there's a recession. 

Investors would be better off buying the best companies in the German market, rather than the whole German market. Germany's the 4th-largest economy in the world, but it's had a bunch of issues with its own deficit and economic slowdown. He owns specific stocks in Europe. 

He'd sell a stock today if he didn't think it offered upside. By owning a stock, and buying it for new clients, he thinks there's more upside.

He's going to paraphrase Andrew Coyne from Saturday's Globe & Mail: "We're seeing a period of unknown upheavals and, given what Trump's done already, we're talking about upheavals that could go on for 4 years." In the short term, then, what should we be worried about?

When he stands back and looks at the market and how to make money, outside of the fact that Trump is causing wiggles in market moves, what Trump says doesn't mean a great deal to him. 

Looking at the NASDAQ and the S&P 500, the last time that those 2 markets got up to where they just were before the selloff, was back in 2000. Valuations, in price-to-book terms, are back to those levels. Technically and  mathematically, those are very difficult levels to break through. To break through and get higher, you really have to have a very strong economy with something extraordinary happening.

People were expecting and hoping that AI would do all that. Unfortunately, it takes time, just as it took time for fibre optic cable uptake in the 2000s. AI platforms are overbuilt. We're going to have a setback, just like in 2000. So the economy isn't going to be as strong as people expect. With Donald Trump mucking around on the side, it gets even worse.

So it's more of a natural correction. We're at an all-time high, and he expects a fairly large correction.

Never look at them lumped together in a group. He's watched them for over 50 years, and a very interesting pattern emerges. RY and NA are up at the crest of the wave, trading at a good premium to book value, but on their way down. Down in the trough are BNS, BMO, TD and LB -- those are the cheap ones on their way up.

Trump wants Canadian energy; if he can get it as cheap as he can, all the better. He reiterated "drill, baby, drill". But American producers are sitting on their hands because prices aren't high enough. Prices need to get above $80-90 or even higher before it's going to get attractive again.

He's followed 3 excellent analysts over the years, and at least one is calling for oil at (hold onto your hat) $200 a barrel. That may be excessive, but if it got to $90-100, all the oil stocks would do very well.

He likes the oil patch broadly speaking, as it's fairly low risk. He prefers the junior oils, rather like the junior golds, as those names are overlooked and cheap.

Canadian Financial Companies Well Positioned for Tariffs:

Canadian banks and insurance companies that have high exposure to the domestic market. These companies are not dependent on importing/exporting physical goods. Although sustained tariffs could lead to an economic slowdown and weaken consumer health over time, this scenario is unlikely to happen overnight.

Sun Life Financial (SLF, Market Cap: $45 billion): A well-established Canadian insurance company with a decent track record of profitability and dividend growth.

The Bank of Nova Scotia (BNS, Market Cap: $87 billion): An international bank with main exposure in Latin America and the domestic market.

Goeasy (GSY, Market Cap: $ 2.6 billion): a small-cap consumer lending business with superior growth and return on capital profile.
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What to do as the tariff war starts this morning? 1) Capital preservation. In recent years, easy money was made. Not now. 2) Be ready to buy names that fall and add them to your portfolio. 3) Raise cash so you can do #2. Extra 10% tariffs on China: When Trump imposed tariffs on China in his term, China devalued its currency, and those sanctions didn't work. Now, will China put sanctions on US companies? Wish list: Taking Nvidia for example, wait and watch for a floor before stepping in. If you've made huge gains, there's nothing wrong in taking some profits. Trim winners and raise some cash.

It's very interesting. The CAD fell hard on Friday, bounced back a bit today. He's shocked that the TSX did a lot better then the US market in February. If you were worried about the world ending tomorrow, why would that be?

He thinks the market's unsure whether these tariffs are going to happen. If you told him how long they're going to be in place, how bad they're going to be, and who's going to be most affected, he could tell you what playbook to follow. But he doesn't know those things, so he's not going to take any action.

We should find out later today what the impacts are going to be. He tells his clients that you have to be nervous every day when Donald Trump is president, but you don't have to react.