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

He holds stocks for the long term and is not overly concerned about short term developments in the world caused by Trump, war, etc. This includes changes in the economy. Every five years we will go through a bear market. He just holds through it. When asked about the indicators of a technical recession, he sees it as two consecutive quarters of negative economic growth. We have had five years of negative GDP growth per capita and that is what matters to people. We have to get the economy back kicking. The US accounts for 20% of our GDP growth so the fighting and competition with them means we're going backwards.

The choice of Kevin Warsh is significant. He's going to embark on an experiment to shrink the US balance sheet. 

People have different opinions about that balance sheet, but Greg was around in 2008 when it was a very scary world. We were fighting deflation -- if you get that wrong, you can end up in the 1930s. So you don't want to get it wrong. The balance sheet sort of rescued us from that.

Warsh believes that the path to lower interest rates is a smaller balance sheet. He also believes that the great productivity gains that we're seeing through AI are deflationary. Greg thinks he's going to be right on both of those.

However, the wild card right now is what is the price of oil going to be over the next 3 or 6 or 12 months? If oil prices are too high, then he won't lower rates (even though Trump wants him to). It's very important for the Federal Reserve and the integrity of the US to maintain some independence. The checks and balances are there to ensure that.

Markets are seeing this great run on earnings, even though there's uncertainty about both oil and the interest rate outlook.

Investors aren't ignoring the fallout from longer-lasting high energy prices, but are looking through that. Strait of Hormuz might not be what it was 3 months ago, but investors are betting that it will improve. As long as you can move some traffic, and strategic reserves and other drilling can keep oil around these levels, then that should be OK enough for the economy.

We've been in this situation before, and we've seen higher prices. If oil goes to $170, that's a totally different matter. That would have a slower-growth, recessionary impact. But investors are saying right now that that's probably not going to happen.

Markets are seeing a lot of AI productivity in many companies, and it's one of the bullish theses to explain why markets are defying expectations and going higher.

Do you own this in a non-registered account? Or will you be paying tax on it?

The banks are totally a different game than they were 2 years ago. Used to be stuck around 12.5x forward PE, now hovering ~14.5x. Despite some troubles with the housing market, fundamentals and balance sheets continue to improve. Macro's looking pretty good.

Even at these levels, he's buying more.

Certainly they can take advantage of hedging the market right now. There's a lot of common sense to doing that. 

As to buying into the oil complex right now, it depends. If the thesis is that oil's going to drop to $60 right away, then he probably wouldn't buy now. If you already have oils in your portfolio, don't buy.

But if you share his thesis that the Strait will be challenged with only some traffic going through, then we're probably looking at $80-90 oil. Canadian oil companies are at a massive advantage because we're really trying to expand our markets.

For a 5-year horizon, CNQ looks really good. On the nat gas side, he likes TOU and PEY.

Bulls say this rally can continue. Central banks are net buyers. Individuals have easier access to it. Investors were underweight, and now have to catch up. People will continue to move away from the US and toward gold.

Gold has had 6 main cycles over the last decades, and they all end with a shock. He thinks it's come off partly due to the smaller balance sheet of the US. 

Making a call on gold is not like making a forecast on supply/demand the way you do with anything else. You're forecasting investor appetite, which is very fickle.

If you don't have enough, you could buy here for diversification. Will it do the heavy lifting to lead your portfolio higher? No. But it could ;)  

They always switch places. For example with MSFT, OpenAI is seen as not as good as Anthropic. A month ago, they were all down so he advised to just buy them all.

He'd advise to buy the CDR (hedged) version, as he thinks the CAD has more upside than down over the next 5, 10, 30 years. And it would be tough to play against that headwind in USD.

NVDA is still compelling, but he likes META a lot.

Tells him (as we're often taught) that event-driven market moves tend to resolve themselves fairy quickly. The market's forward-looking and expecting some type of resolution. Out of that comes a V-bottom.

What we've seen on the surface is not  structural. It could morph into that if the Iran conflict goes on a long time, has an effect on economic growth, or impacts inflation. But we're a long way from that.

It's part of the process of digesting big numbers of capex spend on something, like AI, that doesn't guarantee an adequate return. People were nervous.

Now starting to see the beginnings of the effects of AI. As a percentage of GDP, corporate profits are at record levels. A new productivity is beginning. Implementation of AI is just starting to take hold. It'll have an enormous effect on ability of companies to generate profits and be productive.

It'll have some ancillary issues, which won't all be good, and we'll have to deal with them. But good things happening on the surface. As an investor, we want to defend against the bad and embrace the good.

Some sectors of North America will be affected. This is an ideal time for corporations to take cover. If they have any bad news or are feeling a bit skittish about their own operations, it's the perfect time to say, "Oh, it's the war. It's not our fault." We haven't seen a lot of that.

We've seen a lot of beat and raise. Contrary to what we think might happen, companies are confident. 

Volatility has been present, but the market continues to go up. First of all, it's very important to stay invested. Don't try to time when to get out and when to step back in -- a mistake that retail investors make over and over again, and that's why they tend to underperform the market by a significant margin.

The AI data centre buildout has been a major theme. As well, the shortage of power infrastructure and electrical capacity constraints. 

In Canada, Build Canada is a massive investment theme.

And defense. For obvious reasons, budgets are increasing.

As for SaaS companies, it feels to him as though we're in the bottoming process. The market's getting smarter about who will benefit from AI and who will be disrupted. He notices governments being extremely cautious on AI with respect to access to sensitive data.

How difficult is it to implement the software solution? How mission-critical is it? How sensitive is the data it has access to? How much of the product offering is purely software? Is it easy to disrupt?

The type of business itself is also a factor.

He's not a subject matter expert in this area, but he took the question to challenge himself and think out loud :)

Still some work to be done in the area. But once it does become real, it doesn't have a very broad application across the tech stack. Very narrow, niche applications -- but in those, it will have tremendous impact.

It will apply to anything related to security and cybersecurity. Any of those protective layers can be easily broken if you have quantum computing. Those companies will have to adapt to change, though he's not sure how they'll do that. It's a big risk for those types of businesses.

On the positive side, it will enable major drug discoveries. So a big company with 1 blockbuster drug will be at risk from smaller companies. Big disruption there. SaaS companies, though, will not be at risk.