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

He worries that oil prices will lead to higher prices for consumers as a tax on spending on necessities and discretionary alike, but this will result in deflation longer term. In energy, he owns bellwether CNQ, but generally one should consider taking prices; this energy spike will pass eventually.

He would differentiate the two that much, but ETFs offer far more liquidity. Now, he isn't surprised to see in Asia a sell-off in oil as well as gold to become more liquid. But this sell-off is temporary noise.

He's not going to cross-check an expert like that who understands the dynamics. Though no reliable sources yet, he expects there's been some damage to Iran's ability to produce. There's enough excess capacity in different parts of the Gulf to offset that, so he's not too worried at this point.

The market's celebrating today with a relief rally that the war isn't escalating, but he suspects there's more to come. The rally may last the rest of the week, until negotiations start. You can also expect the US to be bulking up its presence in the Gulf; this was just a bit of a pause.

Right now, it's a glass half full/half empty scenario. For him, the end goal is about regime change in Iran; the world just might be a better place if we had less terrorism.

A couple of weeks back he reduced exposure in the energy sector, assuming that the spike would be temporary. But recent events suggest it's a bit more permanent.

If we see that December crude oil is starting to trade a lot higher than where it is today, that suggests sustained elevation. We're not seeing that yet, but something to keep an eye on.

Oil and gas are big inputs into everything. Transportation is the obvious one. When you raise the price of gas at the pump that's $$ that literally goes up in smoke, leaving less discretionary income for the consumer to spend. Restaurants, clothing, you name it.

Discretionary income is what will get hit if this is a more permanent thing. He doesn't think it will be, but it's going on longer than the couple of weeks initially thought. Could easily be several more months.

The extent to which the US has mitigated Iran's military and missile capability is still being debated.

It's a huge factor. By and large, President Trump has broad support from the Republican Party in the sense that the world's a better place with less terrorism. They want to finish the job, rather than leave it half-done at this point. Trump's request for additional funding last week put pressure on the bond market which, in turn, helped put pressure on the stock market. 

A number of things need to be considered.

The answer depends on your specific situation. If you're an active trader, currency trading can get very expensive. It would be different for a buy-and-hold investor. Are you in a taxable account or not? Generally speaking, CRA doesn't look kindly on tax-avoidant strategies.

CDRs give Canadian investors a way to invest in big US firms by using only small amounts of money. The smaller amount of capital required also lets you diversify more easily.

US Debt

That it's at a tipping point is an understatement. The amount of debt in the world is catastrophic. We're at a place where there's an opportunity here.

Over the years, governments have been very lazy in not being willing to make hard choices because it risks their political future. They've been poor governors of our tax dollars. So the debt problem just gets worse and worse and kicked down the road.

The book This Time Is Different: Eight Centuries of Financial Folly comments that the inflection point is when public debt is 100% of GDP. Last year, 2025, was the year the US crossed the Rubicon of more than 100% debt to GDP. Projections by the US Congressional budget office aren't even taking into account recession risk, and we'll almost certainly have one. (There's a link in his blog for those who want to look into the book further.)

It's the 10-year bond rate, not necessarily the overnight rate, that matters the most. It has everything to do with supply of debt and inflation. With the war going on, both inflation and the cost of debt are big problems.

TLT is an ETF that he likes to trade. It's the long bond, giving you the 20+ end of the bond market. Chart shows that it's at the lows it's hit for the last number of years. With a US slowdown and recession, it has the potential to return to $110 (though not much more). Big potential for capital gains. Compelling risk/reward.

Concerning the whole market he sees smaller and mid cap companies operating a little differently and not as over-valued as the market in general, even with its decline up until Friday. There is a reversal of the enthusiasm in the markets, but with an overhang of enthusiasm especially with the larger companies. The market hit a high in January and he has seen a decline since then even before the Iran war. He feels momentum has been completely lost. It looks like a classic reversal pattern. Usually you see a 30% drop from the high point in a major downturn. There are issues such as rising interest rates and inflation especially with the war in Iran. We don't know where the price of oil is going.

He tries to identify trends in a chart to create a trading plan. Have a target and this is an exit price. You have to apply the discipline.

Know that markets can go down and be prepared to sell stocks - don't be stuck holding them. The discipline of selling is the hardest part. Buying stocks is easy.

All these concerns (Iran war, software, private credit) look dramatic but are fairly benign, believe it or not.

The beat that the market's marching to now is the inflation print from Wednesday morning. The market's ready for the story of:  OK we have elevated oil now, how long will that last, and what will that do for inflation? But it was not ready for an inflation print from before the war that was far too high. 

For him, that means that the rate path was not what we thought. It means that the market multiple was not what we thought. And we're seeing the effects in the market.

Every time you're in a bull market, you always have narrative shifts and tests. Everything we're seeing now is consistent if we can get to a place where earnings growth resumes, inflation is in check, and interest rates do start to go down.

But we're probably not going to see that for a while, even if the Iran war were to get under control and the Strait were to open tomorrow. We can always get a rally, but we're still dealing with inflation being too high even before the war started.

One of the reasons for inflation was US tariffs. Those tariffs do get passed through to the economy. The long-term trajectory of AI is a lot of disinflation. 

So the disinflation story is intact, but it depends on how long it takes oil to start to come down.

When you have market carnage like this, everything gets attacked. While market multiples still need to come down for the likes of banks and industrials, tech already took its drubbing. Tech is the belle of the ball.