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

What's important about this year is that a lot of high-population democracies, such as India and Indonesia, are also having elections. The US one is going to have an overwhelming impact on the global economy.

Hard to tell this early on what's really going to happen. It's going to be a bit of a bun fight, with everyone saying all kinds of nasty things about each other. In the US, all comes down to whether you win the Senate and the House. Very difficult with the structure in the US for a president to get anything done unless they win both those bodies, or at least get ones more likely to compromise. This has not been the case of late.

So whoever wins, it will depend on how the House and the Senate are set up. That's the important part. It's how the economy and politics works there. Or doesn't work there. 

There are also a lot of issues in the US with the fact that either would be sort of a "lame duck president", as neither can run again.

Insightful Investing Quotes:

“Being too far ahead of your time is indistinguishable from being wrong" – Howard Marks

This quote goes back to being a contrarian. I often like buying certain stocks when everything is boring, and the stock has not moved for a while. This can present sideways action, but if the fundamentals are strong and growing, and valuation is becoming cheaper, I find that these opportunities can represent healthy consolidation, and eventually a move higher can occur. This can appear as being indistinguishable from being wrong, but I often view it as being early.  
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There's great opportunity in event-driven, idiosyncratic opportunities like a CEO resigns suddenly (i.e. affair with a secretary). Investors should be happy. Most portfolios should be at all-time highs. Ex-uranium, commodities look cheap, such as oil and copper. China is bolstering their economy, which bodes well for commodities. Financials look very good, especially in Europe which sees negative interest rates.

Buy a commodity when they're really weak, and trim them when they start to run then completely exit. If you hold for the cycle, hold only a small portion. He doesn't own lumber. Supply chain problems have been solved, so prices have fallen. Also, demand for housing is not a catalyst, because immigration will offset that.

Gold is pushing to new highs today, above $2,100. Gold has been resilient against higher interest rates and a strong stock market. This upswing, if gold hits $2,300, will give gold stocks a much-needed shot in the arm after slumping the past 18 months. Gold and mining stocks have earnings growth on par with tech stocks.

Believes markets too frothy, and investors should be cautious. Expecting upcoming US Fed announcement could alter direction of markets. Inflation biggest topic of discussion. Fiscal outlook for USA very difficult - trillions in debt. If economy enters recession - will be very hard to deal with as deficits very high. Upcoming US/Canada jobs report will be strong - good for incumbent politicians. Elements of a bubble showing signs in markets, but unsure whether economy is due for deflation. 

Believes recent headlines claiming end of stock market "value" to investors not credible. However, does not think market is at its peak. Would recommend caution to investors, but expecting further gains. Not sure when bull market will end. Has sold public equities but unsure of market direction. Prefers private equity at this time. 

 Insightful Investing Quote:

“A lot of financial debates are just people with different time horizons talking over each other” – Morgan Housel

Context is everything. Understanding the timeframe that another investor has is crucial to understanding their viewpoint on a specific stock. Maybe that investor is only looking out three months into the future, and so their view on a stock is bearish, while one’s own view is long-term, and looks at a five-year timeframe. Another reason that I really like this quote, is because over a long period of time, the financial markets have trended up and to the right, and so when taking a long-term timeframe in mind, most investors would agree that buying today might make sense, however, as those timeframes are shortened, the waters become muddier.
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Stocks drifted down a little today. We're due for a pullback and he's sitting on cash to deploy.

Believes interest rates will take longer than expected to fall. A strong US economy, falling inflation and low unemployment stats point towards no need to cut interest rates. Risk of inflation rearing its head is high if rates are cut too soon. Upcoming corporate earnings & inflation numbers will be most indicative of economy going forward. Strong 4th quarter earnings in 2023 also builds case for steady interest rates. If investors focus on quality management teams with strong balance sheets - they will be rewarded. 

Market Update:

The US economy grew at a slower pace than expected, increasing at a 3.2% annualized rate, slightly missing expectation of 3.3%, driven largely by the downward revisions of the private inventory investments. On the other hand, the key Federal Reserve inflation rate, the core Personal Consumption Expenditures (CPE) price index, indicates a price pressure in January, in line with expectations, keeping a June rate cut on the table. The Canadian dollar was 73.76 cents USD. The U.S. S&P500 ended the week up 0.4%, while the TSX was up 0.7%.

A lot more greens this week than reds. Energy added 5.5%, while information technology and materials added 2.1% and 1.4%, respectively. Consumer discretionary and industrials edged up 0.2% each, while financials remained flat. Real estate edged down 1.7%, while consumer staples ended the week slightly down 0.4%. The most heavily traded shares by volume were Cenovus Energy, Athabasca Oil Corporation, and Baytex Energy.
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Things are pretty good. Our economy is growing right now, albeit at a fairly tepid rate. He's fairly encouraged by what's happening in the market. Portfolios are performing well. Banks reported this week with some pretty good numbers, perhaps not across the board, but overall relatively strong.

Buffett likes railways, owning BNI, which is the largest US railway. Railways compete in an oligopoly, and that's why Buffett likes them so much. Oligopolies have pricing power.

Looking at the Canadian market, we have CNR and CP. When you have only two companies in one market, that's an oligopoly. Fewer market participants, homogenous products, inelastic demand. More pricing power, higher profit margins. Of course, you still need favourable market conditions for an oligopoly to be successful.

His firm has written an article on oligopolies. It can be found on the goodreid.com website under Blogs, or in today's Investing section of the Financial Post.

Insurance companies certainly do well with higher rates. You could argue that there might be slower growth in that regard. But they're able to play with the asset mix of their investments to compensate.