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

Yes. It's multi-cycle and multi-year. As you go through the cycle, it's hard to know where you are and if you're even in it. The revolution will challenge the Industrial Revolution in terms of its effect on society and economies. We think of AI as it is today, but it's going to be increasingly impactful day by day.

Estimates give a 1-2% bump in GDP, and these will look low in retrospect. Tremendous opportunity.

Markets ebb and flow, spending very little time in fair value territory. They're either somewhat overbought or oversold. Trying to predict that, and especially trying to trade that, is extremely difficult. Most investors who try to do that end up net losers in the end. They sell too early, and then it's difficult psychologically to get back in once something keeps rallying.

For that portion that you have dedicated to equities, his advice is simple. Stay invested, don't worry about the ebbs and flows, keep your eye on the horizon, and you'll do well over the long term.

See blog under Insights at goodreid.com. You have to balance all the attributes in making your investment decisions. Profitability, growth. Also dividend yield. Worst case is to get into a growth company that's paying a high dividend just to keep you around. They're not fulfilling their primary mandate of being a growth company.

Big difference between liking a product and buying its stock. You have to investigate what the value of that stock is. There might be way too much already built into the price for what you're getting.

For each stock, he creates bands of normal trading for the high and low ends of a cycle. When it pokes its head through the top end of the upper band, he asks some serious questions. If not comfortable with the answers, he sells.

What is a Stock Market Index?

Many market indexes hit new highs this week, but have you ever really thought about a stock index? What it is exactly, and why are they so important (if at all)?

A stock market index is meant to show how a market is doing on average. It typically includes the largest companies in a country, and there are 11 different sub-sectors in North America. Committees try to set up their indexes so they represent the economy/market. If a company is taken over, a new company is added. If a company’s shares become too illiquid, it is dropped from the index.

Most indexes have highly regulated criteria. For example, the S&P 500 has, amongst others, the following criteria for any company to be added: its shares must be highly liquid; at least 50 per cent of its outstanding shares must be available for public trading; it must report positive earnings in the most recent quarter; and the sum of its earnings in the previous four quarters must also be positive.
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50/50 and maybe mix in some bonds. The index fund is the bedrock of the investment, though.

Invest a third of your money in an invest fund before you look at individual stocks. It's a safe approach.

We're entering a new cycle with AI being the big story. He's bullish overall. The market bottomed last October/November, but the appetite for growth is coming back, so IPOs could return later this year. He likes medtech and fintech, driven by AI. You need 3 things to set for the next growth cycle: great valuations, investors are out of the small/midcap, growth asset class and interest rates are flat or falling.

Insightful Investing Quote:

“Sometimes you're flush and sometimes you're bust, and when you're up, it's never as good as it seems, and when you're down, you never think you'll be up again, but life goes on.” – Fred Jung

This is one of my favourite non-investing quotes that I relate to the markets. The emotional joy of making money in the markets is never as extreme as the emotional pain of losing money in the markets. But the key is understanding that the financial markets are inherently cyclical, and it is all a part of the natural ebb and flow of money. To this end, I try to enjoy the purchases I made at lower prices, and I am grateful for the opportunity to buy at lower prices.
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The Central bank is not supposed to meddle in the U.S. elections so in theory they shouldn't be doing a new set of interest rate cuts. There is growth so the economy is not slowing down and therefore why are rate cuts needed. Maybe rates should stay at 5% with low unemployment, decreasing inflation and continued growth. Since last October there has been a very strong S&P and large cap tech market. The S&P could continue to go up or turn down and that will depend on the catalyst of interest rates. He is looking to add high quality businesses that are doing well and also a little bit ignored. Money will flow around the stock market and push things around so these types of quality businesses may get a boost from that movement. He is therefore not negative on where things are going.

The question was on owning gold bullion itself. If investing in gold he would not recommend going into the futures market. Gold holds its value over time but there could be stretches of 5 years where it goes nowhere. The price of gold has just broken out. The cleanest way to play gold in the stock market is through royalty companies.

He sold gold too soon. His mistake. Copper has broken momentum, but steel has monentum.

Markets in tug of war between earnings and interest rates. Strong earnings pushing markets to all time high. Big US tech companies are surprising analysts on the upside. Interest rate cuts are not appearing in markets despite investor expectations. Growth stocks continue to outperform traditional value stocks. "Mag 7" stocks outperforming most indexes, leading the markets. Dividend oriented investors have been frustrated in 2024. 

Insightful Investment Quote:

“Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.” – Warren Buffett

Volatility is an investor’s best friend. Market drawdowns have historically been a good buying opportunity, and after a certain amount of time, broad-based fear can be easy to spot, and buying this fear can lead to high returns.
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Starting the year off on the right foot. Unfortunately, things don't just go up in a linear straight line. Similar to last July, the market's had an extended runup, with everyone feeling good. Then there was a bit of a dip. 

This market run could have more legs in it yet. But at some point, maybe in late spring, he wouldn't be surprised to see a bit of a pullback, but then leading to a strong finish to the end of the year.