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

This year 40% of the world's population is voting in an election. 70% of the population is down the middle and just trying to get by. The macro economic situation has a lot of potential to get markets going but inflation has been a challenge. Governments all over have borrowed a lot of money (as have individuals) so the share of their tax revenue going to service debt is increasing, which means less for social programs, services, etc. This in turn affects politics. The Fed doesn't want to cut rates prematurely and then have to raise them again so they will wait longer. Getting rates down to a 2 to 3% level will be stretched out and we shouldn't expect a return to ultra low rates.

The question was on emerging markets. You want to be in the India market over the next 10 to 15 years, and not in China. India has a growing population with demographic tailwinds. A specific suggestion is HDFC (HDB), the second largest bank in India.

The question was on Bitcoin. He is not interested in it as an investment. Maybe it could have value as a hedge against inflation. He hasn't quite figured out just what it is for. If you want to own some, just take a very small position but watch it carefully.

This rally can continue, but he expects a pullback late this month. We had a similar conversation 12 months ago. But it's interesting that industrials and transports are starting to break out. Take profits, but keep your core holdings.

Believes interest rates will play major role in economy going forward. Seeing rise in unemployment and weakness in markets, combined with mortgage stress. If rates are lowered too quickly, inflation will rise again and sink economy further. Higher earnings results also worth watching as latest quarterly results come in. China appears to have consumer deflation, but appears that economy is poised for growth. Foreign investors skittish on investing in China (political risk) - making economy slow. Expecting NVIDIA to drop off soon - very over valued. 

Market Update:

Canada’s labour market started the year with the largest jobs gain in four months, the unemployment rate fell to 5.7 percent, adding 37,000, but wage growth cooled, suggesting the central bank is not facing pressure to cut rates. On the other hand, a minor adjustment was made to the consumer-price index (CPI) for December 2023, revising down by a tenth, to 0.2%, confirming the Fed is done raising rates. The Canadian dollar was 74.27 cents USD. The U.S. S&P500 ended the week up 1.3%, while the TSX was slightly down 0.3%.

Another week of greens and reds mixed. Energy added 1.5%, while technology and industrial staples added in the 1.3% range each and real estate gained 0.9%. Materials and consumer staples gave up 2.7% and 1.1%, respectively. Consumer discretionary edged down 0.7% while financials ended the week slightly down 0.2%. The most heavily traded shares by volume were TELUS Corporation, Enbridge and Bitfarms.
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Almost at 5,000. This is a big moment. He remembers at the start of his career, the Dow broke through 10,000 in 1998, hats on the floor and everything. It's the old story, where the Magnificent 7 or the top 10% of stocks are really contributing to most of the rally, and a lot of stocks are not participating that much.

Capital light, excellent free cashflow. Even though they were doing the heavy lifting for this rally, they were very soberly priced. Not AAPL, but META, GOOG, AMZN. 

Since the latest run over the last 6 weeks, they aren't as generously priced as in the previous 3 months, but they're not crazy. AMZN, for example, is 28% growth rate, trading at 30x, PEG ratio is a bit higher than 1, but still OK. Even names like NVDA still make sense.

The growth rate of a company compared to its PE multiple. Under 1 is desirable. Near 1 is fine. If you have the growth rate, slightly over 1 is fine, too. So a 20x multiple's OK if a company's also growing profits at 20%.

For sure. Market started out thinking there would be 6-7 cuts in 2024, and now it's down to 4-5. He thinks it will be more like 2-3.

Inflation will go down to 2%, that's the good news. But it's going to take a few years. This market is the reciprocal of what it was in October 2023. Then, people were positioned for a recession, leaning towards fixed income, under their asset allocation for equity. Now the crowd is very ebullient and looking for the next moves. 

We have a reasonable chance of some sort of selloff here, given all the optimism. It's really hard to see that big of a selloff when you have US earnings being so good, and inflation coming in line, even if rates don't come down aggressively.

All copper miners could be subject to a takeout, even some of the bigger ones like FCX. It's so time-consuming, expensive and cumbersome to build new mines, it's easier to just buy one. We need copper for the ESG revolution.

What do you do with a stock that doesn't work as soon as you buy it? If you buy it right and as part of a balanced portfolio, and it doesn't work in 3 years, it's not the end of the world. As long as you're getting your dividend, it hasn't fallen drastically, and you see a path to returning to where you bought it, keep holding. 

That should work with a name like ENB. Don't add right now, but don't have to sell either. A name like this can give you defensive qualities if markets go bust, as ENB probably won't do down that much from here.

To get a good return in a portfolio, you don't have to win on every position at all times.

Markets tend to be fairly placid or weak when it comes to what they want and need. For the last few years, it's all been rates. As a long-term investor of quality companies, he'd much rather have a strong economy with strong earnings, and let rates take care of themselves.

Good companies can navigate a variety of different scenarios. Historically speaking, rates, even where they are today, are lower than average. So the idea that the market's worried about whether a rate cut will come in March or June is completely incidental to him. He's looking for good companies, strong earnings, good revenue growth, moats to their business. All these things will lead him to good places in the long term.

Technology gets most of the headlines, and rightfully so. Another good earnings season by most companies, led by META, which has reinvented itself from the abyss and its fundamental numbers have proven that. We also got really good reports from AMZN. Though the market didn't react particularly positively, GOOG's report was solid, it's a great company.

Market weight on the Magnificent 7 is about 30%. At his firm, he has only about 15% exposure. He likes it very much, but doesn't want to overly concentrate and create undue risk for clients. The other 493 companies that aren't in the Magnificent 7 also have great value. Trading at 16-17x earnings, fabulous choice there from an industry, sector, and company standpoint.

Likes industrials. Still likes financials, though they're a quarter or two away from responding well. Lots of opportunity to look at.