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

Lumber had its heyday during the pandemic, and it will take a while to get back to those lofty times again. But prices were crazy during that time. Likes them over the long term, especially CFX.

Overview of Recent Enbridge Deal:

Enbridge (ENB) is set to buy three utilities from Dominion Energy for a total consideration of $14 billion, including debt. ENB is buying East Ohio Gas, Questar Gas, and Public Service Co of North Carolina for $9.4 billion in cash and $4.6 billion of assumed debt.

This is a monumental deal for the company and for the oil and gas industry, as it now makes Enbridge the largest natural gas provider in North America. The scale of this acquisition is large, and it will effectively double Enbridge’s gas distribution business. The deal is expected to close in 2024.

The company decided to proceed with the acquisitions as they represent an opportunity that does not come around too often and allows Enbridge to benefit as natural gas remains a transition fuel while companies around the global try to reduce oil use. 

This is a big deal for ENB as it will now supply over nine billion cubic feet per day of gas to about seven million customers. The company will now be providing gas services to Ohio, Utah, Wyoming, and North Carolina. In these states, revenue from utility bills is expected to grow faster than the national average.

Of significant importance, this deal adds diversifying benefits for ENB, as it shifts from 99% of its gas distribution being centered in Ontario to a healthier geographic mix between Ontario, Quebec, Ohio, Utah/Wyoming/Idaho, and North Carolina.
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Investing Essentials: Keep Costs Low.

This is unlikely to be a surprise to many people. It is worth repeating though, as over the long-term, fees can destroy the value of a portfolio. 

If you consider fees, taxes and tack on inflation, it can be very hard to just break even. Fees are one of the few items totally in an investor's control, so it is something all investors should keep a tight leash on. No all fees are bad but it is important to understand and be sure you are getting value for the fees paid.

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There was some confusion in markets today. The bond market was closed today for Columbus Day, but if it had been open--and interest rates had risen, then today's rally would not have happened. We'll know more tomorrow when bond markets reopen. 

He corrected predicted a choppy August and weak September. He predicts markets to be rangebound in early-mid-October, but then launch into a powerful rally at the end of October. So, stay in the markets. He expects upside in the Dow starting now. He watches the commercial hedgers in the futures markets, and they have been loading up on stocks lately, are seriously net-long the Dow futures. Each time since 2020 when this happened it led to a big rally.

Recently, he felt that the S&P had to hold 4,200 or else it would fall below that, then suddenly it rose above that and keeps going. His standards are at least 3-6 days of support up to 3 weeks. So, now it seems to be finding supporting. He holds 27% cash, but won't invest it; first, he'll see how the S&P does for the next few days this week to see if this support holds. If it falls below 4,200, the next level of support is 3,800.

Seasonally, oil is soft between October and January.  Long-term, oil is good to own, but unsure about the short term. He has divested, but would return at $80/barrel.

Recent downtrend on dividend paying stocks has come as a surprise. Believes current valuation of tech stocks is way too high. Would advise against locking into ~5% GIC returns as rates could go higher. Buying small amounts of dividend stocks on downtrend. Soft landing narrative still exists - expecting pain in the markets later this year. ~8% dividend yield on stocks like TCE a very attractive opportunity. Canadian population growth will benefit companies like BCE & Telus.

Dividend Investing Book Recommendations: The Single Best Investment - Lowell Miller. The Fourth Turning - Neil Howe and William Strauss. Broken Money - Lyn Alden.

Market Summary:

US job growth surged in September, while unemployment rate was unchanged of 3.8%, suggesting a strong labor market for the Federal Reserve to raise interest rates this year. While, Canada added 63,800 jobs in September, and employment rate stood at 5.5%, the figures beat consensus estimate for a modest gain of 20,000 positions and jobless rate of 5.6%. The Canadian dollar was 73.21 cents USD. The U.S. S&P 500 ended the week slightly up 0.5%, while the TSX was down 1.5%.

Another week of greens and reds mixed. Energy and healthcare gave up 4.9% and 3.6%, respectively. In addition, financials slid by 1.9%. Materials edged down 1.2%, while consumer discretionary dropped 1.1%. Consumer staples added 1.4%. Information technology gained 1.0%, and industrials ended the week slightly up 0.1%.
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Today's hot jobs numbers pressured the market at first, but then the street realized that wages are not keeping pace with inflation. Add to this the falling price of oil, which will reduce inflation. Altogether, the street felt that we may get a soft landing after all and maybe the Fed won't raise rates again. So, stocks soared.

The market ran up into Q2, was soft in the summer, with some fairly significant give back in September. If you trimmed winners, you're sitting on cash. That was the right thing to do.

We're starting to see a real plethora of opportunities whether it's income, growth, value, or geography. 

Within the sector, he'd favour the insurers because they definitely benefit from rising rates. Be wary of the banks, even though we haven't seen a lot of carnage in terms of loans and bankruptcies. Banks will benefit from rising interest rates. We have world-class banks in Canada, and he owns RY and  TD.

Because of the structural differences in Canadian and US banks, in this environment he'd actually favour banks that have balance sheet risk. Once interest rates go up, you get slowing transactional volume, and that's not good for US banks. Equally so, when you get a recession, and the floor's in, US banks offer significant upside relative to Canadian banks.

There are other parts of the world you can look at as well.

He spoke to a large European multinational this week about the state of the global economy. The response was that Europe's in recession and not coming out anytime soon. US chemicals are in a recession, and possibly energy. Wait to see if the US is going to go through a recession. China is the closest to coming out.

If China comes back online meaningfully, base metals will move. Copper is giving you an indication that the economy's going to be weak.

Thinking about the global economy, you have to figure out where the opportunities lie and where you want to stay away from. If you're thinking about a 3-5 year investment the way he is, you want to buy names when they're weak in anticipation of big cyclical moves. For example, last year BHP moved from $48 to $70 in the space of 5 weeks, and that's the kind of move you can get in commodities.

Buy cheaply, trim them at the top, add at the bottom.