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

It's harder to decide when to sell than when to buy. Before you buy, you have all the time in the world and there are no emotional tugs.

Once you own a company, the emotional side kicks in. If you look just at the profit you've made, you're only looking at one side of the equation of value. I've made x%, so should I sell because I've been rewarded? This is a flaw in investment thinking. Instead look at fundamentals, growth of earnings and cashflow, revenue growth. If it's a better value today than when you bought, keep it. This way you give some stocks in your portfolio the chance to double and more.

Take the price and look at what you're pricing, rather then looking at your own experience.

He's looked at the sector, but doesn't own any stocks. Hard to find an analyst who doesn't say there's going to be a shortage, which will drive price. Could be a good long-term hold, but no catalyst that compels him to buy today. Be careful about the size of your investment. Don't make it a large part of your portfolio, because it could be dormant for some time until there is a catalyst.

He doesn't like to buy companies that are at an early stage, trying to find their way and their footing, without a keen eye toward profitability. The market responds to profitability, and it grows tired of just the good idea.

So far this year, people are mispositioned for a recession. Sentiment for a recession has been decreasing, and so there's been this accelerated movement to the upside. With inflation, bond yields, and valuations being where they are, you're going to see a bit of a soft patch.

July was wonderful, but he fully expects a healthy pause, especially with seasonality that typically happens around this time.

Very concerning. Some are seeing strong parallels with Japan in the 1990s, and that's bad news. There's stagnating economic growth, an aging population, and a real estate problem. The good news is that the fallout in Japan didn't happen right away. China can learn from Japan's experience and try to be more agile, reverse course, and be more aggressive to stimulate.

Outside of China, emerging markets are doing well. Legislation in North America is bringing reshoring. He's not sure that we need China to grow the way it was 10-20 years ago in order to have the global growth story. But we don't want China to be a drag, so it's important what happens there.

If you're a 60/40 or a 70/30 person, stick with that. For the last couple of years, you wanted to be under that while rates were going up and equity prices were falling. It's a balance. We're not in full-on growth mode or economic recovery. We could have a recession. Don't be too offensive, but don't be too defensive.

These stocks are to some extent interest-rate dependent. GICs have become an attractive return with no risk. Higher interest rates have increased the cost of funding. If inflation and rates can at least stabilize, these stocks can work. They don't need inflation to reach 2% right away, as long as we're heading in the right direction.

How can investors know if their portfolio in on the right track? Here are a few options:

• Ask your current advisor to review your portfolio - Obviously they will say it is fine since they made it!
• Ask another advisor to review your portfolio - Obviously they will say it is bad or needs work, as they want your business! And to be clear, investment management is an odd business where two people could look at the same portfolio and have opposite opinions on whether it is good or bad, and both may be right (to a degree)!
• If you don't have an advisor and are asking them to review your portfolio, it is probably not fair unless you plan to give them your business, and from a resource perspective just isn't realistic as they aren't going to do a thorough in-depth analysis of your portfolio for free.
• Ask family and friends - This might be the most dangerous option. While these individuals are more than likely well-intentioned, in most cases they probably do not know much more than you do. Or even worse, they THINK they know more than you and others.

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Soft landing unlikely given status of consumers in North America.
Expecting higher for longer interest rates from US Fed. 
Believes inflation will be sticky for the next few years. 
Watching retail earnings results (Walmart) this week to gauge investor sentiment.
Large retailers are good "bellweather" on state of economy.
Economic weakness in China bad sign for goals of becoming international leader.
Economy in China will survive given high level of government intervention. 

Upcoming US Fed symposium in Jackson Hole will focus on interest rates.
Debate in Jackson Hole will be on whether to raise rates.
US/Mexico trade volumes recently surpassed China - indicating more "friend shoring" in manufacturing. 
Question is whether to keep inflation targets at 2-3% given strength in economy.
Expecting further inflation - believes economy "needs" a hard landing. 

A few prominent benefits that negative working capital provides:

1. For a typical business, the more it grows the more capital it needs, but for these businesses the more it grows the more capital it provides. In effect, the growth of the company is funded by stakeholders (customers, suppliers), reducing the needs and risks to raise more equity (diluting shareholders) or debt (less leverage) to grow the business.
2. Usually, companies with these profiles do provide critical products and services, where demand for these products/services is recurring in nature. As a result, the underlying businesses produce a stable, predictable stream of cash.
3. Solid signal of a strong competitive position as the company can demonstrate negotiation power over its suppliers
4. The funds that are collected in advance could be deployed for share repurchases, dividends or acquisitions which are beneficial to shareholders

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He is looking for a soft economic landing since the CPI numbers are encouraging and there has been the lowest two month increase in inflation seen in two years. Rent is one of the biggest drivers of inflation data and the real time data of new leases being signed in the U.S. is starting to come down. There is a lag effect to interest rate increases so an extra 25 basis points increase here and there won't have a big impact especially when compared to the huge increase over the past year. Investors will look for signs of keeping rates where they are or a start to cutting them.

Editor's Note: This is Alexander's first time on Market call so there are no past picks. Instead he added to his general comments from the beginning of the show. One topic was the spread between the 2 year bond yields and the 10 year bond yields. If this spread is inverted it has always been followed by a recession for the past many decades. However, the two events are not always correlated. Things may be different this time since we have gone through a pandemic, (with its consequent slowdown) which hasn't happened in over a century. The supply chain is improving and the labour market is strong with very few cracks so he is anticipating  a probable soft landing.

August is always a squirrelly month. Earnings seasons is over, big investors are on vacation, so there's only data to rely on. He's been nibbling at opportunities. The Nasdaq has broken below its 50-day moving average for the first time in over 100 days, a long time. Now is either a consolidation period or it will test how much lower it can go. He's still heavily into Microsoft, Apple, Alphabet and Nvidia. AMD is interesting, because at year's end they roll out innovation on the generator side. Salesforce and ServiceNow are profitable and he's also looking at them.

Inverse relationship between interest rates and tech stocks not always the case given tech performance recently.
Optimistic that interest rates are peaking - specifically on the 10 year yield.
Markets might be going through a normalization as the economy recovers from Covid-19.
Believes NASDAQ 100 is in over-bought phase (markets are too frothy). 
Given recent highs in stock market indexes - believes economy is strong.