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

He learned from experience to own fewer stocks, because he made more money owning fewer stocks than many stocks. He has a rule to sell one stock before buying a new name.

An economic slowdown will continue, so fade the cyclicals. Avoid companies with weak credit ratings and balance sheets, because rates have shot up. Earnings last month were great, not as weak as expected, though down YOY in the US and Canada, though market sentiment shifted this month. September is known for seasonal weakness and past crashes.

He's been raising cash, because by the second half of September, this weakness, particularly in big tech, will be done. History says that in strong years like this, there will be a good Christmas rally.

He wasn't dovish, but neutral. Powell said he's ready to raise rates, but will first see the inflation data; there are risks, so he will be cautious. Inflation will decline.

He didn't defeat seasonal weakness. Powell just read yesterday's newspaper, and the market already priced in what he said today. The market realizes the risk that the economy stays longer than the Fed is comfortable with and the Fed will have to raise rates further. Powell is like a trader who's right--but early. Inflation will ultimately be transitory as a trillion dollars of stimulus fades out and disinflation in China that will eventually come here. Ultimately, Powell will do too much.

The market paid more attention to what Powell said than Nvidia. Powell's moves have not caused inflation while inflation has fallen. The market is down only 4% from its high, which is impressive. Also, earnings seem okay, not fantastic, as the big companies are holding their own. His comments were neutral and the market is flat. She presumes no rate hikes in September, and watch future earnings.

Big tech, including Nvidia, are vulnerable to sudden changes of sentiment and they re-rate quickly. He isn't worried about the long-term fundamentals -- AI will drive productivity. Big is losing momentum as he enter downward seasonality.

Believes interest rates will remain higher for longer.
Economic growth is surprising investors on the upside.
Second quarter GDP up 2.4% in the USA (annualized).
Strong economy indicates US Fed will not be cutting interest rates soon.
2% inflation target will remain as per US Federal Reserve Chairman.
80% consensus that J.Powell will not hike rates in September.

Investment Valuation Model: Discounted Cash Flow (DCF):

The Discounted Cash Flow (DCF) model is a popular valuation model that forecasts a company’s future cash flows and discounts (builds in a return) them back to the present. With this model, we use the company’s income statement, and using a variety of growth and profit margin assumptions, we derive a model price based on its historicals and growth prospects. 
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There's a lot of activity over the past few years that's analogous to the year 2000 and Y2K. Markets took off in March 2020, but then reality set in. We had government and bank interventions adding to this turmoil, and what we have is a lot of uncertainty. We see visibility coming in now and more steady results from a regular economy. 

There's still volatility, especially with tech stocks and their big drop last year with a big rebound this year. A good example is NVDA with its big beat post-close yesterday, but turning around today.

NVDA's at all-time record highs, which is very good in light of everything that's going on. MSFT and GOOG are also doing very well. NVDA's the exception, but most of these stocks are getting close to highs we've seen before. You need a lot of enthusiasm to push buyers to move stocks higher. It's been a very long decline and recovery, so we'll see where we go.

Look at input costs for the things we buy as the cause of inflation. Wheat peaked last year and then declined. Even though prices to the consumer are not going to be reduced too much, it's nice to see the trend. We see this trend with lumber as well. 

These are indicators of what could happen. World shipping peaked, and activity and prices are now coming down. Things are getting back to normal, inflation is coming down. See his Top Picks for trading ideas on this theme.

He's moderately bullish on the markets, "cautiously optimistic". No matter how optimistic you might be, you have to have exit strategies. Now, you don't want to be selling everything if it drops 5%, or else you'll be buying and selling at a loss. Things are a little more normal now, so you can be a little tighter with the stops.

People get gold as an inflation hedge or to go against the USD, but that correlation is not strong. Sometimes you have a matching of price movements, but over the long term, the price matching doesn't hold. People's perception of gold and the reality are very different.