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

She gets it: if we go into a hard landing and recession, there will be pain in oil prices. She sticks by oil this year, though, by adding to your position, or sell calls and collect the dividend. A lot of this current weakness is overblown. Over 18 months, the price of oil will be fine.

Basics Company Metrics Investors Should Pay Attention To: These are the rules and procedures a company uses to prepare its financial statements. Investors should carefully examine these policies to understand how the company records and reports its financial transactions. 1) One area to pay attention to is revenue recognition, which refers to the timing and method of recognizing revenue on the income statement. It is important to understand how a company recognizes revenue to ensure it is not manipulating its financial results, such as recording revenue too early when there are generous return policies. 2) Another is depreciation and amortization, which refer to the method a company uses to allocate the cost of its assets over their useful lives. Investors should understand these policies to ensure they are consistent with industry norms. 3) Inventory accounting, or how a company values its inventory, is a third key area. Investors should examine a company’s inventory accounting policies to ensure they are conservative and that the company is not overvaluing its inventory. 
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Inflation and rising rates continue to preoccupy investors. Markets are volatile as investors react to changing economic data and will continue to be. The pandemic's impact on global supply chains continues as well as rising geopolitical. Interest rates are unlikely to pull back anytime while a recession remains possible--can't predict its duration or depth.

Look at the company balance sheet. Can they keep paying those yields? When interest rates rise, that exerts the most pressure on preferreds. Are not a bad place to collect yield.

Industrials, energy and materials have delivered the biggest beats during earnings season. Tech has actually had smaller beats, while FAANG has taken off with this market.

Feels okay about the market. The market endured a scary event (the regional bank crisis), and expects a 25-point hike this week, and earnings were better than expected. But: What's the right market multiple? 18x means only 4,350 on the S&P.

If you take out Amazon, S&P earnings were flat this quarter. Sure, 80% of companies beat, but they cut earnings the past 5 quarters--companies manage expectations. He remains bearish. The market might rise with a new generation of investors/buyers who have fresh eyes on the market. The economy is weakening with the impact of the Fed still to come. 

The S&P is approaching 4,200, so let's see what happens at this technical level. Will there be new buyers? A breakout? We got to 4,200 on the megacaps and better-than-expected earnings. Also, the market has digested the First Republic meltdown, and the markets expects a 25-basis point rise in rates this week. Overall, we're pushing to 4,200.

Higher interest rates have hurt the smaller technology companies which are more leveraged. A few big techs are driving the U.S. market higher. 'Buy the dip' is starting to work again after this strategy failed in 2022. Owning after the down days produces good results.

Believes seizure of First Republic Bank by JP Morgan will create stability in US banking market.
Deposits leaving small banks are a result of US Fed policy of hiking interest rates.
Investors prefer money market funds at large banks paying ~5% yields (small banks cant compete).
Without slowing down the labor market - US Fed will not be able to tame inflation.

Dividend Investors Beware: With different characteristics compared to growth investing, income investors must be prepared to deal with adverse scenarios including reduced dividend payment, return of capital, and possible capital losses. A decreased dividend payment is still digestible if it is temporary or a small cut. How will income investors react if a company were to slash its dividend by more than 90% to ‘self-fund’ growth?  This is precisely the case at Sylogist. A company characterized for its strong cash flow profile, high recurring revenue, acquisitions, and high dividend yield (more than 8.5% on Oct 31, 2022) slashed dividends from $0.125 per share per quarter to $0.01 per share per quarter.

Believes energy sector good place to invest in. Strong fundamentals with supply shortage.
Excellent prospects for income oriented investors (high dividends).
Interest rate hikes have not affected portfolios too much.
Higher interest rates are required to tame inflation.
Consumers holding up with rate hikes, but expecting pain if rates continue to rise.

Structuring Asset Allocation. We hold a strong conviction that holding equity, in the long run, is the way to generate greater returns and build wealth whether you are a growth or income investor, so our asset allocations are tilted a bit more to the 'aggressive' side.  Overall, we are generally of the view that investors need more equity than they think in a world where pensions are not what they used to be, individuals are living longer and many big expenses are growing faster than wages are. The fact that investors can put their money in very safe blue-chip equities and realize a dividend yield comparable to most bond yields make it even less attractive to own bonds. 

He's seeing strength across the board in the tech space, particularly after 18 months of pretty weak results. This is turning the corner. MSFT cloud guidance was much stronger. AMZN traded up on that, reports later today, and he's expecting good news. There's been concern about cloud computing growth and the apocalypse in smaller tech companies, but mega-cap techs are showing that they're built differently. Corporate spending is still holding up in a strong economy. More of the general economy is moving toward technology rather than it being just in niche areas.