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

Canadian vs. US banks. In Canada, the large banks own a mortgage asset, and they underwrite, administer, and collect on it. So you have a large iceberg underlying the profit cycle of Canadian banks. Quite resilient. For US banks, mortgages originate at the community banks and then move up the channel and can be sold. Income from these is largely transactional. If transactions slow, as in a rising interest rate environment, this would be a revenue headwind, and you'll see a spike in non-performing loans. US banks will trade down, probably more than Canadian ones. But when we bottom out, there will be a significant opportunity. Wouldn't touch a US bank now. Not a huge fan of banks right now, but if he had to choose, he'd buy a Canadian one.

Sectors for a recession. Historically, commodities such as metals or energy are the #1 performers during a recession. The other categories are consumer staples and pharma. Gives an opportunity to participate in inflation.

Believes economic activity is the largest factor impacting real estate (not interest rates). Defensive asset classes are the best spot for investors in uncertain times. Supply/demand big influence on real estate performance (certain areas of real estate perform well in down times). REIT's behave like stocks in the short term (volatile), but long term will perform well. Fundamentals are still strong in certain areas of real estate (industrial & single family rental homes).

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. Limitations of Analyst Forecasts. When looking at how a company performs, oftentimes the first steps include looking at how company performance versus analyst expectations. More often than not, share price performance following the release of the results depends on how a company has performed relative to estimates. While analyst estimates can come from very detailed and thorough analysis, these are still estimates. Estimates change as new developments come in, fundamentals change, or the macroeconomic environment shifts. Analyst expectations can be a good reflection of what is expected of the company and what is being priced at the current valuation. Given the significance, there are limitations and challenges in forecasting that investors must consider.

Based on data by technical analyst Ralph Vince Stocks are hated and the market won't bottom until there's no one left to sell. Data since 1980: the percentages of bulls was 18% last month, among the lowest in history. Anything under 20% means holds your nose and buy. Last month, 60.9% of investors were bears, the last seen since the crash in 2009. When it's this extreme, it's a buying opportunity--as painful as it is. The University of Michigan consumer confidence index last month hit an all-time low. VVIX (volatility) is near Dec. 2018 levels--the last time Powell hiked rates so aggressively; both indicate a bounce is coming. A chart of net-free credit balances vs. S&P shows is at extreme highs. All this data points to: BUY.

We started 2022 with inflation fears. Inflation hasn't moderated the way we like. Now, the Fed is raising interest rates at a record rate and will continue. We need inflation to come down. September's performance has added to a difficult year. However, corrections and bear markets happen and are normal. Into 2023, we could see an improvement, rising stocks and some normalization.

Indicators point to an end to this bear market coming, that it will burn itself out. Until then, there remains more downside. He predicts the S&P to fall to 3,400. Of the sectors to buy, healthcare isn't immune to a market sell-off but will outperform.

Show unavailable for technical reasons (26-9-22).

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. Debt Can Kill a Company. Endo International PLC filed for bankruptcy protection this week. This is the company that took over Canada’s Paladin Labs Inc. about a decade ago. Endo shares are down 91 per cent this year. The problem? Very high debt. Endo has US$8 billion in debt after a large acquisition spree. Cash flow in the past 12 months? Just US$80 million. It paid US$560 million in interest charges in the past 12 months. The lesson here: Debt can kill a company, sometimes quickly. Make sure the companies you own can service their debt. Times are not always great, and a company must be able to survive before it can prosper.

Regarding the latest news concerning the Bank of Nova Scotia, it is unusual to see an external hire of a CEO in the banking space. Overall it is a tricky market. It had rallied off the June lows but the Fed has declared that it is going to keep raising rates and will do so for longer than anticipated. Investors are concerned that this is a mistake and will lead to a hard landing. He uses stop losses on all positions and has built up a sizeable cash position.

The question was on averaging down on dividend paying ETF's. The answer is no - there are 60 000 securities across the globe to choose from and he only needs 20 to 40 in the portfolio. A stock can be down for a long time. You want to see the technical situation improve both for the market and specific company. Ideally the 200 day moving average should be rising and the stock should be trading above it. Even better if the same is happening with the 50 day moving average. Look at companies in an uptrend.

The question was on oil stocks. There has been some technical damage in oil stocks lately. Oil should not drop too much from here since the U.S. which has been selling reserves may soon be at the point where they may start building reserves again. Perhaps try Vermilion which is exposed to Europe. Start with a partial position and add on strength.

The question was on accumulating cash and where might be the near term low. The simplest way (not too technical) is to look for a strong day (plus 2% or more) with heavy volume involving many stocks. Then within the next five trading days look for the same thing on one of those days. It means something is happening.

There are growth opportunities in alternative energy and utility companies that are expanding in this area. Two examples are Nextera and Northland Power. An investor should focus on companies that are predictable and that have little economic sensitivity. Watch for when the market rallies and then what holds up and what pulls back.