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

Renewable energy. It's a part of his portfolios, but not a big part. Real test this winter in Europe, as they spent billions on infrastructure in renewables. Hopefully, it will pay off. The worst scenario for them is cold and calm, vs. chilly and windy. Chilly means they won't have to use all the power they've stockpiled. Windy means they can take advantage of all their wind farms. It's certainly the future, and will grow as we move forward, but it's not the only game in town.

Royalty streams vs. gold miners. The miners are very cheap. The question is what's going to happen to the commodity, because you have to make your call on it before you look at the businesses. If the price of gold goes sideways, those companies won't do much. Right now, he likes stocks better than royalties. Royalty companies are better to have once things get going. Stocks like AEM, NGT and ABX are really down, and that's a better way to play now.

Fintech and growth. When to buy? If you're not sure, put in a partial position now and wait and see what happens. If the market goes up, you're averaging your costs higher and that's a good thing. He owns some of the fintechs, new economy stocks. Focus on where's the growth going to be in the future. We're going to need the growth, especially if inflation hangs around for a while. Returns get eaten up by inflation. How much growth can I get, how much safety can I get, and am I in the right sectors?

Timing a buy on utilities. Key to any utility and high-yielding stocks is you have to factor the inflation rate into your return. If inflation gets sticky, around 5-6%, you'll have a negative rate of return. You need to get this on sale, especially important if you hold it in a taxable account. If inflation goes back to 3-4%, it's not that big an issue.

Oil in January/February 2023? Somewhere between $80-100. Demand from China has been flat over the last few months, and it looks as though this will continue. Europe looks as though it can hold itself together, as long as it doesn't get too cold. We haven't invested enough money in our own oil patch. What we're getting instead are dividend increases and share buybacks. Can't blame them, as the government's sending mixed messages to the oil industry.

Lessons learned with this week's selloff and recovery? As an investor, you're always learning. Objects resist motion. Traders were all positioned for this number to come down, and people were being too aggressive with that. Inflation is there, it's real, and it will take some time to work through. Even if we did get a positive number yesterday, hinting that inflation wasn't as high, it's still pretty high. The Fed pivot is still pretty far away. Further exacerbated fear. We're going to have to continue to deal with high inflation. Equities now have competition. If you can get 4% in a 2-year, that's pretty attractive, and equities have to contend with that.

At what level will GICs start drawing enormous amounts of investor money? GICs are paying 4-4.4% on a 1-year, not bad. But it's all taxable. If inflation is really at 8%, you're still losing money. Bear markets don't last forever, usually 16-20 months, perhaps less. If we're already 9 months into this, and you allocate your money correctly into equities at the right time, you could be looking at a double for a lot of stocks. You want to have some fixed income in your portfolio. That's why they call it the 60/40 portfolio, you want 40% in fixed income. If you can get attractive GICs or other investment-grade fixed income, grab it.

Inflation and interest rates. Full-scale velocity inflation that we had in the 70s is a whole different situation. What's somewhat comforting is that this is not the great financial crisis and deflation when the Fed had no idea what to do. There's a script for how to bring down inflation. It hasn't reached wages yet, so it just means the Fed is going to keep going harder until they get the result they want. There's a tradeoff: some pain now with job losses, or real pain later with letting inflation go and end up with a lost decade like the 70s. The whole conversation is about whether they can engineer a soft landing. The trick is to raise rates without doing a lot of job damage.

Canadian telcos. Great area to be in right now. Roaming has turned positive, they're at 98% pre-pandemic. Immigration play. Very solid numbers on wireless. Good stocks to own in this environment. His favourite right now is BCE.

Put money to work now in the markets? It's always an OK time to invest, and it's always an OK time to invest 9 months into a bear market. The question is will markets get cheaper? It depends on the path of inflation, which has been pretty sticky. Rates will have to go up more, and this will challenge the stock market. NASDAQ is most sensitive to rising rates, so don't buy here. Dow earnings estimates are likely to come down. The better one is the TSX with its exposure to energy and metals, which may be tough for the next 18 months, but really good thereafter. Banks are at reasonable levels. Are they all going to be up 6 months from now? He doesn't know, but doesn't think so. Are they going to be up a year from now? Yes. Two years from now? Most probably. Ask yourself how comfortable are you with position erosion if it doesn't work out immediately?

Energy patch opportunities. Can't argue with energy companies, still one of the cheapest areas in the market. Still incredible cash cows at WTI $85. He prefers some smaller caps really trading at a discount like VET, ARX, TOU, CPG, and PEY. Many of the energy companies had a near-death experience in 2020, with oil trading so low. They found religion, and this isn't going to change. This new approach favours huge shareholder returns.

Money market fund to park money? Lots of choice out there. High interest savings, cashable GICs. One 12-month duration product he likes, which pays a little bit more, is ZST.L from BMO. Keep for 3-6 months, don't jump in and out. If markets are going to come down 5-10%, nothing wrong with staying in your money market fund for a bit and having some dry powder.

REIT advice for the times. Supermarket-centric is a very good place to be in uncertain markets.

Does he ever recommend non-dividend-paying stocks? His mandate is NA equities. He's not just about dividends. He's opportunistic. Goes for stocks where the risk/reward is really good. He has a bias towards dividends, as you get paid to wait. You can paint a more illustrious painting by using all the tools, and that includes non-dividend payers as well.

The bull case isn't gone, but delayed for a month till the next inflation data. In a month, we're in earnings season which is the next battleground that will determine direction. So far, earnings are hanging on them. Until then, we're stuck. It's possible we could return to June lows, though good earnings could push things higher.