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

Commodity super-cycle. For cyclicals, there are times you want to be in them, and times you want to step away. He thinks we're at the beginning of a new commodity super-cycle. Catalysts for commodities include China starting to grow quickly again, and in general the value of commodities is cheap. Seeing that inflationary effect. Though they have come down this year, he can envision a scenario where they go higher over the next 5-10 years, especially for the energy and metals spaces. Limited supplies, finite resource.

Typically, the market will respond to strong or weak Black Friday numbers. These days, bad economic news means good news, because bad news means the Fed will slow its rate hikes. Yes, seasonality says that markets will move higher. We're in a grace period between the time the Fed raises perhaps 50 basis points in mid-December and the time when we see Fed actions (of this year) have an impact. Yeah, there could be a year-end rally, but then we hit reality after that when earnings come down meaningfully and valuations get too high. He's fairly invested now, but doesn't expect to make a ton of money between now and the end of the year.

He expects capex spending by companies now to slow down. After all, in few recessions do industrials do well. Investors have gone out of tech and moved into industrials, another liquid space. He doesn't see industrials enduring a sustainable cycle during a declining economy.

The US market (S&P) ends 2022 not down 26%, that would be a massive victory. This year, we have digested a ton of bad information, including valuations, Fed moves and remarks and corporate earnings.

The US market (S&P) is rising towards the 200-day moving average because the street feels the Fed will moderate its rate hike to 0.5% in mid-December (and not 0.75%); technicals point to a 200-day MA; and seasonality after the US midterm elections. Don't get overly excited or pessimistic about the economy.

volatility isn't spiking now That's a good thing, because the street perceives there's less uncertainty in the economy path after extreme hikes in interest rates this year. She does not expect stocks to spike in early 2023. Aside from rates, the street perceives a peak in the strong US dollar, which is fuelling markets. A stable, range-bound dollar in 2023 could be a catalyst for risk assets.

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. REIT Conclusion: REITs offer investors a great method of gaining exposure to the real estate sector while also benefiting from capital appreciation of property values and stable cash flows. The business activities and operations of a REIT differ from that of traditional stocks, and as a result, it is important to know which metrics and ratios to use when evaluating these companies. REITs are debt-heavy companies, and because of this it is essential to look at a REITs liquidity (are its debt levels too high? Is it able to generate enough cash flow to service debt payments?) and whether its distributions exceed that of annual cash flows (is AFFO payout ratio above 1.0X?). We hope that this introduction to analyzing REITs has been helpful.

This is traditionally the strongest period for the markets. The gains in energy and finance could create disparity with volatility in other areas that have done poorly this year. The prices of some small and mid caps have fallen a lot but the businesses they run have done well. Some investors will just take their losses and move on and maybe buy back later. Many investors are exhausted from this past year and may just capitulate and go to GIC's.

Believes markets heading into a recession in 2023. Heading into a seasonally good time of the year for the market (historically). Markets tend to trend up during the 4th quarter. Believes market indexes (S&P 500) are approaching levels of resistance (4000 level). If S&P 500 rises above 4000, will indicate bear market is over (not seeing that yet). Not a believer in Crypto currencies and believes most of them are a ponzi scheme. Crypto currencies are not a producing asset (pure speculation). Major institutions not investing in Crypto, thus preventing prices from going higher.

Educational Segment. Since we are likely heading into a recession, tax loss investments are not a good strategy right now. S&P 500 likely will trend down next year (reflection of lower earnings expected). Worst performing sectors this year mainly surround consumer goods (might be a good time to invest). Companies like GM might also be a good investment right now given recent bottom of shares.

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. REIT AFFO Payout Ratio: REITs are well-known for their above-average distribution yields provided to shareholders for being part owners of the several income-producing properties that a REIT holds. The sustainability of a distribution is traditionally known as the ‘payout ratio’ for non-REIT companies, and is calculated as the annual dividend divided by EPS. Although, a REITs EPS can be negatively impacted by its high depreciation expenses since its assets are predominately real estate. Thus, the AFFO payout ratio is the best measure of defining whether a REITs distribution is sustainable. An AFFO Payout Ratio of less than 1.0X is ideal, as it implies that the company is distributing not more than it generates in annual cash flows.

Santa Claus Rally is coming. Data from technical analyst Larry Williams, making a contrarian call about this bear market The S&P chart shows seasonal bullishness in November and December. Late-November and mid/late-December are the two sweet spots. Early December isn't bad, but the 13th-17th trading day of December marks the Santa Claus Rally. The S&P could start roaring in early December.

The Fed is winning the war on inflation--already. Cryptos keep tanking, FAANG stocks keep declining, Walmart is thriving as consumers trade down, crude oil prices keep sliding (crude was a big driver of inflation) and there's weakness in housing. So, why can't the Fed stop making pronouncements? Their aggressive rate hikes are working.

Fixed income is now more credible, not only stocks. Now, both offer growth. The old-school 60/40 portfolio has done well historically, but has value going forward. Interest rates will continue to be high for quite a while, because of this strong job market. We've likely seen the lion's share of hikes, though. Real estate is unwinding as a result.

shorting He invests only in longs. Shorting is very risky and only for sophisticated investors. Losses can be big, especially in a small-cap stock. You could get squeezed.