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

Markets. Rally started last Thursday. Sentiment is washed out, investors are very negative. Pain trade may be a bit higher. People are comfortable that they have reduced their allocation. If you miss the first 20 days of a bull market, you're missing half the gains. Bad news is everyone's positioned for a recession and rates are going higher. Good news is we've gone through a lot of bad news that's been digested. As you go company by company, a lot of them have gotten very cheap. If you're underweight equities, a lot of these rallies will tease you, and you're going to wonder if the actual real recovery is happening. His personal call is no, it's not there yet. But we're going to have a powerful rally in the next few weeks that will cause some people to question and then chase. We're not at completely washed out levels, but we're certainly at levels where you can start picking away and getting some good value.

Risk that rising rates have yet to slow the economy? Yes. So far, the first part of the market fall has really been about valuation. But now, we're on the cusp of the earnings apocalypse. In the US, you're still seeing companies managing to grow and beat. The thinking is that it will be a Q1 or Q2 problem, and that may be the bottom. That could be true. It depends how sticky inflation is, and it has been sticky, and central banks are going higher.

Big tech. There used to be lots of arguments about the law of big numbers. Big companies still find ways to execute and to grow, no matter how big they are. Concerns about big tech stifling innovation has put a bull's-eye on them from government. You don't know what new policies are going to come in, and that is a concern for the sector. But at some point, these names get too cheap and it's time to step in.

RRSP to a RRIF. The goal remains the same: maintain capital as long as we can, try to grow it as long as we can. Names like PPL are going to help, with its wonderful growing dividend, good growth profile, and reasonable valuation. The government wants its money back. Withdrawals start fairly innocently around 5.5%, and get very aggressive as you get older.

Place for US cash? Many people say healthcare, because it's defensive, especially going into a recession. He sees better value in tech, as it's down 35%. NASDAQ may not be the best to own for the next 3 years. But over the next 50 years, this is the best thing to own, especially after the downdraft it's had.

Rally in November-December? It's really cute to call a rally here. We're in it right now, though we're having a tough tape today. If there are more up days in the market, people will be teased back in. We still haven't had the full reckoning in the market. We'll probably bottom Q1 or Q2. But we're at levels right now where it's very interesting to be picking away.

Seasonal factors. It's one factor of many he looks at. It doesn't drive the portfolio much, but it's something to be aware of. Summer, September, October are the weaker months, and then the rest of the year is bullish.

Change tactics from last decade? Over the last decade, main thing was being long tech and e-commerce plays. You just had to buy those companies and sit on them, and those companies did well. In 2021, those stocks were trading at crazy valuations. Now you want to be a stock picker, and not just buy the general market.

We're in for several quarters of choppiness? For sure. Especially the US indexes, which are dominated by the tech sector. Canada's a bit different. The tech area's under a bit of pressure, and we're going into a period of economic weakness. Tech does have some industrial aspects to it in terms of cyclicality. Starting to hear rumblings about weakness in AAPL and other enterprise software companies. People have been valuing these companies like they never, ever have troubles, and it's ominous for those sectors.

Changing of the guard in tech. For years, AAPL's largely just been focused on enhancing their current position. Has a very good ecosystem. He's been following the industry for 30 years. 30 years ago there were companies that people thought were embedded, and then something came along to upset the apple cart. Today's leader becomes tomorrow's laggard. The PC was the place to be in the 90s. Now handsets are the place to be, and that area's being generally dominated by one company. Within that area, it was Nokia for a while, then it was BlackBerry, and now it's AAPL. Even though AAPL has a slightly stronger embedded position, eventually somebody will trump that. Will it happen in the next 2 years, or not for another 20? As an investor, you have to be watching these things closely.

Some say buy cyclicals when multiple has soared and profit has collapsed. Generally true, but things have gotten so wacky. Canada has 3 world-class lumber companies: IFP, CFP, and WFG. At the bottom of the cycle, they'd be at-worst break even. So he'd argue they should be trading at higher multiples than what they're at.

Retail in a recession. If you look at companies like ATD and PKI, the biggest part of their business is selling chocolate bars and coffee. Selling fuel is just a way to bring customers in. When the economy is weak, retail is generally under a bit of pressure. But this is a much more stable area than, let's say, a clothing retailer. In a recession, sales and profits will not go down as much as in other sectors.

E-commerce malaise. Most of the e-commerce pure plays are not making money. AMZN is the exception. In last year's environment, Wall Street would just throw money at them whenever they wanted. But now, you can only finance if you make money. These stocks are in the penalty box, and will continue to be there for a while.

Effect of US mid-term elections. Politics always has some effect. Whenever the 3 areas are controlled by 1 party, scary things can happen. It's good to have a balance, and business generally likes stability of policy. Good chance that the Republicans will get power in the Senate or House after the mid-terms, and that would be a good outcome. So that's something to watch.

Marijuana sector. He's studied the marijuana companies. He just doesn't see how you make sufficient profit to support the valuation. Especially, 2-3 years ago, the valuations were phenomenally high. In Canada, 99% of the companies consistently lost money. Now in a cycle of consolidation to reduce the competition and achieve critical mass. The area now looks interesting, but he doesn't own anything in the sector. Seems to be more profit in the US. Trend to legalization in the US continues, but it's still not official, an ongoing project. Valuations in US have dropped, and he's watching, but too soon to step in.