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

Question on Mutual Funds or ETF's - which is better. He prefers ETF's since they are more rigorous with their holdings, have a ticker symbol and are generally cheaper.

sports betting stocks Last Saturday, online sports betting went legal in New York state, the most populous state for sports betting. But sports betting stocks has been dreadful; Draft Kings was the worst stock on the 2021 S&P. Why? This industry is too competitive. Also, marketing costs in New York state are very high. There needs to be consolidation in this space before you should invest.

Educational Segment. How can U.S. engineer a soft landing? Inflation pressures are building and Feds are behind the curve on that. Ability to ease has never been more challenged. 10-year U.S. bond yields are rising. A yield of 3% would in his mind crush the economy. If the yield curve remains steep, general conditions remain ok. If it goes flat to inverse, it pretense a recession. Keeping the yield curve steeper is going to be better for value over growth.

Believes investors should not be concerned about small interest rate increases. Marginal increases in interest rates won't affect business decisions. Rising interest rates is a good thing, as it signifies a recovering economy.

Investors should continue to focus on good companies with quality products & services to prepare for rising interest rates. Semantics about "growth/no growth" stocks won't affect quality companies over the long term.

The Fed will have to move quickly to contain inflation, but that will pressure stocks, as we saw today, especially the Nasdaq. Stocks without earnings are getting hammered, no surprise, while those with tangible sales will fare better. Housing stocks are already getting hammered, but higher rates are good news for the banks.

Disruption to markets by the Fed. 2022 will be interesting. Expect more volatility. The last couple of years have provided exceptional returns, and we shouldn't expect the same. Yet there's no reason not to expect a good year, as corporate profits remain very strong. Though the Fed is positioned to raise rates, his base case is we'll see a lessening of inflationary pressures. This will let the Fed ease up on the brake and not be quite so aggressive in raising rates. Minutes yesterday were not any different from what was telegraphed in the fall. They are more hawkish, and we can expect increased rates in 2022, but not to the level of extinguishing a very good economy. Have to be careful that the Fed doesn't make a policy mistake in being too aggressive, putting the economy into a recession, though likelihood of this is low.

Inflation. A couple of years ago, Fed was worried there wasn't enough inflation. Fed hasn't been unhappy with asset inflation. Liquidity push has led to higher prices in stock and real estate markets. Cost push inflation is of more concern to everyday people, and Fed is more sensitive to that. Supply chains should start to improve. Inflationary scare will start to diminish. Next 12-18 months, we'll regress to 2-3% core inflation levels.

Market can advance even if valuation multiples compress. Balancing act. We like stocks to go up and make money, but as the price of anything rises its value tends to drop. We've seen advancing prices in the markets, but also very strong corporate earnings. In 2021 we saw the S&P in the high 20% range, but valuations dropped because we saw a 45% rise in corporate profits. He expects another good year where we get good returns in the market, but valuations don't get stretched because corporate profits keep pace.

TSLA vs. traditional car makers. Market is recognizing value in GM and Ford. From an investment standpoint, there's more risk in TSLA. For example, GM's valuation is 6.5 enterprise value to EBITDA, whereas TSLA is about 95. TSLA has done a fabulous job, but you have to marry the fundamentals with the price you pay. TSLA is overvalued. He's gone with mainstream companies with a lot of potential, rather than momentum investing.

Inflation analysis. See the article "Death, taxes, and inflation" on his company's blog.

Bullish on USD. US equities now represent 43% of the global MCSI. US market keeps on going up, huge compounded returns. Still the reserve currency of the world. Expects it to perform very well, and especially if we get any whiff of deflation in the coming months and years, it only goes higher.

Challenges to the market. Tries to model Covid and look for the macro view that will dovetail with all the other macro views out there. So many things going on that impact individual stocks, markets, and industries. Everything seems to be in flux, including this week's data. Intermediate- to long-term models are going back and forth. The market's trying to get a sense of where 2022 is going to go.