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

Telecoms vs. towers. Not keen on telecoms as an investment. Telecom industry is very competitive. You constantly have to deploy capital. Doesn't generate much free cashflow. Telecoms globally have underperformed the towers by a vast margin. With towers, you only own the infrastructure, allowing wireless carriers to pay to put their equipment on it. Telecoms were desperate for cash, and so they sold off their towers. Companies in Canada like BCE, Telus, and Rogers own the majority of their towers.

Opportunities in renewable natural gas. Interesting space, coming into its stride in Canada. A company gets paid by both supplier and customer. Reduces carbon emissions. Methane from landfills is actually 80x worse than C02 for trapping heat in the earth's atmosphere. Important in meeting global climate goals. His preferred play is EVGN.

Pipelines. He has a bias towards Canadian mid-streams right now. TWM, operating exceptionally well pre- and post- and during the pandemic. Its renewables spinoff is doing well. ENB and TRP have sold off materially. With Keystone behind TRP, it can focus on the growth ahead. Pipelines are impossible to build now. Existing value will continue to creep up. GEI, robust tank storage business, recovery unit will be expanded, non-demanding valuation, low-risk projects with high payback for double-digit growth.

EV charging stations vs. renewable energy plays. Charging station space is not one he plays in because it's extremely hot, the Reddit crowd's in there, demanding valuations. Not that they can't run further, but they'll have to grow into the valuations. Fundamentals are not solid enough for an RRSP. Not many barriers to entry. He'd rather own the renewable energy producers, like EVGN, NPI, BLX, or even XBC.

Tech analyst Larry Williams on the Santa Claus Rally, particularly the last 5 trading days of each December. Examining the chart of Dec. 2008: Even during this brutal year the S&P closed higher by December's end, and so fulfilled the SC Rally pattern. In 2008, December started weak with a pullback (times to buy), then bounced by the end of the month. In Dec. 2007, the market bounced in the middle of the month. Dec. 2015 saw a scary, down month, but the SC rally kicked in on Dec. 24 by rebounding off lows. Dec. 2019: the rally stretched well into mid-December. In Dec. 2020, markets were choppy until mid-December then rallied. Again, the middle of the month. Dec. 1987: just 6 weeks after the crash, the S&P roared in the middle of the month. Therefore historical seasonal patterns note that markets rise in mid-December after weakness earlier in the month. Markets can also rally at the end of December. Consider this seasonality, though current worries over Omicron are real and should be taken seriously when investing. Now in 2021: the Advance Decline line (the number of stocks rising vs. falling on a daily basis, with fresh readings each session) peaked three weeks ago in mid-November, then declined to the present. Bad news, because the indices follow this ADL. In fact, the ADL predicted this current sell-off, and indices will bottom after the ADL bottoms, but who knows when? History says the ADL bottoms on Dec. 10, so the market could very well be difficult until then. Then, the Santa Claus Rally kicks in. Therefore: we could see another leg down, then the market will rally. Cramer thinks we'll bottom a little earlier than usual. Over 23 years, William observes that if you bought on the opening of the 4th-last trading day of the year and sold it during the first profitable opening, you would have turned a profit 22 out of 23 years. The percentage drops if you buy, say, on the 8th-last day of December or earlier. Williams recommends buying on Dec. 20. Cramer advises buying on the day down during Omnicrom worries.

Omicron possible scenarios 1) Bullish: Maybe Omicron is containable, no worse than other Covid strains. Also, we've gotten much better isolating the virus, and so far vaccines along with masks and social distancing, might prevail. 2) Optimistic: Omicron appears to be more contagious than other strains, including Delta, but it may be LESS LETHAL. This means, it would displace the more lethal Delta as the dominant strain, but put fewer people in hospitals and does less physical damage and fewer deaths, theorizes Prof. Francois Balloux of UCL Biosciences. During epidemics historically, less lethal strains tend to emerge. 3) Also bullish, but doubtful: If America fights Covid like a war, like President Eisenhower mandated polio shots in the 1950s. After all, you can't go to college without a meningitis shot. Whether you like it or not, vaccine requirements by law are essential. America produces the most Delta cases in the world right now. Why? Because state and local leaders defend your right to get sick and pass it to others. He hopes that politicians stop coddling those afraid to get shots and mandate vaccinations. If these or any of these scenarios happen, we could turn this bear market into a bull.

The U.S. 30-year yield has dropped to its lowest point since January even as inflation has heated up. Growth peaked in April. Central banks are deliberately behind the curve, letting inflation run hot and allow this recovery to play out. That's happened. Now, the path of the pandemic has gotten uncertain in recent weeks, plus economic growth is poised in the first half of 2022 to cool off. So, altogether, it's likely interest rates will rise. It's too soon to tell the impact of the new variant. Compare this to Delta which emerged over the summer, and people were by then aware of the seasonality of the virus. How is the new variant effecting human behaviour? With new variants, populations are less and less effected, based on metrics like restaurant reservations and gas demand. The data says that each wave of the virus and its case counts effects people less. It's important to keep an eye on human behaviour. Also consider the long-term outlook of 5-10 years. Canadian dividend stocks are attractively valued on that basis.

Do the Canadian banks still hold a competitive advantage over small fintechs? Yes and no. Yes, given banking regulations which limit competition. No, they're not as agile or forward-looking as the fintechs. These are two very different investments, two different risk-rewards. PE and PB both classes have hit the midpoint historically. As interest rates rise it will be positive for business, but negative to the amount of loans issued. Banks remain well-protected and necessary for society. Banks also pay solid dividends and are actively raising them--expect that for the next few quarters.

How do inflation and interest rates effect stock valuations We've had declining interest rates since 1983 which has fuelled stock valuations. Generally: 15 years ago a Canadian 10-year bond yielding 5% equalled a stock with a 5% dividend or a PE of 20x. Today, that Canadian bond yields, say 1%, but at a 100x PE with no chance of appreciation at maturity. Historically, stocks trade at 10-25x PE. When interest rates decline, this makes stocks more attractive. Inflation is rising, but he's waiting and seeing. Inflation was predictable given supply constraints and sudden demand. In time, these two forces will level out. Even a small interest rise will have a big chilling effect on the economy. He's not worried about inflation long term.

WTI price outlook At $80 the oil market was priced for perfection. Demand will decline even if a variant impacts it. Even if we shut down all OECD jet fuel demand, crude oil would only drop 2% in demand. The oil stocks have not come off that much. Until we see more weakness, these stocks are a solid hold. Would buy oil stocks on weakness.

Interest rates and real estate investing. Sentiment continues positive. We're seeing real inflation, translating into rent growth, which is the key part of the valuation equation for real estate. Very high new lease growth in US sunbelt apartments, single family homes, and industrial sector. Those who own properties and have taken the opportunity of low interest rates to get well capitalized are well positioned. They have dry powder to take advantage of an increased rent environment in those sectors that have pricing power.

Typically, real estate outperforms with rising inflation. Absolutely. It's able to keep its value, because as rents go up values go higher. As inflation costs go higher, so do replacement costs.

Value in retail real estate? Yes, on the grocery and anchor shopping side. That's his focus right now, necessity shopping. Pandemic proved the resilience of this asset class. Institutions like Blackstone are getting back into the shopping centre space in the US.

REIT convertible debentures. For any new offering, always read the prospectus, the filings, and understand the fine print. Majority of the issues by Canadian REITs include a clause about "payment in kind". If bankruptcy, you would be paid back in shares, rather than having a seniority position for cash. He wouldn't typically invest in these, unless he's also willing to own the equity. In terms of bonds, there are better yield plays out there.