A Comment -- General Comments From an Expert (A Commentary)
COMMENT
US tech giants. Selloff, as in Feb/Mar when inflation was becoming a bigger worry. Tech companies are long-duration assets with lots of free cashflow in the future, such as MSFT and AMZN. When interest rates are so low, small moves in either direction can have a big impact. Also have had a big run up. This selloff is temporary.
COMMENT
Investment parameters. He owns companies in a very specific niche. Low debt, high ROIC, and have generated predictably high ROIC. Doesn't distinguish between value and growth stocks. Looks for growing free cashflow, but trading at a reasonable valuation. Finding companies all over the world. Valuations are better outside NA borders. High quality, predictable companies that are border agnostic. He owns 20-30 securities at any one time.
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. The rate rise is the same thing that occurred in February. Rates rise in a stronger economy. Markets will adjust to the new reality. Earnings are strong and the stimulus from the pandemic is mostly over. The recession is over according to 5i. Unlock Premium - Try 5i Free
Stockchase InsightsUnknown
COMMENT
Natural gas in this market If the price of natural gas stabilizes or decreases, then FAANG stocks will stop falling and maybe bond yields will come down. This happened 4:30-10:30 am EST today. Nat gas has been rallying in the US for no reason--the US has so much of it. So how and why did it fall yesterday? One reason is that there aren't enough pipelines to move it, so some of it is left in the ground. Some even burn excess supply instead of find storage space.
COMMENT
Educational Segment. Inflation on the shorter term horizon is going up but the longer term number is relatively low. However, longer term expectations are now rising. If prices become unanchored, people will go buy today instead of in the future. There has been no meaningful change in terms of inflation in 5 years. This is why the Feds think it is transitory. If inflation goes up, PFIX could offer a hedge to inflation, as well as IVOL.
Larry Berman CFA, CMT, CTAUnknown
COMMENT
Energy prices. The energy price melt up is probably transitory. There has been underinvestment in replenishing due to the greening of the world. The demand side is not curtailed as fast as the green side wants to see. The demand for energy is still relatively high. Depletion will come into play. Since we have not reinvested in the past, there could be meaningful upside pressure on prices.
Larry Berman CFA, CMT, CTAUnknown
COMMENT
Stagflation. There are many trends are pointing to stagflation. Productivity and population are the two key factors. Productivity may go up thanks to technology even though the work force may shrink slightly. There are many signs of stagflation coming. Bond yields are breaking out, and with the yield curve's behaviour, we are seeing that the bond market will push back. Equity risk premium will rise and we will get some compression in PE.
Larry Berman CFA, CMT, CTAUnknown
N/A
Market. There are sector dynamics going into office space. Post-pandemic you would expect numbers to increase but he is trying to estimate what percentage of workers will stay working from home. The office sector is one to continue to avoid as we are too far from the bottom. Office vacancies are the highest since the '90s. XRE-T collapsed at the start of COVID but has not got back to where it was pre-pandemic. It has a mix of winners, post-pandemic, retail, and office. These later sectors SHOULD suffer post-pandemic. You should not look at one ETF overall.
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. The 10-year US treasury rate did rise. Rates are moving up as the economy gets stronger. The concern is the speed and expectation rather than the fact of rising rates. Companies can continue to do well, even with higher rates. Higher risk, expensive stocks may be affected. Unlock Premium - Try 5i Free
Stockchase InsightsUnknown
COMMENT
Nothing is on sale in this market since last November when stocks jumped sharply. Good value is hard to find. Stocks will go higher, a far cry from March 2020. Today, we're seeing a 2% dip--a retail investor shouldn't chase it. A 10% dip gets his attention, but at 15% he starts buying. He likes Canadian and American banks, because interest rates will slowly increase and raise the net interest margins for the banks. Also, the banks have a lot of capital held over from the pandemic. Third, the economic recovery is a tailwind. His covered calls in US banks is up 50%, surprising even him. The job outlook looks positive, because the end of government supports will force those to find work.
COMMENT
Pretty gratifying to see the calls coming into fruition about limited oil supply globally. There is still some bearish overtone. People do not want to believe due to the severity of the downturn. They are just getting over this trauma. All the gains are from specialist and retail. Generalist and institutions have been missing. Now seeing a surge in interest from Europeans even. Cannot resist the performance for much longer. Year end performance will be strong. The backdrop is very bullish for oil. Energy stocks today are cheaper today than January of this year. The party has just started.
Eric NuttallUnknown
COMMENT
Have been waging conversations about reintroduction of meaningful bold action for generalist investors to come back to energy stocks. Companies should maximize free cashflow and introduce dividends with meaningful share buybacks. Average company is trading at 2.7x cashflow right now.
Eric NuttallUnknown
COMMENT
Natural gas versus oil. There has been consolidation of the natural gas producers so there is supply discipline. Demand, the summer has been hot. In Europe, there are energy shortages. Outlook in LNG is good. We may see some seasonal sell off. The winter, if cold, will push natural gas higher. How long will current prices last and when will the supply response come? Gas to oil switch in the UK is coming.
Eric NuttallUnknown
COMMENT
The market this week Flat is the new down. There isn't negative news, and Evergrande on Monday was merely an excuse to sell. The market won't pull back dramatically. She expects to buy stocks she missed earlier at a cheaper price soon. The market will be flat for a while. Remember that markets are up nearly 20% YTD and 30% in 2019 and 18% in 2020. All these gains are making investors a little nervous. So, they are stepping out and moving a little more money into cash, not not bonds (no income). The market is bifurcated between stocks trading around 30x and other around 13x.
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