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

Canadian and US banks. Had the usual rebound after a crisis. Well ahead of themselves. Higher than before the pandemic, which doesn't make a lot of sense. Growth is extremely limited. Good stocks to hold long-term just to collect the dividend. All the good news is baked in, and they should trend sideways. Better opportunities elsewhere for upside as well as the dividend.

Approach to IPOs. Looks at a lot of them, and occasionally participates. It's the question of valuation that matters most at the end of the day. You can't dance at every party. Most valuations are much too rich, so he shies away from them.

Adage that insiders may sell for a number of reasons, but they only make significant purchases for one, which is that they think shares are undervalued. It's a big indicator for him. Also, when a conversion price on convertible debentures is lowered and a shareholder takes advantage of that, it's as though they acquired those shares. When an insider has a lot of skin in the game, they want it to work.

When not to look at PE. The E stands for earnings after taxes, depreciation, amortization, interest and lease payments, finance costs, etc. So in a capital intensive business, such as CJT, these items are significant and will depress the E. More appropriate would probably be to look at enterprise value to EBITDA.

Each day we get extraordinary news, and yet it's greeted as bad news--fear. Why? We've forgotten what a rapidly expanding economy is like. Today, it was the Wall St. Journal touting home prices hitting a record high in May, which reads like a criticism of Jay Powell's stand on keeping interest rates low, like a harbinger of bad times. This housing news is actually positive and healthy. Toll Brothers CEO feels this housing boom has legs and is actually starting to recover to satiate pent-up demand. Lennar's CEO is also bullish on housing. 2021 is not 2006, the eve of the Recession, caused by the housing meltdown.

Will the run-up in commodity prices continue this year? They've been weaker recently as the US Fed hints at raising interest rates to end of 2022/2023 and as China sells some strategic reserves. Oil prices are expected to stay high as world demand outpaces supply as we recover. In the U.S., inventories for products remain low, caused by supply chain bottlenecks and will continue this year. Inflation will be transitory, he feels. The pandemic has accelerated the digitization of the economy, which will keep wage inflation in check temporarily. Employers are competing with generous unemployment benefits in the U.S. Europe paid less, so people there want to get back to work. Also, the pandemic has encouraged people to work from home, which has enlarged the labour pool. Strong EPS revisions will continue for this (17% on S&P) and next year (14%) while the S&P is up only 6%. Markets will remain volatile for the next quarter or so as the supply chain sorts out. Consumer spending will be strong. Question about work is how much of a home/office mix it will be.

Outlook on the U.S. banks The US banks are outperforming the S&P this year. For instance, BAC is up 36% YTD and Wells Fargo 51%. We're in the late innings for the US banks recovering. These banks will likely be able to buyback shares and raise dividends again. Also, interest rates are expected to rise sometime in the future and therefore benefit the banks. He feels inflation is temporary.

Commodities volatility. Copper and lumber has seen some volatility in the past few weeks. Feds walked back on comments made last week that may not have been interpreted correctly by investors. The focus on Fed and reducing accommodation will be there for the next 6-12 months. The markets are trying to correct.

Iranian oil. There is a new leader coming into power in 6 weeks. Israel also has a new leader. This will make the deal with Iran a lot harder to execute. If the deal does not go through, oil prices could rise.

Feds. The whole idea of QE and support against the deficits we will see will be meaningful. A weaker USD to global currencies will need to be on the front burner.

Copper. We have not seen a fundamental rise in the demand for copper yet. A lot of the move up in copper is speculative activity. The long term trend is to a higher plateau for copper. The next year will be to establish a new range.

Canadian banks. A big factor is the steepening yield curve. If Feds start unwinding QE and raises rates, they will not go very high. The yield curve has probably gotten as steep as it will get. There could be some more upside, but best move may have already been seen. There may be a risk off event in the fourth quarter.

Gold. Has been a big head scratcher. Gold should be significantly higher than it is. Why with negative real rates, gold is not doing better. Should be higher but it does not seem to budge higher. Has trimmed some exposure into the strength.

Silver. A leverage to gold. If you are bullish on gold, should have some silver exposure. Silver will have an industrial demand as we electrify the world in the decades to come. Supply-demand longer term favours silver. Buy dips. Inflation issue will be with us for years.