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

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.

Educational Segment. Powell stated on Friday that it was the start of discussing tapering accommodations. Looking at 2013, which was the last taper tantrum, Feds started only raising rates in 2016. Equity markets started to have problems in 2014 when Feds started to shrink the balance sheet. We are probably okay and corrections will be relatively modest right now. In 2022, 16.5x multiple is expected. Low end of a pull back would be 3,500 on the S&P500. This would be a 15% correction, maximum. Any big correction will happen when the Feds balance sheet starts to shrink, which would be around 2023-2024.

Market. The striking rally in the Canadian dollar is caused by the increase in commodity prices. The US dollar has fallen against the world's major oil currencies because of large money printing, massive deficits, and an unwinding of the safe haven trade. Investors experience the Canadian Market outperforming the US as well as the Canadian currency outperforming the US. If you are on the wrong side you are under-performing on both. The Canadian market under-performed the US market for 9 of the last 10 years. These periods tend to last 10 to 12 years during the last 35 years. If you believe the pattern is going to continue then this is going to be the decade where the Canadian market outperforms.

Canadian Banks. Generally are great long term holds. RY-T and TD-T are two he owns. BNS-T is also very attractive right now. For all of them, their loan growth is expected to increase as well as net interest margins increasing, they will benefit from releasing of credit reserves, and they have all this excess capital which they can deploy. They are the one sector you can hang onto indefinitely.

Monday's rally erased Friday's gains. There could be further dips to buy, and an investor should look at oil, travel and leisure, The Gap, Adobe, Home Depot on weakness (down 40 points from its high) and American Express. Tomorrow, traders will go for winners like these. The artificial forces that drove down markets recently have vanished.

Feds comments. There was a change in tone from the feds regarding interest rates at the latest meeting. People were waiting for Feds to lay the ground work more, but it has leaned against higher inflation ratings. There is continued excessive easing from the Feds. They say inflation is transitory. The market is buying into what the Feds are selling. Markets are moving out of cyclical stocks into growth areas such as tech and defence. A tough spot in the market since you have to play one side or another.

Longer term the impact of technology and globalization will put downward pressure on prices. At the same time, there is cyclical pressures that have been exacerbated by the supply issues from the pandemic. We have had an entire decade of underinvestment in commodities and infrastructure. There is tightness across the board giving rise to inflationary pressures. Short term strong upward impacts of the inflationary pressures could be under-estimated. The movement we have seen will continue, but there may be a break soon.