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

The virus vs. the vaccine, and Biden vs. Trump. These are forces are broiling the market, which sold off today. The rising number of cases will impact markets, despite the V-shaped recovery. Covid is impacting sales. Without stimulus, it'll be a tough winter for some businesses. Also, we need a vaccine plan; so far, there are talks. Ultimately, he feels that the vaccine(s) will win, though. Trump keeps fighting the election results, which creates uncertainty for markets. Also, he suggest buying the market before Thanksgiving on Thursday. After that, seasonality points to a rally.

The last few weeks have been very eventful. There has been a decline in US political uncertainty and promising results from vaccines. There has been targeted lockdowns across the world as well. Looking further out, vaccines are coming and this will help the economy return to something like normal. Logistics will still be a problem short term.

Tech and communication, and consumer stocks remain the heaviest sectors invested. Cyclical stocks have done well too. He is starting to add back to normal stocks into the portfolio. Still overweighting the tech space.

Is there too much euphoria over the potential vaccines? Market was already in a transition away from momentum stocks. Starting to move into value. The Pfizer announcement created a big jump in stocks that were already starting to move. Stocks aren't necessarily too much ahead of themselves, but we're going to have a rough patch or two before it's all done.

Longer term, sobering thoughts on US debt to GDP? The long downtrend of US GDP dropped in 2008 to less than $3 of debt to $1 of GDP for the first time, and we had the worst recession since the Great Depression. It held tight at the 3.5:1 ratio until we got to 2020. Now we're back in the same condition as 2008, and along came Covid. GDP plunged as indebtedness went up. Can't tell if it's a Covid effect or something else. The economy won't bounce back in 2021 the way people are expecting. Covid isn't over yet, despite the vaccines.

Time to take profits from gold and silver? No. Outlook for inflation is perking up. Historically, upwards pressure on interest rates plus upwards pressure on commodity prices. Stay the course in the golds, and add some of the other commodities including copper. Not the time to bail, just because they're in a temporary hiatus.

Canadian banks vs. BAC Prefers the Canadian banks. They over-reserved on Covid losses, so there should be some earnings recovery in 2021-22. This hasn't happened with the US banks. Regulators still hate the US banks because of 2008. Canada is a cleaner environment for banks, and any of them would do.

This two-day pullback is a golden buying opportunity. We finally broke the tyranny of the index funds--ETF buyers. This year, new younger buyers flooded the market; they aren't trading the S&P 500. Rather they invest in individual stocks to make money in commission-free trading. He doesn't like sector ETFs, because you're owning the good with the bad.

The markets are way up, but investors are climbing a wall of worry, scared of many things. He himself is an optimist, because the market has always gone up the last century. It pays to be an optimist. If you're not, don't get into stocks. Long-term, there'll be higher taxes, but short-term people will get into stores and restaurants again. There's a light at the end of the tunnel and we'll see more good vaccine news. People have been locked in their homes for months and will get out. At the same time, governments have thrown a lot of money into the system. The Fed will raise interest rates, but very gradually over time.

The effect of China signing the RECP pact with other Asian nations--will that push Canadian raw materials out of the picture? https://www.japantimes.co.jp/news/2020/11/15/business/asia-pacific-rcep-trade-deal/ It's a big picture question. Oil companies here have been decimated. These companies have to shift to renewables or find other export markets. If not, we'll become a domesticated market which will lead to lower prices, profits, etc. He doesn't see an easy way out of this.

What would happen if Ottawa's Liberals get rid of the capital gains exemption? Wow, you hit a hot spot! Ottawa will be looking for tax revenues down the road (to pay for these Covid supports) and the safest, least political way will be charging people who've already made money. He doesn't expect Ottawa to do this short-term now during a pandemic, because it would trigger a lot of market selling and chaos. Also, this measure wouldn't bring in a lot of revenue, because an investor can just hold their stocks and wait for a new federal government to change the rules. Unfortunately, it's likely on its way.

We have to distinguish news on vaccine efficacy and trying to chase stocks. Moderna has seen more insiders selling than buying. It is unmistakably speculative. The news is great and the efficacy is fantastic. It will take a couple quarters for vaccines to be distributed. We are already at all time highs though. We see a rotation away from stay at home stocks.

There was a lot of talk that the republicans did very well in the house and senate. Therefore, there was talks we would not see tax hikes. However, he is not sure. They will need to push through tax hikes. They want to do massive stimulus. There will be some battling in Congress. We will probably be surprised by the willingness and degree to let tax hikes happen.

Educational Segment. Looking at the different stock types, we can see that outside of the tech area, which is a big weight in the US large cap market, there has not been a lot of growth and earnings growth per share. If we look at US large caps, there has been earnings growth but it has been 50% compared to a decade ago. Where is the growth coming from? Beyond a handful of stocks, there has been little earnings growth globally. The entire decade has been about multiple expansion and not driven by real earnings growth. The factor behind the expansion is the low interest rates. The guaranteed return has never been lower. This makes the market quite risky.