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

Are share buybacks just artificial engineering to prop up the stock price? Whenever a company comes out with a bold change to capital allocation, such as a buyback or dividend increase, his first question is whether it's a red flag. Do they not have any good ideas for what to do with their money? A skeptical view is warranted.

US market hitting records day after day touching unreality? S&P is up over 55% since the low. Economic numbers continue to surprise. Housing numbers, consumers, and dovish monetary policy are helping. Risks remain. Possible resurgence of Covid, escalating US-China tensions. Possibility of disputed US election. In 2000 when this happened, the S&P fell 6.5%. Only 45% of the S&P index consituents are in positive territory YTD. The relative strength index is at overbought levels.

What are you looking for in the markets? Still likes growth over value. In a low interest rate environment, growth is favoured. Healthcare, tech, communications seem to be benefiting from the post-pandemic environment. Themes of work from home, e-commerce, health sciences, retail consolidation. Stocks like Wayfair and Peloton are moving higher, and that's where you want to focus.

Gold sagging the last few days. He owns some bullion through IAU, the iShares ETF. Took half a position off his silver ETF, SIL. Gold and silver have come off a bit, probably correlated with a global downward move in the Covid-19 curve.

Do you look at relative strength index, RSI, of the index before buying a particular stock? Certainly. Most indices are overbought right now. Markets and stocks can remain overbought for some time. So it's a matter of how much capital you want to commit when they're up that high. Now, the S&P has an RSI of 75.5, so it's definitely overbought.

What broader Chinese index ETFs make sense? FXI, the iShares China large cap ETF, is one of the best known. It has Tencent, China Mobile, and Alibaba. Broader would be the AIA, iShares Asia 50 ETF, with 37% in China, plus Taiwan (19%) and Hong Kong (17%). For higher octane, consider KWED, which invests in internet companies in China. You can start to nibble away at these names.

E-gaming stocks and ETFs. Electronic Arts (EA), NTES, Activision Blizzard, or TTWO. He doesn't own any of these. But it's a theme that will excel in the post-pandemic world. Hero (HERO) is an e-sports ETF with a 50 basis point expense ratio. HERO owns the gamers plus some semi-conductors.

Value shares in the TSX 60 have underperformed which points to the future. 32 stocks in the TSX 60 here have dividends higher than 2%, and total returns of these value stocks are -12.8% YTD a while the overall TSX 60 is -0.2%. There's a big division: growth stocks are up 12% while value are down 12%. We saw this in the tech bubble of the late-1990s; after tech collapsed, value names picked up the slack for the rest of 2000s decade. Alert: investing in tech stocks are fine, but remember that the Nasdaq in 2000-3 fell 71%. Even Microsoft fell 75% in 1999 and didn't recover until Feb. 2016--17 years. Watch companies with high PEs and high Betas. Don't just chase tech stocks, but look at healthcare and staples that are performing just as well. Diversify. Gold: He prefers owning inflation-protected bonds than gold which offer similar performance if interest rates continue to fall. Gold has climbed this year because the USD has fallen.

PAST PICK - 22% total return since August 2, 2019 Treasury inflation-protected bonds: if you own bonds, you're exposed to inflation which we haven't seen much of in the past decade, but if it comes, these bonds give you some protection. Example: in the 1970s, inflation peaked at 18%, this bond paid over 2% + the inflation rate (over 20% total return). This bond always puts you ahead of the curve. The only problem with these bonds now is that the real yield is negative. Wait until the real yield turns positive. Because they're long-dated bonds, these have run up so much lately in price.

Are we in a stock market bubble? We're in the verge of a new cycle, creating by the virus starting with a brutal sell-off. We;ll see cyclicals, that have been depressed in recent years to move up substantially. There's still a massive technology shift in working from home. He expects the market to move up, a gently upward trend in the next few years. Older people around the world reduce spending and save money. He doesn't see much inflation and expects interest rates to stay low. This is why stock prices are high.

Does market timing work? Wants to enter tech stocks now. Timing never works in his experience. Downturns happens so quickly that you don't have time to react. You're better to trade through them and benefit during the upside, which always surprises investors. At the bottom, the market looks forward. In sell-offs, discounts are huge. Look at his top picks for ideas. Look at Alphabet for advertising revenues.

There is a disconnect between the equity market and the broader economy that is cause for concern. The big contributing factors for equity market returns are low interest rates and the wave of money supplied by central banks. The stimulus has worked to buoy the market. Financially strong companies have been accessing the capital market through inexpensive debt. It has allowed strategic maneuvers. Don't chase the returns and pick good quality companies.

Banks. He is not worried about a big surprise from banks next week. They have taken a very cautious approach. Whether the loan loss provisions will come back is still to be seen. Canadian banks tend to be very conservative and the provisions shouldn't be a worry as long as the losses don't even the capital. He thinks they will have reasonable return on equity at around 8%.

US Politics. We have started seeing the attention turn to the US elections with the DNC. It will be a referendum on Trump. He still thinks that Biden will win. With mail-in ballots, we may see lawsuits at any of the results that are close.

Next week's speech will be on monetary policy. He is expected to talk about yield curve control. Markets are responding well to what the Feds are doing. It's not a healthy market, especially since Apple accounted for the majority of the lift of the composite.