A Comment -- General Comments From an Expert (A Commentary)
COMMENT
Billy Kawasaki’s Insights - Picks from 5i Research. The announcement from the Federal Reserve stating that interest rates are to stay low for a while will likely be positive for gold and stocks. Q2 results were pretty good and it should remain strong when the world reopens. The "anything is better than cash" mentality from low interest rates is likely to stay for a while. Unlock Premium - Try 5i Free
Stockchase InsightsUnknown
COMMENT
Strategy on oil. Two dynamics at work, inflation and growth, and those dynamics cross and you get 4 regimes. Different asset classes respond differently to the different regimes. Oil does well in rising inflation or accelerating growth. We've had a significant increase in liquidity to fight the pandemic. If suddenly there's a vaccine, commodity prices could take off and overwhelm the opportunity for the economy to grow. So, have a balanced portfolio across the 4 regimes. Make sure it hasn't been thrown out of whack by the disinflationary boom where large tech stocks have come to dominate the market indices.
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Fixed income ETFs. Potential for inflation. Investors should have a solid holding in sovereign bonds. You can add some US bonds like HTD or TLT. If rates fall, something in your portfolio will go up. TIPS in the US are inflation-protected bonds and a nice addition, as they'll respond positively when inflation goes up. XRB, ZRR and XBB in Canada. He'd skew more to the sovereign bonds.
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A Canadian silver ETF? HUZ is the Horizons ETF and which tracks the commodity, not silver stocks. HZU is the betapro 2x exposure to silver. These ETFs are very dangerous. They're for trading, not for buy and hold. He's not aware of a silver miner-based ETF in Canada. You could take a look at Sprott's suite of products including PSLV.
COMMENT
Artificially inflated market? January started quite strong. Then Covid was just in China, but it spread and brought the market down by about 35%. Governments stepped up and moved a ton of stimulus into the market. So now we're up 61% from the March lows. A bit of wind has come out of our sails, but we're up from where we started at the beginning of the year. Not out of the woods. No vaccine, no clear communication on long-term stimulus, threat of a Canadian election, and the US election. Valuations are quite high. Plus, certain pockets have rampant speculation. Next 6-18 months are going to be critical for preserving capital. You should be happy if you're even or a little bit up on the year.
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COMMENT
What happens to my stocks when the company is bought out? There are two scenarios. One is that you get shares of the acquiring company instead. This way is often used if the purchasing company's stock is overvalued. The second way is that you get straight cash, the method used often when the purchasing company's stock is undervalued.
COMMENT
Billy Kawasaki’s Insights - Picks from 5i Research. The upcoming throne speech should not affect how people manage their portfolio since it would just be a guess on what might happen. Infrastructure companies should benefit from increased spending on large scale projects. Tax rates and rules are not expected to change. Unlock Premium - Try 5i Free
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COMMENT
Big financial research institutions drive markets; the Fed doesn't as it appeared today after Powell's comments. These big companies hold morning meetings to pitch certain stocks as buys and hold and occasionally sells. Covid changed the way the US does business. E-commerce has soared. FedEx, for example, has soared on delivery packages because of e-commerce spikes. But this is a zero-sum gain for those thriving sectors. A FedEx exec said in an investors' call because spending has shifted from the service industry into other sectors like goods. Is the US turning into a manufacturing economy or the service industry is in a downturn (temporarily)?
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Why did the Nasdaq sell off today? It sold because investors sold their FANG stocks and bought the IPO, Snowflake, which turned out to be the most successful software IPO in Wall Street history. Problem is, we're facing a flurry of tech IPOs this fall and we will see more of this sudden tech selling. (The only big tech name that didn't get hit today was Salesforce.) The buying is healthy for these tech IPOs, but unhealthy for tech stocks as a whole. Beware.
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While most stocks are flat or down, big tech has gotten ahead of themselves, so the recent sell-off was needed. Her picks today will be defensive. Ahead, there is Covid uncertainty with lockdowns possible and the looming U.S. election. Defensives include income stocks and consumer staples whose valuations are far more reasonable than the momentum stocks. We saw a very fast recovery this year. It's difficult to time the market. if you had sold at the (March) bottom, it's hard to chase and get back in. Six months after March, some highs have surpassed those March highs. She owns financially sound companies, even though their share prices may drop in the near term, but will ride out this storm and come out well in the end.
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Federal Reserve. He doesn't think the Feds will do much at their meeting this week. However, there is talk about the huge liquidity that they have put into the economy. Yield curve control and long term low interest rates will be a focus. Europe and Japan have been doing similar quantitative easing and yet they do not have markets at all time highs. If we look closer, we see that the rise is mainly due to FANG stocks and not the general market.
Larry Berman CFA, CMT, CTAUnknown
COMMENT
Educational Segment. There has been a massive amount of small investors playing the option markets. There has been hedge buying that has propelled stocks up. Although there is a lot of exciting developments in tech, earnings growth has not kept up with stock price. There is rampant speculation from non-institutional investors on companies like Apple. We must wait for pullbacks. He would write a put for $80 a year from now for Apple to be paid while you wait.
Larry Berman CFA, CMT, CTAUnknown
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