A Comment -- General Comments From an Expert (A Commentary)
COMMENT
The S&P's intrinsic value is 3,150. No surprise that the index has pulled back a little since recently reaching that last Wednesday--in the past 25 years, the S&P has rarely exceeded this level. Blind optimism and low interest rates have overridden this math. Barron's recently wrote that the failure of the market to decline has caused investors to believe that we're in a new investing era where market risk is no longer a realistic consideration, and where FOMO exceeds all other actions. In February 1969, the market peaked, then took another 15 years to reach that height again. In that period, there were buying opportunities. He suspects we're at this stage in 1969. We'll find out....
COMMENT
The market was overbought coming into December, so it's natural to give some back this week so far. We're still in a consolidation phase, which is normal in early December during tax-loss selling. Technology and financials' gains will offset losses in, says, energy. This selling continues until the Santa Claus rally in mid-December. This year we have a strong consumer, unlike last December which was dismal, the opposite. Be ready after Dec. 15 to buy. Gains are rare in early December. Investors take on risk at the end of the month.
COMMENT
Stop loss strategy and indicators to use? He has a three-pronged approach to keep a stock: 1) stock is in seasonality; 2) technicals are good; and 3) fundamentals act as a tailwind. If even one prong fails, he will reduce or sell the position. He doesn't use anything strict for a stop loss, but will use breakdowns of moving averages; he'll sell a stock when it returns to its previous level of resistance/support. He won't sell on a break, because the stock could break down a point points further--don't sell into the panic. But take advantage of the rebound.
COMMENT
Tax-loss selling is happening for his clients, but he's holding onto candidates like Arc Resources and Manulilfe. The lifecos have done well this year, especially Sun-Life. Both offer relative safety and growth in Asia. In fact, Manulife isn't a tax-loss candidate. But NFI-T is; New Flyer's deliveries are below expectations and their UK acquisition needs time. The stock is overly punished, though, and will stay in this range for a while. There are signs of growth slowing worldwide with manufacturing data declining. Yet, markets are hitting new highs; markets are ignoring these signals. A narrow band of stocks, including tech, are driving these highs. He expects a rollover to come with investors looking for value. Building cash and fixed income isn't a bad idea now.
COMMENT
We've had three down days in a row. Trump can't have a day without getting into the headlines. Today, he's screwing up world markets by slapping tariffs on Brazil, Argentina and France, on top of the US-China trade deal in progress. Google is up after changing leadership today with the two founders staying on the board. Not a surprise and won't change Alphabet much. BMO just announced deep job cuts of 4% of the workforce; he doesn't know the details yet and it's his least-favourite bank (doesn't own it). He suspects the layoffs presage bad earnings.
COMMENT
What stocks to include in legacy investing long-term for a child? Insurance companies which take a very long view, like life insurance policies. Those companies have to invest their premiums for 50-60 years. Brookfield and Berkshire invest in infrastructure, proprty and renewable utilities, which have very long lives; this isn't quick-hit investing. Think like those companies.
COMMENT
Do you use stop losses and when do you use them? Not at all. The reason is the last two days. For example, if you own a high-quality stock like Apple, you could get sold out of it when you don't want to, like Trump says something stupid and the stock drops, but rises again. He is an investor, not a speculator. Sure, some traders use stop losses for their benefit. But for a long-term investor, the risk of using a stop loss is too risky. Also, you'll have to pay capital gains on any stop loss sale.
N/A
Market. Trump had exempted Brazil last time when he went after steel tariffs. Now they are on. Energy is a big part of what moves the Brazilian currency around. Trump's use of tariffs is not going away. The markets are rationally exuberant about trade. Globally the Purchasing Managers Index has ticked up, except for the US, which is part of the market weakness today.
Larry Berman CFA, CMT, CTAUnknown
N/A
How do you play the negative side? He does not just make one bet. Gold equities and silver will likely go up and stocks in Canada while other equities will probably go down. It is all about diversification.
Larry Berman CFA, CMT, CTAUnknown
N/A
Being Green. How do I invest in Biodegradable cutlery? SHE-T is the best ETF of the year last year. It is a gender diversity ETF. It has done better than the broad world index but only by a tiny amount.
Larry Berman CFA, CMT, CTAUnknown
N/A
Market. Do not take on risks that you do not understand. Index funds get into industries and markets that may be winning or losing. There is nothing safe about being in something you don’t like. Cannabis has no barriers to entry because anyone can growth some of it. If there is a material adverse change or management lies to him, he sells. Cyclicals can be bought when out of favour but when they are in favour, he reminds himself that it is cyclical and prepares to sell.
David FingoldUnknown
DON'T BUY
Gold. He is not bullish on gold right now. For it to do well, the US dollar has to go down, and then global central balance sheets need to grow more than they are now, and there have to be negative real interest rates. Gold has not been a hedge since 2012. It is not timely right now.
David FingoldUnknown
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