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

Most of his portfolios are fully invested right now. He has no choice but to follow the firm's rules. So in the seasonal portfolio, it's 30% bonds -- they get in late summer and sell early October, as a routine every year. In the last few days, that bond position has done quite well. 

After 30 years in the business, there are some areas he just avoids because they never seem to make money. Transportation is one, with too many variables that make a positive return challenging. Airlines. Car makers, though modern car makers like TSLA and RIVN are a different kettle of fish, as they're changing the structure of the business.

There is a relationship between the commodity and the producers of commodity. Commodities and producers should go in the same direction. But it's always the producers that lead, because they're the smart people who know what's going on with that commodity, whether gold or oil. 

If producers are high and then start to roll over, but the commodity stays high, then you can bet the commodity will eventually roll over. And vice versa.

Sometimes it's like the advice you get from your mom or your grandma, like put your coat on. Use common sense principles. You've done really well on a stock, so what are you waiting for? If a stock's grown so big in your portfolio, and you're trying to time when to do it, just the fact that you're asking the question means it's probably the moment.

It comes down to portfolio management, rather than a fundamental or technical analysis. 

Generally, a confirming indicator. So when you get a lot of volume but you have bad news, and it holds, that's positive. If you break down on a lot of volume, and there's no place it holds but keeps going down, then that's a negatively confirming indicator. Or if you break out of a congestion area with a lot of volume, it means you have a lot of commitment.

So it's quite imporant.

Very prone to geopolitical stuff. US is pushing hard on India to get them to stop buying Russian oil.

It's been kind of lumpy. So producers don't go out and look for new mines or wells. Any bit of upside out of the lumpiness gives you a positive move. Once the producers (run by in-tune, smart people) start to act a bit better, then you know the commodity will follow.

When Investors Like Dividends: Management Discipline

A company that pays a regular dividend has to have cash flow available for the payout, every single quarter. Knowing that investors are expecting a dividend, executives of the company have to show discipline. They cannot just randomly go on an expansion or acquisition spree without consideration of the cash flow requirements of that dividend, every three months. When an executive team looks at deals, they need to consider the long-term consequences. Any deal needs to be financed properly in order to make sure the current dividend can be paid. Any deal needs to be a good deal so that it does not impair the company’s dividend-paying ability in the future (and, preferably, allows the company to increase its dividend). Sure, non-dividend paying companies may have more capital available for growth, but this doesn’t mean the expected growth is going to pan out. We think this point is particularly valid at economic peaks, when confidence and stock valuations are high. We have seen many executives go on spending sprees at the exact wrong time (in hindsight). Companies paying dividends just seem to have more self control during ebullient times.
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Yes. Over the last 2 quarters, he's been surprised by how much tech capex has driven GDP growth. In the last quarter, it was more important than personal consumption, which is a huge part of the economy. So we have a stock market that depends on tech capex, and an economy with increasing dependence on tech capex. He finds that a bit worrisome.

The one thing that doesn't matter in the short term for markets to go up is valuation. Greenspan talked about "irrational exuberance" in late 1996. Markets continued to go up in 1997, 1998, and 1999, until it all went pear-shaped.

There's been a ton of AI investment. But the poster child for that, OpenAI, makes no money, though there are beneficiaries of that spend. Ultimately there has to be a return on investment. Without that, effectively we're in a bubble. History tells us that roughly 3/4 of innovations over the last 150 years have resulted in some sort of bubble. Why would we expect AI to be any different?

The narrative is still very strong, but we haven't seen a return on investment yet. Companies are throwing money at AI, and that will continue for a time, until it doesn't. At that point it could be quite nasty.

Last he saw, probability of a rate cut was ~80%. Almost a shoo-in for 25 bps cut. Last 3 months have seen a sea change with jobs market very poor and housing market moribund. Inflation seems to be under control.

This would be alongside the Fed Reserve doing the same, or maybe even more.

Banks give $$ away and hope to get it back. Insurance companies take $$ in and try not to give it back.

Bank valuations are right up there on both sides of the border. He likes and owns both. For new money he'd tilt towards insurance companies, but be selective. For banks, you might want to take some money off the table.

Past Top Picks were pre-empted by an announcement on nation-building projects from PM Mark Carney.

AVGO got a boost of 14-15% in one day. GOOG blew it out of the water too. So for the hyperscalers, yes. For the network providers, yes. Software guys, maybe not so much. 

Too early to say. But he's lightened up a lot on the software side, mainly because the market has told him to lighten up. The likes of NOW, CRM, and ADBE -- the kings of the hill in the software sector.

The ones that are doing the best are the ones embracing AI.