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

For the HISA ETFs that came out, the regulations were changed. So there's no real benefit in the public versions of these. There are, however, still some benefits with the private ones. So you have to look at what the additional yield is.

He loves ZST.

Inflation

White House is pretty adamant that their tariff policies aren't inflationary. Last week, we saw President Trump nominate Stephen Miren for the Fed Reserve Board. If you go to Larry's post from today on BNN, there's a link to a paper by Miren. Go read it. It gives you the vision of why they're doing what they're doing. One of the reasons is the hollowing out of the US middle class in terms of jobs.

Larry brought a chart titled "Inflation pressures intensifying". Looking at the ISM prices paid survey, the prices paid component has a direct correlation to CPI. Prices are going up. Questions are:  by how much and when will it start? You may see it start this week, but prices are going up over the next couple of quarters.

The Fed will want to know if this is transitory. Last time prices went up, the Fed was late. Now they're on pause. Maybe they're making a similar mistake in the other direction. 

Miren believes that the way Trump is doing this is not going to be inflationary, based on how currencies adjust around the world. Lots of debate here. 

Why are they doing all these things? They're trying to improve growth, trying to make jobs better in the US. The chart titled "Manufacturing employment" is part of Miren's paper. Looks at the total number of manufacturing jobs in the US post-WW2, and as a percentage of employment overall. Globalization has led to the gutting of the US manufacturing sector, and this is nothing new. Trump's policies using tariffs is to change that whole picture.

Wall Street appears to believe the proposed outcome depicted in the chart, and that inflation will either not come to pass or will be transitory. We'll see. For the next few quarters prices are going up, and we'll see what the policy response is from the Fed. Suspects they'll be on hold unless the US employment picture continues to weaken, and that's the right move.

The TSX and U.S. markets are somewhat linked and there are several headwinds such as high valuations. In Canada we're more resource focused and energy is in the de-valued category. We're poised for continued strength because our valuations are at a relative discount to the U.S. This gap will close as earnings from TSX companies are likely to increase and there is increasing confidence in the market. With no trade deals being made this will likely add to the volatility but he sees the market higher in six months in spite of the overhang keeping it somewhat weak. He's not even sure if a trade deal adds much value. He doesn't think we are headed for an all-out recession in Canada. Stick with diversification and value deals.

The question was on his outlook for oil and gas. He feels that gas is likely to stay flat for a while. The full production of LNG is not ramping up for 8 to 9 months. Oil as a global fuel has a low growth forecast of around 2.5%. There is an appetite in international markets for natural gas. In Canada it trades at a premium to Europe. Coal production in the U.S. is in decline and being replaced by natural gas. Natural gas is a transition fuel to the full use of clean energy and will be around for quite some time.

The question was on crude oil. OPEC has brought on some production but the worry is that the discipline with restraint hasn't been there. Globally the traditional bases are rolling over and he is bullish on Canadian energy. Oil is not renewable and he sees a slight decline in the U.S., Russia, and Mexico too. The western basins are not in the same struggle as others and we are sitting in the crown seat. Getting it out of the ground is what hampers us and that needs to improve. Trump's tariffs on Russia and India help.

Investing 101: Excessive Trading

Excessive trading creates transaction and taxation costs that are hard to overcome.

Tax drag can be significant. Trading in a portfolio means an investor not only needs to be right by calling 'the top' on the stock they are selling but also be correct on the next investment they purchase and finally have that investment be so good that it overcomes the potential taxable gain created when the initial investment was sold.

This sets up a high bar for investors that trade a lot in their portfolio. We talk a bit more about when to sell here.

Think in terms of years, not months or quarters.

This one is so important and probably the one that gets ignored most often by investors. No one wants to wait 5 or 10 years to see their portfolio provide gains. We want it all now. Unfortunately, patience is key in a portfolio. Set up a structure that makes sense for the long-term and don't change it unless your situation sees a material change (or if it was inappropriate to begin with). 

Markets take time to generate returns and compounding takes decades to have the true power of compounding returns felt. It will be worth it though. 

Similarly, companies do not execute a strategy in three month periods. It takes years to change a large company and for its strategy to be fully rolled-out, so an investment in a company should in-turn be viewed in a matter of years and not quarters.
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The unemployment rate remains the same. But the job-loss number isn't too surprising given that we are expecting a bit of softness in the Canadian economy in the middle 2 quarters of the year. Jobs market will continue to be a bit choppy, especially with the push and pull between part-time and full-time.

That Canadian manufacturing posted gains is surprising, but is probably just a result of the ebbs and flows of the economy. And there's the tariff issue affecting everything. 

In the US, technology makes sense. Financials also make a lot of sense in this environment. Likes industrials, they've been right at the top of the 11 sectors so far this year in terms of performance. Among the very diverse healthcare industries, you have to be selective; some names have been beaten up, others have held up quite well. 

He's being very selective in the Canadian market and somewhat cautious.

When you look at the US market, we're seeing about 8.5-9% YOY Q2 growth. That's more than expected. Good news. Technology continues to lead -- great reports from MSFT, NVDA, GOOG over the last month or so. About 81-82% of US companies so far this quarter have beaten earnings expectations. 

The word he'd use right now would be "resilient". 

It's all very challenging. News that comes out one day on tariffs can change the next. His team goes back to their quantitative methods, using the formulas they have to forecast expected earnings based on the numbers they have.

In his portfolio he has AMZN, AAPL, GOOG, and NVDA. Those are the names he favours. META screens well, but he doesn't own it because you can't have 90% of a portfolio in tech/Mag 7 names. MSFT always seems expensive.

TSLA is a different animal entirely, based on expensive valuation. Concerned about management and where management attention is at any given moment.

Right now WTI is $64 and 200-day MA is slowly moving down. Hard to predict. So much depends on OPEC+. Sentiment around economy still a bit uncertain, and that explains why oil prices have not really pushed higher.

Investing 101: Don't Buy Fads

Nearly every investor has been caught buying a fad that didn’t work out. Cannabis? Check. Electric vehicles? Check. Dot-com companies (for the older folks)? Check. When there is a fad that is attracting investor attention and money it is important not to get caught up. Yes, there are often good companies doing well, and that’s how the fad or bubble is created in the first place. But investors can focus on smaller companies and there are always promoters and brokers willing to extol the virtues of a sector or specific businesses. Stick to the fundamentals. Don’t pay 100 times sales for a tiny company just because it is in a ‘hot’ sector.
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Believes momentum will continue. What's holding us back are Donald Trump's tariffs, which are very specific. About 90% of goods are moving across the border tariff-free under USMCA. It's a very complicated setup. 

On the other hand, our economy's been "liberated" by turning on a big gas and a big oil export facility on the West Coast. These have pumped a lot of $$ into the Canadian economy. Gold production with the price rising has also added a lot.

The pessimism around Trump's noise has flattened the housing market. But we are going to get rate cuts, which should hopefully rekindle that market. Bruce's wife is in real estate, and so he's had feedback that housing is starting to pick up a bit.

The TACO part of Trump is coming through, and people are starting to ignore Trump and just get on with their lives. The outlook looks very good.

Canada has lots of technology expertise, so we're well-equipped for the AI revolution and will benefit from that.

Steel's been hurt badly because we're not a global leader. But for aluminum, we're a low-cost producer providing a large share of the world's supply. So for that we can export to other markets, though not make as much $$ as we do when products criss-cross the US border.