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

She doesn't find the numbers as strong as posted once you start reading through them. There are conflicting job reports. Yesterday's ADP number showed job losses. Today's report beat expectations, but expectations have come down. Looking on a YTD basis, the number of new jobs created is about half what it was for the same time period in 2023. 

Details of today's report are not very optimistic. Outside of healthcare, not many industries are hiring. A lot of the jobs are government, whether municipal or state. Government jobs are the least productive in terms of economic productivity.

Her firm is being a bit more careful, positioning conservatively. This past quarter has seen exceptional market growth. But when it comes to the underlying economic data, that's been mixed or weak. When it comes to the disconnect between the market and the economy, it seems to have widened. Then you add in more uncertainty with geopolitical tensions and tariffs. 

There are a lot of things to look out for, yet the market keeps making record highs. They see that, and they're a little bit concerned.

There are a lot of reasons why, and she doesn't have the one answer. Perhaps bad economic news makes investors think there's going to be a rate cut. After today's US job numbers, a rate cut likely won't happen this summer. We haven't really had a real recession since 2008-2009. Investors have gotten used to the idea that whenever there's any economic weakness, either central banks or governments will swoop in to save the day. 

But with debt levels continuing to rise, there's a limit to how much governments can spend to support the economy. There are signs that the economy is slowing, so it's better to be cautious. Given risks in the market and current valuations, unlikely that markets will continue to post record highs in the second half of this year.

What she does for clients is to take the dividend in cash. The DRIP is not a bad thing for accumulating stocks, but her firm likes to have a bit more control. Dividends come in, and they get to choose where to deploy them. This way gives you more flexibility.

For example, she owns AEM which has done very, very well. Instead of "dripping" in more shares at the elevated level, she'd rather put the dividends to work in something that's underperformed, is at a lower valuation, or has a higher yield.

Since she's a little nervous about the markets, she's taking dividends and putting them into money market funds as she waits for a market pullback.

Has to do, probably accurately, with a perceived weakness in the global economy. In addition, we're seeing weakness in the energy complex despite continuing fears about conflict in the Middle East. So people are afraid of an economic slowdown sometime in the future.

Here, you're seeing a real-time slowdown. Weak prices for oil and gas, despite conflict in the Middle East, says an awful lot about the state of demand.

Yes, could compress prices even more. Tariffs are taxes. In the US and Canada, we are overtaxed. Tariffs also make trade more difficult, but trade makes us richer. Doesn't think Trump actually knows what he's going to do, which makes it difficult to forecast. 

His hope is that this is mostly posturing. Trump makes outrageous demands so that he has a very strong position to retreat from. That's the best we can hope for.

He's watching the "big, beautiful bill", which is big, but it's certainly not beautiful. The arithmetic around the USD is very bad for the US, and very good for gold. On-balance sheet liabilities of the US are about $36T, which is dwarfed by the off-balance sheet ones exceeding $100T. And those numbers are growing. The only way to honour these debts is to reduce the purchasing power of the US dollar, much like in the decade of the 1970s.

Note that he thinks the USD will do OK relative to other currencies. But in absolute terms, the spending power of the USD falls. This budget bill is a classic example of Republican and Democratic log-rolling (there isn't a constituency in Washington for reducing spending; there's only a constituency for advancing the interests of one's own district). Things are going to get worse. This is bad for the economy and its citizens, but good for gold.

Tax cuts without any reduction in spending basically amounts to fraud.

In his experience, silver is a late mover in a precious metals bull market. Happens when the generalist investor is attracted by the momentum in gold and comes into the precious metals market, and leadership generally changes from gold to silver. He'd expect that to occur because we're in a very endurable precious metals bull market.

It might not happen for a year or two, but you won't need him to tell you when it's occurred. Silver is extremely volatile to the upside when its time comes.

Two Types of Behavioral Biases: Cognitive and Emotional

To simplify the classifications, a cognitive error can be defined as an information processing error (statistical and/or memory). It is often the result of faulty reasoning. Many times an investor will "think" they are using a rational process in their decision making but fail due to these errors. Conversely, emotional biases are much harder to correct because they stem from impulse and/or intuition. Often an investor needs to first recognize these issues, then find a way to minimize the effects. 
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The U.S. banks just passed the annual stress tests with strong results. All the 6 big banks raised dividends and some have announced share buybacks which will support the stocks. He owns many banks and expects the good times to continue. Bank valuations are favourable compared to the overall market.

The US employment numbers at the end of the week are far more important than the digital services tax, which was nevertheless a big issue for many Canadians. It was also important for Trump, as he cancelled all negotiations on Friday, but today it's all good again. 

We're going to see a lot of volatility around trade discussions in the coming weeks. Companies still don't have a better handle on the uncertainty ahead. We just heard that the EU is going to accept the tariff rates. We'll have to see how it all plays out. Those tariff policies are still inflationary.

We are seeing a decay in the employment situation for both economies. Demand for labour is softening, as well as the supply of labour. Starting to see an increase in how long it takes Americans to find jobs. That will matter far more to the Fed cutting rates than what President Trump says.

The Fed has a dual mandate -- inflation and full employment. It's balanced 50/50, though at times it skews. If we were already starting to see job losses, it would be far more weighted to the employment situation than to the inflation fight. If job losses are here and now, then inflation's going to come down because demand will fall dramatically.

Right now we're around 50/50, but there's concern that the inflationary policies of tariffs are going to be a factor. Things change by the hour these days, and we have no visibility. President Trump's policies put the Fed on the sidelines, it's just that simple.

Over the last couple months of uncertainty, we saw forward expectations on earnings flatten out for the US. They didn't come down in a big way, but they became flattened to slightly down. Recently, now that markets are at all-time highs, we're starting to see an uptick again.

He doesn't follow the Canadian marketplace for earnings as much. Canada is 3% of the world economy, whereas the US is 65%. We have a structurally weaker economy, and so our earnings will be structurally weaker in general. But our market multiple isn't expensive to the same degree that the US market is. There's still better value in Canada.

RY has been the Cadillac of the Canadian banks for years. But it trades at a premium. TD recently has had some idiosyncratic issues. BNS has perennial issues with Latin American exposure. National Bank has more of a growth story. BMO and CM are just average, doesn't see a lot of growth.

He doesn't like any of them right now for new money. They're all pretty expensive. Loves them long term, measured in years and years. If we are going into a harder economic landing (which is still his base case), these banks aren't going to maintain current levels. Need to buy them when they're cheap and there's blood in the streets.