Brian Madden

Impact of rising rates can take 1.5 years to take effect. Not to downplay the impact of inflation on people's lives, but it's just getting started. Economy is just starting to feel the impact of the first rate hikes enacted about a year ago. There's a 12-18 month lag for monetary policy. Rate hikes hit the rate sensitive parts of the economy first, and then propagate elsewhere. Haven't started to see the real economic impact of the last round of hikes. The rate-hiking campaign is alive and ongoing in Canada, the US, and globally in developed areas of the world. All this will play out in 2023.

Impact of rate hikes on the stock market. The silver lining is that markets are hair-triggered to react early, swiftly, and decisively to changing forces in the economy. A lot of the pain in 2023 may manifest in job losses, lower corporate profits, bigger bank credit provisions. The market sniffed that out starting in the tech sector in November last year, and in January for most of the market, and then in March/April in Canada. Market's already discounted what's going to happen in 2023, but we're not out of the woods just yet.

55K barrels of oil a day in Colombia. Political risk, but tax changes would have to be cataclysmic to affect PXT. One of the lowest-cost producers on the TSX. Profitable at sub-$30 oil. Growing production. ROE 36%. Cheap at 2.5x next year's earnings, 3.5x this year's. No debt, lots of cash on balance sheet, buying back stock.

Unfocused, a cleanup operation. Trades cheaply, but deservedly, as it's half as profitable as other big money-centre banks. Chart's not good, tracking the market down. Better ideas elsewhere.

Canadian and US banks. Not exposed to US bank sector. Does have some core holdings in Canadian banks. Not timely to be overweighting banks when we're going into a declining phase in the economy. Capital markets have been busy since Covid, households and businesses have been flush with cash, excess savings high. Recessions are when they wear the consequences of bad lending decisions. US banks are 2-3x more credit sensitive than Canadian banks.

If economic slowdown, why not reflected in stock price? Slowdown is being reflected, but not in the Canadian rails. CNR and CP are up YTD, whereas US rails are down mid-teens or worse. Canadian industrial sandbox doesn't have the breadth and diversity of the US. US investors are finding better ideas elsewhere in their own sandbox. CNR under new management, optimizing prices. Booking record profits, will probably slow in 2023. Typically performs better than market averages in bear markets.

If economic slowdown, why not reflected in stock price? Slowdown is being reflected, but not in the Canadian rails. CNR and CP are up YTD, whereas US rails are down mid-teens or worse. Canadian industrial sandbox doesn't have the breadth and diversity of the US. US investors are finding better ideas elsewhere in their own sandbox. CP is digesting its acquisition. Booking record profits, will probably slow in 2023. Typically performs better than market averages in bear markets.

Successful serial acquirer. Tarred with same brush as non-investment grade, growth-by-acquisition stories. When refinancing, bonds cost more. He owns ATD, a better operator, more globally diversified, better in-store merchandising. There will be a time to nibble, but not now.

Not cheap. In difficult economic environments, investors sometimes trade up to one best-in-class name in a sector. He sold WCN in favour of WM, which is bigger, more profitable, stronger credit rating. WN is a better quality business at a less demanding multiple. All waste management takes on debt to finance acquisitions.

In difficult economic environments, investors sometimes trade up to one best-in-class name in a sector. He sold WCN in favour of WM, which is bigger, more profitable, stronger credit rating. WN is a better quality business at a less demanding multiple. All waste management takes on debt to finance acquisitions.

Covid spurred a generational pulling forward of demand for cars, prices skyrocketed. Demand has been downhill since. Auto parts are amazing early cycle performers. He'll get back to the space when the time is right.

Copper chart not giving off the warm and fuzzies right now, often thought of as a warning of economic slowdown. Not interested till copper picks up. Valuation not great. Rent it when you get a hint that the next bull market is on.

(A Top Pick Nov 03/21, Up 22%) Still buying. Reported yesterday, close to what the street was looking for. Great company. Insured loss costs went down during Covid. Pricing power. Best-in-class P&C insurer. A buy and hold "trophy".

(A Top Pick Nov 03/21, Down 11%) Tough. He sold, recognizing peak of earnings cycle had come and gone. The cycle for this industry is wild.