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What's Coming Next
He's at a cool conference in Florida. In the US, they're way ahead of Canada in terms of building portfolios with different asset classes.
About a year ago, he was talking about moving his own personal portfolio into private equity and private credit. Take a look at VBAL, VGRO, VCNS. On a chart of the last year, you can see the ups and downs and swings in volatility. But today he had a meeting with Cliffwater Corporate Lending Fund, a fund provider that's much more steady-eddy, less volatile, but available only in the US. He's working on changing this access for Canadians.
He really likes the private market exposure, and how it lets you combine with public market exposure to ultimately smooth out the ride for investors. As society ages, more and more people won't be in their working years anymore but living off savings. Having a smoother ride in your portfolio, as a CPP would do, is really resonating with more and more investors.
If you want liquidity every day in your portfolio, then public markets will work for you. Typically, you won't see private credit and private equity with daily liquidity in an ETF format, though he has developed this type of investment at his own firm.
This will be the focus of the next 10 years of his career.
Before Covid, Trump presided over a fantastic economy and job growth with no inflation. But this term, Trump gets angry, lashing out and is so inconsistent that it frightens business owners until they don't know what to do; business thought they had a friend in the White House, but they have an enemy who seems upset with them. Trump expresses fury even at workers from various industries, many of whom voted for him and are worried about their jobs. Any sense that we see the Trump of term 1 will send stocks higher (last Friday), but the Trump creating uncertainty and it willing to let the market roll over sends stocks down (last Thursday). There doesn't need to be a transition period full of pain, but rather certainty in the process. If the market knows what Trump is planning, it will make investing a lot easier for businesses and investors. Without it, the market will have a hard time staying positive until the next beat down.
On his outlook for growth he feels that part of the problem is that so many things are up in the air. The stock market as well as business and consumer sentiment are being swayed by one individual and this a pretty unusual situation. Trump has co-authored ten books and from this we know that he likes to anchor high and therefore starts with the maximum amount of demand. Then if he has to compromise he can consider himself having a win. The take-away from another book is that he likes to keep people guessing - knowledge is power so keep as much of that to yourself as possible. This is all part of his playbook. The guest thinks he is pretty serious about trade issues since he has been critical of international trade for 40 years.
Very concentrated stock portfolio, leverage of 2:1. Pays out a lot in income. A bit of smoke and mirrors here, but not in a nefarious way. Twice as volatile in general as underlying markets. When things are good, they're really really good. And when things are bad, they're really really bad.
If you're OK with leverage, and you think markets are going to go higher, you'll probably have a good experience. Last 2-3 months, with all the downside market risk, have not been pleasurable.
The misleading part is to look just at the dividend, and say that's a great dividend. Don't be fooled; it's the leverage talking to you. There's also a risk with the preferred shares of absolutely losing your money. For sophisticated investors only.