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

What's happened is that the Fed's moved more toward what the market was pricing, and that's being rewarded by the market in the last couple of days. Good news for market psychology. 

2024 will be a good year, but also challenging. Volatility, economic change and surprises. It's important that investors be well positioned. Owning the whole market will be a little dodgy. You want to be in the right spaces and let the economy reward you through the market.

Absolutely. A month ago, we were just starting to see the beginnings of that. Since then, it's done nothing but broaden out. He's very encouraged by that. 

The Magnificent 7 led most of the performance for the year. Now the other 493 stocks in the S&P are participating. These are unloved, undervalued stocks that represent very good value on their fundamentals. Investors should be there.

Historically, the third year is the best, averaging over 13% growth in the US. The next best is the fourth year, at about 6.5%. 

You can see this as a visual if you go to the relevant e-article at goodreid.com under Insights. It shows that 2023 pretty much represents the historical norm, with a very strong beginning, a mid-summer swoon into the early fall, and then a very strong Christmas rally.

Politicians want to please voters, so as we approach an election, policies that are enacted tend to be voter-friendly. The tough love happens in the first and second years of a presidential cycle.

He doesn't use CDRs, as he likes having exposure to multiple currencies. It's almost like laying on a hedge or another asset class. Canada represents only about 3% of global wealth, so the currency diversification is great for the long term.

If you look at successful portfolios, often the root is in relatively few stocks that have done extremely well. Peter Lynch talked about the pursuit of the 10-bagger. So you stick with them. He points to AAPL. In 2005, he bought in around $2.50 per share, adjusted. It's now $197. A wonderful company for his investors.

The closer you can get to the source of information on a company, the better off you'll be.

Would tend to hold in cash account. Growthier opportunities provide more opportunity for capital appreciation, so you get the benefits of friendlier taxation, as capital gains are taxed at an inclusion rate of only 50%. Hold fixed income and low-growth components in your RRSP.

Yes, we've already started to see it. Healthcare has really been a laggard in 2023. When you compare sector performance with its fundamental growth of around 2.5-3x GDP, there's tremendous value there. That, despite headwinds of impending legislation that might hamper some growth prospects in the sector.

Likes the sector. Will do well with a normalized yield curve, as it enhances net interest margins. Fed signalling interest rates coming down should depress the short end of the curve, with the long end maintaining itself somewhat.

Trading at about a 30% discount to normalized valuations of around 13.5x earnings. That carries through to book value, trading at discounts to historical norms. He owns JPM, BAC, and MS, and that's where he'd put money.

Seems to be. Today's Fed rate announcement is a bit different from the others. Expectation is they'll hold rates, but they'll also be releasing the dot plot, a survey of roughly 20 people who have a say on rates. We'll get a sense of their expectations of interest rates over the next 3 years. 

They release the dot plot 4 times a year. The September one clearly showed a declining interest rate environment. There's less interest in the rate announcement itself than there is in the dot plot, which will be quite telling.

It's the hardest thing for investors. You hear negative things such as a potential recession, but then look at what happened to the markets in November. Putting money in and then taking money out doesn't work. Absolute biggest mistake investors make. 

You have to get in at good prices, and then you have to stay. Who'd have thought November would be so positive, but that's why you have to stay invested. Things can change quickly.

He'd rather buy a great business at a reasonable price, than a marginal business at a great price.

Sentiment is very negative, so valuations are depressed, and that makes him constructive on the sector. With all the technology, scale is so important in being profitable. Being only 8-10% market share in some markets is not profitable enough for a bank, something would need to change.

Companies That Earn More With Less:

One of the greatest investors of our generation, Warren Buffet once said “The best business to own is one that over an extended period can employ large amounts of incremental capital at very high rates”. Investors always need healthy, growing businesses not only to maintain their purchasing power but also to compound capital. However, growth at all costs without considering the incremental capital required can be detrimental to long-term shareholders’ wealth.
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It's official: we're no longer fighting the Fed. Jay Powell today said that the economy has slowed considerably and will cut rates next year. The bulls have been waiting for this. The most-shunned stocks--homebuilding and banks--roared back today. Mortgage rates will decline and so will defaults, which lifts banks. The easy money's been made in big tech (though not smaller tech). Banks and cyclicals now have room to run.