Market Commentary — Page 142

Market Commentary

COMMENT

Disasters are increasing. Is this a hit on insurance companies? For example, ALL is property and casualty, they do cars and homes. That's where disasters will hit them. MFC is life insurance. People are living longer, but MFC prices this in. Rising rates are positive for them. For example, if someone bought life insurance 30 years ago, with a life expectancy of 80, but they live to 85, this is good for MFC because they don't have to pay out the money.

COMMENT

Housing market. Mortgage rate has doubled from a year ago. A lot of investors are not covering costs anymore. Rising rates have to have some kind of impact on housing, not a positive for real estate. Foreign investors have caused a lot of upward pressure. Economy remains strong. Perhaps not everywhere, but in the hot markets like Toronto and Vancouver, it looks like housing is poised to take a break. It's not having an impact on landlords yet. Because of rent control, when interest rates go up, you can't raise your rents accordingly. The problem comes when you want to sell, but no one wants to buy because prices are declining. As Warren Buffett said, investors should stay away from leverage.

COMMENT

Criteria for picking a stock. He looks for companies that pursue dramatic share buybacks and raise their dividend. Look at Warren Buffett: He bought his last share of AXP in 1998, and he owned 11% of the company; now, with share buybacks, he owns 20% of the company. Those types of companies keep on creating shareholder value for you. All you have to do is sit back and enjoy the ride.

COMMENT

Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Only time will tell if we enter a severe recession, but the odds are it will not be the case. Based on history alone, the probability of a market decline beyond 35% is low. The S&P 500 has only seen a handful of market declines beyond 35% in its 100+ year history, and these are associated with severe recessions. A lot of bad news has been priced into the markets, and tough times don't last forever. It's tough to say exactly when the market reverses its course, but we would not rule out a better second half of the year than the first half. Unlock Premium - Try 5i Free

COMMENT

The US Fed hiking rates, the Russian war and China's Covid lockdown are weighing on markets. When markets gets jittery, the Fed lowers rates, but it can't do that now, while Russia and China we can't solve overnight. Markets are gradually pricing in negative earnings growth. Typically when the US 10-year yield touches 3%, the market trades at 15.5-16x. We're close to a bottom, one or two bad days away. Blue chip stocks (pay a dividend and shares grow) have corrected 10-15% while momentum stocks fell 60% and these may not have earnings in 2023. Put those aside and buy a quality name like a bank, pipeline or Visa. He's very close to deploying cash.

COMMENT

The VXN, the Nasdaq volatility, peaked today (over the past year). A few spots, like Walmart and CAT, are doing okay amid this sell-off. Today felt like a liquidation as stocks cascaded across many sectors. ETFs declining will add to the sell-off.

COMMENT

Bitcoin You need puts to the downside in something like QQQ.

COMMENT

Everybody is so negative. He hasn't seen this in a long time. Investors should take a deep breath and stop looking at the stock market day to day. A bear market story is in every single stock and the market will go lower. Ignore this if you don't need the money in the mid-term since the time horizon is important. He quoted Warren Buffet as saying you need the right temperament and most investors are not wired properly for investing in the stock market. If selling you need to have sold months ago, not now. Be the first to sell and not the last. Most stocks he is looking at are cheap across the board. He is interested only in the stocks he owns today that are free cash flow positive, high quality, profitable businesses.

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WAIT

The question was on U.S. banks. They have sold off more than the Canadian banks. His clients own JP Morgan, a good company. It is hard to know how U.S. bank earnings will do. Wait for cooler heads to prevail with markets.

COMMENT

The question was on major gold and silver producers. He avoids commodity producers because there is no control over commodity prices and they can't be predicted. Higher inflation is not necessarily good for commodities.. Focus instead on companies with higher cash flows and recurring revenues.

COMMENT

He expects banks to go even lower as the Fed hikes rates. It's a macro call.

COMMENT

Today's rout The selling since last week's Fed announcement makes sense, including today's rout. He sees the next level being 3,750 on the S&P. ETFs selling off is a good sign; the excess is being cleared out, though we haven't capitulated yet.

COMMENT

Opinion on GICs Yield linked to interest rates. Expects the Fed and Canadian Central Bank rates to stay very close over time. GIC rates could go up to 2.5% but not much higher than that. Sees longer-term inflation in 4-5% range. GICs will not yield enough to safeguard against inflation.

COMMENT

Educational Segment. What will be the catalyst to turn the market? Stimulus coming from China often plays that role. Currently China is having issues with Covid but hight pressure on the government to be stimulative. China's credit impulse should be coming in next 6-12 months. US 10-year yield is currently at 3.2%. If it breaks past 4% it could be really tough on equity markets. There will possibly be a tradable rally soon but a rally that will fail. Almost certainly a down year for US equity.

COMMENT

Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Sentiment in the market is bad. We haven't seen capitulation yet but it seems close. a VIX spike above 50 might be the sign that the towels are being thrown in. On a more optimistic side, if inflation is seen as peaking, markets would likely relax quite a bit. We get new inflation data on Wednesday. Unlock Premium - Try 5i Free

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

Disasters are increasing. Is this a hit on insurance companies?(A Commentary)

Housing market.(A Commentary)

Criteria for picking a stock.(A Commentary)

Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research.(A Commentary)

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

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

Bitcoin(A Commentary)

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

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

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

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

Today's rout(A Commentary)

Opinion on GICs(A Commentary)

Educational Segment. (A Commentary)

Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research.(A Commentary)

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