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

The question was on wheat. It is up a lot along with concern over the Russian/Ukraine conflict. It is experiencing a strong move outside of its seasonal period which could mean a sharp correction, but this time could be different. Not buying now because it is out of season.

The question was on the effect of interest rates on banks. There is a big difference between U.S. and Canadian banks on these effects. The U.S. banks are very sensitive to interest rates and Canadian banks less so. Rising interest rates are good for banks because of interest rate margins. Also consider the yield curve which is starting to flatten out. This is a tougher environment for banks to make money than if the yield curve is rising.

Wall Street is seeing its best week since November 2020, but he expects more volatility. QT is behind us, yet the US economy remains strong. The second half of 2022 could see lower inflation. He's focused on supply chains--if those shortages ease later this year, will the Fed be as aggressive? Time will tell. We could see some bounces in coming weeks heading into the next earnings season.

Extremely positive year for TSX (energy, materials & financials). Holds long term positive view of the energy industry. Secure energy supply in Canada is a major plus.

Sees risk in companies that find it hard to pass on inflation costs to consumers. Be careful investing in industrial sector & consumer discretionary companies. Leisure industry will also face pressure as discretionary funds dry up.

Uncertainty and markets. He looks at EBV levels, taken from balance sheets, and aggregates all the S&P 500 companies. Since January, S&P has collapsed down to the EBV 5 level. His EBV level is 4280 (recalculated every night), and the S&P closed last night at 4357. He's trying to predict if there will be a bounce off this level. He thinks yes, and we'll retrace the highs from January. Going forward, the market will hold above this level until late summer or fall. He emphasizes that if we solidly break 4280, we're officially in a bear market.

Does the EBV level help to simplify decisions? Yes. There's so much going on, he's so thankful for research. In a macro sense, we're playing 3D chess.

Sectors with upside? Look for what's cheap in this market. There are only 2 asset classes out there that are cheap. See his Top Picks for ideas. Two years ago, it was easy to find value, but this is no longer the case. Market is clearly rotating heavily out of tech, and into hot areas like commodities. Growth stocks are getting to levels that are very interesting. If the market can stabilize, without surprises, or with a tentative peace plan, then he suspects this market will rally and rally hard. In which case, he'd predict that the market will go for names that have corrected substantially over the last couple of months.

Jump on the commodity super-cycle train? Everyone's talking about the commodity super-cycle, but the issue is whether these companies can make any money. We're seeing prices going up, but we also have an inflation problem. Costs of extraction could go up substantially. There's a mismatch between revenue upside and escalating costs. Where does that leave earnings?

TFSA portfolio construction, with 40K to spend, and a focus on US financials. Put your funds into USD. We're going through one of the biggest macro changes since the World Wars. Don't put it into individual companies. If you're focused on the US, try to keep it as safe as possible. Wait until things get cheaper, which may involve sitting on your hands for a while. Look at iShares, and see his Top Picks.

US tobacco companies for the dividend? Hard to analyze, because they don't have any balance sheets (which, yes, does sound weird). For example PM, with its 5.5% yield, has negative shareholder equity of 10B. If something were to happen to this company, there's no balance sheet to help you. It's a high wire act. These stocks are too risky for him. Try to avoid.

A strategy for using PHYS and TLT from the Top Picks. Buy both with USD. In his portfolio, he's put equal measures of PHYS and TLT. There's a time to be bullish on gold, and now's the time. There's something called a long volatility strategy. TLT and gold are the only 2 asset classes left that can play this strategy. If you have the two together, it eliminates all possibilities. If we have major deflation, gold will get hit, but TLT will go spectacularly up. Or vice versa, if we have hyper-inflation. It's a way to hedge in the macro space. Buy some popcorn, and see what happens. One of them will be substantially higher down the road.

Markets and volatility. Fed has said it has to deal with inflation, whether it's 25 or 50 bps, and whether the world is growing and what that looks like over the next few months. But what's going on with Ukraine is putting a wrench in what the Fed needs to do. Ukraine will add volatility until we have some kind of peace or negotiation that reduces the bombing. Plus, the bond market says the world is slowing down. Fed needs to figure out if it deals with inflation or with growth. At today's upcoming 2 pm meeting, he's assuming rates will be raised 25 bps, not 50. The market really needs to know the direction of rates. Will the Fed do this through the normalization of moving the Fed funds rate up, through the balance sheet, or both? The market would have a tougher time if the Fed took a "wait and see" approach. Fed is usually really good at giving guidance.