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

S&P500 Have come off highs and seeing a decline led by large cap tech. Meme stocks and high valuation stocks are seeing a big hit. Could last several more quarters. A lot will depend on what the Fed does on policy. Seems clear there will be not much more fiscal support. There will be some spending though.

10-year yields rising. The principle of risk off is that money does go into bonds. However, if the market is going down because of inflation and rates, then it is more important wha the Feds are going to do. There are 6-7 rate hikes already priced in. If the Feds aren't able to do that much due to financial conditions, then the markets are over priced. Equity markets will be more volatile over the first half of the year until we get a better idea of inflation rates. If it falls, then the Feds won't have to raise as much.

Overvalued stocks are the ones you want to look at liquidating. Companies at decent multiples should be alright, like Apple. Over priced tech companies with no revenues would be what he would be worried about.

Markets got ahead of themselves with some valuations a bit extreme (major sell-off day). It's painful but healthy for markets to be doing this. Valuations now getting more reasonable. This is all against a backdrop of rising interest rates, Russia/Ukraine, momentum driven market. New money is coming into the passive side of ETF's rather than stock picking. This cycle will change at some point. The market may be nearing the bottom. Shopify could be an example of what is happening. Before it pulled the broad index up, now it is pulling it down and is valued pre-pandemic. It is still a good stock and the shorts will eventually cover allowing it to rise again.

Question was on hedge funds. This is a leveraged play. You can make a lot of money or lose a lot of money. Some are very well managed. Their management teams look forward. You need to consider rising interest rates.

It's almost never as bad as it seems. Like today when markets plunged, then rebounded huge. Sometimes you need to buy, not sell. Bears sold like they were afraid of a recession. You almost always see a bounce after an overselling session. The bottom can happen at the blink of an eye. Bears fear that Powell will take a hard line when he speaks Wednesday. Yes, Russia/Ukraine is a factor, too. Many money managers dumped stocks today with the chance of buying back after Powell on Wednesday. He doesn't think Powell will repeat the mistake he made in December 2018. He doesn't see another recession and he's optimistic about earnings that'll be reported this week. An investor must be disciplined to buy when others feel the sky is falling, or selling when others keep buying. Discipline means avoiding the meme stocks. Adobe and Servicenow both led the tech stocks up. Homebuilders also recovered. Today saw those who wanted to see exit the market; they had run out of shares to sell, exhausted. Such a crescendo is a buy signal. We haven't seen a crescendo since 2020. If you bought into today's weakness, you will be positively surprised Wednesday when Powell speaks.

Bitcoin technical analysis Technical analysis by Tom DeMark: identifies peaks in the last two April and in both times Bitcoin decline .......... Need to see two more sell session before buying. Also need to see Bitcoin break certain levels, namely $34,495 earlier today before rebounding. If this rally is short-lived, expect a 2-3-day panic selling climax, as far down as $26,355--definitely a buy there. In 2021 April through late-June, Bitcoin lost 56%. Now, the same 56% drop will mean dropping to $30,657. Given the current descent resembling last year's descent on the charts, there's a good chance we'll see this same plunge.

Believes turmoil in the market is due to reduction in Federal Government stimulus. Reduction in quantitative easing & rising interest rates will negatively affect risky assets. Current environment is extension of trend since 2008.

Lower equity prices are presenting market opportunities for long term investors. Higher equity prices will negatively affect short term traders and speculators. Trendy stocks in bull market are risky asset class for individuals approaching retirement age.

Technical analyst Mark Sebastian on the VIX The VIX jumped this past week from 17 to 29. There are two kinds of volatility: spikes and swells. Spikes jump briefly. Swells sees the VIX rise for 2-6 weeks until the stock market enters a correction. (When stocks sink, the VIX rises and vice versa--at least that's how it work when things are running properly. We saw yesterday this inverse pattern breaking down between the S&P and the VIX, and this is not good. It means, we're seeing a swell now, and swells are ugly. Volatility could last into early February, so plan your buying with this in mind.

Shares plunged today. No surprise. He's been warning of junk stocks, those without solid earnings, for months. Now is a true shake-out. You can't afford to own or two high-flying PE stocks. The good news is stocks were oversold today. Bad news is we're in the heart of earnings season. Bonds rallied; Russia could invade Ukraine this weekend.

Not keen on resource stocks. They try to have a low beta, low cyclicality strategy. Resources, mining, oil & gas, and any commodity are all volatile businesses, where the CEO can't predict the price of his product. Low ROICs. They make a good trade if you can time it right, but not good long-term investments. Energy in Canada is down over 50% over the last 60 years. He likes energy infrastructure, to get some exposure to the sector, like the mid-streamers. Those ones are much more stable, solid, cash generators, great dividend payers, dividends are rarely cut and usually increased yearly.

Aren't oil stocks with huge cashflows screaming buys at these levels? Good point. Trend is away from fossil fuels, so a lot of selling over the decade by pension funds and institutional investors. You should not pay high multiples for these stocks. Price of oil is very volatile. OPEC likes to control the price. These stocks will rise, and fall, with the price of oil.