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

Buying on a pullback. There are 1000's of companies to choose from, but you only need 15-20 companies to build a portfolio. You don't want to buy the one that has a current question mark. If we're in for 6 months of a great market, which he thinks we are, there are better ways to use your money.

Online retail. The whole online retail group continues to struggle a bit. IBUY, as a proxy for the entire group, has underperformed for several months.

Commodity cycle. We've been in a commodity bear market since 2008. The major commodity indices, as of a year ago, had given 10-year annual returns of about -10% per year. Let that sink in. When a commodity bull market completes after 10-15 years, the 10-year returns tend to be about 18% per year. The 10-year compounded returns of the major commodity indices are just now breaking even. There's a time to own things, and a time not to. For commodities, you need to have the wind at your back. We're in the very early stages of a structural bull market across the commodity complex. Last cycle for RIO was a 10-bagger over 10 years. The Canadian market has more exposure to commodities than most, which is why we act more like the commodity cycle than the US growth cycle. It's early for this group, and it's underowned. The best commodity index to look at is the Rogers Commodity Index, RICI, an unweighted index across all major commodities. It peaked in 2008 and has only recently broken out of that downtrend.

Be afraid of financials making new highs? When something's making a new high investors get nervous, since they don't want to be the last ones to buy. The reality is that it's been making new highs all along the way. Don't be afraid of a company that's making a steady advance, especially if the sector they come from has a tailwind. Financial sector is currently one of the best performers currently relative to the rest of the market. Seeing good conditions such as rising bond yields and improving economics. Most of the Canadian banks will raise dividends when allowed. Financial services around the world have been underappreciated for a long time, as they did badly in the financial crisis. An underowned and relatively inexpensive group. Financial services are likely to lead for a long time. Added fuel of dividend increases will be very attractive. Making a new high, and then consolidating, could kick off a new leg in the rally. Financials are likely to perform well over the next number of months and years.

Markets near all time highs. Yes, but there's not too much optimism. Almost mid-way through Q3 earnings season, and the numbers are rolling in very strong. Strong and broad-based growth. Looking forward to continued earnings growth of an additional 7% for 2022.

Weight of government debt. A longer term cost that will have to be borne. Government spending adds to GDP. You could argue that governments over-stimulated, and so we have more pervasive inflationary pressures. This will be additive to growth in 2021 and likely to continue in 2022. Ratifies centre-left agenda of big government, big spending. Down the road, we'll need to see more fiscal restraint in the form of spending cuts and tax increases. This should bolster, not detract from, expected strong earnings growth next year.

Recovery stocks. He has exposure to value and cyclical elements of the market. But he's not way out on a limb with hotels or airlines. Those are not the kind of stocks that match his investment philosophy. Most hotels are US-traded. Airlines are slim pickings. Air Canada doesn't check the boxes he looks for, which would be a sustainable, defensible, growing, profitable franchise, resilient to downtrends, not beholden to the government. He wants to own things where something has to go really wrong to lose money, not where things have to go really right to make money.

Hold or take profits in Canadian banks? OSFI has a press conference tomorrow, so we may get a hint on increasing dividends and reinstating share buybacks. Banks are chomping at the bit on this. Banks have been a cornerstone of his portfolios for years, and he expects them to be for years to come. He does trim if they get to an outsized weighting, as part of ongoing risk management. He wouldn't be taking profits. At 33%, outpacing the TSX. Banks are secular dominant, profitable, growing franchises that deliver a good income stream and are very well governed. He's comfortable holding them here. Expects further gains in months and years ahead, mainly in income rather than share price appreciation.

Oil and gas. Some exposure. Best of breed approach, which has brought an opportunity cost, as the most distressed names have rallied the most. He takes a longer term approach. See his Top Picks.

Evaluating serial acquirers. Need to have a critical eye on serial acquirers. He owns a lot of acquisitive companies, since there's a dearth of high organic growth companies in Canada. You want acquisitions that are strategically in scope, reasonably priced, synergistic, accretive, no undue financial risks, expand products or geography.

When to buy more bond funds? Good question. A bond fund offsets stocks risk--people forget this. Don't own this when interest rates are rising a lot, though. A bond portfolio, not stock, can act as a bank account to withdraw cash when needed.

Outlook. It depends on how interest rates rise that will impact current record highs in stocks.Central banks around the world want to stop liquidity and raise rates, so you must wonder what the U.S. Fed will do tomorrow--likely quantitative easing. This could lead to volatility. He hasn't bought or sold any shares any lately and is happy with his portfolio. His holdings will do well in any economic environment. As for Canadian banks, we have very good regulation over them, in contrast to the U.S. He likes the banks; they reserved well during Covid and now have lots of capital. The banks should be allowed to buyback shares and raise dividends.

Educational Segment. Climate change brings in the idea of ESG and what investors can do to change. There are clear risks to uranium. If China and India do not get on to stop using coal, then there won't be a substantial change. We will start to see ESG become a more important part of investing. Just starting to see material change. ESG World Leader Index is starting to outperform the broad markets. Additional cost is a factor however.