A Comment -- General Comments From an Expert (A Commentary)
COMMENT
Bitcoin versus Gold. Does gold remain at these levels, or will certain categories and sectors come back? In an inflationary environment, gold will be preferable to him to bitcoin. It has a proven record of holding value. He would prefer Ethereum over Bitcoin since it enables processing payments and settlements.
COMMENT
Have relations between China and America so strained that the bulls are excited only when those two leaders talk on the phone? He's skeptical of any detente between the two nations. He thought that things would improve when Biden became President. We didn't see a rally in Chinese stocks today. Let's see if there's progress on Monday.
COMMENT
Seasonality Technical analyst Larry Williams explains that September is historically a brutal month for stocks. Add to that Delta worries and high government debt. 20 years ago, seasonal charts showed that stocks dive in September especially after Sept. 17. Today's chart by Williams shows that the patterns hasn't changed much. Sept. 17 is still the heaviest sell day through the end of September/start of October. The best time to sell the S&P is the 7th-last trading day of September, which is Sept. 22 this year. Though riskier, hold onto the 14th day of trading before selling for a higher return.
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Industrials should remain strong. There has been significant consolidation in the sector. There are a limited number of public securities to invest in. Data centres and warehouse demand as the economy grows. Unlock Premium - Try 5i Free
COMMENT
Momentum in tech stocks now? There are fundamental and technical criteria, but these days they're taking a back seat to momentum and stimulus. Massive miss by payrolls last Friday, but markets seem to ignore these events. S&P 500 has broken above resistance and tech has upward momentum long-term, but not in an excited way. Large caps are in overbought territory. He'd rather wait for some mean reversion before putting new money to work. He's just over 92% invested, with a 64% short equity hedge to protect on the downside. So, if the market were to drop 3-7%, he'd lose a bit but not as much as the market. If it goes beyond the 7% downdraft, his portfolio starts to make money. For example in March 2020, he came out with just over 8% rise in NAV.
COMMENT
Undervalued areas. In some of the unliked stocks. But, because there's so much money sloshing around, large caps are ruling the roost right now. FANG stocks keep going up because they have the liquidity on the upside and the downside. This year has been more of a trading arena in the tech sector. When stocks reach their price targets, he takes money off the table and goes back to his shopping list. There's tremendous upside in the Chinese tech arena, but he's stayed away because of the political risk. Every 2-4 years, the Chinese government comes in and flexes some muscle to remind everyone that they're driving the bus. When you get wind of that, best to get out of the way until the dust settles.
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- Johnson & Johnson (JNJ-N)
- VICI Properties (VICI-N)
- General Motors Corporation (GM-N)
- Apple (AAPL-Q)
- AMC Entertainment Holdings Inc. (AMC-N)
- Palantir Technologies (PLTR-N)
- MicroVision (MVIS-Q)
- ContextLogic (WISH-Q)
- PowerShares QQQ Trust Series I (QQQ-Q)
- ArcelorMittal (MT-N)
- GameStop Corp. (GME-N)
- Tesla Motors Inc. (TSLA-Q)
- Cameco Corp. (US) (CCJ-N)
- Upstart Holdings (UPST-Q)
- Clover Health Investments Corp (CLOV-Q)
COMMENT
Markets for the rest of the year. Three things to think of. First, what is the economy doing? Second, what's the policy response both fiscally and by central banks? Third, what's being priced in? Very strong year so far, except for China. Cyclical parts of the market have done well. Now the economy is starting to slow down. Going forward, with less fiscal support and with tapering starting, there's a bit of risk into the fall. All-time highs the last month, so not much of the slowdown is being priced in. He's cut his cyclical and economically sensitive exposure. Recycling proceeds into more defensive names and sectors. 5-6% cash. Not super negative, but tilted more defensively. Weak seasonally, combined with the other factors, makes him more cautious than earlier this year.
COMMENT
Sugar high of massive stimulus? Sugar high and caffeine high at the same time. Three signs of a bubble: people are borrowing to invest, lots of new securities are being issued, massive participation by retail investors. All 3 boxes are checked. But can you go all cash and sit on the sidelines? The market could continue going up for years. He's trying to stay invested, but be as defensive or as aggressive as needed. Focus on risks, not just on the returns. If you do that, the returns will take care of themselves.
COMMENT
Canadian banks. Terrible idea to take a large amount of margin right now. People feel that they can take more risk and borrow against their portfolios. Not time to be that aggressive. Lot of risks for Canadian banks. Mortgage portfolios are expanding, housing prices are up 30-40%, and this is a lot of risk in an economy that's slowing. He's maximum underweight banks. Once or twice in a career, you get to a point where the banking sector is facing risks not priced in, and we're as close to that as we've been in a long time. Canadian love their banks and dividends, but the banking sector is facing a lot of risks and investors need to be paying attention.
COMMENT
Sell for cash or hold? Look at size of each position. If north of 10%, you have to really like it. 5% is more reasonable. Tax implications of taxable account vs. RRSP or TFSA. Do your stocks pay dividends, or are they more focused on capital gains. 5-7% cash right now is appropriate till end of year. If you're thinking of trimming from 3% to 2%, it's not going to have a meaningful impact on your portfolio. As a general rule, if something is keeping you up at night, your position size is way too big. Right size it, and drive on. If you raise cash, you'll have it if the market tumbles in the fall.
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. If inflation continues, 5i recommends reducing exposure to utilities and dividend stocks. This is due to inflation usually leading to higher interest rates. Metals, gold and healthcare tend to do fine in an inflationary environment. Industrials are also fine if economic growth is present. Unlock Premium - Try 5i Free
COMMENT
The past year we've seen a shift from growth to value stocks, triggered by the first vaccine news last fall through March/April 2021. Since the spring, we've seen a rise in Delta which could delay the recover. The value rally is on pause. He'd buy cyclical stocks that will do well in an inflationary environment. He adopts a barbell strategy in case inflation (wage increases) last a little longer than expected, but remain temporary. Iron ore and potash are commodities worth buying. He's also looking for discretionary and tech growth stocks, but not the megacap techs in case we run into stagflation.
COMMENT
Lots of opportunities in the market. Believes in the small cap section in Canada, in particular. The big cap stocks have carried the headlines but small and mid-caps have now registered bottoms and the bull market has returned. JP Morgan team also reported the tides to be positive for small- mid-caps.
COMMENT
Certainly some storm clouds on the horizon. US unemployment numbers fell short. Number of states are still giving additional benefits. In states that have reduced benefits, people are going back to work. Select shortages in the supply change are probably temporary. Outlook remains positive in certain spaces.
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