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

There's been a changing of the guard from tech last year to a strong cyclical rebound this year, led by oil and banks. Healthcare, utilities and energy infrastructure still show some growth. Wait for opportunity, given current high levels, like in Google and Microsoft, otherwise large tech are not buys now. If you own big tech, don't sell, but valuations have risen a lot. As for cash, he's near fully invested. He's not anxious to sell and move cash to the sidelines. Rather, he would recycle value, selling and buying selectively.

US bank outlook and asset risk Among US banks, there are money-center banks vs. the regionals, and he prefers the former. In terms of balance sheet risk or poor-quality risk assets, the US banks are in a good spot (as are the Canadian ones). The 2008 recession cleansed the balance sheet of all the banks' toxic assets that the banks accumulated for 20 years. So, there hasn't been enough time to accumulate toxic assets again, so their asset quality is very strong now. The big concern is valuation, so given this he prefers the Canadian banks, trading at 12x forward PE (vs. US money-center banks at 14x). The US economy is ahead in the reopening, so the US banks benefit. Banks in both countries offer value, but Canadian ones offer an edge.

Job numbers. US job numbers were weaker than expected. It's been a number of months that we are missing expectations. In Canada, we have had months of job losses. The US is doing better at reopening than Canada.

Global corporate tax. Ultimately, governments will have to extract more taxes from global companies. Covid relief has had an impact on governments. Taxes must go up. There will be push back, but this will happen. Many industrial companies have higher taxes already but it is the tax havens that will push back.

Gold. The inflation debate is raging and there are lots of factors to consider. Yellen said that Biden should go ahead with spending plan even if it sets off inflation. She wants higher rates as well, which will be important for markets.

Agricultural ETFs. Are people going to be permanently eating more staples or is the increased demand more transitory. The world is not eating more soy and wheat. There is a degree of speculation and labour struggles to produce output. Trend is spiky and would not look as a long term investment. Okay for traders but not for longer term.

Gold. Real yield is important to consider when looking at gold. When real yield is negative like right now, it is bullish for gold. The correlation is to real yield and not nominal yield. Inflation expectation is increasing faster than nominal yield. Bitcoin is also pulling some of the money that would have gone into gold.

Educational Segment. The Feds want more inflation and also Yellen wants higher interest rates. The current inflation expectation is transitory supply shortages. Core inflation is about wages and wage pressure. We will see in years and decades that labour's share of income will have to keep going up. This will affect corporate profit margins. Volatility is related to inflation expectations and higher multiples. Corporate incomes has been hitting record highs. Government will need to issue debt and it will be interesting to see how the markets accepts this. Large inflation is not a good thing.

Market. There are a couple of problems right now. When people are thinking about risk, there is a lot of noise out there right now. And then there is financial engineering. Companies are not using GAAP earnings. This sent the multiples through the roof. S&P earnings are amongst they highest they have been. Companies are comparing Q1 earnings to a year ago when earnings were disastrous. There will be a jump in earnings surprises.

Market outlook. The market is at record highs but not every stock is at record highs. Also, earnings are at record highs. You must screen and look for value. Canadian banking industry is doing well and thinks it is not yet over priced. Dividends will also be going up.

US Tech. Owners and believers of the FAANG stocks. The notion of winner takes all in tech is something he believes in. Revenue and profit growth of big tech is from stealing market shares from competitors and other sectors. These companies have enormous wealth and tech capabilities. They are dominating the world in a way we have never seen. Disruptors may arise from Asia or other companies we have not heard of. However, we should not bet again big tech.

Bank loss provisions. Banks make provisions for loan losses and then makes revisions based on actual loan losses. You can look into the financials to see the actual loan losses. However, provisions are forward looking and actual loan losses is backwards looking.

The Reddit/meme trade and Wall Street investing Things have fundamentally changed. Shorters aren't targeting retail investors, but rather flawed companies that maybe shouldn't exist. Without short-sellers pointing things out--if people had listened to them years ago, maybe the Great Recession wouldn't have happened and been a disaster. He truly believes that big hedge funds are hiring people to stoke these Reddit chat rooms to stoke these rallies (like AMC this week). He can't judge whether that's right or wrong.