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

The booming U.S. cannabis space He's an expert in the cannabis space, running an ETF and sitting on company boards. The macro trade reflects the legislation from state to state of cannabis--the market keeps growing--and will attract institutional money. Once they do, it will lift all boats. This is a hyper-growth industry at 50-60% annualized. Not profitable before, these companies are profitable now. Risks are company by company, not macro. You got to find the right company based on fine managers.

Cryptos He worries about the leverage in the system in the crypto trade. The volatility is not surprising; a lot has to do with uncertainty over regulation. The volatility is scary, especially going into a weekend; in recent weekends the trade has been wild. Among the cryptos, he'd choose Bitcoin, which has proven to be counter-cyclical many times and marched to its own beat.

He just started offering cryptos to his own clients, because there was so much interest in them. You'll see wide swings in cryptos, a new asset. Institutions are still entering this space as the ESG discussion over cryptos will continue. Long-term holders must look 15 years down the road. Some will trade it and some will hold after they look at the fundamentals. Time will tell in this very new space.

Markets. Government debt as a percentage of economic output is at the highest level since WW2. This doesn't worry him, as the actual debt service burden is on the decline. Government debt financing was done at incredibly low interest rates.

Inflation is good for the stock market. His research concludes that, despite volatility during inflationary times, any increase in input costs gets passed on to the consumer. Earnings go up, companies raise dividends, and stocks have beaten inflation by a healthy margin. Real estate and stocks hold up very well during times of inflation, whereas long-term government bonds get hurt.

Recovery stocks. Airlines, cruise lines, and hotels are very cyclical, have already done very well, and have a lot of debt. He'd rather own other companies that are cyclical but still have great value.

Chip cycle. Good times are not coming to an end, but we're closer to the end than the beginning. Earnings will probably rise this year and next, but then there will be a big drop in pricing, which will kill earnings. It happens every single cycle.

Canadian banks. His dividend fund has a large weighting in Canadian bank stocks. They make money in good times and bad. Benefit from a rising interest rate environment. Very well capitalized, solidly profitable, not that expensive. 20% of a portfolio just in the Canadian banks is probably too much, so diversify outside Canada. During the financial crisis, value of Canadian banks dropped 50%. Don't expect to see a lot of loan losses and they should, in fact, improve. Nice fat dividend yields.

Bullet-proof investments. Nothing is safer than a government of Canada security. Keep your money short-term, and then when rates rise you can lock it in. Don't buy a 20-year government bond at a very low interest rate.

Short-term bonds. In a rising rate environment, you don't want to own long-term bonds, as they'll get hit hard. You want to be on the short end, earning maybe 1.5-2%. Less volatile. You'll be protected if and when yields rise.

Markets. Tech looks overvalued. He doesn't try to guess where we are in the economic cycle. Where to find value depends on how you define it. It's a bit of an arbitrary concept to make the divide between growth and value. Those in the growth camp tend to favour steady, reliable growth year over year, with less focus on price. Whereas value investors calculate intrinsic value and look for deals. Looking at the Russell 1000, we find almost a 10x excess PE ratio on that growth basket. Large cap tech faired well through the pandemic, and now there might be an opportunity for value.

Inflation. Inflation really changes the conversation. New US president, and the world is reopening. A lot of uncertainty around medium-term impact of interest rate decisions. If Canada's CPI accelerates, he expects the trend will continue of value outperforming growth.

REITs. Likes retail exposure in favourable categories such as groceries, medical, department stores. Prefers industrial, commerical. Worries about residential, as the rents get capped.

Gold. A great place to leave money in all but the most pressured markets. Gold has lost its lustre in favour of crypto, so that might be an opportunity. Not keen on gold companies, as they're perpetually expensive. To justify the price, you have to be really optimistic on the price of gold. Owning the physical commodity may be a better bet. Stays away from heavily promoted mid-caps. When gold prices move higher, so do costs. Likes the streamers such as FNV and WPM, and you don't have to worry about cost inflation. WPM has a narrower basket and is easier to understand. Not positive on gold in anything but short-term cases.