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

Will portfolio managers avoid pipelines to be seen as "green"? A possibility. But these companies are working to get to a level where they are more environmentally friendly. They can always get capital from somewhere. If you're interested in the environment, engagement is the most important factor, instead of just refusing to own a stock. Engage, and encourage companies to do better.

Favourite telecom? He owns BCE in his equity portfolio, owns BCE and Telus in his dividend portfolio. These two are in the best position to do well over the long term, growing their dividends and business. Rogers has had some issues the last little while.

Utilities. Interest rates affect utilities, and people are worried. With the volatility comes an opportunity to buy them at the right price. He owns a lot of them in his dividend portfolio. Consistent dividend growers, and they will continue to be.

Semiconductors. Interesting industry, with political aspects. Chips are vital. US is ahead of China in its ability to manufacture chips. TSM is one of the great foundry companies. Huge capex in the next few years. You can also look at NVDA (gaming, cloud) and QCOM (5G).

The number-one driver of stocks is the bond market--bonds--which in turn are driven by their yields. What raises bond yields is inflation. You need more yield to compensate for inflation eroding the purchasing power of the dollar. So, when inflation rages, bond yields spike. Things just aren't worth as much in the future, and stocks are valued on their FUTURE earnings potential, so those future earnings are worth less in a world of higher inflation. This is particularly true of stocks without dividends or earnings (i.e. the tech stocks of 2020). This is called "multiple contraction." Stocks that benefit from rising bond yields and inflation like metals and natural resources. Stocks that'll suffer are the non-dividend/earnings ones that are growing by momentum. If treasury yields rise because of inflation, then high-growing stocks like those will get crushed which is what happened today with the latest CPI number which was very high.

There's certainly been a rotation out of tech after valuations got pushed high last year. Now, the bloom is coming off the rose as investors look at stocks that are trading at cheaper valuations and more growth. Rising inflation will raise interest rates and that will effect valuations and therefore tech stocks. He looks for stocks with accelerating earnings now, not those expected to. He covers cannabis stocks. U.S. weed stocks and Canadian ones like Curaleaf have been reporting good numbers (Curaleaf today). Legalization in the U.S. continues, perhaps not as fast for some. Canada has an overhang with oversupply, but companies with niches are doing quite well. Cannabis is part of the wider market sell-off, but is compressing valuations of the big players; in the next leg up, these names will go higher.

Market. Dividend increasers are not as inexpensive as they have been. It is difficult to find 'great' opportunities, however Canadian dividend-paying equities are still attractive. He believes there are share price increases on the horizon. One of his focuses is power generation. Electricity demand is going to continue to move higher. It is driven by the rise of electric vehicles and the greening of other fossil-fuel-based power sources. Cloud computing is another big one as well as continued prosperity and build-out of the housing market. This also extends to power distribution utilities.

Copper. It is not that simple to get exposure to a pure copper player. HGA-T was graphed as an example of one. Mining companies are traditionally not good stewards of capital. It is not easy to find sustainable companies that are good stewards of capital. TECK.B-T could be considered, at a third copper. FCX-N is another go-to name but it has had a massive run. He is looking at it.

REITs vs. Banks. Both have done well this year but for different reasons. Interest rates going up has helped banks, but for REITs it is not helpful. They are coming up from such low levels that it really doesn't affect them. Retail and office are still very uncertain. He prefers industrial REITs e.g. WIR.UN-T. He is looking more seriously at seniors real estate as they were hurt so badly during the pandemic.

Cyber security. The pipeline shut down due to a breach underscores the importance of cyber security. It is critical infrastructure, serving the whole East Coast, that was vulnerable and it will be even more important going forward.

Job numbers. Starting to see upward pressure on wages. The economic data and estimates used do not account for the dynamics of covid. As we re-open, the job picture will continue to get better. Inflation is often talked about in hand with employment and wage pressure. Paying people to stay at home is also hurting a bit on job growth.

$1.3T of new bond supply. There is a deficit of $600B in new bonds. We did not have this last quarter. Now we have $600B being sucked out of liquidity. Liquidity has boosted markets and it can deflate markets when it changes currents. There will be some challenges in the next few quarters.

Educational Segment. Commodities are very cyclical. It depends on the cycle and which commodity. Looking at PICK, which is an ETF that gives you exposure to base metals and mining, it has seen a major move up close to previous highs. Looking at individual commodities, you can see that the copper story could be a fundamental shift that is different from previous cycles. Other commodities like corn and soy could see a new base price but right now we are in a spike market. A lot of the commodity spike is supply driven. Crude oil is the opposite of copper. As we electrify, this sector is at the start of a longer term secular downturn.

This is no market for young investors--tech stocks slid today. Confusing and terrifying for them. This is a market for grizzled veterans. Nasdaq stocks are sources of funds and they got hammered today. Instead, the remaining bull markets are mines, oil, infrastructure, homebuilders, transports, raw materials, consumer products, agriculture, chemicals, drugs, and banks. These are driven by current demand, such as homebuilders, which extends to home furnishing and mortgages (i.e. Best Buy). Other examples in these sectors: Pepsi, Freeport-McMoran, The Gap, Dow.