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

Educational Segment. Big tech is reporting this week. Looking at the earnings in the tech sector today. Factor investing is when you look for an investment factor that will drive excess returns. If we look at sub-industry sectors and weighing earnings by market caps, tech, hardware, storage as well as system software accounts for a massive amount of earnings. The top 10 stocks in tech drive 70% of earnings. When the markets are strong or weak, the equal weight exposure does better than market cap exposure. Looking at momentum and quality factor is another way to look at it. Tends to overweight tech as well at 42% for momentum and 20% for quality. Likes factor investing.

Market. He remains constructive on the stock markets. Technology is a sector he continues to like. It seems the vaccinations are working according to the numbers. We will probably see a shift fro spending away for home and spending for experiences. We saw a big run up in special purpose acquisition companies like crypto-companies. We saw some deflation in those markets recently. Special media names have held in well. We've seen higher quality larger growth companies have had multiples expand whereas commodities and banks' multiples are very low. Some of the higher quality growth companies may see growth slow soon. Banks would benefit from rates potentially moving higher in the future.

Semiconductor companies. They a had a great run over the last decade. He prefers Broadcom. It is one of his largest holdings. He would be buying it here. He sees 3-5 years growth.

It's driving him nuts that people keep calling a peak. Peak is a curse word on Wall Street--it means "done." The peak means stocks stop going higher. Cyclical stocks right now can make fortunes as we reopen. Some feel that this recovery will be gigantic (stimulus money, businesses reopening, jobs). He's confident the U.S. economy will have real momentum this year and even into next year. It's been decades since we've seen a strong economy and maybe we don't see it now. Then again, others see a peak now. Some money managers are getting out now, but it's absurd. We haven't yet seen Americans truly spend money after a year of not being allowed to spend on entertainment, travel, restaraunts. A peak is absurd.

Market outlook. As a general rule, buy quality at a good price and hold it for the longer term. Take advantage of the opportunities that are ahead. Cyclicals are a theme in the next little while. There will be a need for balance with cyclicals and growth.

Stay at home stocks. A lot of them have come off their highs because people are at home day trading. These stocks will come back down to earth. The better trade was to buy quality stocks, sell into strength and ride it back up again. You want to buy Disney over Netflix right now for example.

Large sustainable companies with good cashflow that will increase their dividends are promising right now. Growing companies like Visa are also to be looked at. The dividend yield is skinny still and is growing. Nestle, for example, is gradually growing dividends and it is steady. Some of the larger dividend stocks sold off due to money flowing into growth stocks last year. Maybe it is a good opportunity. However, you cannot completely discount growth stocks either.

Markets. Clear signals we're in the early stages of a new economic cycle. Many investors are focusing on secular growth stocks, and missing opportunities in the more cyclical materials, agriculture, and industrials. The cyclicals probably have a long runway and are relatively inexpensive.

Commodities. If you look at the RJI ETF or the DBC, only about 4 months ago we broke a 14 year downtrend. Positive outlook should go on for several years. Themes like electrification will encourage incremental demand in things like copper. You have to pick your spots, and this is one of them.

Oil. Across the commodities sector, agriculture was the first to break out, followed by forestry, and then base metal miners. If you look at the XOP ETF, we still have to break the downtrend. Bigger headwinds in energy than in other sectors. Some companies have become stronger through the difficult times, and he has some positions there.

Reaction to earnings. Don't look just at what the earnings are, but how the market reacts to the news. Not the first day, but a week to 10 days out. How is the market digesting the news? NFLX is one of the casualties of not over-delivering enough.

Lumber price affecting homebuilding demand. The question is if there's pricing power to put through to the buyer. It seems that there is. After years of very little movement, prices are now going up. He likes the suppliers to the homebuilding industry, as well as the builders themselves.

Gold and silver. If you look at the GDX ETF, it's broken out of consolidation since March, led by Newmont and FNV. We've started the next leg higher in gold, and this will be significant. An asset to hold if you believe money printing is going on. This is a sector you want to own once in a while, like now. Since March, miners are outperforming the metal itself. Companies will generate significant cashflow. Silver is an industrial metal and should do well.