A Comment -- General Comments From an Expert (A Commentary)
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. The recent rallies we are seeing is largely supported by an asset allocation shift by pension funds globally. They are shifting from bonds to stocks. This will likely continue until global growth raises interest rates, which could be a couple years away. Unlock Premium - Try 5i Free
COMMENT
The Reddit short squeeze: with markets you always see new things. Unpredictable. After a week, the element of surprise is gone, but it's possible this could happen later to other stocks though the effect will be weaker. People who bought may be in a losing position now. Wider markets could be choppy this month, given investor sentiment being overblow in January. Now, that sentiment is peeling back. Also, February tends to be seasonally weaker. So, he's raised some cash and is putting it to work on down days.
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Market. He is worried things are looking toppy and we are in a bubble of some sort. After stocks go public, the stock goes way up before the money is even spent. When you look back to 2001, not all stocks got hit. A lot of the rest of the area other than Nortel was not hit that hard. There are pockets of the market where you will be okay. He is optimistic that the vaccines will come into greater use and the pandemic will come under control. The trajectory for stocks over the next few years will be higher. There are going to be corrections along the way, but you have to stay invested in stocks.
COMMENT
Rising margin debt. Every major market peak we have had, there is an element of speculation. You can't time these things however. You are seeing the froth and the leverage coming through margin accounts. It speaks to the expansion of credit margins and the quality of the value is entirely speculative. The rally we are seeing is not on fundamentals.
COMMENT
The caller asked whether money managers can use ETFs to beat indexes. There is always the option to go with actively managed ETFs that try to beat the index. The other aspect is asset allocation. ETFs allow money managers to move easily between stocks and bonds instead of liquidating and buying numerous equities. This makes it easier to change allocations and maximize returns.
COMMENT
Educational Segment. Looking at moving averages and market breadth. It's important to look at how many stocks are participating in the rally. Market breadth is telling us what the current quality is like. Looking at the moving averages within the S&P 500, we are seeing a pullback coming soon. However, when is the important question. We are seeing market breadth lessening and so this indicates retracement. This week, if the S&P 500 does not close above the 50 day moving average, then it will be closer to the 200 day average. Don't chase the bounce today.
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. 5i doubts there will be a big crash soon. There is always a possibility of a correction. However, in general, corporate earnings are fine, interest rates remain low and the world is awash in cash right now. Unlock Premium - Try 5i Free
COMMENT
Risk vs. reward during Covid short-selling craze: does this mean a new risk to markets? Ask, is it systemic risk or any other risk? He isn't worried; we can handle with this rationally.... Semiconductor shortage: he had no idea it was coming. A buy during volatile times....Other opportunities lie in tech like Facebook and Etsy...The reopening trade: Disney and Boeing. The latter didn't go down despite a bad quarter....Other bullish themes during volatility: cybersecurity, 5G (Qualcomm), China (don't play it through commodities, but buy Apple, Nike), healthcare (Eli Lilly, Teledoc), e-cars (GM on weakness), housing (Home Depot), clean energy (Plug).
COMMENT
Market outlook. The vaccines are coming slower than we would like. It is a persistent virus but it is a natural event. In terms of the Reddit frenzy, we have seen this before but not to the same extent. He got lucky and sold into this rally for BB. Robinhood had to suspend to ensure solvency. Buyer beware when the market itself is threatened.
COMMENT
Robinhood. People are engaged now and after 2008, there was virtually no retail investors. They are slowly coming back, and more liquidity is a good thing. Democratization of ideas is also a good thing. The market mechanism is to find truth. Stories can persist for a while but it will reflect the truth eventually. Hopefully people won't be burnt too badly.
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. A bear market is definitely coming but it’s hard to say when. It is a natural part of markets. A crash is not expected, but a market correction is normal. The short squeeze is not healthy but it is only a small sub-section of the market. Unlock Premium - Try 5i Free
COMMENT
What's trends are catching your eye? Condo market is quite different than publicly traded real estate. CAR, for example, is focused on the upper tier suburban market that isn't competing with condo rents. Condo rents are being affected by a shutdown in population growth. Return of immigration and foreign students will make a big difference to the condo market downtown. In the meantime, apartment REITs such as CAR are well positioned.
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