A Comment -- General Comments From an Expert (A Commentary)
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Investors should always act as though a 10% correction may happen tomorrow. These corrections are not uncommon over the course of a year. However, 5i remains optimistic. The next 2-3 months may be sluggish but with the vaccine, we may be turning a corner soon. There is also pent up demand and higher levels of savings looking for higher rates. Unlock Premium - Try 5i Free
COMMENT
This two-day pullback is a golden buying opportunity. We finally broke the tyranny of the index funds--ETF buyers. This year, new younger buyers flooded the market; they aren't trading the S&P 500. Rather they invest in individual stocks to make money in commission-free trading. He doesn't like sector ETFs, because you're owning the good with the bad.
COMMENT
The markets are way up, but investors are climbing a wall of worry, scared of many things. He himself is an optimist, because the market has always gone up the last century. It pays to be an optimist. If you're not, don't get into stocks. Long-term, there'll be higher taxes, but short-term people will get into stores and restaurants again. There's a light at the end of the tunnel and we'll see more good vaccine news. People have been locked in their homes for months and will get out. At the same time, governments have thrown a lot of money into the system. The Fed will raise interest rates, but very gradually over time.
COMMENT
The effect of China signing the RECP pact with other Asian nations--will that push Canadian raw materials out of the picture? https://www.japantimes.co.jp/news/2020/11/15/business/asia-pacific-rcep-trade-deal/ It's a big picture question. Oil companies here have been decimated. These companies have to shift to renewables or find other export markets. If not, we'll become a domesticated market which will lead to lower prices, profits, etc. He doesn't see an easy way out of this.
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What would happen if Ottawa's Liberals get rid of the capital gains exemption? Wow, you hit a hot spot! Ottawa will be looking for tax revenues down the road (to pay for these Covid supports) and the safest, least political way will be charging people who've already made money. He doesn't expect Ottawa to do this short-term now during a pandemic, because it would trigger a lot of market selling and chaos. Also, this measure wouldn't bring in a lot of revenue, because an investor can just hold their stocks and wait for a new federal government to change the rules. Unfortunately, it's likely on its way.
COMMENT
We have to distinguish news on vaccine efficacy and trying to chase stocks. Moderna has seen more insiders selling than buying. It is unmistakably speculative. The news is great and the efficacy is fantastic. It will take a couple quarters for vaccines to be distributed. We are already at all time highs though. We see a rotation away from stay at home stocks.
COMMENT
There was a lot of talk that the republicans did very well in the house and senate. Therefore, there was talks we would not see tax hikes. However, he is not sure. They will need to push through tax hikes. They want to do massive stimulus. There will be some battling in Congress. We will probably be surprised by the willingness and degree to let tax hikes happen.
COMMENT
Educational Segment. Looking at the different stock types, we can see that outside of the tech area, which is a big weight in the US large cap market, there has not been a lot of growth and earnings growth per share. If we look at US large caps, there has been earnings growth but it has been 50% compared to a decade ago. Where is the growth coming from? Beyond a handful of stocks, there has been little earnings growth globally. The entire decade has been about multiple expansion and not driven by real earnings growth. The factor behind the expansion is the low interest rates. The guaranteed return has never been lower. This makes the market quite risky.
N/A
Market. Optimism on vaccine progress has been driving the markets since last Monday. Historically pandemics last one to two years and this one seems to be following that same pattern. There has been a lot of assistance this time around compared to history so we will see if businesses can hang in there. Stimulus is expected to be a little lighter. We should be able to get through this. With zero interest rates you HAVE to go to stocks, people think, and this is something to be concerned about. If there is a reversal and interest rates rise, you can imagine what would happen gradually to valuations. Interest rates starting to inch up would make the market go sideways for 3 to 4 years. Increasing interest rates or a decreasing US$ would require interest rates to go up. Make sure you have a portfolio that includes stocks that could handle rising interest rates.
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. The vaccine shouldn’t dramatically change things. Cash rich companies that are expected to grow at 40%+ would still get a premium over value companies. Companies that had good growth rates pre-covid should maintain good growth rates post-covid. Unlock Premium - Try 5i Free
COMMENT
Wall Street welcomes a Biden presidency Wall Street was never on the Trump train. Sure, investors liked the tax cuts, but hated his China trade war (though Cramer himself believe Trump needed to confront China). Wall Street is full of free traders who will welcome Biden. He expects Biden to phase out the current tariffs against China. Expect M&A deals between US and Chinese companies to happen quicker and smoother. Apple, semis stocks and Honeywell will benefit from Biden. Also, CEOs were outraged with Trump's contempt for the environment. Anyway, we have an oil supply glut, so oil prices have been hammered. He predicts e-cars and green energy will do very well under Biden.
COMMENT
This week has been quite crazy. He has come at it from a quantitative perspective where he wants to buy stocks that are cheap, stable and rising. This week, we saw rotation into anything that was in a downtrend. More levered companies in financial and energy saw rotation. This was due to the vaccine news.
COMMENT
Coronavirus vaccine. Looking to Q1 and Q2 of next year, it is positive. However, the market is trying to pull-forward this timeline. This bull market has been very odd, since normal beneficiaries coming out of a recession, such as financials, materials and industrials have not recovered yet. It has been an asset price recovery and not an economic recovery. The market is very expensive. There are expensive growth stocks and reasonably priced cyclical stocks.
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. The vaccine will take time to be distributed. Investors are probably comfortable going forward, especially with the vaccine coming in time. Markets did alright even with the world completely closed. With bond returns low, bond-to-stock asset allocation shift will continue to be a big driver. Unlock Premium - Try 5i Free
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