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

He remains bullish for the second half of 2023. Companies across the board (airlines, casinos, steel, though not retail) are more positive than macro-economists. Earnings estimates for companies keep rising. He's sticking with cyclicals. Watch Q2 earnings.

He missed the rally in megatech, missed this new generation of investors. He still believes we're heading to a recession. 

Should. The market should have reacted different to rising rates and the yield curve inversion in the first half of 2023. Instead, the bulls have taken over and now see a new bull market rather than a bear market rally. She's not sure this sentiment will endure. She wishes she had not missed the rally in megatech. It's interesting that investors shifted from believing that if yields are down then tech is good to if yields are up the tech is good. They both cannot be right and something will have to give.

Was not expecting 500 basis point interest rate hike - without recession. 
Still believes recession on its way with higher interest rates.
Caution warranted for investors who are too optimistic. 
Investors don't believe that Fed will keep rates higher for longer. 
Unsure whether strength in economy is due to previous stimulus, or fundamentally strong business'.

12% inflation from the 1980's not comparable to today.
Not worried about prime interest rate rising as high as 1980 rate @ 15%.

General Investing Mistakes: Letting Emotions Guide Your Decisions. We know this one is tough. No one likes losing money, and fear can be a very powerful emotion. Panic selling has probably cost investors more, collectively, than any other action. But greed is also powerful. Visions of a cushy retirement dance in your head when you have a stock rising every day. A stock up 50 per cent might even make you so happy you want to buy more of it. Here’s when things get tricky.

We love momentum stocks, and the best move is often to buy more of a stock when it is up a lot. Obviously, the company is doing well in such cases, and more investors are taking notice. More buyers can indeed change the valuation of a company.

But let’s not forget the basics here. Don’t let greed push you into having one company represent 30 per cent of your portfolio. Sure, sometimes this will work. But when it doesn’t, a whole portfolio can be killed. Stay calm, manage your portfolio positions and look at the fundamentals over emotions — always.
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Somewhat over-optimistic. A lot of the interest rate hikes have not been priced into earnings yet. We still could see a bit of an earnings recession in the last half of the year, followed by good news the following year. We could still see some weakness of 10-12%.

If the government is going to achieve its inflation target, it's going to have to increase rates more. You can't get inflation down without there being a slowdown in the economy in general. 

The Fed has signalled it's going to increase 2 more times this year. Increase in rates is going to harm the overall economy. Not disastrously, as it's not 2008, but it will impact earnings.

We're seeing all this enthusiasm for AI, and it's reminiscent of last year when everyone was chasing meme stocks. Same kind of mentality. A bit different from 2000, because a lot of those companies weren't making money. Whereas the AI ones already are. 

It's the old FOMO, with people chasing and trying to get on board.

Look at certain core positions that you hold. In his case, he's always overweight the US market, simply because it has the greatest breadth and depth of any market on the planet. So it's always a core position. He very rarely sells his core positions, but looks to add on any kind of weakness, and that's what he's doing now.

There are quite a number of these high interest savings account ETFs these days -- some from Purpose, BMO, Horizon, and others. He was buying these quite a lot a couple of months ago, and he still holds some. But he became concerned when OSFI stated that it was concerned about these ETFs and liquidity issues if there was a run on Canadian banks similar to SVB in the US. This was a warning flag. It wasn't a big risk, but he wasn't completely comfortable with them, so he sold most.

Instead, he moved into Government of Canada treasury bills. There's a slight discount to the rate you get, but there's a lot more safety.

He prefers equal weighting when it comes to, let's say, Canadian banks where there are only 6 of them. Otherwise, when there's a large number of stocks, he's much more interested in market cap weight. 

The basic reason is because the CRA won't let you. They don't allow naked call selling either. In both cases, you're dealing with cash and not a security. CRA views naked put writing as essentially an ongoing business, rather than dealing with a security.

In non-registered accounts, people use naked put writing to generate income. It's all supposed to be cash secured, but he's met people who leverage it 2-3 times. If things go the wrong way, they get clobbered. That's one of the reasons that CRA doesn't want it in registered accounts.

When people looks at some of these ETFs, they usually focus on the dividend yield. He always says "never trust yield", because there's always something going on if the components have a lower dividend yield than the actual yield of the ETF. 

Some companies like Harvest often use leverage to achieve their ends. That doesn't suit his perspective for clients. There's nothing wrong with it, if that's what you want.