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

Recent increase of S&P 500 hard to explain for Larry Berman (unsure why he has been wrong on bearish forecasts). 
Believes average stock isn't doing as well as major tech leaders (rising S&P 500 average).
Expecting markets to fall given underlying fundamentals in economy.
Companies will report lower earnings later this year, which will be reflected in stock market.
"Nifty 50" a good analogy to false sense of optimism in the markets today.

Previous Investment Bubbles: Dot-Com Stocks. In 1999 you could own a dopey gold company worth $20 million called Look for Gold Inc., change its name to Look for Gold.com and suddenly your company was worth $300 million. It was insane. The internet was going to change the world (I guess it did) and companies were hopping on the bandwagon. Investors got greedy, which is a necessity for any bubble.

Dot-com IPOs could soar 400 per cent on the day of their listing. No one cared about profits, only growth. If your company didn’t have dot.com after its name, it was going to be a dinosaur. It was, truly, a stupid time in the market. Fortunes were made by investors and companies that had no idea what they were doing. And then, as usual, the party just ended.

Profitability became important again, and the money pipeline investors were pumping to startups closed. Some stocks lost 90 per cent of their value in a matter of months, if they even survived at all. Amazon.com Inc. traded for less than 30 cents a share, though it was one of the survivors.
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It's been a bull market, but we're in for a tougher run. Stock prices have been bobbing up and down. The chart suggests a pullback in mid-June, followed by a July decline. He suspects the Fed will hold rates in mid-June, but that will put pressure on every data point--every strong economic number will pressure the market. Good news was that last week saw the rally broaden from tech into cyclicals and some financials. That said, he advises taking some profits, so you're ready to buy more later.

Seasonality is a big factor, in particular for trading portfolios where trimming is often done, but not as much in long term portfolios. The technology sector is week in June, maybe a flurry of activity at the beginning of the month and then some softness. Tech stocks are very affected by rate increases. He is not sure when the market will pull out of the inflation problem. It is looking for rate cutting but it's not happening yet. Only 5% of stocks on the NASDAQ are making new highs and this does not indicate the start of a new bull market. We may be getting close to a market low but we're not there yet.

The question was on the NASDAQ. Look at around the range 12 500 to 12 700 for the best spot to enter. 13 000 would also be an OK level to increase holdings and individual stocks. There might be a downturn of the NASDAQ after the Apple event which is happening today.

Markets are toppy. Washington settled the debt ceiling, stabilized the U.S. banks for now. Are still dealing with inflation and don't know the direction of the US Fed. However, the market has priced that we will get rate cuts in 2024, and that's a delusion. He expects stocks to pull back, though not a crunch. Take profits, get defensive and wait for a pullback. The Fed meets June 14. Australia surprisingly raised rates yesterday after a pause. Inflation here has ticked up again. The BOC announces their next move tomorrow and he expect a raise.

Is encouraged by US debt ceiling agreement, & thinks it will positively affect markets.
Lots of moving pieces with regards to macro environment (debt ceiling, inflation, interest rates etc.)
Is expecting second half of year to be positive for investors.
Expecting volatility through June in markets (short term). 

Past Investment Bubbles: 3D Printing. This was a massive bubble several years ago. Everyone was going to have a 3D printer at home, maybe even one in every room. Trucking and delivery companies were going to go out of business as consumers just printed what they needed at home. The stocks of 3D companies soared and soared, and then crashed. What happened? Well, simply, demand just never materialized as expected. The technology was emerging, but stocks got ahead of themselves.

Now, after the bubble has popped, the sector looks a lot better. The technology has improved, and there is a real benefit in using 3D for many companies. The bubble popped, but, unlike some others, there is still a real industry here left in the ashes.
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The rest of the year will look exactly like what we've seen so far. Up and down, a lot more volatility. A tale of 2 economies. On one hand, inflation rates are up, with interest rates rising accordingly. On the other hand, a very strong consumer with employment rates at record highs, and wages going up with inflation. 

Though inflation rates have trended down a bit, the consumer is still healthy and spending will remain strong overall. Short term, we'll have to see which one weighs out over the other.

No, if we do get one, it will be short-lived. Consumer spending, more jobs, and more wage increases will offset any decline. Data in the short term will be up and down: interest rates, inflation, jobs, and spending. The numbers will weigh in favour of the consumer.

He's never seen such a divergence between the narrative of oil and reality (the fundamentals). Ignore price for a moment, and just look at the setup. Global inventories have built so far this year by about 7M barrels per day, whereas typically they'd build by 80M. Inventories are telling you that the health of the oil market remains strong. 

When you look at real-time demand, such as that from China and India, it's making new records. Refiners are all pointing to very strong demand, both in the US and globally. We're weeks away from seeing the impact of the voluntary cut from OPEC. 

The fear of a recession is clouding people's ability to see what's coming on very soon. This summer, we should experience the sharpest drawdown of inventories in history. We have a seasonal uptick in demand, China demand normalization, the OPEC cut, and Russian production finally rolling over.

You can believe in a recession, but he still expects to see this year a 5-10 year low in inventory levels. We need a jolt to make people see that the physical market is tight and about to get meaningfully tighter. That catalyst should be inventory draws and should start in the next several weeks.

If you're income-oriented, other than a couple of small caps in Canada, US names are better geared for that. So he owns companies with higher dividends and writes call on them. US names are trading at a material premium to Canada. 

His positioning now is 92% focused on Canada in his main fund. The only names he wants are Canadian heavy oil, as we're getting a decades-worth of free cashflow and deeply discounted, but the differential could really narrow, Trans Mountain expansion adding capacity. Much longer inventory depth than US peers, and much lower decline rates. This means that US names need to spend more money than Canadian names to sustain production. For capital appreciation, focus on this theme.

Up until a year ago, one of the strongest predictors of price of oil had been inventories. As inventories went up, price went down, and vice versa.

This broke down around June 2022, when the fear of an ultra-hawkish Fed took hold and recessionary talk took off. People started to use oil as a financial instrument to express a negative view on the economy. Sentiment is very poor, yet fundamentals appear to be strong.

Global inventories have built only modestly this year, as opposed to usual. Heavy drawdowns will send a price signal to the market. If oil continues to sell off for the next couple of days, he could see OPEC cutting again, but it's tough to call. His base case is there will be no cut, as previous cut is only just now taking effect, and they'll let recessionary fears play out.

Recent Investment Bubbles: Artificial Intelligence (AI) - This theme gets our vote for the next most likely bubble. Investors are scrambling for new ideas, so the mere mention of AI in a press release moves stock prices, and large tech companies are mentioning AI hundreds of times in their conference calls. Investors see AI as the next greatest thing, one that will lower costs, boost productivity, boost margins and accelerate growth for hundreds of companies. Frankly, it probably will. But that, of course, doesn’t mean all AI companies are going to be winners.

AI development is expensive, and that’s why we would concentrate on the largest, cash-rich companies in the field. Just because a company mentions AI, or even has AI in its name, doesn’t make it a winner. There is going to be a lot of hype in this sector. Also remember that AI has the ability to destroy sectors and other companies, or at least lower their valuations. Investors need to be careful about what they buy in the AI field, but also about what they own elsewhere in case it is negatively impacted by AI.
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Will it kill the Fed to wait a little longer before raising interest rates? The word on the street is that they will the next time they meet later this month. But he gets it--housing prices are jumping and he expects unemployment to remain at historic lows--he gets the need for hikes. But the prices for all else aren't as hot. Oil, copper and natural gas, for example, are getting crushed. Also, retail reports and forecasts are down. Advance Auto Parts warned of a serious slowdown in auto sales. Tech firms like Meta are cutting jobs, but more so now. The Fed should pause.