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

He doesn't worry too much about what he thinks are low probability factors. GM, MG, STLC all have capabilities in factories and raw products to switch to products other than those used in peacetime. He doesn't necessarily want to invest on that basis. But if that's your view, the major industrials wouldn't suffer as much, because they would have a production outlet. During the pandemic, modern manufacturing processes allowed many businesses to switch to Covid-related products. He can't invest on the basis of what he doesn't know, so he goes with what he does know.

The market doesn't like banks right now. If the economy slows down, what will that do to loan losses? Earnings start tomorrow, might be all right as the economy hasn't rolled over yet. He'd be a bit concerned going forward. He's underweight banks right now. Lower end of valuation range, decent dividends, but earnings growth will be challenged in the short term. His order would be TD, CM, and then BMO.

He prefers Canadian to US telcos for better growth, valuations, and yield.

None of these businesses are under pressure on the dividends, but it's the valuations. Everybody wants to be in renewables over fossil fuels, and he gets this over the long term. The problem is when renewables were trading at 15-18x operating cashflow, and then suddenly the oil stocks are trading at 3-4x operating cashflow, it's hard to do that shift. Some money has been moving out of renewables and into conventional oil and gas production, strictly on a valuation basis. When the valuation multiples come down, names like RNW, BLX, NPI will come down to 10-11x range, which is cheaper than they were though more expensive than traditional fossil fuels. BEP.UN is probably the most expensive of the group. He likes them for growth and ESG reasons, but hasn't made the switch. He's getting closer to it. Once he did make the switch, BLX and NPI would be the first names on his list.

Yes, definitely for those that have a heavy debt load or that are unprofitable. SaaS companies are especially interest-rate sensitive, because it's a pretty crowded space with a lot of unprofitable ones. Since the whole cycle started in February 2021, SaaS rolled over and then rolled over again in November 2022.

The tech arena was similar to the rest of the market. All the names that were beaten up last year, people saw value in them, bought them back, and that dragged the rest of the market with it. They're all coming back down to earth now.

Around October 2022 and again in November, it was down at the base, and that will be very strong support. With the runup, the selloff is not surprising, but he'd call it more of a consolidation. As long as the NASDAQ stays above the 50- and 200-day moving averages, you can still call it a consolidation. 

The buzz has been going on for about 5 years. But now there's more data and power to process, so it's all starting to happen. 

Everything. Generative AI has taken the place of crypto. EVs, autonomous vehicles. The whole AI segment is huge, both for processing and power chips.

NVDA and AMD are really the kings of GPUs. DDOG is like the data aggregator. Companies like CSCO and AVGO play into that, as they direct where the information is supposed to go.

Investor Psychology Mistake: The Conservatism Bias is the tendency to give too little weight to new information (the short report), therefore people fail to modify their prior beliefs as much as the new information would warrant. Cognitive dissonance bias occurs when newly acquired information conflicts with preexisting understandings. People will go to great lengths to defend their view despite new information (It happens in the uranium and gold sectors as well).
Unlock Premium - Try 5i Free

Why inflation is so sticky is the biggest question now. Data lately has not been encouraging. Food was up 10.1% January YOY (Russian invasion, bad harvests), though Walmart is limiting food price increases with its own private food label. Housing prices are up 7.9% because there is a shortage of 3-6 million homes in the US. Wages are up 4.4%. More immigration would help, but is politically unpopular. We need to see huge bankruptcies to lower employment, unfortunately. There are signs of hope, of lower inflation: TJX is reported a good outlook today, and when TJX does well, the apparel industry is not. Zip Recruiter just issued a lower forecast (and shares tanked), but this means there are fewer job openings. These indicate that the Fed is on the right track, but their rate hikes take time to have an effect on the economy.

Inflation is slowly declining as central banks are in the late inning of interest rate hikes. Investors hope banks reverse course later this year, but job numbers remain high and inflation in sticky. Sentiment is neutral. There's fear of missing out in “zero days to expiry” options trading on single stocks and U.S. indices. He remains cautious, patient.

How Capital Gains Work. Canadian investors that own financial assets outside of a registered account (TFSA, RRSP, RESP, etc), are required to pay income tax on any capital gains that they realize within a tax year. Capital gains are defined as the increase in value above one’s cost basis for an investment that has been realized upon sale. When Canadian investors sell equities that have increased in value above their cost basis in an unregistered account, they must pay income tax on this increase in value. One caveat is that if an investor also sells an asset that has decreased below their cost basis, this realized capital loss can be used to offset any capital gains, and thus decrease one’s income taxes. One technique that many investors use is selling an asset that has decreased in value to realize that capital loss and repurchase the stock 30 days later (to avoid the wash sale rule).

Has been keeping a close eye on corporate profits/earnings the past few weeks. 
As expected, earnings down "year over year" for Q4.
Believes companies are bullish on ability to grow earnings in 2024.
CPI number reported on Feb 14 came in as expected (still above 2% target number).
Recent market rally backed by lower inflation numbers & lower energy prices. 
Expecting mild recession in 2023.