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

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. Too Much Focus on The Short Term. All investment eyes were on exactly one data point last week: the consumer price index (inflation) number in the United States. Next, everyone will shift to corporate earnings reports. Sure, these are important when looking at the market, but one economic number — or one quarter of earnings — should not form the basis of your entire investment portfolio.  We know many investors who will sell a company after one bad quarter. But the best companies play the long game: focusing on long-term gains, even spending more money in the short term to get there. If you own a stock, you should strive for at least a five-year holding period: you want that compounding to work for you. Looking so closely and reacting to a 90-day period out of 1,825 days (not counting leap years) is likely doing your portfolio a huge disservice.

Markets know that China will eventually have to turn around and accept a certain level of Covid. It will not destroy itself economically. There have been some good things happening in the market lately but we're not out of the woods yet. After 10 months into a bad market there are some good valuations in different sectors including some oversold tech companies. Also fixed income is an incredible place to be now. Portfolios now can even be less than 50% equities with GIC's at over 5%. Dividend stocks are a good place to be too. Generally stocks have more upside over the next five years than downside. Regarding Crypto it is hard to know where it is going. It is way too risky so if you want to get into this area do so with only very small amounts of money.

Question was about bonds and fixed income. If you have large gains from selling before or at the beginning of the market downturn, you can offset this with selling some trusts and bonds. There are good opportunities and he thinks the Feds will begin to taper rate increases.

Question was on the falling Canadian dollar and how it might impact investors buying U.S. stocks. If you wanted to buy JP Morgan for example you would just buy it in U.S. dollars if you thought the Canadian dollar was going to fall. If you thought the Canadian dollar was going up you could buy the CDR hedged version of JPM on the TSX. If you own U.S.dollars in your portfolio you could buy inter-listed stocks like BMO and own them on the U.S. exchange.

The question was on Canadian banks, whether to buy now or after the earnings come out which is soon. He doesn't really know but probably wait.. The banks' fee incomes are under pressure and loan growth is slowing. The U.S. banks are cheaper and there is more growth.

The question was on preferred shares. Don't buy the perpetuals since there is a poor risk/reward on them. Rate resets are good to buy and for suggestions you can follow their daily lists. For the fixed income part of your portfolio, own quality real fixed income, not preferred shares.

The question was on fixed income strategy. Five year laddered GIC's are good. Also in laddered portfolios they are buying coupon bonds with an average yield of 5 1/2% or more. An example would be 7 year investment grade bonds which are flexible since you can sell anytime. You can buy them at a discount so you are guaranteed capital appreciation if held to maturity.

The question was on oil and oil stocks. They started buying oil stocks three years ago and have had good returns. However, the oil market is manipulated and unpredictable so be careful. They have pared down their positions but there is still value in Canadian companies.

We're not as entwined with China's economy as we fear, as seen with the 1.5% sell-off today on civil unrest in China, triggered by their misguided zero-Covid policy. Look at oil. It's been declining because of the slowing Chinese economy, but he's been adding energy stocks. OPEC could announce another production cut, and domestic U.S. air travel could maintain oil demand. Cyber Monday and Black Friday show that the U.S. consumer remains strong....On Wednesday, Jay Powell will speak, but he expects him to be vague.

The Dow's outperforming the other indices at least through January The Dow is up 2% in the last 6 months, leaving the S&P and Nasdaq behind, because those two indices are weighed down by speculative stocks and tech names. Many Dow stocks have benefited from supply chain problems fading away. The insanely strong US dollar has pulled back from its highs, this increasing the profits of many Dow companies.

This was another question on Canadian banks. The outlook will depend on what they say this week and the guidance the individual banks give. For the previous quarter there were not really any signs of recession. If inflation is still growing then this will a problem for the banks. Regardless, they a great investment over the long term.

Christmas has come early for energy investors with recent selloff. World oil market is getting tighter (despite record record US SPR release and China pandemic lockdowns). Believes 2023 is setting up for higher energy prices. Fear of missing out on energy returns will force generalist investors back into the space. Reports from the WSJ on Saudi/OPEC increase in production not accurate. Is leaning towards companies with oil production over natural gas. Lack of supply, inability of super majors to grow and rising demand leading to higher growth in oil demand. Global oil inventories sitting at generational lows.

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. Lower Commissions are Bad for You. After launching in the United States, free stock trading has now started to expand in Canada. But are trading fees of $0 good for investors? Well, contradictory to our comment above about fees in general, we think free commissions are bad for investors. Zero commissions encourage trading, and trading can seriously hurt your long-term returns. Low-cost trading causes you to react rather than invest. You are more likely to sell on one piece of bad news, and more likely to take a 10-per-cent short-term profit rather than a 1,000-per-cent profit though longer-term compounding.

Effect of higher rates on corporate profits. Tricky environment. We've seen massive tightening very, very rapidly, which is going to impact the economy, and we haven't fully seen those effects yet. Lots of data is being thrown at us. The yield curve is very steeply inverted. Signals are suggesting that the economy 3-6 months out isn't as bright as some hope it will be. He's being cautious as the data trickles in to see what effects it has. So far, it hasn't had a massive impact. Lots of job openings, employment still very strong, consumer is in OK shape. It's taking a while for tightening to show up in the data.