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

Educational Segment. Since we are likely heading into a recession, tax loss investments are not a good strategy right now. S&P 500 likely will trend down next year (reflection of lower earnings expected). Worst performing sectors this year mainly surround consumer goods (might be a good time to invest). Companies like GM might also be a good investment right now given recent bottom of shares.

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. REIT AFFO Payout Ratio: REITs are well-known for their above-average distribution yields provided to shareholders for being part owners of the several income-producing properties that a REIT holds. The sustainability of a distribution is traditionally known as the ‘payout ratio’ for non-REIT companies, and is calculated as the annual dividend divided by EPS. Although, a REITs EPS can be negatively impacted by its high depreciation expenses since its assets are predominately real estate. Thus, the AFFO payout ratio is the best measure of defining whether a REITs distribution is sustainable. An AFFO Payout Ratio of less than 1.0X is ideal, as it implies that the company is distributing not more than it generates in annual cash flows.

Santa Claus Rally is coming. Data from technical analyst Larry Williams, making a contrarian call about this bear market The S&P chart shows seasonal bullishness in November and December. Late-November and mid/late-December are the two sweet spots. Early December isn't bad, but the 13th-17th trading day of December marks the Santa Claus Rally. The S&P could start roaring in early December.

The Fed is winning the war on inflation--already. Cryptos keep tanking, FAANG stocks keep declining, Walmart is thriving as consumers trade down, crude oil prices keep sliding (crude was a big driver of inflation) and there's weakness in housing. So, why can't the Fed stop making pronouncements? Their aggressive rate hikes are working.

Fixed income is now more credible, not only stocks. Now, both offer growth. The old-school 60/40 portfolio has done well historically, but has value going forward. Interest rates will continue to be high for quite a while, because of this strong job market. We've likely seen the lion's share of hikes, though. Real estate is unwinding as a result.

shorting He invests only in longs. Shorting is very risky and only for sophisticated investors. Losses can be big, especially in a small-cap stock. You could get squeezed.

Upcoming US Federal Reserve decision on interest rates is very important for direction of the economy. Potential for continued interest rate increases if inflation doesn't slow down. Unemployment levels are still very good in Canada & the USA (more reason to increase interest rates). Consumers spending appears to be resilient which also points to rising interest rates. Concerns that people are drawing on savings built up through the pandemic. Stats are pointing to increasing credit debt levels(deliquesces still low).

It's a battle between positive sentiment vs. economic numbers, from now to the end of the year. If the S&P can maintain current levels by Dec. 31, she would be thrilled.

He's generally positive about the rest of the year, given lighter than expected inflation numbers last week and December seasonality. That said, rates will probably rise 50 basis points in December, 25 in February and maybe the Fed will then pause.

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. REIT Liquidity Ratios: Debt Service Coverage Ratio (DSCR) measures a REITs ability to service its current (one-year) debt obligations. It is a ratio that takes a REITs annual cash flows to assess if it can meet its one-year principal and interest payments. This is especially important for REITs as they carry a high debt load, and generating enough cash flows to service its debt is vital in staying solvent. A DSCR of more than 1.25X is preferred.

Negative market mood and inflation. We'll probably be here for longer than people think. Issue is that central banks, particularly the Fed, have made it clear they want to get inflation under control. They'll continue to raise interest rates until they see inflation subside reasonably, not for just a month or two. And they're going to have to slow down the economy to do that. The actual rate hike number doesn't matter, because the end goal is a higher number than people are thinking about. Talk about pivoting is not going to happen until they see these numbers come down. We have to go into next year before we see interest rate increases pivoting or stopping around the world. Inflation is moderating, which is good. But high inflation is a very difficult thing for the economy and for lower income earners. Once it becomes installed in people's thinking, it's even harder to get rid of. There's real pressure to keep those rates high.

Earnings valuations vs. the S&P. The issue with earnings multiples falling is that the S&P has fallen, but the earnings underlying it haven't. It was trading at 23-24x at the beginning of the year, and now it's trading at 15x. Earnings growth has fallen only 5-6%. You have to see earnings come down. The opportunity today is to do the work on good companies that you really want to own. Earnings will come down if we go into a mild recession, so it gives you a chance to buy really great companies at much lower multiples. You get those opportunities every so often, and this is one of them.

Where to hide in a moderate recession? A moderate recession lasts for a couple of quarters and then you drive on. Historically, you want to be in defensive stocks like pharma. He'd argue that you should buy good companies with good businesses. Take a look at them, because now you have the time with all the volatility in the prices, and you may be able to buy them at cheaper multiples. Build a portfolio of good businesses over a long period of time. Hard to hide in any specific sector, because everything's doing poorly except for cash. Interest rates are impacting everything from bonds to equities to housing, so it is hard. But it's still a good opportunity for those with a long-term view.

Oil stock ideas. Don't need to go internationally to own oil companies. He owns CNQ, a great business that's executed and acquired well. The whole complex has come down a fair bit over the last little while, reflecting slower growth. Oil will be tighter than people think. Oil may be higher, but not substantially. SU is another one to own. After 2020, they all cut capex, paid down debt, bought back stock, increased dividends. They continue to do all this. Will continue to throw off lots of free cash.