2023 was not a banner year for predictions by the “financial consensus complex.” GDP didn’t grind to a halt in the US and unemployment rates didn’t spike. Central Banks did not start cutting interest rates. A banking meltdown didn’t occur after the Silicon Valley Bank mess. Despite all of these challenges the world didn’t come to an end.
One can’t ignore the geopolitical risks. Evaporating social cohesion will be on full display in this year’s US election and the 80 other nations (making up half the world population) hitting the polls.
Despite this backdrop, we remain cautiously optimistic. A “softish” landing seems possible? AI is driving productivity gains. P/E multiples are fair. Dividend growers continue to see capital inflows.
Prudent investors must separate a gloomy view of the world from investment decision making in order to emerge from the turmoil in a sound financial position.
That requires proven methodology and the discipline to stick with it…especially when “shiny objects” abound.
We discuss an array of topics including:
• 2024: The year of the Dividend Grower?
• Why the Commodity Super Cycle still has lots of room to run
• Assessing the potential impact of national elections, the military implications and CBDC’s
• Are market commentators unrealistically optimistic about Central Bank rate cuts?
• Opportunities in infrastructure, private lending and real estate
• How a realistic long term financial plan can prevent you from making big mistakes
Webinar recorded on Jan 15th, 2024.
(Full Transcript below)
0:02
Hello, everyone, and welcome to tonight’s Webinar.
0:08
Titled tonight is our 2024 Market Outlook: Balancing, Realism, Prudence, and Patience.
0:52
So, this is our comprehensive wealth advisory model.
0:56
The core of that, of course, is our financial plan approach, our financial planning process, can be summarized as: number one, Understanding your life goals, finding the right people in the right tools, to help you achieve those life goals, and keeping you on track with regular updates, and making wise changes as circumstances in markets and your life change.
1:20
Alright, so primary reason why a lot of clients choose IWA, I’m frankly, is because of the alignment of our general worldview.
1:28
We’re certainly very focused on the sovereignty of the individual, very much reality driven, as opposed to following what the mainstream media says, and trusting every word, they say.
1:39
And we’re very open to two contrary opinions, because those very often, ends up being right.
1:49
And it appears we’re having some additional fun here.
1:52
OK, Let’s see, All right, so why this webinar?
1:55
Well, essentially, it’s the stuff here on the left.
1:57
But as I was reviewing my notes for the webinar today, I was struck by the sheer number of important global events and trends unfolding before us, Too, with the annual World Economic Forum, Shindig and Davos.
2:11
We’re winding down in Ukraine, dragging on in Gaza and ramping up off the coast of Yemen.
2:16
Election seasons are ramping up around the world. We’ve got the declining popularity of failed left of center politicians, like Orange Girl, Rachel Notley out in Alberta.
2:25
The Return of Orange Man, Bad, and last night’s Republican, Iowa Caucuses, and nasty neo-con, Nikki Hillary, supported by Democrat Donors and Activists.
2:35
Then there’s continued inflation. Rising mortgage rates uncertain, economic forecasts screamed out by overconfident hacks in mainstream financial journalism, et cetera.
2:44
It actually sounds a lot like a remake of a Billy Joel song, We didn’t start the fire.
2:49
It’s my job tonight to sift through the noise and help you understand how all this really affects your well being, and especially to help you make wise decisions for your friendlies investment portfolio.
2:59
Sometimes that means making changes, and sometimes that means actively choosing to do nothing, because the current pressures you’re feeling will pass, and weak areas will self correct as cycles unfold, They always do.
3:11
Back in the summer of 2017, I actually had a personal mantra of sorts that bubbled up into my consciousness.
3:17
And I actually had it on the top of my tablet for about five years.
3:21
And that mantra was, quote, and empowerment supports, sovereignty of the individual, and quote, and sovereignty on so many levels is the dominant theme theme of this moment. The great news is that we are not powerless.
3:34
We all have agency, and that’s very empowering, so in many ways, … was actually built exactly for turbulent times like right now. So let’s get rolling.
3:46
So in today’s discussion, we’ll do a quick recap of 2023, we’ll talk about capital flows, geopolitics, and risks, Central banks, inflation, and interest rates.
3:56
And we’re going to talk about some specific investment strategies created by all of these things. Specifically, we’ll look at the year of the dividend grower, potentially, the commodity supercycle and private enterprise.
4:08
And we’ll talk a little bit about your financial plan.
4:11
Your financial plan is actually one of the areas where you have the most agency because you can see exactly what your financial situation truly is, and how much rate of return you need. And we, then, all of your other, perhaps public pension, say, like, old Age Security Canada Pension Plan, maybe a private pension plan.
4:30
And also the income sources from your investments, as well as potentially part-time employment during retirement.
4:40
So on the recap side of things, we’ll talk a little bit about the financial concensus complex, and the fact is, consensus is not always correct. In fact, it’s very often correct, and it’s spewed out by experts. As Mark Twain said, experts are people who know more and more about less and less.
4:58
And in the financial media, it’s really all about narrative building and in many cases, actually talking their own book.
5:04
And so it’s really important to be able to distinguish between fact and fiction, and as I sat on the interview with Mike the other day, we need to go to the financial information providers for information, but don’t look there for wisdom.
5:17
In 20 23, there was also some, some key events.
5:21
What was kind of an event that unfolded over the course of the year which is the equity market performance was heavily skewed by the Magnificent seven, which has substantial risks associated with that, of course. And then a couple of things that happened that weren’t really on our horizon: There was the banking crisis, the regional banking crisis, in the US with Silicon Valley Bank.
5:43
And of course, the major event that happened in the last quarter of the year is the October seventh Hamas Attac terrorist attack in Israel and the resulting, um, counter, counter, military operation, whatever you want to call it in Gaza.
6:05
Now of course, it was a very, very tumultuous year, but frankly all’s well that ends well. Then.
6:10
Actually that you’re dead end off fairly well, which was pretty refreshing.
6:15
And that sets us up for 2024.
6:17
We’re going to talk a little bit about valuations, earnings. The unemployment picture. We’re looking at some of the differences between Canada and the US. And we’ll talk also a little bit about consumer spending.
6:29
And just like the picture you see on the right-hand side, even when things don’t always look great, there’s always reason for hope.
6:37
So on the specific investment strategy side of things, we’re going to look at commodities. We still think there’s lots of room to run. We’ll show you why.
6:45
Talk a little bit about dividend growers. Talk about corporate fixed income and cash. And the emphasis really is on private, not public.
6:54
And you see on the right there, essentially, that that graphic is, or the picture is really about what it comes down to for our approach and the service that we provide, which is protecting your family. And honestly, we need mostly protection from external sources.
7:11
In fact, there’s the two greatest impediments to becoming and remaining financially independent.
7:15
Our human nature, our own fear of missing out, fear of loss of capital, impatience, dissatisfaction, biases, et cetera.
7:22
Number two, those who prevent, restrict, or try to reverse human flourishing That is, elites, governments, and ideologically driven radicals. And in some cases, that could be media complexes included in that. So we should always remember, of course, that governments don’t create wealth. They only redistributed, inefficiently and to their own benefit.
7:45
So we’ll talk about capital Flows, Canada, the US, to the Dow and the Quantities and the Dividend Growers, little bit about the phenomenon of money on the sidelines and money market accounts, and the effects of kash actually paying a little bit of a decent return these days.
7:59
This is a screenshot Took last week obviously off the Socrates system.
8:06
It’s the most recent monthly capital flows, and you can see in red is where there’s a decrease of zero to 5%.
8:16
And the green is where there’s an increase of greater than 5%.
8:21
And essentially, we can see capital that’s flowing out of right now, out of India and Mexico and South America.
8:29
I’m not sure which country that is and South America, and, of course, leaving Portugal and in Spain and in most of Europe, frankly, and most of it flowing into places like Russia, some into the safety of the UK, into Scandinavia, particularly Norway, and Sweden.
8:48
And of course, here to North American, and also a little bit also going into Brazil, and Argentina and Chile, obviously, for the resources.
8:58
So those are positive things.
9:01
Capital flowing into North America is flowing into North America, primarily for safety and for opportunity, and that comes from safety of the currency, but also the opportunities for markets.
9:14
So let’s shift over and look a little bit at money market funds.
9:17
Right? now, we’re actually at an all-time record for assets in money market funds, around $6000 billion.
9:24
It’s pretty a pretty large number, obviously.
9:27
So, we can see that there were some peaks in some previous times, 2000, that was around kind of a tech, the tech bubble blowing up at money just flowing into cash.
9:37
This was the great financial crisis.
9:40
This would have been the, the period right around the covered crash, and we have it currently happening here.
9:48
Now, it’s a little bit different, I think, though, what’s happening right now, because of the fact that, cashes, finally, starting to pay something in money market securities, that is, short-term Treasury bills, and maybe up to two year paper.
10:05
But banks are not flowing through any of those attractive interest yields, too, to their customers.
10:12
So, people are choosing to move 2, two money market accounts.
10:16
So, you can see here, we’ve had some previous times back here in 2001, and again, the great financial crisis, 2008, there’s your, there’s your coburg, crashed, et cetera.
10:30
And these are the numbers, in white, going into money market accounts, and this is just a smooth moving average in the pink that you see.
10:37
And this is actually the S&P 500 index, and it does take some time.
10:43
Generally speaking, it leads eventually to funds flowing into the equity markets and equity markets being pushed higher, but it doesn’t always happen immediately.
10:53
So, right now, the situation we have right here, I think is more so dominated.
10:59
More than anything else, by the fact that we can get, you know, 4.5 to 5, and 0.25% are somewhere in that neighborhood in the money market. Or short-term interest bearing ETF.
11:11
While our banks don’t want to pay us more than half a percent or maybe 1% if we have a high balance.
11:16
So that’s what customers are choosing to do, which of course is the rational thing to do.
11:23
So we got some, we have a lot of geopolitical things happening in the world. We’ve got the election cycle, talk a little bit about interest rates and inflation, a little bit about social cohesion, eroding, which is a very important concept.
11:36
Talk about central bank digital currencies and the World Health Organization’s impending pandemic treaty which is something to watch out for.
11:45
So in 20 24, we have a very rare concentration of national elections. In fact, about 80 nations are going to the polls.
11:53
four for national or federal elections. It’s about half of the global population, and it includes five of the six largest democracies in the world that you see there in the lower right-hand side.
12:05
The only one that’s missing from the top six is, is Brazil, and they, in fact, had an election last year, So we know that the cycle is moving back towards the center.
12:17
Generally speaking, the mainstream media is generally quite hysterical about this, because anything that moves back to the center indicates that it’s moving to the right.
12:28
And of course, the vast majority of mainstream media outlets have a very strong left of center, biased.
12:34
And so, you know, anything that is moving to the right of say, oh, I don’t know, Karl Marx is, is room for Or, as Reason for Panic in their mind. I exaggerate, but only slightly.
12:48
This year, the biggest election, of course, is in the US, or the one that’s going to affect us the most, and certainly, the one that we’re going to hear the most noise about. That’s for sure.
12:57
The good news is that, when it comes to markets, the fourth year of Presidential sike, of Presidential terms, is almost always a very positive year.
13:08
In fact, when there’s an incumbent running, equity markets are always positive in the year of the Presidential election.
13:17
Now, this year, of course, we have an incumbent running, running loose, like it. That’s a very loose and generous terms. Say that Joe Biden might be running.
13:29
The fact is, though, is that Joe Biden in many people’s minds, is not going to actually ended up being the Democrat nominee because his, clearly, his health is declining.
13:43
He is very obviously, in a dementia related decline. It’s very cruel to watch.
13:52
And I would say, it’s probably the world’s most publicized incident of senior abuse.
14:00
Well, what that might mean for the markets and who the Democrats might replace them with, is another question, could be, Michelle Obama, could be Gavin Newsome And, you know, if the world ever needed a better caricature of an evil politician, I don’t know that they could do any better, said, Kevin, do some, he just looks creepy.
14:22
Anyways, one of the biggest problems that we’re seeing happening is civil unrest, and we see that ramping up.
14:31
Martin Armstrong’s models have made it pretty clear that civil unrest is likely to start ramping up in May, which of course is much earlier than the early November election in the US.
14:43
So we don’t know exactly what that’s all about.
14:45
Could it be something happens with, with Biden in that timeframe?
14:50
Could it be that Trump has, by that time, completely secured the Republican nomination and something happens with Trump?
14:59
Whether, you know, one of the, the 91 charges in the four indictments against them If one of them Styx We don’t know exactly what it’s going to be.
15:10
But we do know that whoever wins, the other side is going to contest it. And that is a very, very significant issue.
15:18
So that really speaks to this next issue, which is social cohesion.
15:23
Now why does that matter? Well social cohesion is that trust that exists and the tolerance of the respect that that exists amongst a population.
15:34
We have a very, very significant decrease in social cohesion.
15:39
Lots of division.
15:40
Now, you know, the elites these days are almost exclusively globalists and they’re seeking increased control. because they think they’re smarter than us, They’re narcissists for the most part. And many of them, frankly, are sociopaths, as well.
15:53
And the most proven methodology of controlling people is by dividing and conquering.
15:59
And so some recent examples here would be the fallout from the October seventh Hamas’ terrorist attack inside of Israel.
16:08
But also looking at some of the things that have been happening for quite a long time, which is the build-up of the The Wolk Agenda like diversity, equity, and inclusion agenda.
16:21
It’s too soon to tell.
16:22
There are some folks that are hopeful and I’m one of them that perhaps the claudine gay resignation from Harvard for plagiarizing too many times to count.
16:32
Um, that maybe that is the start of a pushback.
16:37
And, honestly, I’m struck by the irony. one of the things I didn’t include in my opening commentary was the fact that yesterday was Martin Luther King junior Day.
16:46
And of course, his great wish from the I Have A Dream speech was that I dream of the day that, that we are judged not by the color of our skin, but by the content of our character.
17:00
And that’s exactly the opposite of what’s happening right now, or actually, sorry, yeah! But that’s the opposite of what, what’s happening Right.
17:07
Now people are being judged based on the color of their skin or gender ideology, or even political ideology, rather than on the contents of their character.
17:17
And Mike Campbell had a really interesting quote from from MLK. And his five minutes with Mike … yesterday, and I think it’s particularly relevant today.
17:28
The quotas This, if we’re not careful, our colleges will produce a group of close minded unscientific illogical propagandize, consumed with immoral acts.
17:39
I don’t know that anything could summarize.
17:41
What’s going on in our universities in North America better than that?
17:46
What ends up happening, of course, is, with this increased polarization, is we have an increase of intolerance. And I don’t mean tolerance of evil things. I mean, just tolerance of people who are different from us.
18:00
And that is a very, very dangerous thing, respect for diversity.
18:04
And you do you and everybody leaves each other alone, that’s at the heart of a civil law liberal democratic society. But that stuff is starting to erode.
18:15
Unfortunately, social media has played a big role in that.
18:18
And that is, that’s obviously corrosive.
18:22
For those of you who haven’t seen the documentary on Netflix called Social Dilemma, with that, I believe it’s Tristan Harris.
18:31
Very, very excellent. Documentary.
18:34
It’s worth watching, I’ve watched a couple of times, including with, with my kids, and it’s a very, very important documentary.
18:41
Now, there are some good things happening on the, on the social media front, Obviously. Elon Musk, taking over X and making it more of a free speech or a free Earth speech platform is a very positive thing.
18:56
Because, of course, the answer to bad speech is not censorship, the answer to bad speech is more speech.
19:01
It’s better speech, and another very bright light on the on the social media front is actually Tucker Carlson?
19:09
And looking forward to seeing Tucker Carlson Live with then he’ll Smith here in Calgary a week from tomorrow should be very interesting.
19:19
So let’s talk a little bit about the inflation and interest rate path.
19:24
So year over year inflation in Canada. Latest number that came out, I believe it was today, or yesterday was 3.4%. And the US. Late last week, they came out with a 3.4% overall inflation rate. But the core rate, which includes energy and energy, and housing is up 3.9%, which is probably a more important number.
19:49
And here in the inflation situation, we also see some division, some polarization, because we have the investor class, which overall has benefited from the effects of inflation in the rise in real estate values, general rise and stock values, certainly rising commodity based investments, and the like.
20:11
Whereas everyone else, who is not an owner of assets, that benefit from inflation, probably also has a lower income.
20:20
And it’s very much struggling to make ends meet and that’s a very difficult thing for an economy overall.
20:26
But of course, when it comes to social cohesion as well on the interest rate path, boy, we could talk for an hour on this one.
20:35
But I’m not going to try and delve into that like a fixed income expert wood.
20:41
What I can say is that we don’t anticipate that the 5 to 6 rate cuts, that the market has already price, again, that those are actually going to happen.
20:51
So, the general, the general consensus is that in the, in the bond market, in the talking head market, is that the no inflation is well under control.
21:04
Last week’s number puts that more in doubt, but, because of inflation as well, within control, the Fed is going to be in a position to drop interest rates a full six times that a quarter base quarter point each for 1.5% decrease.
21:19
That’s already all priced into the bond market.
21:22
Now, if inflation does continue to to stay sticky and maybe even to rise, there’s no way that the Fed’s going to be able to do that.
21:31
So, we’re, I think, a little bit in a situation where the bond market overall, particularly the government bond market and the long end of the bond market, is a little bit too optimistic.
21:43
So, that’s why we’re more much more interested in corporate fixed income.
21:47
So, we think that that long duration bond trade, particularly with, with sovereign bonds, government bonds, is already priced in.
21:56
But, on the corporate fixed income side of things, we’re very comfortable with the seven plus percent yields. They’re very attractive. Corporate bonds, of course, are backed by actual physical security. Unlike government bonds, which are actually debentures. Because, of course, if a government defaults on a bond which happens more often than you might think, you know, for example, if if the US Defaults on a bond, we don’t get, you know, the right arm or the the left elbow of the Statue of Liberty or anything like that.
22:26
It’s just all based on the full faith and credit of the government and has that erodes soda’s investor confidence.
22:34
So we think that, uh, in the bond market, there’s going to be a few opportunities for, for locking in some longer term gains. But it’s definitely going to require some, well time moves.
22:45
And we have to be very careful to make sure that we don’t become part of the crowded trade that, that often characterizes markets. And again, sovereign debt looks very vulnerable. And keep in mind as well the central banks don’t control fiscal policy. That’s the big problem here.
23:05
So, we’ve got some mortgage and housing issues obviously.
23:09
We know that Alberta as an example, is the Canadian equivalent of Texas and Florida, where a lot of people are moving to.
23:15
Same thing, holds true for Arizona and the Carolinas and Georgia and even in Tennessee because those are lower, real estate costs, lower taxation, and far freer states.
23:31
That’s obviously a big thing in the US. And here in Alberta were the recipients of that in terms of lower government, slightly lower taxes, but excellent job opportunities.
23:42
one of the big differences between Canada and the US on the real estate front, though, is the percentage of GDP that housing represents.
23:50
So, in the chart on the right, you can see that in the US, housing is about 3.9% of their overall GDP. And in Canada, it’s 7.8%.
24:02
However, when we add housing related consumption, like renovations and furniture and things like that, in Canada, it’s actually when you add it all up, it’s about 20% of GDP. In the states. It’s about 60% of GDP.
24:18
So, while the red states that are receiving the human capital inflows are certainly very healthy, Not so much.
24:27
In the higher taxed areas, like the left coast in the US, north-east, those are problem areas, and in Canada, the biggest problem that we have actually is renewing mortgages. About two thirds of mortgages will be renewing the next three years at much higher rates than people have been accustomed to.
24:45
So, there’s going to be a real pinch on discretionary spending.
24:49
And, in fact, we may see some defaults, a lot of people are concerned about the effects that that has on the banks. But, the banks have already, in Canada, have already stepped up their loan loss provisions and probably have actually taken greater loan losses on their books write downs, than is actually required.
25:09
Another factor, of course, with, with housing is immigration. Now here in Canada, of course.
25:16
In 20 22, we added about 105 or one point zero five million citizens, about a 3% growth.
25:24
But we also have about 800,000 active student visas and overall about 60% of those folks plan to apply for permanent residency.
25:33
As a side note, this is one of the reasons why we actually invest in student housing as one of the alternatives to to government bonds.
25:41
And in the US, of course, the immigration picture is a whole bunch different there.
25:47
Official immigration, Legal immigration numbers are about one point seventy five million in twenty 23, but, of course, the, the biggest issue in the States is actually illegal immigration.
25:58
And that is putting a tremendous, tremendous amount of stress on, on state and local governments.
26:04
And may, in fact, have some pretty serious consequences when it comes to what the elections look like, depending on some things that might happen with proposed Democrat policies, executive orders, et cetera, around making illegal or making residents all eligible to vote.
26:25
So realistically, we’re looking at things probably starting to get choppy in the equity markets.
26:32
I would not be surprised if it aligns with with what looks like a timing benchmark on the Socrates models for the week of February fifth. Things are certainly getting pretty stretched to the upside.
26:43
Particularly with the Dow Jones, S&P the same, nasdaq not quite as much.
26:48
It hasn’t reached, hasn’t returned to its previous peaks just yet, but when it comes to a lot of global events that seem to be, ah, that are currently in motion or are about to happen, may looks like the key timeframe.
27:06
So, you know, right now bullish sentiment is high, we don’t know exactly what the catalyst will be.
27:12
Again, we’ll look at the Socrates Data to see that our managers are well aware of the Socrates Information, but also, of course, they have their own systems that measure extreme sentiment and an extreme pricing, and things like that, and they already take take proactive measures to actually reduce the amount of equity holdings, raise cash, and wait for pullbacks.
27:37
What it really comes down to, unfortunately, I think, is going to be very challenging May, and some beautiful May flowers, There are some tools.
27:45
Some daffodils I asked Sandro to pull up a picture of that, because tulips and Daffodils wear my Mom’s favorite favorite flowers, and growing up in the Okanagan. That was a big part of of what we did outside.
28:00
The key here is Marty’s got this may seventh at eight, seventh, or eighth ECM date, and there’s a lot of stuff that’s happening.
28:09
Could it be that the US tips into an actual recession then?
28:13
Could it be the Russian inauguration? They’ve got their federal election coming up in March.
28:19
Looks like Putin Sirtuins got about currently an 83% approval rating. Be surprised if he is not re-elected, but May seventh is actually the inauguration date.
28:29
Will we start to see sovereign debt issues?
28:31
I mean, we’ve got, we’ve got the US.
28:34
Proposing to actually sees $300 billion of frozen Russian.
28:40
Um, assets, including including Russian Central Bank reserves that are held in, in institutions outside of Russia.
28:51
Don’t know if it’s that that would certainly spark a problem because that would just completely erode trust in Western institutions.
29:00
Or let’s say oh the rest of the world’s like China and India, even Japan, South America and certainly the Middle East.
29:10
There’s also the World Health Organization getting together. They’re working on this pandemic treaty.
29:16
And this is a very, very, serious issue because, again, the issue of sovereignty is very closely linked to that. Central bank digital currencies. Is that what’s going to be the, kind of the key, stuff, that happens in May?
29:30
Or could it perhaps be you know, what drop and, and the beginning of a slingshot move to the upside for commodities?
29:38
The fact is, we don’t know We just know that the focus is, is really on me, for a lot of different things. And, as it happens, to be, our next webinar is going to be on May 10th, We didn’t plan it that way, we didn’t plan.
29:53
We didn’t plan the timing of tonight’s webinar to be after the Iowa Caucus, Caucuses, or anything like that. We didn’t know Rachel Notley was going to resign today or any of those things.
30:04
But it’s interesting how some of these timeframes just kinda work out.
30:08
And we’ll be here to give our perspective on things right in the middle of the flurry.
30:15
Unfortunate reality is that today we have a significant increase in, in warfare. And there’s all kinds of forms of warfare.
30:24
There’s, of course, there’s the kinetic war, but there’s also cyber war, including the use of AI, and then there’s financial warfare.
30:32
And of course, right now we have active hot wars in Ukraine and in the Middle East and increasingly, in the Middle East, we’ve got hot spots in the Taiwan Strait.
30:44
Obviously, a ramp up of of military personnel and activity. And all say posturing in Guyana.
30:55
because Venezuela and Guyana both lay claim to a very significant oil and gas field that is off their coast.
31:05
And they both lay claim to that.
31:07
But we also have some very key resistance that’s boiling up. We’ve got the Dutch farmers.
31:12
There’s about 30,000 people and 3000 farm vehicles that are involved in a very significant basically resistance protests that basically involves parking and talking and chanting and all kinds of things like that.
31:31
Of course we had the Dutch farmer protests last year and right now we also have the Polish and Hungarian farmers and truckers who are actually joining in Germany.
31:39
So very interesting to see photos of, of farm vehicles and, and and tractors, and everything. On the on the route leading up to the brandenburg gate is very, very historic.
31:54
We also have the risk of cyber warfare, and this could be something deliberate caused by a nation state.
32:02
Of course, everybody talks about Russia and China being, you know, very technically capable, very true.
32:09
I will point out that one of the most successful cyber attack events was actually perpetrated by the US on Iran, a couple of years ago, where they shut down their uranium enrichment, centrifuges via Stuxnet.
32:24
So that was something that the major countries of the world all seem to have a technical capability of doing that but we could also have something that is a more natural event. It could be.
32:37
It could be A or something that’s not directly cyber.
32:42
Could be a natural event, like a coronal mass ejection or a … storm.
32:46
We avoided that something like that short time ago, or it could be something more sinister and deliberate.
32:53
Like Anne electromagnetic Pulse attack which both natural events like a CME or an EMP attack, which is human caused a course.
33:04
Those would fry electronics, and would cause a very, very substantial disruption of any society that is hit by that. And in fact, it would be very dangerous.
33:15
And then, of course, there’s financial warfare and primarily, that comes in the form of sanctions. We’ve seen that, the sanctions against Russia, I think there’s 9000 of them in total. 11 different rounds have turned out to be boomerang sanctions because Russia’s.
33:33
Russia is booming, but it could come in the form of trade embargoes and tariffs and things like that with other countries.
33:41
And of course, war is just a continuation of policy by by other means. And when we stop talking, that’s when things start to get nasty, unfortunately, right now, we don’t seem to have a lot of effective diplomat’s out there on, really, on any country side.
33:59
There’s something it’s a whole lot closer to individuals’ hearts because we’re not in countries where we’re really at risk of bombs falling. Of course, you know, death is the ultimate loss of personal sovereignty. But here in the west, there’s very definitely a war on our personal sovereignty, through central bank digital currencies.
34:21
Now, the bank of Canada has done some studies and they found that there’s still about 85% resistance to the idea.
34:29
They’re claiming that, you know, they there, they indicate in their, their published works that the central bank digital currency must protect privacy, and won’t eliminate cash. But of course, the entire purpose of a central pink tissue currency is for surveillance and control, so that doesn’t really stand the smell test. Bank of Canada’s just kinda following orders and getting prepared.
34:51
Ultimately, it has to be a parliamentary mandate, but they are dangerous.
34:57
one of the things I will say that that we can do to actually resist this is to use cash, support politicians, and, and, you know, policy think tanks and sign petitions and talk to your friends, talk to your family members about continuing to use cash.
35:17
Because, ultimately, this is a, it will be a massive, and, if not, potentially, permanent loss of, of privacy when it comes to decisions that you get to make around where you spend your money, how you spend your money, how your save your money, and those sorts of things. And, of course, financial independence is one of the things that is most important to maintain your overall sovereignty, both as an individual and also as a country.
35:49
We also have, at the higher level, a very clear war on national sovereignty.
35:57
Leslie Lewis, the, she was a candidate for the conservative Party of Canada Leadership race that pauly of one, but she’s a very, she’s very impressive person, a lawyer. And she’s actually introduced a private member’s bill, pushing back against against agenda 2030 with the UN and the World Health Organization.
36:22
And that’s because of the fact that it actually undermines national sovereignty, and again, personal autonomy, And of course, her criticisms were actually criticized as being conspiracy theories by the liberals and the mainstream media, but I repeat myself. But, you know, if there’s a if you’re called a conspiracy theorist or a racist or something like that, you know that you’re over the target. And they don’t have anything else to criticize you with.
36:47
Um, there’s a quote there on the right-hand side that those who would give up the central liberty to purchase a little temporary safety deserved, neither liberty nor safety nets from Benjamin Franklin, one of the Founding Fathers of the US.
37:01
And, it’s, it’s a timeless quote.
37:04
And it applies today, more than, at any other time, that I can, I can recall, certainly, in my lifetime.
37:12
There’s another really important thing going on, which is the Pandemic Response Treaty, quote, unquote, which is being developed by the World Health Organization. They’re getting together in May to see if they can implement that.
37:25
And if you want to have an extremely, extremely insightful and cogent, and well thought out overview of that, and what happened through the pandemic, I would strongly recommend that you look up the Brett Weinstein interview on the Tucker Carlson Network. You can often find these things on YouTube’s a couple of days later.
37:49
It’s about 45, maybe 50 minutes long, and it is incredibly, incredibly insightful.
37:56
And despite how dark some of his conclusions are, it’s actually pretty positive on a net basis.
38:03
one of the most important things that we need to remember is that, whenever major negative events are happening, and people are scared, that is the time when they are the most vulnerable, two accepting things, which, which restrict their, their individual freedoms and our freedoms as a society as, as a whole.
38:24
So those are some things that we need to be on the lookout for. And with, the most important thing that we can do is talk about all those things. So why does all of this stuff matter?
38:35
Well, all of this loss of sovereignty on an individual level and on a national level, and what we see happening with the chaos, in, in politics, it’s all decreasing confidence in our institutions.
38:53
That is key, declining confidence in institutions, and of course, as Mark Armstrong has often talked about, it’s declining confidence in government. And that’s why the sovereign debt crisis is in my view.
39:06
And inevitability an eventuality.
39:09
We just don’t know exactly when it’s going to happen.
39:12
But that’s something that we have to be on the lookout for.
39:17
So of course, what can you and I do? What can individual investors do? Well, it really comes down to our behavior.
39:25
The most important things are not giving into fear when things look bad and also not getting too aggressive and to euphoric when things look good.
39:36
We know that a patient and disciplined decision making framework is always, always more productive, more fruitful than impulsive or emotional decision making, but it’s difficult.
39:48
That’s a big part of what we help with.
39:49
And we have to remember, of course, that perfectionism is the enemy the enemy of the good and that you’re not going to get everything right every time in, in every market condition, but it’s not about perfection and it’s not about getting the maximum performance out of everything all the time. It’s really about having a poor portfolio that’s durable, and that comes from having structure and discipline with flexibility to changing market conditions.
40:19
So, the current financial consensus from the consensus financial consensus complex, as we like to call them, is that inflation is moving in the right direction and will soon reach the Fed’s target of roughly 2%.
40:31
I think that’s fantasy.
40:33
As a consequence, additional rate increases won’t be necessary. That could be true.
40:38
As a further consequence, will have a soft landing marked by a minor recession or none at all.
40:43
Well, that could be true.
40:45
But the reality is that eight out of the 12 last opportunities that are last attempts that the Fed made at a soft landing, they only succeeded.
40:56
Sorry, on the last 12. They only succeeded four times. They failed eight times out of 12.
41:01
So, two out of three is bad in this case.
41:05
And I’ve heard it heard or seen it characterized that pulling off a soft landing as a bank of Canada or as a central banker. It’s like trying to allow the 747 on an aircraft carrier. It’s difficult.
41:18
So, again, the financial consensus is that the Fed will be able to take rates back down, that’s already priced into the bond market.
41:27
Right now, the bond market seems to be more or less priced for perfection with all those things. Built-in, and frankly, so are stocks.
41:37
Investor sentiment is exceptionally bullish right now.
41:43
And the VIX, which is a measure of volatility or risk premium in the market. It’s the put call ratio on the Chicago Board of Exchange and Options Board of Exchange …. And it has just started to tick up from the incredibly low levels.
42:02
That it’s been out for awhile so certainly, you know, seeing some pullback and equity markets in the next few weeks would not be Would not be a surprise.
42:12
And our portfolio managers are very definitely ready for that.
42:16
So shifting over, taking a look at last year, again, sector performance.
42:21
Not sure who the producer is of this periodic table on the left, but it’s always interesting to see.
42:27
We can see that, um, in 20 23 on the top right-hand corner information technology and telecoms and consumer discretionary, did the best.
42:38
Overall return of the S&P 500, was 26.3%.
42:43
And then Industrials, Materials, Real Estate, financial’s, Healthcare, Consumer, Staples, Energy and Resources and Utilities were at the bottom.
42:53
Over on the TSX last year.
42:57
Infotech did the best, that’s really based on Shopify, more than any other company, because that’s what our That’s what our infotech sector is mostly comprised of on the healthcare side of things. We don’t really have a health care sector. We have a weed industry. We have a cannabis industry and there have been some sub gains there. This year. We have had a nice little recovery in, in financials, which is nice. And that happened mostly in the back of the last two months of the year, really, just which is excellent.
43:30
But the difficulty, of course, is, that’s easy to see going backwards.
43:37
More difficult going forward.
43:40
Last year was a quintessential example of concentration risk and and the mania or euphoria associated with a particular idea.
43:50
The idea in this case was the Magnificent seven, which was a branding or a marketing name That was actually actually hatched by the guy that we saw on one of the previous pages. Jim Cramer.
44:05
Who is the fellow from CNBC.
44:07
Who is I’m?
44:09
I’m absolutely certain that he that he must be the love child of Justin Trudeau and bozo the clown because nothing that comes out of his mouth seems to make any sense but he is good at that waving his arms and getting people’s attention.
44:25
So in 20 23, the S&P 7, 7 companies, is up more than 50%.
44:32
But the rest of the S&P 500 is basically flat, as you can see, along the bottom.
44:37
And of course, a Portfolio Manager, who is responsible, cannot put, you know, 30% of a client’s portfolio, and seven companies, because that’s the, that’s how much the S&P seven actually represents 30% of the market cap of the S&P 500.
44:56
They can’t do that, and you don’t want them to do that, because while it’s good, When it’s good, it’s really good.
45:03
The fact is, is that we have situations like Research in Motion, and and Nortel, and you know, even more recently here, Shopify as examples of when things go bad, they go really bad.
45:15
And of course, taking a look, again, last year, people do a lot of comparisons if we look at the TSX and the S&P 500 on a one-year basis, even taking into account, you know, the S&P seven and the S&P 493, and blending them together into that S&P return.
45:35
Yeah, the S&P 500 did really, really well last year. But if we zoom out just by one year, we can see that basically, they’re on, on equal footing from on a, on a two year basis.
45:50
And of course, in 20, 22, when we had 20% drops, from peak to trough, and an overall 12% negative year, with with equities and stocks, you know, everybody was happy that there was great risk management that was in place, but, of course, everybody wants all the returns to the upside when things are good.
46:12
Um, and it seems that the only people with shorter term memories than investors are voters.
46:20
So, looking ahead, earnings and valuations are actually pretty decent.
46:25
So, we are cautiously optimistic. We’re not wildly optimistic because we have the challenges on the on the horizon that we’ve referred to a little bit earlier.
46:35
The things are definitely not terrible.
46:37
So on the TSX, you can see that the actual earnings are right around 14, oh, six, And anticipated growth on a 12, 12 month basis is about 6.5%. So 412 month earnings expectations are 498.
46:52
The S&P 500, the actual current, is at about 218, in total. And the forward 12 month is at 235.
46:59
So there is about an 8.2% growth in earnings or profitability expected for each of those. Or for the S&P 500 next year.
47:11
What is distinctly different, though, is that the current price earnings ratios.
47:17
So on the TSX at 14.4, 2, that’s very reasonable.
47:21
There is a pessimism around the multiple that the market is actually going to give. So even though there’s an expectation of a 6.5% growth rate on earnings, compression of this multiple from 14.5 down to 13.5.
47:36
What actually results in about a -6% growth?
47:39
So, that’s pessimism being discounted on a forward basis, but not on a current basis, because investor sentiment right now is very high.
47:48
Over on the S&P 500, the actual price earnings ratio right now, including the Mag seven, which are just price for perfection, and, I think, irrational, multiples of current earnings.
48:02
It’s at 21, which is at the high end, but on a forward 12 month basis, if we contract it just a little bit, it actually more than more than discounts, the 0.2% growth that is expected going forward.
48:17
So we have some kind of contradictions, some kirt, euphoria, and more of an outlook though of pessimism.
48:28
So we’ll have to see exactly how how things workout.
48:34
So we’ve got a couple of things here to show you really quickly that have to run through here. This is the unemployment rates in Canada. In the US, you can see Canada is, is a little bit higher.
48:46
Unemployment rate in the US is is very low.
48:50
That’s not necessarily a really super good sign. It’s generally a good sign.
48:55
Unfortunately, the reality is that there are quite a lot of people better working a second or a third job, just to make ends meet, but, and the majority of this existing unemployment rate is because they have job openings that they can’t fill.
49:12
In Canada, we’re a little bit higher, still.
49:15
You know, we’re trending a little bit higher in unemployment right now, likely because of, I would say, probably more because of our housing crunch and increasing mortgage renewals and things like that, Just a little bit more pessimistic generally.
49:29
And the growth rate here in Canada, as you can see, is, right now, right, Close to zero.
49:37
It could, in fact, with the next GDP print, be slightly negative, which would put us in a position where, you know, we’re getting set up for a technical recession, But right now, of course, with interest rates and inflation higher than GDP, it feels like a mild stagflation.
49:55
GDP growth in the States is a little bit higher here.
49:59
As you can see, that the trajectory is a little bit higher, it’s a little bit more positive, but again, with inflation being high, it doesn’t feel as good as, as that would normally make us think things should be. And then let’s also look over on the consumer spending side here in Canada.
50:17
We’re basically flattened out after a pretty steep rise coming out of, obviously, this period here, which colvard Lockdowns, and then, you know, obviously, the spike recovery, and then, generally, trending up. But right now, obviously, consumer spending in Canada looking a whole lot more cautious.
50:36
And yet, in the states, we still have this high this trending higher.
50:43
We can see that it’s it’s not sloped up, very much. Consumer spending is still expanding, but it’s somewhat muted.
50:52
And of course, we have to always keep our eyes on the whole issue of what’s going on with with refinancings and credit card debt because Americans seem to have much more of a love affair with their credit cards than than even Canadians do.
51:10
So, going forward, how do we put all this stuff together?
51:12
Well, the framework that we use, what we call our forward thinking portfolios, the three general areas, the stable income generation, which includes alternatives and corporate bonds. The income growth area, which is stocks you can tolerate, and then an opportunity seeking area. And we generally break those down into two kind of categories of core and what we call explore.
51:35
So let’s talk about some investment strategies, some specific ones that we’re looking to or for growth going forward.
51:42
First is in commodities.
51:44
Also, dividend growers talk a little bit about corporate bonds. And the emphasis here really is on private assets, not public assets. And that includes, of course, the alternatives talk about.
51:56
So the area that we did the best in last year, very happy about this, was our, we call it our core to explore portfolio. But it’s really the Explore part last year, 20, 23, full year.
52:09
We did 11.89%.
52:11
You can see that here on the right-hand side, the Bloomberg Commodity’s index was down 7.9%.
52:20
And so, that kind of outperformance, We’re we’re thrilled about it. We’re not thinking that it’s going to continue to be that fantastic.
52:30
But the reason that we have had very solid performance throughout is because of the active management since inception, which goes back to March 18th of 2021.
52:43
Cortex Flourished delivered about a 15.5% return and that’s still outpace the Bloomberg Commodity Index and we’ve had substantially lower drawdowns.
52:53
The areas where we’re concentrated right now are in energy.
52:56
That’s includes oil and gas, and our best performing asset this past year, certainly, in the second half of the year, has been the uranium or the nuclear play.
53:05
We also added base metals in the fall.
53:09
That’s things like iron or aluminum nickel and copper.
53:12
Those are, of course, the essentials, when it comes to infrastructure built out, and industrial production.
53:18
Precious metals, it looks like we’re in a position where we might see a move to a stronger move to the upside with the precious metals.
53:29
Right now, we’re up a little bit from our investment that we made in trenches back in August, August 11th, and july 24th, I believe. And, so, we see some good growth going forward there. And we also, longer term, see some really strong potential in food commodities. Though, we’re not heavily invested in that right now.
53:50
And, again, active management is what gives us the advantage there.
53:54
So, why do you think there’s so much room to run?
53:56
Well analogs to history so, here’s where the fed pauses, its interest rate increases and this is what it looks like for trend following, commodity trading advisors thereafter.
54:07
It’s generally very positive trend.
54:12
This looks at different one decade periods.
54:17
You can see here in gold is the 19 seventies, similar to the carpet that many of us had in our homes in the seventies.
54:27
We have the eighties here in black, um, in blue is the two thousands, and right here is where we are.
54:33
This is looking at the Goldman Sachs Commodity Index just as, uh, as the benchmark.
54:39
And you can see here that over those previous decade long periods, the analog shows us that there’s a whole lot more room to run. We think that’s still the case.
54:51
And if that works enough just to hearken back, again to that seventies show.
54:57
This is the path of US inflation that we saw from 19 70 to 19 83, again, in that, and that beautiful autumn gold, which could have also been, I think, potentially, our home appliances, if I recall correctly, Dishwashers and and stoves and fridges were often that ugly gold color as well. But here’s the analog where we are right now. Going back to 20 18.
55:26
We can see that there’s a little bit of a lull in inflation, which is what we’re kind of experiencing right now.
55:32
Now, again, this is not deflation. This is not prices coming down. This is the rate of increase is slowing. But we think that there’s still plenty of room for that to run and commodities.
55:42
We’ll be a substantial beneficiary of that.
55:45
And that’s primarily because of what we see as being shortage, shortage, driven, or supply driven, and driven primarily by the rise in military conflict, and some of the trade embargoes and sanctions and tariffs and things like that that might result as part of financial warfare that goes along with some of the military conflict.
56:11
Switching over to dividend stocks, you’ve seen this before.
56:16
Not all dividend stocks are created equal. We showed this in previous webinars, The previous two, I think. And this shows that dividend growers and initiators have the highest long-term quintile of return performance, and going along mixed this axis here, They have the lowest quintile of annualized volatility.
56:36
Dividend growers and initiators are, in fact, the closest thing to a free lunch that there is.
56:41
The difficulty, of course, is that we get impatient and instead of sticking with the tortoise, we prefer to look at the shiny object or the supposedly greener grass on the other side of the fence.
56:55
And inevitably, when we give up on a consistent, long term strategy, after it’s been doing poorly, that’s usually the time that it turns.
57:04
We set that back at our October fourth seminar, and lo and behold, about three weeks later, the dividend payer markets, or the dividend stocks turned substantially and had a an excellent rally, all through year end.
57:21
and of course this looks at dividend stocks after rate hikes. We had a little bit of a delay in this period’s, so it takes some time after.
57:31
Interest rates are increased by central banks. We had more rate increases, so it took a little bit longer for this to happen.
57:39
But here we are about three months later or so. And, lo and behold, we’re starting to see dividend growers and initiators, taking off to the upside. We’re happy about that.
57:50
And, just as dividend, stocks have been so unloved or under loved or undervalued for quite some time, what we see here is the valuations, so the price earnings ratios of high dividend stocks versus the overall S&P index.
58:08
So, the average undervaluation of dividend grower dividend stocks is about 12.9% versus the S&P 500, but we reached some extremes here.
58:21
This is in the tech, the the bust after that, the tech rally and things rebounded very substantially thereafter.
58:32
I remember being an advisor back at my mutual fund dealer days with with a large national firm whose name shall not be mentioned, but their their name means thank you in Swahili. And we had clients, of course, who were, you know, clamoring for some of the tech rally returns. And then things went bust and dividend stocks came roaring back.
58:57
We had a plus 17% year the following year, which was phenomenal and we’re back in not dissimilar territory or dividend stocks are really under loved and undervalued.
59:08
So, again, this is where we gotta be really careful, not to jump from one horse to another, just because it’s not doing as well, right now, as other things that we see around us, And going forward, there’s very definitely some excellent sectors of interest that our portfolio managers are looking at. Financials of both Canada, and the US, and utilities. Utilities about a horrible year, because of rising interest rates. Healthcare, particularly in the US, Canada, not so much, because, again, our health care sector is really just the cannabis sector here. In the US, though, health care has been terribly beaten up and looks like a good purchase.
59:48
Energy stocks looked good a little bit earlier in the year have obviously come off pretty substantially but are so undervalued right now. And the reality is that the outlook for oil and gas on a long term basis is still extremely positive.
1:00:02
So those are of interest telecom’s in Canada, and certainly a publicly traded real estate investment Trust in the US and consumer staples as well.
1:00:13
So, there are lots of good news stories for sectors to rotate into.
1:00:19
And, we are right now, at exactly an hour, and I think I might even take a breath here shortly, but we’ll do some some Q and A after.
1:00:30
But, of course, all of this comes down to: What does this mean for you? What does this mean for your family?
1:00:37
Ultimately, it makes sense to take a look at what could be improved.
1:00:41
If you’re one of our clients, you’re if you haven’t already been booked in for the annual review, that will be happening.
1:00:47
Soon a course and it’s a good time to assess what’s going on, not just in the past year, because that’s again a short-term type of time horizon.
1:00:57
But it’s really about what’s what’s been going on for the last 5 or 6 years and how things are faring.
1:01:04
So you know, if you want progress, we need equal parts of time, money, and a willingness to change.
1:01:10
Some of the things that people cling to are some outdated investment strategies, and they stick with an advisor, maybe because they, they like that individual, but it’s just not working for them. And one of the one of the things that I think is most important to see, how all of this applies to you. What’s going on in the world? What’s going on in your portfolio? What’s going on in your family life?
1:01:31
What’s going on in your family’s financial situation can answer those questions with a comprehensive financial plan.
1:01:40
All right.
1:01:41
So as we’d like to say, applied knowledge is power and we’ll give you some opportunities to, to actually apply that, will have an exit survey, as you exit the webinar here, we’ll send a follow up e-mail. Course we offer a complimentary consult and if you like, you can also sign up for our video and Webinar library interviews, crow’s Nest. And of course, you can contact us directly at the, at the website that you see there, I hyphen wealth dot, CA or integrated wealth, management dot CA. We kept that old URL as well. And you can e-mail sand or directly as well.
1:02:21
So, I’ll take a pause here for just a moment, and let Some questions come in. And I’m actually going to take a drink of water, and look forward to seeing how many questions we have, and answer as many of them as we possibly can.
1:02:38
Before we kind of, Before the Chariot turns into a pumpkin, shall we say, see in a moment.
1:03:55
All right, welcome back, and thanks for allowing me to have a glass of water and a bit of a break here. Had a question that was sent in.
1:04:03
If banks can bail, can be bailed in, that is by depositors in the US, is this true Canadian Banks? The answer is yes, we do have bill in legislation here in Canada. That’s one of the few things that, I would be highly critical of Stephen Harper for doing. That came in the wake of what happened in Cyprus which was seen as a template for for bail ins. Of course. We do have CIC insurance in Canada for 100,000 per account for institution. Beyond that is where we start to get some potential risks of of a bail in. That is to swap deposits for equity in a bank if the bank is having a challenge. Next part of the question of central banks are buying gold. What is their message to investors? I think that’s fairly straightforward. Central banks diversify what their reserves are and gold is one of them.
1:05:02
So I think that’s a positive message all that’s all already priced into the market.
1:05:07
Second part of that same question is, Is this something big, is coming along from the zero Hedge article. I’m not sure what that one means. Oh.
1:05:17
In Texas, they are passing a law for gold and Silver to Tabak the Currency locally.
1:05:24
It’s interesting. We’re starting to see some things like that, that are happening, again in the relatively free state of Texas, and also in, in, in Florida, places like that.
1:05:36
I believe De Sante said that central bank digital currencies would not be considered legal tender in Florida.
1:05:43
But that’s really an area of federal jurisdiction, so I don’t know how much effect those those those state laws or executive orders would actually have. But we certainly see an uptrend or upside for, for precious metals, particularly as confidence in government declines. That’s all part of a big theme.
1:06:05
Next question here.
1:06:06
What does the, uh, oil and gas outlook in Canada versus the US?
1:06:13
Well, first of all, in Canada, actually globally, the outlook for oil and gas is very positive, because we continue to have growth globally, as slow as it is. It’s not like.
1:06:27
We still have continued growing demand, but of course there’s the current level of consumption. And so of course, oil and gas companies have to continue to explore to replace depleting production.
1:06:39
Generally speaking, here in Canada, the energy sector is slightly underperforming the rest of the index, right now it’s benchmark.
1:06:50
Whereas in the US, the energy sector is doing slightly better on a relative basis, still very positive in, in both countries.
1:07:00
Um, the problem in both countries, of course, is regulation, and basically Federal governments that are hostile to oil and gas development.
1:07:12
And we know the background as to as to why that is.
1:07:16
Second question, if it’s the same person, Europe is prepping for war plus, big military exercises in September, in Northern Europe. What’s the impact on North America and Canada?
1:07:27
Generally speaking, The impact on North America and Canada is positive, because capital flees warring areas.
1:07:38
And areas that are at risk of military conflict and destruction and it goes to places that are that are perceived to be much safer.
1:07:47
And for the time being, the US, Dollar remains the world’s reserve currency that will change eventually as the brics countries develop.
1:07:56
And if, if Western nations try and do some stupid things, like seizing, um, Russian foreign reserves, that will dramatically erode trust in in Western financial institutions and that would be bad, but if, if they hold off on doing that, I would say it’s generally generally positive.
1:08:24
It is extraordinarily tragic for, for those in those war torn areas.
1:08:29
And certainly, just in the last 48 hours, I believe, Poland has issued basically a 40 or a a warning about conscription coming in preparation for fighting Russia, which is suicide for Poland. But with some very, very strict, very strict penalties.
1:08:51
So can you speak to your recent comment, equity market volatility, and Q one, likely beginning in early January.
1:08:58
This was too many investors, including professionals, but this is a bear trap, thus, this period will likely be the last big, shorter term opportunity to get fully long and equity portfolios.
1:09:11
That was a comment. Essentially, that came from, from Martin Armstrong’s World Economic Conference.
1:09:17
And the, he said, that the market value equity market volatility could start as early as early January.
1:09:26
It’s looking now, here we are in mid january and looking like perhaps it’s already starting. So we could end off January in a very, very challenging situation.
1:09:39
Marty did say that the period of upcoming volatility will challenge, even the most seasoned investor so kinda buckle up.
1:09:48
Our portfolio managers are ready for that.
1:09:51
They have no problem whatsoever with Lightening up on, with lightening up on their equity exposure decreasing the Beta. That is the the the volatility of their existing stockholdings, buying protective puts and hedging currencies by holding US dollars.
1:10:14
Will the slides be available after the presentation? We don’t actually send out the slides, Doug, but we do send out a recording of this. So, effectively, you get the slides through the recording of this.
1:10:26
And to do, Armstrong wrote about a bear trap and slingshot timeline mister sketchy or any thoughts there?
1:10:37
Thanks for that question.
1:10:38
Gabriele, I think I actually actually answered it above when Marty was talking about market volatility in the first quarter and the bear trap. So similar question.
1:10:51
Um, and the question is around minimum investment accounts.
1:10:59
Don’t know what the, it’s the first initial, I won’t say the last name, just four.
1:11:05
Just for confidentiality. But we contact you about that separately.
1:11:12
And to do oh, and it says, I might have missed it. What was your average past year returns? Using the S&P 500 as a benchmark?
1:11:21
The SPY return, almost 25% with, with virtually no management expense. How does your team adapt to changing market conditions?
1:11:28
when your theses don’t match reality not have been happy with the 50% or I would not have been happy with a 15% return on my portfolio by or professional manager.
1:11:38
Well, what I can say is that, frankly, the S&P 500 is, it’s an equity benchmark, because it’s the best known one. We have never actually bought into the concept that a bed inequity benchmark should be the, or an equity index should be the benchmark for a Portfolio Manager to compare to.
1:12:01
Because they don’t invest in their investment portfolios don’t look like the S&P 500.
1:12:10
And so, you know, some of our portfolio managers delivered a 50% return and their growth allocations lower in there.
1:12:18
Their dividend grower allocations. And if if you wouldn’t be happy with the 15% return on a risk controlled basis, then fixed probably stick with what you’re doing.
1:12:31
Crypto, Bitcoin ETFs, we’d like to hear any news on this front.
1:12:36
Well, of course, in the last week or so, we’ve seen a Bitcoin ETFs start trading, and there’s lots of competition in that regard. I’d say that’s a good thing.
1:12:49
I don’t really have a lot of long term confidence in in bitcoin as an asset class. It’s fine for a trading vehicle. You know, could I be wrong about that? And it eventually is accepted as an alternative currency? Yup.
1:13:09
Could very definitely be wrong about that.
1:13:12
But, I would look at them as a trading vehicle, not necessarily as a long term, store of value.
1:13:20
Ah.
1:13:22
So, as uranium has had a quite a run, where do you see it going from here?
1:13:28
Yes. Uranium on the spot market, just got over 100 bucks a pound, could easily run to 150.
1:13:36
We’re, I’d say, in the mid stages of a bull market.
1:13:40
And we are holding fast with our uranium allocation and our core and explore portfolio.
1:13:48
From Dan here says Your e-mail commentary from the Armstrong Conference was much more bearish on remaining invested in the short-term, rather recommending going to cash short-term.
1:13:58
Have you altered your outlook toward dovish position?
1:14:02
Actually, the recent commentary that we sent out from the Armstrong Conference was much more bullish than we had anticipated that bardy would be.
1:14:10
And we were talking about shorter term volatility. And that’s kind of what we see happening right now.
1:14:17
So, I think you may have actually misinterpreted that e-mail I’d invite you to write in and we’ll send it to you again.
1:14:26
We actually are ah, longer term bullish for the year, but we still see again, some volatility. That’s probably starting right now and potentially in the May timeframe, which I think is probably going to freak some people out.
1:14:41
Ah.
1:14:44
So, are we looking at Bitcoin or crypto as a small speculative position to hedge against central bank, digital currency, or central bank issues? Not really.
1:14:54
No will accommodate.
1:14:57
You know, as much as we can for for clients who might want a little bit of Bitcoin ETF, but it’s not something that we see as a longer term asset class.
1:15:07
How safe do you think the Canadian banks are in comparison to the US banks? And you think credit unions are even safer than the banks.
1:15:14
First comment is that in Canada, we have effectively a banking oligopoly.
1:15:22
So, that’s the downside. The upside of that is that, generally speaking, Canadian banks are considered to be amongst the safest in the world, if not the safest in the world doesn’t mean that they’re invulnerable, it just means that on a relative basis, they’re very, very strong.
1:15:38
In the US, the biggest issues are with regional banks, as we saw, say, with Silicon Valley Bank and some other players like that.
1:15:47
And do I think that credit unions are even safer than the banks? I would say, generally speaking. Yes. Credit unions are regulated under a different set of legislation, they actually have a $250,000 deposit guarantee per account per institution, as opposed to the CIC for Canadian Banks for Canadian Chartered banks.
1:16:11
And credit unions, generally speaking, are managed a little bit more, a little bit more conservatively than a little bit more conservatively then than banks generally. And of course, there they tend to be more community focused. And that, generally speaking, means it means a safer banking institution.
1:16:35
Got a question here, Are you familiar with David Webs, the great taking. He raises some very concerning concepts regarding beneficial holders versus entitlement holders, big banks and major corporations, versus the rest of us. What are your thoughts? And I can’t see the risk to your question here.
1:16:53
I’m going to try and expand this window here, so I can see the rest of your question.
1:16:59
Are we here?
1:17:08
What are your thoughts and are we more protected in Canada?
1:17:12
Maarten Armstrong has, has gone through and more or less debunked some of the more extreme things that David Webb is claiming the and I’ve had numerous clients that have had a that have asked me about it.
1:17:27
Starting back in the fall, the biggest issue I see is that even if what web says is actually true. And anything that has any debt against oing against it can actually be seized by an institution in the event of default as opposed to, you know, you still owning your equity.
1:17:50
I see the primary issue with that being enforcement. And I think that if you were to do that, you would create the greatest uprising of shotguns and pitchforks that the that you’ve ever seen in not just the US, but even in Canada frankly. I just just don’t see it as being realistic.
1:18:07
Ah, OK. Very low or zero GDP growth for Canada would be heavier weight of the US equity Portfolio is be advisable. I wouldn’t look at the country allocation for stocks based purely on GDP. Canada is very certainly in a more vulnerable position to going into recession than in the US, There’s no doubt about that, but I would look at it more on a sector basis. I actually think that Canada is very well positioned for growth on the investment side of things, particularly because of our heavy weighting in materials.
1:18:46
So, raw materials, precious metals, industrial metals, et cetera, which are part of the commodity boom theme that we talked about earlier, as well as with oil and gas stocks that are very, very undervalued, in, in our view.
1:19:08
Hmm, hmm.
1:19:09
OK, and it looks like Oh, wreaths in Canada versus the U S Why is the US. More Favorable?
1:19:18
Now this is on the long only side of things.
1:19:21
It’s basically because in the US, there have been much more, much more of a negative year, more recently in the US than in Canada.
1:19:33
Something that I probably should have mentioned earlier, that I’m really happy about, is, that, on the alternative side of things, someone that you might be familiar with, which is Vision Capital, Their CEO, or Chief Investment officer is Jeff Olan, He’s regular guest on money talks, and also speaks the World Outlook Financial conference.
1:19:54
Their long, short strategy in publicly traded real estate, is now available on the, for portfolios with one of our portfolio managers and their alternative category. And we’re trying to get it, we’re trying to get it approved with with another one as well.
1:20:11
So just bringing that in into play, rates. Of course, there’s many different sub sectors of rates. We’re definitely not bullish on office space.
1:20:24
We are more bullish on generally speaking Canada and the U S on multi-family residential, but also on fulfillment or logistics or or industrial space.
1:20:37
Office space. Again, not so much, a whole lot.
1:20:41
A whole lot more people work, a whole lot more from home than they ever did before.
1:20:45
And we’re certainly seeing that bear out in a lot of empty office space, not just here in Calgary, which is the case for quite a number of years with, you know, 25 to 30% vacancy in the downtown tower’s, But we’re starting to see that happen more and more down in the US and even a little bit in Toronto right now. So that’s, so that’s the general view there.
1:21:07
All righty, so we are now at an hour and 22 minutes and that’s an hour longer than this hour has 22 minutes on CBC.
1:21:16
one of the the more recent and somewhat funny shows that the Communist Broadcasting Corporation produces. So anyways, that’s my way of wrapping up and saying thank you very much to everyone for attending. And we look forward to hearing back from you. And we’ll be happy to discuss anything to do with your portfolio. And if you are an existing client and we haven’t yet booked in your annual review, just drop us a note.
1:21:45
We’ll be our business manager, and Sandra are already booking those in with our portfolio managers.
1:21:52
But if you’d like to move, move up on the schedule, just drop us a note. And we look forward to chatting with you soon.
1:21:59
Bye for now.
