In this episode with SIACharts' President, Paul Kornfeld, we kick off our conversation with the recent changes in the Federal Reserve's rate cut projections and the performance of various stocks. We question whether it's a good time to 'buy the dip or sell the rip.' We get into the use of SIA charts in analyzing market trends and making investment decisions. What are the benefits of using a systematic approach and relative strength analysis? We touch on the challenges and opportunities of 24/7 trading, and the pressure that's mounting for moneycenter banks. We dive into the importance of having a rules-based approach and risk management in investing. We discuss the opportunities and risks in the market, and in particular the generational opportunity in the energy and materials sectors. Wending our way through the conversation, Paul peels back the layers on the importance of diversification and the need to consider the opportunity cost of investing in certain sectors. There's also the potential impact of various serious geopolitical events on international markets to weigh and the importance of incorporating risk management strategies, now. What has been the historical performance of different sectors and how great is the potential for a shift in market dynamics. What is the market indicating are trends to follow in specific sectors? What is the potential impact of inflation on portfolios and how great is the need to consider alternative asset classes?

<h3>Takeaways</h3>

<ul>

<li>The Federal Reserve's rate cut projections have been revised, leading to uncertainty in the market.</li>

<li>Using SIA charts and a systematic approach can help investors analyze market trends and make informed investment decisions.</li>

<li>24/7 trading presents both opportunities and challenges for investors, and risk management is crucial in navigating the market.</li>

<li>Money center banks are facing pressure due to rising interest rates, and it's important to monitor their performance.</li>

<li>Having a rules-based approach and discipline in investing can help mitigate emotional biases and improve investment outcomes.</li>

<li>There are opportunities for profitability in sectors like energy and materials</li>

<li>Diversification is important to mitigate risk and take advantage of different market opportunities.</li>

<li>Consider the opportunity cost of investing in certain sectors and evaluate the potential for higher profitability in other areas.</li>

<li>Geopolitical events can have a significant impact on international markets, and it's important to monitor and adjust investment strategies accordingly.</li>

<li>Incorporating risk management strategies is crucial to protect portfolios during market fluctuations.</li>

<li>The historical performance of different sectors can provide insights into potential future trends and opportunities in the market. Diversification and following trends in specific sectors can provide opportunities in the current market environment.</li>

<li>Inflation is expected to remain sticky, and portfolios need to consider alternative asset classes to fill the void left by bonds.</li>

<li>SIACharts is a tool that simplifies research and provides actionable insights for advisors.</li>

</ul>

In this conversation, Mike and Pierre talk to Tobias Carlisle, Managing Principal and Chief Investment Officer at Acquirers Funds, LLC, and portfolio manager of ZIG and DEEP ETFs. Toby shares his approach to value investing and the historical perspective he brings to the art of investing. He also talks about the performance of value investing and the importance of staying consistent with your strategy. Our conversation highlights the benefits of a systematic and quantitative approach to investing. We explore the challenges and strategies of value investing. Toby emphasizes the importance of having a systematic design and sticking to a set of rules to avoid emotional and behavioral mistakes. We discuss the ideological debate between value and growth investing and the need for a balanced approach. Our conversation turns to the role of activism in value investing and the importance of avoiding ruin and focusing on survival. The conversation continues with Toby sharing his insights into portfolio construction and the baked-in returns of value investing. We further explore the concept of investing in value stocks and the challenges that come with it – the importance of considering the long-term perspective and the potential for high returns despite short-term fluctuations. Mike and Toby deconstruct the role of market feedback loops and the impact of market crashes on investment strategies. Toby highlights the significance of character and reputation in investing. We ask Toby about his upcoming book 'Invincible' and its exploration of the parallels between value investing, Sun Tzu's 'Art of War,' and Lao Tzu's 'Tao Te Ching.'

In this episode, our conversation with Aubrey Basdeo, Head of Fixed Income at Guardian Capital LP, we focus on the fixed income landscape and the outlook for interest rates in the US and Canada, the Federal Reserve's approach to inflation and interest rate cuts, as well as the differences between the US and Canadian economies, the impact of mortgage rates on consumer spending and the potential for rate cuts by the Bank of Canada. Overall, the conversation highlights the importance of maximizing optionality and the challenges of monetary policy in a changing economic environment, various topics related to central banks, portfolio construction, and fixed income investing. Our main themes include the shift in central bank narratives, the impact of inflation on monetary policy, the changing dynamics of portfolio construction, the shifting climate in holding duration for the sake of hedging portfolios, and the critical importance of using active management in fixed income. Our conversation also touches lightheartedly on the challenges faced by different generations in the current economic environment.

Timestamped Highlights:

00:00 Maximizing Optionality: The Federal Reserve's Approach to Interest Rate Cuts

12:10 US Exceptionalism: Strong Growth and Pro-Growth Policies

15:55 Challenges in the Canadian Economy: Higher Mortgage Rates and Slower Job Growth

17:54 American homeowners have tax deduction advantage.

21:16 Bank of Canada needs to pivot on inflation.

24:32 Bond market optimism can spell consumer pessimism.

26:43 Bank of Canada rate likely to rise.

32:32 Portfolio construction shifting due to global changes.

35:26 Hedging portfolio with fixed income shifted focus.

40:24 Fed should be less restrictive, economy speed-dependent.

43:20 Bank of Canada will ease rates moderately.

48:29 Central banks shift risk approach, requiring active management.

50:45 Focus on coupon, not duration, for returns.

54:12 Economic growth needs younger population to sustain.

"The mistake is that if they're going to make a mistake, it's that they're going to be focused on that two number (~2% neutral rate) and insist that they need to get to that, rather than you're on that trajectory towards two and you can start to ease at that point."

"The world that we're entering into in terms of how things are going to, the factors that we're gonna be reacting to are going to be different from those factors that guided portfolio construction for the past 30 years."

"If you're looking for duration as the hedge to the portfolio, that's not going to provide it in the same way that it did 10 years ago."

Takeaways

• The Federal Reserve is aiming to maximize optionality in its approach to interest rate cuts, with the possibility of three cuts, two cuts, or no cuts depending on the evolution of inflation and the economy.

• The US economy is showing signs of exceptionalism, with strong growth and pro-growth policies driving the outlook for interest rates. In contrast, Europe and China are facing slower growth and export-driven challenges.

• The Bank of Canada is expected to ease interest rates ahead of the Federal Reserve, as the Canadian economy faces challenges from higher mortgage rates and slower job growth.

• The impact of mortgage rates on consumer spending differs between the US and Canada, with American homeowners benefiting from tax deductions and longer-term mortgages.

• Bond investors are optimistic about the potential for rate cuts, while consumers may be more pessimistic due to the potential impact on disposable income.

• The Bank of Canada will need to carefully navigate the path of easing, considering the impact on inflation, the interest rate differential with the US, and the potential depreciation of the Canadian dollar. Central banks may shift their narrative from targeting a specific inflation number to being less restrictive in their policies.

• Portfolio construction needs to adapt to a changing economic environment and regime shift.

• Duration may no longer provide the same level of protection in portfolios as it did in the past.

• Investors should focus on the belly of the yield curve for fixed income exposure.

• Active management is crucial in navigating the risks and opportunities in the fixed income market.

• The current economic environment has different implications for different generations.

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In this conversation, Doomberg (https://doomberg.substack.com/) joins Pierre and Mike to discuss various topics including Bitcoin, the parallel between Michael Saylor and Hugo Stinnes, speculative mania, the parallels in the borrowing strategy of Hugo Stinnes and Michael Saylor, the pumpamentals driving distortions in the market and the flywheel effect, the geopolitical implications of the Russia-Ukraine conflict, the dangers of do-gooders and climate newspeak, and the natural gas situation and its unexpected impact on the economy.

The conversation covers various topics related to the resource and wealth potential of Canada and the US, the prolific natural gas development in the US, the strength of the US economy, Mexico's hidden benefit from natural gas, the importance of secure borders, the economic boom in northern Mexico, the inconsistency of border security measures, the price discrepancy between natural gas and oil, the impact of natural gas prices on the economy, the role of natural gas in manufacturing, the implications of the Tonga eruption, the debate on climate change and carbon emissions, the potential consequences of sanctions on Russia, the capabilities of Russia, China, and India, the dangers of provoking Russia, the dangers of provoking Iran, the rise of nuclear power and gold, the 'Prime' time data center and the future of energy, and the importance of nuclear power for the AI revolution.

Takeaways

- Michael Saylor's bet on Bitcoin has paid off, demonstrating the potential of high volatility assets.

- Speculative manias often precede currency debasements, making Bitcoin and crypto of interest.

- The borrowing strategy of Hugo Stinnes (WWI) and Michael Saylor (today) highlights the importance of real assets.

- Pumpamentals and the flywheel effect can create market distortions and lead to irrational behavior.

- The Russia-Ukraine conflict and geopolitical tensions have significant implications for energy markets.

- The dangers of do-gooders and climate newspeak can lead to the suppression of speech and the lack of trade-off discussions.

- The abundance of natural gas in North America has prevented a potential recession and supported the manufacturing and industrial sectors. Canada and the US have significant resource potential under the right leadership.

- The US is the most prolific natural gas producer in the world, with a sophisticated downstream manufacturing sector that takes advantage of cheap hydrocarbons.

- Mexico is a hidden beneficiary of the natural gas boom, with an industrial boom happening in northern Mexico powered by cheap natural gas.

- Secure borders are important for stability and economic growth.

- The price discrepancy between natural gas and oil has significant implications for the economy.

- Nuclear power and gold play important roles in the future of energy and wealth preservation.

- The AI revolution and the electrification of various industries will drive the demand for energy.

Where to find Doomberg

Doomberg on Substack

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This is one of the trickiest times in investing history marked by heightened uncertainty, distorted valuations, regime change and increased volatility in both equity and bond markets. For good reason, advisors have increasingly turned to shifting parts of the portfolios they manage away from traditional equity and bond assets in return for exposure to structured note and investment strategies that provide structured investing outcomes from those same asset categories.

In this conversation with Bill Bamber, CFA, Chief Executive Officer at BMO Global Asset Management, we are treated to a behind-the-scenes look at how and why BMO GAM developed and launched its innovative Strategic Equity Yield Fund (SEYF) solution (in June 2023). What was the thinking behind innovating this?

Investors face unforeseen risks, eroded correlations, as well as unprecedented decision-making challenges due to the proliferation of choices of individual structured products in the marketplace. SEYF is an elegant, actively managed, one-ticket solution for investors, the likes of which were once only available to large institutional investors, via the capital markets desk.

We discuss the rationale and strategic thinking behind BMO GAM launching this type of actively managed capital markets-based solution for accessing the best ideas and best strategies in the structured note market, in the form of a mutual fund. Now accessible to all investors, this is a milestone unto itself, to solve what have become some quintessential problems for investors desiring structured outcome solutions for their portfolio, in an always-on, always available format.

Bill Bamber, CFA, brings 3 decades worth of expertise in the capital markets space to BMO GAM. As CEO, he is leading this drive to bring wide investor accessibility to structured capital markets investing strategies for everyday investors. This solution provides the enhanced yield plus capital appreciation potential and liquidity investors are seeking, along with the sophistication of stability, structured downside protection and price-seeking power, owing to the economies of scale of the firm’s substantial global trading operations.

Thank you for listening!

About Bill Bamber, CFA

Chief Executive Officer

BMO Global Asset Management

Bill Bamber joined BMO Wealth Management in April 2022 as Head of Synthetic Asset Management and is currently the CEO of BMO Global Asset Management. Bill has more than 30 years of experience in the Financial Services Industry, including extensive experience in International Capital Markets, most notably in exotic derivatives spanning all asset classes as well as global structuring and structured products.

Prior to joining BMO, Bill oversaw Structured Products and Quantitative Investment Strategy businesses globally and led many ground-breaking initiatives and innovative indices. He has held senior positions at International and North American financial institutions including a focus on equity derivative structuring in the Americas.

Bill is well-known as an innovator in the investment industry with an outstanding track record for product firsts around the world. This includes pioneering the world’s first Emerging Market ETF (STX40 SJ Equity) and creating the first MLP-linked security both inside (AMJ US Equity) and outside of the U.S. He was also the first to create a listed trading platform for zero-coupon South African gilts.

Bill is a Chartered Financial Analyst (CFA) and holds both a Master of Management Analytics and a Master of Business Administration from Queen’s University.

This episode with guest Mario Cianfarani, Head of Distribution at Vanguard Canada kicks off delving into 2024's First Challenge: Bond yields and the importance of re-positioning cash for the long term given the likelihood of central banks shifting towards rate cuts in 2024.

- It’s time to consider how to put money back to work, to shift from a defensive market stance to a more opportunistic investment approach, and its implications on advising with regard to 60/40 portfolios and bonds. We discuss the challenge posed by having funds on standby in short-term instruments and cash equivalents, and emphasize sticking to or revisiting long-term investment strategy despite today’s uncertainty and market fluctuations.

- Challenge Two: We discuss the importance and challenge of investors being able to stick to their predetermined plans emphasizing the value of guidance provided by advisors. Do they have plans THEY can stick to? How can you properly get them to that state? The nature of markets has always required the necessity of portfolio diversification, and HOW you diversify is even more important, now, as is the ability to adhere to long-term investment strategies. Mario makes the point that advisors should communicate their value by widening the scope of their client discussions. That goes far beyond selecting stocks or managing portfolios, demonstrating their role, in financial planning, behavioural coaching, estate and tax planning. It’s very important to consider context when making investment decisions and utilizing viewpoints and data, for managing portfolios.

Pierre highlights the considerable value-add of tapping in to (such as) Vanguard’s deep experience and resources to enhance portfolio construction and bolster investor trust in the quality of the source of guidance, in the context of the reintroduction of interest rates, i.e. the impact and gravity of that. Our discussion sheds light on how the zero interest rate environment has influenced now distorted valuation models and investment strategies, highlighting a return to investing principles in response to effects of higher interest rates.

The conversation touches on the increasing professionalization and personalization in wealth management, Mario references Vanguard's seminal research into Advisors Alpha and the significance investors attach to services.

Challenge Three: The conversation wraps up by discussing the impact of wealth transfer on succession planning for advisors suggesting it's high time to consider the notion of promoting a multi-generational approach, to managing family wealth, OR face the high risk being traded out, replaced, as their key advisor at succession. How can you strategically begin to approach this problem?

Thank you for watching and listening!

Ilan Kolet, Institutional Portfolio manager in Fidelity's Global Asset Allocation Team, joins us to discuss the most important questions he and his team mates, David Wolf and David Tulk have been fielding at the start of 2024. We delve into the unexpected shifts in monetary policy led by the Federal Reserve and mull over the repercussions of potential rate cuts on inflation volatility, weaving through the intricacies of the Fed's data-driven stance and 'pivot' toward a less restrictive monetary environment.

In the context of historical reflections and economic projections, Kolet elaborates on the team’s optimism regarding the US market, supported by a belief in a productivity boom that dallies with the possibility of economic prosperity, low inflation, and equity strength. We get into Canadian fiscal policy, where Kolet voices concerns about Canada's macroeconomy potentially trailing in equities and fixed income, and how the team is allocating to Canada. Kolet sheds light on the team’s investment strategy, from high-conviction underweights and overweights to the complexities and nuances of handling asset allocation.

Throughout the episode, it's clear that the core of the discussion isn't merely the transactional aspects of investment but relates to the broader challenges advisors face when reconciling market complexities with client needs. The episode provides Fidelity's highest conviction global asset allocation guidance through the labyrinth of 2024's financial mixed and uncertain landscape.

John De Goey, Portfolio Manager and Investment Advisor at Designed Wealth Management joins us to discuss and explore the current investment landscape and the choices available to investors. He highlights the importance of managing risk and staying on the short end of the yield curve, for time being where fixed income is concerned. We also delve into the topics of optimism and pessimism, with a focus on the potential challenges and uncertainties in the market. We talk about the shifts in real estate markets, particularly the shift happening that's favouring the US Sun Belt, and the potential impact of climate change on investments. De Goey urges investors to be prepared and take proactive measures to balance risk in their portfolios. He also cautions against unrealistic expectations for future returns. Is your portfolio equipped to handle unknown variables and tail risks?

Our chat wraps up with a nudge to uphold a diverse and balanced portfolio, mindful of the effects of surging interest rates. Remember, Balanced Asset Allocation and Balanced Funds are not the same - risk management is key. Unlike a traditional 60/40 'balanced fund', a balanced asset allocation approach ensures apt risk distribution.

We explore the perils of unchecked optimism in the finance sector and how to construct a resilient, well-equipped portfolio. We ponder the withdrawal effects of quantitative easing and the necessity to confront market realities. We also investigate the financial industry's positivity bias and the knock-on effects of negativity.

De Goey's "dumbest thing he's heard" takes a jab at data manipulation to bolster a narrative. We delve into the need to anticipate potential pitfalls and the importance of diversification as a safety net. Our dialogue concludes with a conversation about managing expectations, loss aversion, and the task of keeping clients invested for the long haul. Certainly, plenty to contemplate.

Takeaways

• Stay on the short end of the yield curve for now, and manage risk in the current market.
• Be cautious of excessive optimism and be prepared for potential challenges and uncertainties.
• Consider investments in real estate, traditional inflation hedges, and diversified portfolios.
• Recognize the changing investment landscape and adjust expectations for future returns. Blind optimism in the financial industry can be dangerous, as it can lead to a lack of preparedness for potential risks.
• Quantitative easing has created withdrawal symptoms in the market, and it is important to face the reality of the current situation.
• The financial services industry has a commercial imperative to be optimistic, but it is crucial to consider both the positive and negative aspects of investing.
• Cherry-picking data to support a narrative is not a reliable approach, and it is important to consider the full picture.
• Proper diversification is like insurance for a portfolio, and it is essential to mitigate potential harm.
• Expectations management, loss aversion, and maintaining perspective are key in keeping clients invested for the long term.

Timestamped Highlights:

[00:00] Introduction

[01:01] Investment Choices in the Current Market

[03:31] Optimism and Pessimism

[06:07] Shifts in Real Estate Markets

[06:56] The Sun Belt and Financial Centers

[08:20] Concerns and Pessimism

[10:32] Preparing for Uncertain Times

[16:06] Lowering Expectations for the Future

[21:12] Balancing Climate Obligations and Economic Growth

[26:04] Preparing for a Lower Standard of Living

[31:05] The Danger of Optimism Bias

[35:47] The Importance of Being Prepared

[41:49] Diversification and Balance in Portfolios

[46:16] The Impact of Rising Rates

[48:40] The Danger of Blind Optimism

[49:14] The Withdrawal Symptoms of Quantitative Easing

[50:20] The Commercial Imperative of Optimism in the Financial Services Industry

[51:18] The Cascading Effect of Pessimism in the Market

[52:16] The Dumbest Thing Heard: Cherry-Picking Data to Support a Narrative

[55:43] Listening for Quips and Side Comments in Financial Media

[58:32] The Afterglow of Reaction to Bad Economic News

[01:00:36] The Importance of Considering What Could Go Wrong

[01:02:31] Optimism with Insurance: Proper Diversification

[01:05:55] Expectations Management and Loss Aversion

[01:07:29] The Challenge of Minimizing Losses and Maintaining Perspective

[01:09:29] The Difficulty of Keeping Clients Invested for the Long Term

[01:11:36] The Struggle of Getting Clients to Embrace Diversification

[01:14:33] Differentiating Between Great Companies and Great Stocks

[01:15:16] The Historical Perspective of Overvalued Markets

[01:17:41] The Redistribution of Wealth During Flat Markets

[01:20:55] The Need for Realism and Mitigating Potential Harm

Join us for this enlightening conversation with Ilan Kolet, Institutional Portfolio Manager, Global Asset Allocation Team, at Fidelity Investments, as we delve into the economic outlook for 2024. Kolet provides invaluable insight into the Canadian and US economies, the housing market, investment strategies, and inflation protection. We explore the impact of interest rates, consumer spending, and central bank policies on investments. Kolet's expertise sheds light on asset allocation, portfolio diversification, and the potential implications of elevated inflation rates, making this episode an absolute must-listen.

Timestamped Highlights:

[00:00] Introduction - career - Bank of Canada, under Dodge and Carney, to Bloomberg, then Fidelity in Boston.

[05:24] Thoughts on Market optimism.

[12:10] Potential US economic growth boosted by technology.

[17:36] Labor market shows resilience and interest concerns.

[23:19] Reduced consumer spending leads to economic impact.

[29:47] Asset allocation process involves feedback from managers.

[33:03] Elevated rates causing financial stress in Canada.

[38:11] Diversifying and explaining investments to numerous clients.

[43:33] Services drive inflation, labor market drives expenses.

[48:45] US government faces challenges in refunding debt.

[57:25] Researchers on Wellington acknowledge economic sensitivities, rates outlook.

[01:02:28] Leverage negative sentiment, be cautious in exuberance.

[01:06:15] Questioning fixed income view, cash overweight strategic.

[01:10:13] Investors have many short and long-term options.

[01:17:30] Working with talented teams on global research.

Where to find Ilan Kolet, Fidelity Investments:

Fidelity Investments Canada - Asset Allocation Quarterly

Bio

Ilan Kolet on Linkedin

Global Asset Allocation Team - Fidelity Investments

In this insightful discussion, Dino Bourdos, Portfolio Manager & Head of Investment Solutions at Guardian Capital LP delves into the intricacies of investment strategies, particularly focusing on the use of derivatives, covered call strategies, and the impact of market dynamics on investment decisions. With his extensive experience in the field, Bourdos offers valuable insights into the challenges and opportunities in the current economic landscape, making this a must-watch for investors and financial professionals alike.

Timestamped Highlights:

[00:02:19] - Impact of 2008 Financial Crisis on Individual Investors: Discussion on how the 2008 crisis led to a need for risk management strategies for individual investors, leading to the development of innovative options strategies.

[00:03:39] - Guardian Capital's Approach to Asset Management: Insights into Guardian Capital's strategies, including the use of machine learning and AI in stock selection and the launch of innovative solutions like the Tontine.

[00:09:47] - Creating Awareness in Investment Strategies: Emphasis on the importance of understanding the mechanics of investment strategies and setting realistic expectations to avoid misconceptions.

[00:10:46] - Role of Advisors in Setting Expectations: The significance of advisors setting correct expectations and working towards delivering on them, particularly in relation to mutual funds and systematic withdrawal plans.

[00:21:02] - Fundamentals Over Yield in Investment Choices: The discussion focuses on the importance of the underlying asset in investments, rather than just the yield, and the necessity of a portfolio's ability to grow and sustain payments.

[00:24:31] - Cover Call Strategies for Long-Term Growth: How cover call strategies can be integrated into long-term investment plans, providing tax-efficient income while maintaining portfolio value.

[00:29:04] - Personal Investment Strategy Using Home Equity: A personal anecdote about using home equity to invest in a cover call strategy, highlighting a creative approach to wealth creation.

[00:32:35] - Opportunities in Single Stock Options: Discussion on the transition from index options to single stock options and the different opportunities they present in the market.

[00:36:02] - Navigating Market Volatility with Covered Call Strategies: Insights into the use of covered call strategies during market downturns and the importance of being pragmatic and prudent in investment decisions.

[00:37:16] - Adapting Investment Strategies Amidst Global Transitions: Commentary on adapting investment strategies in response to global shifts such as from globalism to protectionism and low to high interest rates.

Where to find Dino Bourdos

Dino Bourdos on Linkedin

Guardian Capital LP

Research: Is the yield on your Covered Call Fund too high?

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