Monthly INsync Chit Chat December 2023
Hello Winter… [by David]
Winter showed up with a thud this week and a big dump of snow, which included white-out conditions. But with my winter tires on, my coat and scarf out of storage, I’m ready, or at least as ready as I can be. Some of you know that I’m not a big fan of traffic, which means the thought of travelling into Toronto always comes with some trepidation. I took the kids into the ROM (Royal Ontario Museum) last week and traffic was thick enough to make it 90 minutes to get there, and two hours and a half hours to get home (phew – glad we left at 3pm before rush hour!). We had a great time and particularly enjoyed the bat cave and all the mammals and dinosaurs on display.
I was invited to speak (in Toronto – yes, that was two trips in November) at the University of Toronto, in the trading lab at the Rotman School in a joint presentation by the CMT Association and their business school. Speaking to an engaged crowd, I, of course, shared charts and went over the value of technical analysis and its importance in gauging demand and supply as part of the investment process. And yes, I showed countless examples of how fundamentals (cheap vs. expensive and strong growth vs. weak growth) do not necessarily translate into expected results -> stock prices. I always love to chime in on the fundamentals vs. technical debate. On that note, there are now approximately 771 of us, globally, who are dual holders of both the Chartered Financial Analyst (CFA) and Chartered Market Technician (CMT) designations, and as one of those dual holders, I feel justified in having an opinion on that topic.
News –Some That You’ve Heard, Most That You Haven’t
Javier Milei voted in as the new President of Argentina, causing a media backlash from the west, fearful of his cost-cutting, smaller-government, cancel the central bank, anti-woke platform. Lyn Alden reminds us of the “unfortunate fact that wars lead to sovereign debt crises, but sovereign debt crises also lead to wars”. Can the U.S. afford two wars? Three? Health Canada confirmed the presence of DNA contamination in the Pfizer vaccines and that Pfizer did not disclose the contamination to the public health authority. Deutsche Bank is expanding its restrictions on financing coal, which covers both thermal and metallurgical coal (unfortunately, without metallurgical coal, you don’t have steel, and without coal, you don’t have cement, and without coal, you don’t have electricity and without electricity, you don’t have aluminum. And Chris MacIntosh points out that without coal, you can’t produce renewable-energy-producing equipment. Hmmm. A study showed that 41% of France’s population is in favour of a proposal to limit everyone to four flights in their entire life (59% of 18-24 year-olds agree). There were 18,000 “gotaways” in only three weeks in Texas, described as illegal immigrants crossing the border and evading authorities.
Things We Recommend [by Conor]
This month, I wanted to share a podcast recommendation that provides interesting insights into the world of finance and economics. Odd Lots, hosted by Tracy Alloway and Joe Weisenthal, offers a unique and refreshing perspective on the complexities of global markets and the forces that shape them. What sets "Odd Lots" apart is its ability to make complex financial topics accessible and engaging for listeners of all levels of expertise. Tracy and Joe bring a dynamic and entertaining approach to discussions with leading experts, providing deep dives into market trends, economic theories, and the intricacies of finance. The chemistry between the hosts is evident, creating an enjoyable listening experience that combines insightful analysis with a touch of humour.
Whether you are a seasoned finance professional or someone with a budding interest in economics, "Odd Lots" has something to offer. The podcast covers a wide range of topics, from macroeconomic trends to the latest market developments, making it both informative and relevant in today's ever-changing financial landscape.
Lifestyles to Consider! [by Criselle]
Black Friday sales just ended, and I am pleased with my purchases. The best one I got was the Zwilling cooking set, originally priced at $800. But I got it for only $135, and to top it off, I used a gift card reward to cover it! Who willingly pays the full price anyway?
As inflation continues to rise, here's some tips to help you save on your daily expenses. First, seek out stores that offer price matching, a handy feature available at major supermarkets like No Frills, FreshCo, Maxi, and Real Canadian Superstores. Simply ask the store if they provide this service, present a competitor’s current flyer (printed or online copy), and they'll match the price – a money-saving gem worth exploring. Secondly, exercise patience. For non-urgent purchases, hold out for those golden moments, such as Black Friday or Boxing Day, to snag enticing deals. This will also give you more time to contemplate if you truly need the purchase, helping you avoid impulsive and unnecessary spending. Lastly, as a bonus tip, check benefits offered by your existing membership (i.e., CAA) or credit cards. Many of these companies extend exclusive discounts, coupons, or cashback to their loyal customers. You’re paying for it, might as well make the most out of it!
These are simple and practical tips that have the potential for a compounding effect, ensuring you get more value for your money!
How’s the (Bigger Picture) Market? [by David]
Well, well, a three-month correction was enough to turn everyone negative (and as I pointed out last month, produce the first RSI(5) oversold market in 2023) and a month later to today, we’ve had a decent rally. A big enough rally that I now have to point out that we’re overbought and sitting right below prior summer highs on the S&P 500. All that said, to suggest that, while indeed stocks are acting bullishly, some backing and filling and some profit-taking can be expected wouldn’t be surprising. We’re back to buying pullbacks. I want to point out that if some selling fails to develop here in December, it will be further evidence of the underlying strength of risk assets and would be extremely positive, as we set to head into 2024. Many investors remain very negative, given the headline and economic headwinds. We’ll stick to what the market thinks and not let our opinions or fears get in the way.
Source: Optuma
* * as at November 29th, 2023
Market Summary & Trend of “All Assets” [by David]
Here again, we look at our “all asset” list, sorted by one-month returns. The first thing I noticed, as I inserted the table this month, is the amount of green now visible. The short-term and intermediate-term trends have turned upwards for many assets and look very constructive, including more broad-based, as stocks, even including European equities, gain some lustre as the U.S. dollar slips and yields settle from their recent highs. You can see that the bottom part of the table shows a correction in U.S. dollars and commodities, but everything (including bonds!) is up for the month and lots of trend initiation potential.
Source: Optuma
* * as at November 29th, 2023
We All Need To Keep Learning! – “What Are Candlestick Charts?” [by Conor]
Candlestick charts originated in Japan in the 18th century and have since become a staple in technical analysis. Unlike traditional line charts, which show only closing prices, candlestick charts provide a more detailed view of the market by illustrating the open, high, low, and close prices for a specific period.
Each candlestick represents a specific time frame, whether it's one minute, one day, or any other interval chosen by the user. The body of the candlestick is filled or hollow, and its colour typically indicates whether the closing price was higher or lower than the opening price. You will often see us using candlestick charts in our communications, as they are our primary charting style.
Anatomy of a Candlestick:
- Candlestick Body:
- The filled (coloured) or hollow part of the candlestick.
- If the closing price is lower than the opening price, the body is filled (often red or black).
- If the closing price is higher than the opening price, the body is hollow (often green or white).
- Upper Wick (Shadow):
- The vertical line extending above the body, representing the highest price during the time period.
- Lower Wick (Shadow):
- The vertical line extending below the body, representing the lowest price during the time period.
Source: The Association of Technical Analysts
Failing To Plan Is Planning To Fail [by Criselle]
Santa's checking his list, and it's wise for you to do the same! As the year winds down, take the time for some essential year-end planning to optimize your financial situation. The end of the year is a great time to update your asset list that you have safely stored in your filing cabinet, safe or safety deposit box. You know, the one that contains an easy-to-read, easy-to-find list of all your assets including account numbers and institution contacts to make your executor’s job easier. Things change each year, sometimes more than we think. A new account here, an old account changed, or disappeared. Need tips?! Ask us!
Secondly, review your extended health benefits to determine if you’re fully utilizing them. Consider scheduling an appointment for that massage or adjustment before your practitioners are gone themselves for the holidays. Third, begin gathering your documents for tax season to avoid overlooking any possible deductions or credits. Preparing in advance will make your tax season less daunting and more rewarding. Lastly, assess your overall financial goals and evaluate where you stand. This serves as a reality check, allowing you to celebrate progress and identify areas for improvement. Understanding your current financial position better equips you to make informed decisions about budgeting, saving, and investing for the upcoming year and making you more “Financially INsync”.
This Month in Innovation [by Conor]
World's smallest particle accelerator is 54 million times smaller than the Large Hadron Collider — and it works. Recently, researchers successfully initiated the world's most compact particle accelerator for the very first time. This remarkable achievement, roughly the dimensions of a small coin, has the potential to unlock various possibilities, including the utilization of these miniature particle accelerators within the bodies of patients.
First plasma fired up at world’s largest fusion reactor
Japan's JT-60SA, the most extensive fusion reactor globally, was powered up just last month. This device can maintain a superheated plasma at temperatures of 200 million degrees Celsius for approximately 100 seconds, exceeding the capabilities of previous large tokamaks. While this activation marks a significant milestone in affirming the reactor's fundamental capabilities, it will still be a few more years before the JT-60SA can maintain plasmas for extended periods, enabling meaningful physics experiments.
Former Apple designers launch $700 Humane AI Pin as smartphone replacement
Humane, a five-year-old artificial intelligence startup founded by former Apple designers, Imran Chaudhri and Bethany Bongiorno, announced its first product on Thursday — a $699 pin you wear on your lapel.
The Humane AI Pin is designed to replace your smartphone, allowing the user to make calls, send texts and look up information through voice controls. It also has a laser display, turning your palm into a mini screen that can show the time, date or what’s nearby.
One UPtrend, One DOWNtrend [by David]
I can’t emphasize enough how important the trend is. If we want our portfolios to rise, let’s own investments that are rising in value. Like last month, let’s grab another pair of securities, and contrast them to demonstrate that, even without some kind of technical background or designation, the chart can be understood by those that look at the picture.
In the top panel, we have the chart of Cadence Design Systems (CDNS:US), a large $74 billion dollar company that develops electronic design automation software and related software. You can see the pattern of higher highs and higher lows on the two-year chart below that really got going in the spring of 2023 (for the record, the much bigger picture chart of 10 years+ also shows a clear uptrend). And, in the bottom, we have Nutrien (NTR:TSX/NTR:US), a product of the merger between the old Potash and Agrium companies. You know, the one that produces fertilizer that fed into the old “everybody has to eat” narrative that was thrown around at cocktail parties in 2008. Knowing the emerging markets were growing and would need to grow more food, the analysts told us that meant fertilizer demand [side note: the world still has to eat, but these stocks have been out of favour]. You can see the clear downtrend, lower highs and lower lows. At some point, the downtrend will end (maybe), but for now, it’s just a $27 billion company that was worth much more a year and a half ago.
Source: Optuma
* * as at November 29th, 2023
Sharing Our Tools of the Trade [by David]
Those of you that follow me on “X” (formerly known as Twitter!) will have seen this trend template. I posted it each month and yes(!), those are manually ticked boxes that signify whether a particular condition is in place and it’s part of my weekly investment routine. I like the feel of knowing how the trends change as a week passes by and I always like to point out that an investment discipline requires ongoing and regular analysis to keep a market pulse and know what’s going on and how things change. You can see here that on November 27, 2023, it’s really the Toronto stock market that stands out as different than the rest and still struggling, but this has been the case for some time. It’s not in a long-term uptrend. It could change, but it hasn’t changed yet.
We Like Fundamentals Too! [by David]
This month, let’s check in on another company from the cyber-security industry and it’s CrowdStrike Holdings (CRWD:US). Some of our clients will recognize this company. They just reported quarterly earnings and you can see (in the table below) that their latest earnings per share represented +105% growth compared with last year (that’s a lot!). Sales, often called the “top-line” were +35% higher than a year ago too (bottom line of the table). That is a lot of growth and honestly, characteristic of most of the businesses in the cyber-security sector right now. One could argue that that’s why the stocks have been so strong.
Source: Marketsmith
* * as at November 29th, 2023
But! Look at the smaller snip beside the earnings/revenue table above for a moment. P/E ratio, that’s the price to earnings ratio, tells us how much an investor is paying for a dollar of their earnings. The P/E ratio for CrowdStrike is 82 (which is about 3.9x higher than the market itself). Expensive!? Yes! Here’s where we get into the debate about stock prices. Fundamentally, one could say that is crazy expensive. Then, I could counter that expensive comment, with, well, this is a company growing at incredibly high rates right before our eyes. Either way, investors have an opinion, which is collectively expressed through price. Look at the price chart for CRWD below. What do you see? An uptrend. Investors love the stock right now. The two green circles are on top of the earnings reaction (yesterday) and the previous earnings date in September. Both good reactions. The fundamentals and the technicals are in alignment.
Source: Optuma
* * as at November 29th, 2023
Chart of the Month [by David]
This month, I’d like to show two charts side by side. Both are of the U.S. stock market, and more specifically, the S&P 500. One of them is the index that most investors know, and the other one (right) is the same index but priced in gold. This is created by taking the index value and dividing it by the price of an ounce of gold. Please look at the two charts. They’re different. Particularly, the past five years. The one on the right is not nearly as strong, which means, the U.S. stock market hasn’t appreciated more than gold and an investor with gold bullion in their pocket (or safe or investment account) has added stability by it being there. If we add in the understanding that the gold bullion is not very correlated to stocks, we start to understand why owning some gold is as a diversifier to a stock-only portfolio and can make sense. But you know my view on this, I’d still rather own a diversifying asset that is rising in price too. And, as we finish out November, gold bullion has been quite strong and trying to push through its $2,000-$2,050’ish level that would represent a big breakout.
Source: Optuma
* * as at November 29th, 2023
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Did you know that our team can handle cross-border solutions for those with work and/or residences on either side of the border? A Canadian inherited U.S. retirement accounts? Yes. A U.S. citizen and resident with RRSPs still in Canada? Yes. A Canadian citizen working in the U.S.? Yes. Lots of permutations and something that we could NOT have offered back when we worked for the bank. I am licensed with FINRA and please ask if you have questions about our services.
Here's an article that just came out from Raymond James that I thought might be useful, along with a graphic showing some of the different situations in which we might be able to help!
Upcoming Dates, Seminars, and Announcements [by David]
I’ve been invited to speak at an upcoming seminar co-hosted by the CMT Association and the University of Toronto:
What: CMT Association & Investopedia
Where: https://www.investopedia.com/chart-advisor-newsletter-opt-in-right-rail-7095828
When: We’re providing the daily report for the week of January 22-26th, 2024
What: CMT Association Annual Symposium
Where: Dubai, UAE
When: February 28 – March 1, 2024
I am planning to attend!!
What: Bitcoin 2024 Conference
Where: Nashville, TN
When: July 25-27, 2024
I am also planning to attend this growing conference next year!
Thanks again for reading this “Monthly INsync Chit Chat” and I always welcome your questions, comments and criticism!
Sincerely,
David Cox, CFA, CMT, FMA, FCSI, BMath
Senior Portfolio Manager, Wealth Advisor
Raymond James Ltd.
Phone: 519.883.6031
Unit 1 – 595 Parkside Drive | Waterloo, ON | N2L 0C7
david.cox@raymondjames.ca
www.financiallyinsync.com
@DavidCoxRJ