Monthly INsync Chit Chat November 2024

To the Other Side of the World (and Back Again)… [by David Cox]

Did three months just pass without a monthly “INsync” chit chat?! My? How time flies. Did you miss it (please be honest!)? For so many reasons, I pushed pause, as summer, some vacation and global conference travel happened, and I was glad to have taken a hiatus. I travelled to Malaysia for the “Nomad Capitalist Live” conference and there were 700 attendees from more than 42 countries, all of whom seemed to share similar concerns about the increasing overreach by Western governments intent on spending their way into oblivion, while taxing their citizens and wanting to understand what options exist for various forms of diversification.

I was also invited to speak at an investment conference several days later, in China (on the island of Hainan), and with the few days in between, I flew to Kota Kinabalu (on Borneo) for some snorkelling and birdwatching (I found a lot of parrots!). The conference in China was jointly held by the CIDTAA and IFTA (International Federation of Technical Analysts) and was quite interesting, including a full day of presentations by Chinese university academics and economic analysts (I wore a headset with an English translation!). The following days, there were a number of presentations, focused on technical analysis (including, yours truly) and, overall, it was quite the experience (including the 29-hour door-to-door trip home).

My two youngest kids (Emry (14) and Eloise (10)) have been going to a homeschooling cross- country group (organized by KWCHEA) every week for coaching and practice. This past weekend was the culmination of those efforts and the end of season race (with 5-6 other surrounding racing teams) on an absolutely gorgeous fall morning! It was so much fun!

News – Some That You’ve Heard, Most That You Haven’t [by David Cox]

Canada experiencing a 90% growth in year over year visits to the food banks. Canada’s finance minister (Freeland) vows to provide “generational fairness” to all Canadians by raising the house value that can be insured from < $999K to $1.5 million to make it easier with lower down payments and bigger, longer loans. Russia fines Google a record-setting $2.5 decillion U.S. dollars for refusing to restore several of its government accounts [that is 2.5 trillion trillion trillion dollars – Ed note: they might need to tap the Federal Reserve money printing staff to make the payment]. Microsoft shareholders to vote on whether Bitcoin should be purchased as a tool to diversify and better hedge company resources against inflation and other macroeconomic forces. Canada imposes a 100% tariff on imports of Chinese-made electric vehicles, matching the U.S. Joe Rogan (his podcast has ~15 million followers) interviewed Donald Trump for 3-hours, and, in response, YouTube removed the podcast and made it impossible to find. Assisted dying “abused” in Canada, admits group that helped legalize it. With a U.S. election looming, the betting polls (not the ones the media typically reports on) show Trump with 60.6% vs. Harris 38.9%.

Lifestyles to Consider! [by David Cox]

Do you think you have good balance in your life? I think that no matter how cluttered your schedule (and I sure hope it’s not as crazy as mine often seems!), you find the time to step back, take a few deep breaths and enjoy a hobby, a good book or, perhaps, try to learn something new!

Playing music has been a part of my life for many years, although it’s been pushed to the back burner in the past year, and yet I still find myself thinking about it regularly. I do listen to music (and find Bach incredibly relaxing and a good accompaniment for bible reading, charting or reading a book!) but playing? Not so much. I just finally decided to get myself a bass amp (Fender Rumble Studio 40) because admittedly, playing an electric bass unplugged is a tad lacking… I love it! So motivating! A new practice streak has begun and, with it, the chance to pull myself away from my charts! Do you have hobbies that you have forgotten about, or neglected?

Book Corner [by David Cox]

What Are We Buying? Selling? Holding… [by David Cox]

The cybersecurity stocks are a group with strong sales and earnings growth, which makes sense to me, given the prevalence and seemingly growing problem that cyber crime and digital theft is! Many of us have had our email hacked or have been sent malicious links and these scammers and hackers have clued in that hacking (ours!?) data from a big company is worth a lot of money!

Cloudflare ($NET) is a $31 billion company and it’s been consolidating since 2023, and recently broke out of a multi-month base (green circle), which of course captures my attention. The group itself, using the $HACK cybersecurity ETF, has gone out to new highs this fall, which means the stocks are on the move. In that sense, one could argue that Cloudflare is lagging because, as the chart shows, it’s not at new highs. But the risk-reward set-up for a breakout is attractive, with defined risk and the pullback since that move higher looks calm with the stock now sitting at that horizontal support line. But now, it’s earnings season and they report in 7 days, so the market might decide to wait to see what the company has to say before paving the way for further price movement.

Source: Optuma
* * as at October 29th, 2024

How’s the (Bigger Picture) Market? [by David Cox]

I’ll be the first to admit that, after the Japanese Yen carry-trade unwind and mini-crash we experienced (as investors) in early August, I wouldn’t have expected to see such smooth sailing through what can often be a volatile period of time, seasonally, in September and October. And with a big U.S. election looming even! But the market is the market and the environment we are in, where central banks and governments are intent to continue to provide liquidity and stimulus (the Federal Reserve is now joining the rate dropping party that Canada has been cheering for many months) and asset prices have been rising. The S&P 500 has broken out to new highs and while there are indeed weekly bearish divergences in the chart below (red circles), price is most important. Backing up price has been a rather strong backing of market breadth from a wider set of stocks than we had in 2023 and earlier in 2024. This is a good thing! Either way, we’re now into the strongest seasonal time of the year for stock prices (October through May). We’ll follow the trend, until it changes.

Source: Optuma
* * as at October 29th, 2024

Market Summary and Trend of “All Assets” [by David Cox]

When we look at our “all asset” table of trends and returns, we can see that it’s Bitcoin, silver and gold taking the 1st, 2nd and 3rd place spots on the year-to-date price % performance list. This has been the case for much of the year, with gold outperforming stocks (and few investors realizing this has been going on longer than they think). What’s not trending upwards? Bonds, oil, and some foreign stock markets that have weakened as of late. While the Canadian stock market indeed has risen (and made new all-time highs), it is still not yet sufficient to change what has been a pronounced 14-year trend of relative weakness against the U.S. stock market.

Source: Optuma
* * as at October 29th, 2024

One UPtrend, One DOWNtrend [by David Cox]

Let’s keep it simple this month and get back to basics. I have two weekly charts below and the top chart is the S&P 500 (U.S. stock market) and the bottom chart is U.S. long bonds ($TLT:US).

I have plotted 65-week moving averages (in green) and while higher highs and higher lows indeed are useful for determining trend, I also like to make use of moving averages and particularly, their “slope.” What does that mean? If the moving average is rising, the slope is positive and you can see that, in early 2023, stocks were turning upwards and that long-term average was doing the same. That’s not to say that our clients waited for this to happen to embrace stocks (definitely not the case as the markets bottomed in Oct ’22) but I’m trying to demonstrate how to use moving averages for trend analysis in the bigger picture. The bonds have had a falling slope for several years now (they were trying to change in recent months, but not confirmed yet!).

As I usually say, if you want your portfolio to rise, it makes sense to own things that are rising! Keep it simple! Using this chart, an investor would want to own stocks and be weary of bonds (given the losses they’d be suffering!).

Source: Optuma
* * as at October 29th, 2024

We Like Fundamentals Too! [by David Cox]

Nvidia ($NVDA) is a $3.4 trillion dollar company that is the “go-to” company that is mentioned in any (every!?) artificial intelligence conversation (or headline!). Whether this has become a bubble, or overly and irresponsibly embraced by investors remains uncertain, it is true that they’re growing their business rapidly, and more so in the past year. Look at the table below, from $5.9 billion in quarterly sales in October 2022 to $30 billion in the most recently reported quarter, that’s a lot! And they’re starting to make a lot of profits too!

The stock has four quarters of rising sponsorship, which I love to see (middle panel below), but what about valuation? Firstly, you know that valuation means little (to nothing) to me given that valuations contain data that is in the past and does not, in any way, speak to the decision- making (and the greed and fear) of investors. Different stocks have different potential future paths, and no analyst can successfully predict the future anyways. The stock is trading at a P/E (price to earnings) ratio of 64 (which many would call expensive). The table below shows that in the past 5-years, it has traded as low as a 26 P/E and as high as 155 P/E. Cheap or expensive? Let’s move on!

Source: MarketSurge
* * as at October 30th, 2024

Here’s the weekly chart, and the first thing to acknowledge is it’s in a higher-highs and higher- lows uptrend. When buying into a pullback of sorts, we’re always waiting for confirmation that the uptrend is indeed continuing and that is best evidenced by new highs. You can see by the horizontal line (in the chart above) that I have plotted, that we recently broke through those prior summer highs. How high does a stock go? No idea, and clients know I don’t play around with forecasts (and know they’re futile). An uptrend is an uptrend until it’s not!

Source: Optuma
* * as at October 29th, 2024

Chart of the Month [by David Cox]

I’ve been harping on this a bunch, this fall, and it’s the re-emergence of the emerging markets as a potential longer-term opportunity in development. Firstly, I’ll point out that I am now using the SPDR Emerging Asia Pacific ($GMF) as my proxy for the “emerging markets.” Most would look to the $EEM but, given the long history of outperformance and the relative trend (of $GMF vs. $EEM), I’m going to now focus on the Asian region as my default. While the relative strength vs. the U.S. market has been largely absent for 14 or so years (same time frame as Canada by the way), we do have some noteworthy action on the charts, backed up by some unusual and recent stimulus announcements out of China.

It was very exciting to be in southeast Asia amidst not only the market strength, but at a time of new direction from a monetary and fiscal policy standpoint and to hear many related perspectives at the conferences that I attended. The weekly chart below is an uptrend and while it got overheated in the short term, quickly, with a 13-day massive rally in Chinese and Hong Kong stocks, things have now settled some, and yet continue to resemble a constructive weekly looking “pullback against.”

Source: Optuma
* * as at October 29th, 2024

Social Media and Our Website [by David Cox]

This past month, I did get an article written entitled “Bitcoin for $400” please, David; and I appreciate the feedback that I received! In fact, I received many more comments for this article/blog post than I think ever before and I appreciate that muchly! If you did miss the article, it’s posted here on our website:

https://www.financiallyinsync.com/we-communicate/our-latest-thoughts/2024/10/24/bitcoin- for-400-please-david

I do enjoy sharing perspective, charts and market observations on “X” (formerly Twitter) and if you do find yourself on there some day, perhaps for the first time, please do look me up @DavidCoxRJ. Here’s a couple of recent posts of what I’ve had to say.

Upcoming Dates, Seminars, and Announcements [by David Cox]

What: Raymond James National Business Conference
Where: Collingwood, ON
When: November 13th-16th, 2024
Who: I will be in attendance!

With my (way too) full travel schedule in the rear-view mirror, I’ll be closer to home for the next several months, which is very welcome as we do have a number of changes that are in the works at the office, and for our team, as we move toward 2025! More exciting announcements to come!

Thanks for reading our “Monthly “INsync” Chit Chat!” And please don’t hesitate to tell me what you like, or don’t like!

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

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