MONTHLY INsync CHIT CHAT January 2025
I Always Like the Start of a New Year… [by David Cox]
I know many will point out that between the end of one year and the start of a new year, it’s really just one week to the next, but I still like the fresh start of a New Year. There is something alluring about the chance to reflect on what was, and to look forward to what could be, and I always take the opportunity to set new goals, some of which will require new, or more consistent habits and/or a reallocation of time towards becoming a better version of oneself. Happy New Year to you and your family, as we head into 2025! I’m particularly excited, work-wise, for 2025, with a new team set to join me for the road ahead and the launch of the “AllINsync” pooled fund, a huge undertaking at Financially INsync!
When my brother-in-law wrote me in November, asking if I’d have an interest in learning the bass parts for their 60-song(!) classic rock repertoire to join his current duo ensemble, I admitted intrigue, and have secretly harboured an unshared desire to once again play music with others. Well, the three of us managed to get together this past month for what turned out to be a four- hour jam session through the likes of Blue Rodeo, the Tragically Hip, the Allman Brothers, Tom Petty, Johnny Cash and even the Grateful Dead. It was fun, and while yours truly had to work hard to keep up, it’s a challenge I welcome, and consider good balance and a healthy diversion from my research and portfolio management responsibilities. Perhaps we’ll play at a venue near you some day and you’ll be able come to listen! Hahah.
News – Some That You’ve Heard, Most That You Haven’t [by David Cox]
Canada’s Finance Minister, Chrystia Freeland tells Canadians that things are better than they think, and it’s all a “vibecession,” but then shortly after resigns, from the sitting government. Some huge losses in Ontario real estate are appearing with Mississauga offering examples of houses falling $650-750K from bubble purchases. Canada’s Ambassador of Climate Change “trumps” even Trudeau’s travel budget, at $254K for travel expenses. Zelenskyy interview requested by Tucker Carlson was rejected by the U.S. state department. The outgoing U.S. President Biden pardons his son (and for 10-years of time no less, conveniently to cover the period of his business activities in Ukraine), and even considers blazing new ground by pre- emptively pardoning Anthony Fauci (the latter seems particularly odd, having called him a hero – why does a hero need a pre-emptive pardon?). NATO estimates 1 million casualties in the Ukraine war. Microstrategy $MSTR, the software company that has become a Bitcoin proxy, is added to the Nasdaq 100.
Things We Recommend [by David Cox]
I downloaded an app last year called “Fit Men Cook.” You can guess what it is, but it’s actually a very useful, easy-to-approach way to add some recipes to one’s cooking repertoire. I suppose I can’t speak to whether a woman too, would enjoy such recipes (hard to imagine why not!?) – but I’ve found it helpful and useful to inspire new ideas in the kitchen!
A few of my go-to favourites are: Canned Chicken Curry Bowl, Southwest Quinoa & Black Bean Salad, and Fire Salmon with Avocado Mango Salsa… Looking for new cooking inspiration as we enter 2025!? Fit Men Cook!
Book Corner [by David Cox]
I know many would name Kiyosaki’s book a top finance and investing read and I honestly don’t know how it took me this long to finally open its pages.
It is indeed a great book, and I think provides some excellent perspective on what it means to earn money to spend vs. invest money and how much of what we do as consumers is buying we think are assets (like cars) but they’re actually liabilities.
He provides a number of insightful graphics that show the connection between income and expenses, and assets and liabilities and how many approach their financial lives, setting themselves up to be stuck in the perpetual loop, needing the next promotion only to keep up with growing expenses and tax burdens.
What Are We Buying? Selling? Holding… [by David Cox]
Broadcom (formerly Avago) $AVGO, has joined the $1 trillion+, club which currently includes 7 other companies (Apple, Nvidia, Microsoft, Google, Amazon, Facebook and Tesla), all of whom are household names, I’d suspect. As a semiconductor company making chips and products that are inputs amidst the technological revolution and contributing to the exploding field of artificial intelligence, the stock has been in a strong uptrend since the market last bottomed in late 2022.
As technology lost relative strength and the semiconductor stocks peaked in the short- intermediate term in mid-2024, Broadcom stood out amongst its peers and remained an obvious leader for anyone comparing relative strength and looking at charts. After a six-month sideways consolidation, the stock broke out this fall and offered another buy point for willing investors, and/or those looking to add to their winning positions. When stocks break out of bases, on big volume, especially in reaction to earnings and/or an outlook (what happened here), I like to take notice and Broadcom continues to sit as a broadly-owned position by our clients.
Source: Optuma
* as at December 30th, 2024
Lifestyles to Consider! [by Criselle Tung]
The New Year is a time to embrace fresh beginnings. It’s the perfect opportunity to focus on goals that truly matter. Whether it’s improving your finances, enhancing your health, or focusing on personal growth, small, consistent steps can lead to big changes. Never underestimate the power of compounding!
Start by creating a budget. Take the time to track your income and expenses to see where your money is going. Setting realistic spending limits and prioritizing savings can help you feel more secure and in control. Building an emergency fund is also crucial. Life is unpredictable, and having three to six months’ worth of expenses saved can give you peace of mind in a world full of uncertainties.
Speaking of savings, make it a habit! Maximize your RRSP or TFSA contributions to allow your investments to grow over time in a tax-efficient way. Consider automating your contributions to make saving easier and more consistent. This simple step ensures that you stay on track without having to think about it constantly.
Finally, don’t forget about your personal growth. Whether you learn a new skill, build and strengthen relationships, or give back to your community, these efforts not only enrich your life but also create a sense of purpose and fulfillment. Start a better, brighter chapter by setting realistic goals that can last the entire year.
The Greatest Gift [by Donald Daggett]
As I work towards the end of the year 2024 and my upcoming retirement date on December 31st, I have taken the time to reflect back upon what has been an incredible journey through life, and look forward to my next chapter.
I wanted to share a few highlights: little did I know where my life would lead while growing up in Kapuskasing, Ontario. There is an expression that “Things happen for a reason.” I was born and raised in Kapuskasing, Ontario to Donald and Genevieve Daggett and have two younger brothers and an older sister. Kapuskasing was a small pulp and paper town that was a great place to grow up. It was a place where you truly experienced the four seasons and was also a town where everybody knew each other. I attended the University of Ottawa and graduated with an Honours B.Sc. (Earth Sciences) and then went on to complete my Canadian Securities Course (May 1987), followed by a relocation to Southwest Ontario (Guelph) in 1989, shortly after beginning my investment career. I met the love of my life (Dawn Barrett), who later became my wife (May 1994) and our son was born in November 1989, and he is the smartest kid I know! I have learned many lessons along the way.
My investment career has allowed me to meet many very special people with whom I have created life-long bonds. I feel very fortunate and blessed for what Dawn and I have done, experienced and accomplished, and we’re looking forward to many more years on our continued journey of discovery.
I am comforted by the fact that I can now join my clients (as a new retiree!) in the very capable hands of David Cox and team at Financially INsync. Happy New Year to all. Sincerely, Don.
How’s the (Bigger Picture) Market? [by David Cox]
Although the bearish divergences that evidence slowing momentum, have been in place for many months on the weekly chart of the S&P 500, the trend of higher highs and higher lows has continued and the recent breakout line, marking the price surge after the U.S. election, remains the short-term line in the sand as we look to finish out 2024, which has been a stronger year that “shocked” the forecasters and left them all on the wrong side of reality. Forecasting is a fool’s game, in my opinion, and investors are much better served by accepting the trend instead of embracing any narrative about what they think will happen.
Source: Optuma
* as at December 30th, 2024
Market Summary and Trend of “All Assets” [by David Cox]
The recent pullback (pullbacks are normal and healthy!) shows some increasing signs of red in the short and intermediate-term columns of our “all assets” table. Bitcoin has eclipsed all assets with a +119.1% year-to-date return and is up more than 4x the S&P 500 market. Global equities lagged considerably this year and it’s been another strong year for growth stocks, with value (the latter of which tends to be more correlated with Toronto stocks and emerging markets) lagging VERY considerably. There is so much to see in the table below, and I’d encourage you to ponder for a minute or two before quickly moving on. We don’t know what 2025 will bring, but you know that you won’t find me making some kind of foolish forecast because no one can know what the future will bring. But we can acknowledge the trend and accept changes in demand and supply and as usual, we’ll be open minded as we enter 2025 in a long-term uptrend that started in the fall of 2022.
Source: Optuma
* as at December 30th, 2024
We Like Fundamentals Too! [by David Cox]
Let’s take a break from individual stocks this month and look at what I would argue are the “fundamentals” and/or underpinnings of the Canadian economy. Canada took on a huge number of immigrants in recent years, helping the government pitch its growing economic growth (GDP) story, but the two charts below paint a different picture.
On the left, we have GDP/capita which is growth per person. You see, more people means more goods and services produced in an economy, but if the economy is shrinking in per person terms, it’s shrinking, and not growing. It’s stagnating, and in a country whose government’s finances are as poorly structured as the U.S. (i.e., exploding deficits, growing debt piles and an inability to finance the soaring interest costs), we need growth to happen in order to move forward. It simply isn’t happening.
While I realize the media is doing a great job to hype up the Bank of Canada’s contribution to lowering interest rates and (hopefully) debt burdens for average Canadians, I’ve pointed out before that the longer-term interest rates/yields are suggesting it’s not going to be so easy. Look at the chart (below) on the right. It’s Canadian unemployment and what do we see in the last couple of years? An uptrend! Rising unemployment isn’t good and most can understand this (it doesn’t take an economics degree). If we can’t provide jobs, or if the jobs that have been created, are mostly created by the government (in Canada, they have been in recent years), then we’re setting ourselves up for further economic pain ahead. I see these two charts as showing rather weak fundamentals for Canada and, maybe you think I’m being too pessimistic, I’d of course prefer to be realistic and tell the data like it is, not make up a narrative of what I’d like it to be.
Source: TradingView
* as of December 30th, 2024
Chart of the Month [by David Cox]
Amidst news about central banks around the world lowering interest rates (again), the bond markets, especially that ginormous one in the U.S. (did you know that the bond market is almost three times larger than the stock market!?) isn’t providing confidence. In the U.S., we can now see the U.S. long bond market ($TLT is the ETF for the 20-year treasury bond) is -51.3% from its highs in early 2020, when interest rates bottomed. Yes, you read that right, those bonds are - 51% on paper since then!
And yes, if you’re scratching your head, wondering if it’s all these bonds, the future obligations of the U.S. government, that are held on the books of all the financial institutions, you are right again. And if you’re wondering why we’re not reading of more financial troubles, given the incredibly significant loss of capital on these obligations, it’s because the U.S. financial systems permit those large bond owners to not mark their assets to market if they intend to hold these bonds to maturity. This is insane in my opinion, and as I’ve pointed out before, would be like me telling our clients that even though they’re seeing on their statements a loss of -50%, it’s not real, they should ignore it and it will be ok in the end.
Like any company with a deteriorating credit rating, the cost to borrow rises and that’s what’s happening to the U.S. government. Their cost to continually spend more than they earn and to service the past costs of what they’ve already spent are ballooning and not getting cheaper (even though the Federal Reserve has started to drop interest rates). We’re in the midst of a debt bubble (and have been for years) and I don’t believe we’ve seen the fallout (yet). No, I’m not trying to stir up fear because, in truth, no one wants to see financial calamity and the Fed has continually demonstrated a creative and aggressive approach, when necessary, to create calm and backstop the system. I believe the money printing (quantitative easing/application of “modern monetary theory”) will continue and a new government is not going to suddenly embark on a plan to austerity by cutting spending to match reality. All we can do is pay attention to the charts and accept that the U.S. bond is not healthy.
Source: Optuma
* as at December 30th, 2024
Social Media and Our Website [by David Cox]
Every morning, as I conduct my morning chart review, I tend to screen snip up to 25 charts that I think are helpful, insightful and/or important and strive to share them on X (formerly Twitter). With so much going on in the past quarter here at the office, there have been many days that despite snipping all those charts, they simply don’t get posted. But I see them. And as I’ve said before, I actually see my feed as a journal of sorts, not put there for the attention of others, but rather as evidence of what I’m seeing at the time, as I seek to keep that #marketpulse and ensure that our clients are on the right side of important trends.
Upcoming Dates, Seminars, and Announcements [by David Cox]
What: Our Team Re-Shape, Re-Tool & Re-Design!
Where: Financially INsync, Waterloo, ON
When: First Half of 2025
Who: Brian Potter will be in his new seat on January 14, 2025, and we’re excited to welcome him!
What: The Launch of Our “AllINsync” Pool!
Where: Our Accounts
When: TBD (hopefully by January 20, 2025)
Who: All of our Clients (with Canadian domiciled assets)
What: Investing with IBD (Investor’s Business Daily) Podcast
Where: www.investors.com/Spotify/Apple/YouTube
When: January 16, 2025
Who: I’m thrilled to have been invited to speak with host Justin Nielsen!
Thank you for taking the time to read our “Monthly INsync Chit Chat” and I wish you and your families a happy, healthy and prosperous 2025 ahead!
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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