Written by: Mike Simonato, Ontario Presenter: “Investing for the Long Term”, presented to the Feb. 6, 2021 International Online Forum, you can watch by CLICKING HERE.
There are 3 Main Keys that can affect the Market
- Earnings
- Inflation
- Interest Rates
EARNINGS: This is relatively simple. You have the Costs involved in producing a good or service and the price you can charge for said good or service. What costs are involved:
Labour. At present we have what is being called the “Great Resignation”. In Aug in the USA 3.4 million people quit their jobs (Mainly in the food and retail industry) Every month a new record is set. People are being told that if you’re unhappy now’s the time to quit and look for a better paying job. RESULT Labour costs will soar.
Raw Materials. As we all know, there are serious Global Supply Chain issues that makes the cost of every step of the process skyrocket if you can even get anything. Ikea said it will be well into 2022 before any end will be in sight for them and Apple announced there will be a limited supply of the new iPhone because of production issues.
Other costs: ie Heat, Hydro, Rent/ Leases, Fuel for vehicles etc. are all skyrocketing
Prices that can be charged: With the cost of everything skyrocketing, the consumer is going to have to be a lot smarter about spending money or they will dig a debt hole they will never get out of.
INFLATION. This ties in with Prices that can be charged, and that affects earnings. I went out this morning to top up the winter supply and get a couple of necessities. Bread for lunches I’ve been paying max $2.50, now $4.19. Veg Oil – Reg $4.95 Now $10.97. Heat and Hydro up. Gas for the van. Luckily my work lets me usually get a good price but yesterday I saw prices from $1.34 to $1.47. This morning where I live went down to $1.33
Groceries and several other things have gotten insanely expensive. Even though I have the money, I will not pay insane prices. I’ll do without. This costs companies’ sales, which affects earnings in a negative way
INTEREST RATES: This is a tricky one. The Gov’ts have all kept Interest Rates insanely low to try and keep the economy going. At some point, Interest rates will rise and this has the potential to cause a real crisis:
- Household Debt is at all-time highs. A large number of Canadian households won’t make it to Xmas.
- Business Debt loads (Especially Small business) are enormous
- Govt Debt loads are at all-time highs Canada is over $1 Trillion in debt
Even the slightest raising of Interest Rates could result in a catastrophe.
Here is where it gets really interesting. The Govt figures that when the economy gets roaring again, then the tax revenue will come rolling in and in time all will be good again. Here though, is the interesting part. I’m in a lot of homes and deal with a wide array of people of all walks of life and income levels. I’m being told by more and more people that First, it’s really hard to get anyone to come and do anything, and Secondly (This is the key) They will only work if they’re paid cash.
Two problems with this. First, that means No Tax Revenue as this isn’t being declared as income. Secondly, when these bozos go to retire, there will be no pension as your pension is calculated based on your Taxable Income.
Summary: As I always say, Ride the Bull until he throws you off, however, be cautious because everything I’m seeing could end very badly. I really hope I’m wrong, but if I’m right, only the Smart/ Strong will survive and what I’m being told by really high-end traders and money managers is this is already underway.
As I close, I thought I’d share the scariest News info from the week. Elon Musk is now worth more than Bill Gates and Warren Buffet combined.
NOTE: I am My Retirement Plan going Forward. 1. How to Play Bob Turnbull’s strategy in Canada and USA (which I will personally be doing) and some stocks that I already own or will strongly look at purchasing in the future.
As always nothing more than my 2 cents and I hope it’s of interest and value
Now for the Markets:
USA C/UP on Thursday
DOW JONES: 2 really big up days Thurs and Fri Watch for continuation next week
NASDAQ: Buying the last 3 days with volume increasing Watch for continuation next week
S&P 500: Again Big moves the last 2 days
MKT TIMING: Big moves the last 3 days Watch for Continuation
READ Views and Strategy
CANADA Still C/DN but lots of green is showing in the Color Guard.
PTSE: Friday broke to a New High. Watch next week to see if it can continue.
VENTURE: Finally decided to join the party. Strong move this week on Strong Vol. If it breaks above the 200 SMA definitely, want to look at it.
MKT TIMING: All 3 Indicators rose sharply as did price Watch for continuation next week
READ Views and Strategy
AUSTRALIA Read Views and Strategy
BRITAIN: Read Views (May want to print this one out) and Strategy
Finally, let’s look at the least loved Step Child GOLD On WED the 3 EMA crossed the 8 EMA and crossed the 20 SMA (usually a strong buy signal)
On THURS crossed above the 40 SMA but a Doji Candle
On FRI it sold off but still closed above the 40 SMA.
Watch to see if it finally has a tradeable rally, or if it will break hearts once again
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