Five takeaways from the Toronto MoneyShow

Peter Hodson: Every investor had one thing in mind: inflation

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The Toronto MoneyShow, after a pandemic hiatus, took place last week. It’s a big show: a giant exhibit and forum for all things investing and money. It was even better to go back to real in-person discussions with investors, rather than Zoom conferences. Attendance was high, but spirits were not. Let’s look at five takeaways from the show.

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Everyone was depressed

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From speaking to conference attendees to attending some of the hundreds of presentations, misfortune was everywhere. No one was excited about the market and the doomsayers got the biggest following. A merry boy even predicted a bear market for another 20 years. Investors lamented that everything was down, even bonds.

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Cryptocurrency and cannabis investors lost so much that related companies didn’t even bother to come forward. The mood was grim, with the conference starting just days after markets fell 4% in a single day. Attendees looked at me like I was from another planet when I commented in a speech that “it wasn’t everything wrong.”

Alts come out when nothing works

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There were presentations and booths by a company selling rare wine as an investment, a private condo in Texas seeking investors, and a company whipping up music royalties. They have all received a large following, as investors are looking for something – anything – other than stocks and bonds. Many investors were simply looking for an investment that didn’t act the same as the rest of their portfolios – the beloved uncorrelated asset class.

We have nothing against alternative asset classes. After all, we are the portfolio managers of an American hedge fund. But investors should be careful not to shift money to other asset classes just because something isn’t working. The change can take place at exactly the wrong time (before a rally) or in something that investors don’t fully understand or may not be right for them.

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It’s not 2008

Despite the pessimism, some of the few speakers who weren’t completely negative (including me) noted a few things when comparing the current economic period to that of the great financial crisis of 2008.

First – and this is important – no one was talking about impending bankruptcies likely to hit the Monday morning after the conference. This was in stark contrast to 2008, when investors were too scared to wake up in the morning due to fear that another automaker, bank, brokerage or mortgage company might go bankrupt. No, this year we have gone through another week, month, quarter and year without a giant bankruptcy.

Another area of ​​difference relates to jobs. In 2008, the US economy was losing 400,000 jobs per month. But at the MoneyShow, attendees were discussing the fact that there are 11 million job openings in North America and no one can find workers to fill them. It is indeed a different era.

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A cold shoulder on hot themes

In previous years, the showroom was filled with junior mining companies, cannabis companies, and cryptocurrency companies. Real rock stars roamed the halls, promoting the latest fashions they subscribed to. Well, those all turned out to be duds, so maybe there’s a good contrary indicator here.

This year was the first of many that the show was what some might call normal. No one theme dominated, no area of ​​interest captured the full attention of investors. My gut tells me that’s a very good thing. Investors would do well to get back to basics and ignore thematic investing.

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Every investor had one thing in mind

Nobody, at least compared to other money conferences over the years, really wanted to talk about specific stocks and attributes of the company. No, all they wanted to talk about was inflation and interest rates. More specifically, when they will both peak.

The fundamentals of the business, at least for now, don’t matter. Companies reporting strong earnings? We do not care. Higher dividends? We do not care. It’s all about inflation. It’s the only thing that matters to some (perhaps most) investors right now. This makes stock selection very difficult. You might find the biggest stock in the world today, but if inflation continues to rise, this big stock could drop 20% next week.

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The laser focus on one or two data points will eventually change, but that’s certainly annoying for any investor who thinks company fundamentals actually matter.

Peter Hodson, CFA, is Founder and Head of Research at 5i Research Inc., an independent investment research network that helps self-directed investors achieve their investment goals. He is also a portfolio manager for the i2i Long/Short US Equity Fund. (5i research does not own Canadian stocks. i2i Long/Short Fund may hold non-Canadian stocks mentioned.)

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