Andrew Auerbach (00:01.87) Hi everybody. Today is September 18th and I am very pleased to provide a market overview. Today is a big day for the insiders as we all await the 2 p release of the announcement from the Fed with respect to what will likely be a 25 or 50 basis point rate cut.

Certainly, we have not seen a rate cut in many years and it is anxiously awaited. Okay, let's dive in. Before we get into the overview of the markets, it's a really good time to be reminded of the importance of having a long range financial plan. That is really far more important than any moment along the way. And I'm often reminded

The markets are a means to an end. They are not the end. The point is to craft a plan that articulates your goals, that has the return requirements in order to achieve those goals, and then to trust that over time, your advisor is going to make decisions with the long range view of accomplishing those set out goals. You know, there's a wonderful expression about the markets

in the short term being a voting machine and in the long term being a weighing machine. And this is very much playing the long game and not getting caught up in the moment. With that said, let me jump into the moment and talk a little bit about a lot of events that have been underway over the last little while. Let's start first of all with our market overview. Really not a lot has changed since the last time we spoke. The S &P 500 is up.

18 % year to date, the NASDAQ is up 17%, the TSX is up 12%. What I find particularly interesting and given we do have a strong gold weighting in our portfolios, as we've talked about before, is the continued strength of gold. It is now at 25 .82 an ounce. Started the year a little over 2 ,000 an ounce, so it's been up about 25 % year to date. Something to pay attention.

Andrew Auerbach (02:20.907) to as gold is normally viewed as an excellent safe harbor or hedge against volatile equity markets. And to support that perspective, one of the all -time, if not perhaps the greatest investor of all time, Warren Buffett and Berkshire Hathaway has been accumulating massive amounts of cash over the last couple of years. Just to put that in perspective,

They started with 130 billion in cash at the end of 2023, and they have grown to $280 billion in cash. A lot of that is driven to some very significant sales. They sold half of their Apple position. They sold almost 20 % of their Bank of America position at Berkshire Hathaway.

a legendary investor who clearly is one accumulating cash for opportunities in the future, given what a strong value investor he is. And also just with a view of the valuations and the reasonability today. Let's shift a little bit with what I thought was a very interesting kind of review of the Magnificent Seven that I bumped into this month.

So let's take a look at the concentration that we talk about a lot about how concentrated this market is with seven technology stocks. know, as you know, Apple, one of the magnificent seven is, you know, valued with a 33 times P multiple. That is with tremendous expectations around future growth. The 10 year average of Apple would be about 20 times just to give you a sense of that growth.

And so that level of concentration, let me just give you the stat that I saw, which I thought was a fascinating way to tell this story. There's an index called the MSCI All World Index. Now the MSCI All World Index looks at 47 markets globally. It represents 85 % of the public equity market globally. So it is a really good proxy for global equities.

Andrew Auerbach (04:41.356) The Magnificent Seven represent 17 % of that index. Now bear in mind in that index, you're looking at about 2 ,900 companies around the world. These seven companies represent 17%. Put that in perspective, the listed companies in the MSCI All Country World Index for all of Japan, UK, France,

Canada and China represent the same amount of concentration. So these seven companies represent five of the largest countries in the world. I think that was a wonderful illustration for how concentrated this market is. One of the big reasons why we have shifted to an equal weighted ETF in the U .S. away from the heavily concentrated S &P 500.

Okay, let's talk about the Fed. I mean, that is what everybody is talking about. This is being recorded prior to the release of the cut announcement and it doesn't really matter. I mean, we know they are going to be cutting. Our expectation is a 50 basis point rate cut. It could be 25 basis points, but they have a long way to go. And let me just give you a contrast between Canada and the U S which I think helps illustrate that.

The Bank of Canada, you know, started the tightening at the same time, of course, as the U .S. So if we go back to March of 2022, the rate was 25 basis points. There was a series of 10 increases over the period to July 23, bringing the Bank of Canada rate to 5%. Now, since then, starting in June of the summer, they've started easing. So we've seen three rate cuts with the Bank of Canada.

with the rate now sitting at 4 .25. The US is quite a contrast. They also started at 25 basis points. They moved the same up to July 23 with 11 increases to go up to five and a half percent on their rate. That's the highest in two decades and they held firm. So they have not yet begun easing. And that's why when you put in perspective of a 25 or 50,

Andrew Auerbach (07:06.195) Bank of Canada is still quite significantly ahead of them and the implication of these high rates for this much longer in the world's largest economy and most important economy, certainly correlated to ours, does have significant procession risk. And that's where there's been a lot of uncertainty about the strength of the consumer, whether this will be a soft landing.

as we move forward. And the Fed of course has a dual mandate, a mandate that is about price stability, so combating inflation, but also ensuring maximum sustainable employment. And this has been the difficulty where they are starting to see softening in employment numbers while at the same time not yet quite reaching their 2 % target for inflation. So we will see where.

Where that all goes it will be certainly interesting once it comes out and will continue to keep you apprised Here and through our other communications One article I'd encourage everybody to to read actually too. I mentioned Berkshire Hathaway For those of you who have any interest in the markets Every year without question the very best thing that I read

is the letter to shareholders from Berkshire Hathaway. And they archive all of them on their website. You can go back to 1977 and actually see every single year since 1977. And it is just incredible. The amount of wisdom and perspective and consistency in an investment philosophy is what you're gonna get from those annual letters. I'd really give them a review. The other piece, something I've been harping on a whole lot,

perhaps too much, is the amount of government debts, certainly in Canada, as well as in the US. Fantastic piece in the Wall Street Journal today, really talking about how both candidates for president are really not talking about the implications of the soaring debt. And in fact, with the debt level in the US reaching almost $2 trillion, the servicing costs of that debt is just absolutely tremendous.

Andrew Auerbach (09:24.725) the impact to their credit rating, the ability for them to fund their debt with the issuance of treasuries, these are all things to pay attention to in the coming years. You simply can't keep growing debt forever without having implications relative to investor sentiment and where they allocate investments globally. So something to pay attention to. For us, we are very happy with our positioning and continue to maintain

A relative underweight in equities presently across our portfolios. We do have an overweight in gold as we've talked about. We have a underweight in financial services. And as you know, we favor ETFs for the costs that they are low in our US and international exposure. We have shifted a few months ago to an equal weighted ETF.

in the US, largely tied to the concentration that I was just speaking about. Would love to get any feedback or questions that you might have. Feel free to send us a note at info at delialadvisory .com and I'll look forward to talking to all of you soon. Thank you.