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Jonathan Baird: Market Optimism Should Signal Caution in Equities

Tom welcomes Jonathan Baird Editor and Publisher of the Global Investment Letter to the show. Jonathan’s focus with his newsletter is on geopolitical trends and their impacts on markets.

Jonathan discusses starting on Bay street in the mid-1980s and quickly becoming involved in money management managing several large funds. When the firm he was involved with was purchased by a French Bank, he choose to leave and manage his own account. He started occasionally writing on LinkedIn and the response from readers lead him to start a paid subscription service.

The biggest takeaway in markets today is the importance of macro factors. Some things that appear to come out of left field like the pandemic were foreseeable. It’s important to not focus too closely on your investments but also be aware of what is going on in the larger sense.

He discusses events occurring in China and Hong Kong and why China will act in its interest. This may result in slower economic growth in China and could affect commodity demand globally as as all markets are interconnected.

He is growing increasingly concerned about the markets. While he has taken a bearish position his portfolio has still outperformed. Jonathan hasn’t seen any evidence of a market sell signal but he is hedging the VIX and using sell stops. Investors are overly optimistic and volatility is reflecting this optimism, despite the negative economic reports. The risk of a pullback appears to be increasing but when such an event will occur is uncertain.

Given the monetary expansion and the geopolitical issues you would expect gold to be soaring but the chart appears bearish.

Timestamp References:
0:00 – Introduction
0:32 – His Background
3:01 – Lessons of 2021
8:50 – China & Markets
10:46 – Market Positioning
16:20 – Market Direction?
19:40 – Margin Debt – S&P Chart
22:35 – Transitory Inflation?
27:50 – Inflation Psychology
33:05 – Bonds & Gauging Economy
35:07 – Slowdown & Stimulus
39:02 – Hedging Volatility
42:25 – Gold & Silver?
52:27 – Active Investing
56:22 – Concluding Thoughts
57:55 – Wrap Up

Talking Points From This Episode:

  • Jonathan’s background and lessons from 2021.
  • China & Hong Kong and market risks from a Chinese slowdown.
  • Inflation and why it may be transitory?
  • Educational resources, opinions, and importance of asking questions.

Guest Links:

Jonathan Baird is the Editor and Publisher of the Global Investment Letter. Jonathan has a 25-year career as a money manager managing international equity mutual funds. After the firm he worked for was bought out he decided to focus on managing his own money full-time which also led him to start the newsletter.

The Global Investment Letter is a monthly journal that comments on capital markets around the world. Geopolitical trends are examined and their potential impact on markets is discussed. In addition, articles on various other topics that may aid an investor, such as investment philosophy, book reviews are included periodically. Jonathan believes that thoughtful, independent analysis and opinion have never been more essential.

In 2010, Johnathan won the Lipper Award for best global equity fund in Canada.

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