Modern Investing Techniques — Episode 9

Hey, welcome to Modern Investing Techniques, episode nine, for March thirty-first, twenty twenty-six. I'm Patrick, coming to you from Vancouver. Today's markets have some interesting setups that are worth unpacking in detail because they touch on several themes we've been following closely. Let's break them down step by step so you can see exactly how these moving pieces fit together and what they might mean for your own portfolio. Before we dive in, here's the quick but important reminder that everything we discuss here is strictly for education and entertainment purposes. The Practice Investment of the Day uses simulated trades with no real money at risk. I'm not a licensed financial advisor, this is not financial advice, and none of what we cover should be taken as a recommendation to buy or sell any security. Always do your own research and consult a licensed financial advisor before putting real money to work. Markets involve risk of loss and past performance does not predict future results. The big story dominating the tape today is the geopolitical energy shock coming out of the escalating Iran conflict. This has sent the S&P 500 on track for its worst quarter since 2022 while simultaneously pushing Eurozone inflation up to 2.5 percent. Let's start with the Market Pulse so we have a clear snapshot of where things closed. The S&P 500 finished the session at six thousand three hundred forty-four, down 0.4 percent on the day. The NASDAQ was a bit weaker, closing at twenty thousand seven hundred ninety-five, down 0.7 percent as growth-oriented names felt the pressure from renewed rate-hike fears. Here in Canada, the T S X Composite showed more resilience, ending at thirty-one thousand nine hundred thirty-five, down just 0.1 percent, helped in part by the energy sector's gains from higher oil prices. The main driver behind these moves is clearly the escalating Iran conflict, which has spiked energy prices and reignited fears that central banks may need to keep rates higher for longer than previously expected. With oil and natural gas jumping on supply disruption concerns, the entire inflation narrative has shifted almost overnight. Central banks on both sides of the border are now in a clear wait-and-watch mode, reluctant to cut rates while energy costs threaten to keep headline C P I elevated. This creates tighter financial conditions overall, giving policymakers more room to pause rate cuts without looking behind the curve. For Canadian investors this matters a great deal because higher energy costs tend to flow through quickly to domestic inflation measures that the Bank of Canada watches closely. That in turn can influence the timing of any future rate cuts, which directly affects everything from mortgage rates to the attractiveness of dividend-paying equities inside tax-advantaged accounts. Those impacts are especially relevant inside TFSAs and RRSPs where volatility can compound tax-free or tax-deferred, turning what looks like modest portfolio swings into meaningful long-term differences in your after-tax wealth. While the broader market is clearly feeling the heat from this geopolitical flare-up, one sector is quietly drawing fresh analyst attention despite all the uncertainty, and that's where we'll focus our Strategy Spotlight next. Now let's move into our Strategy Spotlight on REIT valuation rotation in a rising-rate environment. This is a theme that keeps resurfacing whenever rates move higher and investors start hunting for pockets of value. The core idea is straightforward but requires discipline: you screen REITs for those trading at meaningful discounts to their net asset value or showing strong free-cash-flow coverage relative to their distributions. Once you've identified those candidates, you rotate capital toward the names that analysts believe remain undervalued even as broader interest rates stay elevated and the macro picture looks cloudy. Today's news that Mizuho initiated coverage on two U.S. residential REITs with outperform ratings highlights exactly this kind of rotation playing out in real time. Analysts are pointing to attractive valuations that more than compensate for the macro uncertainty created by the Middle East conflict and the stickiness of inflation we're now seeing in Europe and potentially here at home. To implement this strategy, Canadian investors can take advantage of the free screeners built into platforms like Questrade or Wealthsimple, which make the process surprisingly accessible even if you're managing your own accounts part-time. A practical filter set might include REITs with a price-to-FFO ratio below the sector average, a dividend yield above 4 percent, and debt-to-ee-bit-dah remaining comfortably under 6 times. Adding a simple check for recent insider buying or fresh analyst upgrades can provide an extra layer of confirmation that smart money is starting to lean in the same direction. Historically, this valuation-rotation approach has performed best in the 12 to 18 months following the peak of rate-hiking cycles, when markets gradually begin to price in eventual rate cuts and multiples start to expand again. Of course, no strategy is without risks. Prolonged high rates could compress multiples even further, or sector-specific issues such as unexpected occupancy drops in certain property types could derail the thesis. The key discipline here is strict position sizing — never letting any single REIT name exceed 3 to 5 percent of your overall portfolio — and using clearly defined stop-losses set 8 to 10 percent below your entry point on the weekly chart. That way you're protecting capital while still giving the rotation thesis enough room to play out. Knowing where to rotate capital is only half the battle though — you also need to understand the hidden costs that quietly appear when markets get stressed, and that's exactly what we'll tackle next. Now, here's something that most retail investors still get wrong even in 2026, and I have to admit it cost me real money before I finally figured it out the hard way. Imagine you placed a market order for an energy E T F last week right when the first Iran-related tanker news hit the wires and volatility spiked. Your order filled 18 cents higher than the last quoted price you saw on the screen, which doesn't sound like much until you do the math. That slippage cost you an extra 162 dollars on what was only a 900-share position — money that came straight out of your returns before the E T F even had a chance to move. What actually happened behind the scenes is that the bid-ask spread on that E T F widened dramatically from its normal tight 3 cents all the way out to 22 cents within the first 45 minutes after the headline. In stressed markets, market makers pull back liquidity to protect themselves, and that spread becomes a hidden transaction cost that can easily exceed the E T F's entire annual management fee in a single trade. During the current Iran conflict, we've seen energy and defense names on both the T S X and N Y S E experience average spreads jumping 4 to 7 times their normal levels, turning what should be routine trades into expensive propositions. The professionals I respect always check the bid-ask spread and the 20-day average daily volume before entering any position larger than 1 percent of their portfolio. If the spread is running more than 0.25 percent of the share price or if current volume is less than 50 percent of the 20-day average, they immediately switch to limit orders or simply wait for the next 30-minute window when liquidity tends to improve. The biggest mistake retail investors continue to make is treating all E T F's as equally liquid regardless of what's happening in the news. Instead, the smart habit to build is verifying real-time spread and volume directly on your broker's advanced quote screen before you ever click the buy button. Doing this consistently can save you hundreds or even thousands of dollars per year that would otherwise disappear as invisible friction. Given this high-uncertainty environment we're operating in right now, let's look at what our Practice Investment model decided today after running the numbers. For the Practice Investment of the Day, we have no new position today, and that decision was deliberate after our full analysis. Remember this is a simulated trade for educational purposes only using no real capital. The decision reflects the patience and discipline required when geopolitical risk is elevated and multiple factors aren't lining up cleanly. Our A I analysis showed only one positive factor standing out clearly, which is certain REIT valuations that look compelling on a relative basis. However, the technicals and momentum indicators were noticeably missing, so our overall confidence level sits at low. The main catalyst in the background is the ongoing Iran conflict driving energy price spikes and creating inflation surprises across multiple regions. We saw Eurozone C P I hit 2.5 percent, which creates fresh headline risk that can ripple across multiple sectors with very little warning. On the charts, broad indices remain below their 50-day moving averages, which continues to act as resistance on any attempted bounces. The R S I 14 is hovering in the 40 to 45 neutral zone on daily charts, showing neither oversold conditions nor strong buying conviction. Volume is certainly elevated compared to recent weeks, but it's not confirming any clear directional break that would give us confidence in a near-term move. With geopolitical escalation still possible, we could easily see spreads widen further and trigger gap moves that are difficult to manage. For that reason, our maximum acceptable portfolio risk on any new idea remains capped at 1 percent until clearer support levels form and we get more confirmation. Learning when not to trade is truly one of the highest-R O I skills an individual investor can develop over time. By requiring at least two well-aligned factors before entry, we avoid the common trap of fear of missing out-driven decisions during fast-moving news cycles that often lead to poor outcomes. I strongly encourage listeners to add this minimum two-factor checklist to their own trading or investing process regardless of account size. It forces real discipline and has been shown to improve long-term win rates even if it means sitting in cash for days or even weeks at a time while the market sorts itself out. Yesterday's Trade Review gives us another honest, unvarnished look at how these simulated trades are performing so we can all learn from both the wins and the losses together. Our last weekly hold was So-Fi, which we entered as a contrarian mean-reversion play on elevated short interest against what we viewed as a fundamentally improving digital banking franchise. We entered at 17.16 on Monday's open with a clear thesis and risk parameters in place. The exit came at 15.87 on Friday's close after the position moved against us. The result was a loss of 7.49 percent, which equals minus 74.91 dollars on the one thousand dollar simulated position we were running. That brings our running total now to minus 74.91 dollars across the two trades we've completed so far in this series. Our win rate is currently sitting at zero wins out of two total trades, which isn't where we want to be but is valuable data for the model. The short-interest thesis simply did not overcome the broader market pressure created by rising rate expectations and the geopolitical risk premium that hit almost every sector. In response, we will be tightening our entry criteria going forward to require positive price action relative to the sector on the actual day of entry. We will also avoid names that are showing clear distribution, meaning higher volume on down days, which often signals institutional selling pressure. Losses like this, while never fun even in simulation, reinforce the real value of strict risk rules and the importance of multi-factor confirmation before committing capital. While we're staying on the sidelines for now in the Practice Investment model, several quick developments in the news cycle deserve attention because they could create both risks and opportunities in the weeks ahead. First, the new Ontario-federal housing deal is expected to bring provincial and federal housing targets significantly closer together than they've been in recent years. This kind of policy alignment could provide medium-term support for residential REITs and related construction plays, especially in Canada's fastest-growing urban centers. Canadian investors who hold these names inside TFSAs should be monitoring closely for follow-on policy details that could affect real-estate supply dynamics in high-growth provinces over the next 12 to 24 months. Next, Air Canada was hit with a four hundred twenty-six thousand dollar passenger-rights fine, which on the surface might seem minor but highlights ongoing operational and reputational risks in the airline sector, especially with higher energy costs now squeezing margins. In Europe, defense-tech startups are seeing noticeably increased interest from Gulf militaries as the Iran conflict continues to unfold. This highlights a potential long-term thematic opportunity in the broader defense sector, although public pure-play names available to retail investors remain relatively limited at this point. Finally, Turkey has restarted foreign-currency swap transactions with local banks after experiencing reserve drawdowns directly linked to the regional conflict. This development points to rising emerging-market currency volatility that investors need to watch carefully. Canadian investors who maintain any EM exposure should review whether currency-hedged E T F versions might make more sense inside their RRSPs to reduce unwanted volatility from FX swings. These stories collectively show how policy shifts and geopolitical developments are creating a complex mix of risks and opportunities that smart investors need to navigate thoughtfully rather than react to emotionally. Let's look at a couple of practical tools and techniques that can help you stay ahead in this kind of environment without needing a Bloomberg terminal or expensive subscriptions. The first is what I call the Invesco Global Real Estate Fund Commentary Analysis Workflow. Take the time to read the latest quarterly commentary from institutional managers to extract the specific country and sub-sector tilts they are making right now. This gives retail investors a surprisingly professional-level view of real-estate positioning without having to pay for expensive independent research. Once you have those themes in hand — such as residential versus industrial exposure or regional preferences — cross-reference them against your own T F S A or R R S P holdings to see where you might be aligned or misaligned. You can do this efficiently using the free E T F comparison tools available on Morningstar.ca or directly inside most broker platforms these days. The second useful tool is the Bloomberg Fuel Levy Adjustment Tracker, which sounds more complicated than it actually is for everyday use. Track government announcements on fuel-tax changes in real time by setting up Bloomberg's free news alerts or simply monitoring the mobile app's commodities section regularly. South Africa's recent decision to lower its fuel levy in order to cushion gasoline prices for consumers demonstrates how targeted policy can blunt the impact of oil shocks on the broader economy. Canadian investors can set similar alerts for both Canadian and U.S. energy subsidy news to help anticipate margin effects on airlines, trucking companies, and consumer discretionary stocks that are sensitive to fuel costs. Now let's review our overall simulated portfolio performance so we stay transparent about the results we're generating in this educational exercise. Total trades so far sit at two, which gives us a small but meaningful sample to learn from. The win rate is currently zero percent with zero wins, one loss, and one break-even trade in the record. Cumulative profit and loss stands at minus 74.91 dollars on our simulated starting capital. That translates to an average return per trade of minus 3.75 percent, which again is not where we want to be long term. Our worst trade so far is that 7.49 percent loss on the So-Fi position we just reviewed. Our A I analysis is actively learning from these patterns and adjusting the minimum-factor checklist to become more selective in future decisions. This remains very much a learning journey rather than a track record that anyone should follow blindly, and we will continue to be honest about both the wins and the losses as they occur. Before we wrap up today's episode, keep an eye on any follow-through details coming out of the Ontario-federal housing deal as well as continued movement in energy spreads, which could create new setups worth analyzing in the days ahead. That's your Modern Investing Techniques for today. Every episode is designed to make you a sharper, more disciplined investor over time. If you're finding value here, please subscribe, leave a review, and we'll be back tomorrow with more market intelligence and practical strategies you can actually use. Thanks for listening — stay disciplined out there. This podcast is curated by Patrick but generated using AI voice synthesis of my voice using ElevenLabs. The primary reason to do this is I unfortunately don't have the time to be consistent with generating all the content and wanted to focus on creating consistent and regular episodes for all the themes that I enjoy and I hope others do as well.