Modern Investing Techniques — Episode 32

It's Friday, welcome to Modern Investing Techniques, episode thirty-two. It's May first, twenty twenty-six and I'm Patrick in Vancouver. Last trading day of the week. Let's review the week and set up for next Monday. Quick reminder — everything we discuss here is for education and entertainment. The Practice Investment of the Day uses simulated trades with no real money. I'm not a licensed financial advisor and this isn't financial advice. Always do your own research before putting real money to work. Clorox cuts profit forecast on weak demand while oil prices hold gains amid Iran tensions and yen intervention. This morning markets opened with resilience as the S and P five hundred index reached seven thousand two hundred nine, up one point zero percent. The NASDAQ composite stood at twenty four thousand eight hundred ninety two, up zero point nine percent. Meanwhile the T S X composite climbed to thirty three thousand nine hundred sixty four, up one point nine percent. Our simulated portfolio sits at a year to date negative zero point four four percent, delivering alpha of negative seven point five seven percent against the NASDAQ which is up seven point one three percent year to date. Like our TMUS pick seventeen days ago that returned zero point six one percent on relative value rotation, today's steady environment rewards selective sector discipline amid currency volatility. Are we beating the NASDAQ this week? On a year to date basis we are trailing, though the focus stays on finding selective opportunities in this resilient setup. JPMorgan has analyzed the nineteen point five trillion dollar E T F market and identified three key structural trends reshaping how investors access broad exposure and thematic opportunities. These trends point toward favoring thematic and active E T F allocations over traditional static index funds, particularly when global shares are steady and currency volatility is in focus. In current conditions this shift makes sense because dynamic allocations can better capture moving capital flows instead of remaining locked into broad benchmarks. For retail investors the practical step is to log into your brokerage E T F screener on platforms such as Wealthsimple or Questrade. Filter for thematic or active vehicles that align with the reported trends and size a modest position within your T F S A contribution room to keep the approach tax efficient. This method has historically delivered outperformance during market rotation periods when early positioning in new E T F categories came before broader adoption. At the same time risks include elevated expense ratios in active E T F's and the chance of rapid reversal if the underlying trends lose momentum due to macroeconomic shifts. Cross reference any single bank's trend report with data from at least two additional providers to confirm durability before committing capital. The goal is not to chase every new theme but to add flexibility so your portfolio can adapt without a full overhaul. Now turning to our Practice Investment of the Day, which remains a simulated trade for educational purposes only with no real money involved. Today's focus is on LyondellBasell, ticker L Y B, listed on the N Y S E in the industrials sector. The strategy centers on a portfolio realignment play triggered by the completion of a major asset sale. LyondellBasell has completed the sale of select European olefins and polyolefins assets to AEQUITA, marking a key milestone in the company's European strategic assessment. With no specific technical levels available in the source data we monitor positioning relative to recent support, noting the broader market gains including the T S X up one point nine percent today. We also watch for any volume increase above the twenty day average to confirm follow through. The risk assessment calls for a stop loss at five percent below the entry price because market reaction to the transaction details could disappoint or reverse quickly. The target remains a gain of three percent to six percent over the week if investors view the realignment positively. This is a medium confidence play since the transaction completion provides a clear catalyst but we still lack volume confirmation or strong sector momentum data. This trade demonstrates using corporate strategic announcements as entry catalysts for industrials sector plays rather than waiting solely for earnings reports. As today marks the end of the holding period we will evaluate the actual performance based on how the market responds to the asset sale news. Looking back at yesterday's flash trade we simulated a position in BTC as a macro rotation play on cross asset signals. The entry was at thirty three dollars and sixty seven cents at market open and we exited at thirty three dollars and eighty one cents at market close. This resulted in a gain of zero point four two percent which translated to about four dollars and sixteen cents on a one thousand dollar position. However the NASDAQ gained zero point nine percent over the same day meaning we underperformed with negative zero point four eight percent alpha. The trade captured a modest gain on the BTC flash trade and validated the use of cross asset signals for opportunistic entries. At the same time the underperformance relative to the NASDAQ highlights the difficulty of beating broad indices on single day volatile assets like crypto. The key adjustment from this experience is strengthening our confirmation criteria to ensure the signal has real substance beyond the initial movement. The rule we are taking away is to always verify price data from multiple providers before entering a flash trade on volatile assets like crypto. To support better decision making in volatile conditions here are two practical tools worth adding to your workflow. First for indirect A I exposure the Motley Fool has listed four brand name companies that invested in An-thropic back in twenty twenty three. This provides a way for individual investors to gain exposure to A I developments ahead of a potential I P O without needing direct access to private markets. You can research these companies current valuations and growth prospects using platforms like Yahoo Finance or the research tools in your brokerage account before allocating. Second with yen intervention keeping currency markets in focus investors can use real time currency data on platforms like Investing dot com to monitor interventions and adjust FX hedged positions in international holdings. This technique is particularly useful for Canadian investors looking to protect returns in their T F S A and R R S P from sudden swings in the Canadian dollar against the yen during policy driven moves. In quick hits oil prices are edging higher as tensions around Iran and potential disruptions in the Strait of Hormuz persist. This creates opportunities for energy sector exposure as a hedge against supply shocks so consider rotating a portion of your portfolio into energy E T F's. Clorox has cut its annual profit forecast due to softening demand for cleaning products signaling potential pressure on consumer staples names. With household spending weakening it makes sense to hold off on additions to consumer staples like CLX until demand indicators improve. Portland General Electric missed its first quarter estimates on both E P S and revenue adding to earnings caution in the utilities sector. Reassess any utilities exposure following this shortfall to avoid further downside. Finally RBC Capital lowered its price target on Smurfit Westrock due to ongoing cost pressures in the packaging and paper sector. This points to margin challenges so reducing position sizing on Smurfit Westrock until those pressures ease could be prudent. Stepping back to our overall simulated portfolio performance across eleven trades. We have a win rate of forty six percent with five wins five losses and one break even. The cumulative profit and loss stands at negative forty eight dollars and four cents with an average return per trade of negative zero point four four percent. The best trade delivered seven point eight eight percent while the worst was negative seven point four nine percent and we are currently on a streak of two wins. Our A I analysis continues to learn from patterns like sector concentration and technical support adjusting our approach accordingly. Now here's something that most retail investors get wrong when it comes to their T F S A and it can quietly erode returns over time. Imagine you bought shares of a U S dividend paying stock in your T F S A at the start of the year when interest rates were higher with your order filling at forty five dollars per share. The fifteen percent U S withholding tax on dividends means you only keep eighty five percent of the payout reducing your effective yield from three percent to two point five five percent and there's no way to claim it back in a T F S A. The pro tip is that professionals always check the foreign withholding tax rate and prefer growth stocks over high dividend ones in TFSAs to avoid this drag on returns. The biggest mistake with T F S A investing is treating it like a high interest savings account instead of a powerful tax free growth vehicle. Instead always prioritize high growth assets like tech or emerging market E T F's within your contribution room to maximize compounding over decades. Track your contribution room annually through the C R A's My Account to avoid the one percent monthly over contribution penalty and be cautious with frequent trading as the C R A may scrutinize day trading in registered accounts. For a moderate risk tolerance a model approach is fifty percent in broad market E T F's thirty percent in individual growth stocks fifteen percent in bonds or fixed income and five percent in cash for opportunities. Before we wrap tomorrow I will be keeping an eye on developments in the energy sector given the oil price movements we saw today. That's Modern Investing Techniques for today. If you found this useful, share it with a fellow investor and subscribe wherever you listen. Check the resources page for tools and platforms we discussed. We're back tomorrow. Keep learning, keep investing. 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.