June was another poor month for financial markets. Most international stock markets fell by about eight to nine per cent. The exception was the emerging markets, which were only three per cent lower. 
As has been the norm, commodities were the outliers. Gold, often considered a safe haven, is almost flat this month. Canadian energy stocks, on the other hand, despite rising almost 4% this week and being the hands-down star performer of 2022, are down 15% since the end of May. Having said that, Canadian energy producers remain 40% higher on the year, while most international equities trade -14% to -22% lower since the end of 2021.

At the half-year mark (where has the time gone?), it bears considering what the year’s second half, and beyond, will bring. The short answer is - I don’t know. And I don’t believe anyone knows. But we do know that the problems, most of which I’ve discussed in previous letters, remain: COVID, inflation, rising interest rates, the war in Ukraine, tightness in the supply chain, and a labour shortage. And it’s becoming increasingly possible a recession could be in the cards, just when the Canadian housing market is falling. And it wouldn’t be a surprise if the U.S. housing market is also hurt, especially as the Federal Reserve recently raised rates by 0.75 per cent for the first time since 1994 and will most likely continue raising rates.

This is a lot to digest, but it’s important to remember that as markets have already fallen by double digits, they, at least in theory, have less of a way to fall. But as Warren Buffet’s mentor Benjamin Graham reminded investors, “In the short run, the market is a voting machine, but in the long run, it is a weighing machine.” This is why I’m so fanatic about rebalancing portfolios. The markets swing from good to bad. And often surge to despondent and ecstatic. Rebalancing, as we’ve seen with gold and energy recently, enables us to take advantage of those unpredictable movements, while reducing risk.

So while I don’t know how things will play out, I do know we are well diversified and positioned to withstand the market’s mood and, almost as importantly, take advantage of the situation.

I’d like to wish all the Canucks a happy Canada Day and hope you enjoy the long weekend!

As always, feel free to reach out if you have any questions, and if you’re looking for more timely information on the markets, you can find them on the research section of my website, or on my Twitter, Facebook, and LinkedIn feeds.

The Evening and the Morning by Ken Follett: “It is 997 CE, the end of the Dark Ages. England is facing attacks from the Welsh in the west and the Vikings in the east. Those in power bend justice according to their will, regardless of ordinary people and often in conflict with the king. Without a clear rule of law, chaos reigns.”
Great prequel to the classic historical fiction book The Pillars of the Earth.
Antifragile by Nassim Taleb: The fourth book (the third is a book of aphorisms) in Nassim Taleb’s incredible Incerto series is another gem. Antifragile explores topics that include: how to gain from stress or damage, barbelling strategies for investing and life (avoiding medium risk, while balancing high and low risk), why it’s often best to trust old things over new (because they’ve endured), how doing less is often better than more, concavity vs. convexity of risk, and a lot more.
This is the second time I’ve listened to Antifragile and still find it one of the most insightful books I’ve read. 

Leaving the Church of Science by Nat Eliason: I like the way the author presents the spectrum of faith to math and how various types of knowledge fall within it. He also clearly explains the scientific method, and what it can and can’t reliably do.
And despite the quibbles I have with his conclusion (regarding the sides society has bifurcated into), I think it’s worth considering.
The Mistrust of Science by Atul Gawande: “The mistake, then, is to believe that the educational credentials you get today give you any special authority on truth. What you have gained is far more important: an understanding of what real truth-seeking looks like. It is the effort not of a single person but of a group of people—the bigger, the better—pursuing ideas with curiosity, inquisitiveness, openness, and discipline. As scientists, in other words.”
Another good article on epistemology that complements the one above.
Unions in Canada Are Securing the Highest Wage Hikes in More than a Decade by Randy Thanthong-Knight: The current levels of inflation have enabled unions to secure higher wage increases. The question is, to what degree will current and future wage increases further drive forthcoming inflation levels?
Reducing Inflation Will Come at a Great Cost: Stagflation by Ray Dalio: If Ray Dalio is right, economic growth (at least in the U.S.) could dramatically slow.
Bull Market Rhymes by Howard Marks: I’m coming to appreciate Charlie Munger’s saying, “Take a simple idea and take it seriously.” For Howard Marks, one of those ideas is the pendulum of history. His latest newsletter explores that theme while providing historical context.
Conversation at Panmure House by Howard Marks: This interview with Patrick Schotanus of Edinburgh Business School also explores the pendulum of history but via a different format. If you’re looking to understand some of the current market and economic themes, this interview and the previous essay are important pieces of the puzzle.
The Many Lives of a Fake Pro Cyclist by Iain Treloar: The unbelievable story of a compulsive liar and fraudster, who, for a time, positioned himself at the centre of a small cycling community in Virginia. Thanks to Joel on my cycling team for sharing the story.
How People Learn to Become Resilient by Maria Konnikova: “It’s for this reason, Bonanno told me, that ‘stressful’ or ‘traumatic’ events in and of themselves don’t have much predictive power when it comes to life outcomes. ‘The prospective epidemiological data shows that exposure to potentially traumatic events does not predict later functioning,’ he said. ‘It’s only predictive if there’s a negative response.’ In other words, living through adversity, be it endemic to your environment or an acute negative event, doesn’t guarantee that you’ll suffer going forward. What matters is whether that adversity becomes traumatizing.”
Hamilton Man Wins Marathon Pushing Stroller: 1) This is impressive. 2) It made me feel better. I’ve run one race in my life, a 10k, and its enduring memory is of a man breezing by me - pushing a stroller … uphill.
How to Future by Kevin Kelly: Sound rules of thumb when attempting to see into the future.
Do We Need a Better Understanding of ‘Progress’? by Garrison Lovely: I don’t love the article’s slant, but it provides a thorough framework of the new - and I believe important - field of progress studies.

The Zen Diaries of Gary Shandling by Judd Apatow: Gary Shandling was complicated. He was also thoughtful, insecure, tortured, courageous, a pain in the ass, and demanded fierce loyalty from those he was close to. This biography made me think - and feel - in a manner others haven’t. Highly recommended!

"If you add only a little to a little and do this often, soon that little will become great."
- Hesiod
"[A scientist has] a healthy skepticism, suspended judgment, and disciplined imagination—not only about other people’s ideas but also about his or her own. The scientist has an experimental mind, not a litigious one."         
- Edwin Hubble, speaking at Caltech’s commencement in 1938
"Life is a series of tradeoffs, and greater results usually require greater tradeoffs.
The question is not, 'Do you want to be great at this?'
The question is, 'What are you willing to give up in order to be great at this?'"
- James Clear
"To admit error and cut losses is rare among individuals, unknown among states."
- Barbra Tuchman
"The greatest shortcoming of the human race is our inability to understand the exponential function."
- Albert Bartlett
Matthew Lekushoff
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