Law and Disorder

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  • March 20, 2023

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December 18, 2022

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Dear Financial Friend,

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We hope that you have an incredible holiday season filled with joy, strength and relaxation. This will be the last newsletter of 2022. Finliti will be ringing in the New Year with a fresh newsletter and some new financial insights to help you get the most out of your 2023. Thank you for your readership and loyalty. Wishing you, health, wealth and happiness! #grateful

The Big North-American Market Dinos (BMD)

Raging Rate Hikes

Source: Google Finance​

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The Toronto (Stock-Exchange): the Centre of the Universe

Canadian stocks eased into the week with some modest gainsthanks to solid performance in the energy sector. Still, it wasn’t long before the country’s main stock market index, the S&P/TSX composite, reversed directions. Cannabis stocks slowed down as Canadian Cannabis majors Tilray and Canopy fell 4.9% and 3.3%, respectively, on Wednesday alone. Despite all the ups and downs, the index finished relatively flat on the week. The stock market consists of two dominant emotions: fear and greed. When fear dominates, investors hunker down and panic-sell. Right now, investors are fearing the dreaded recession. This holiday season, consider reading the Hitchhiker’s Guide to the Galaxy to get you through these recessionary times with a bit of humor. The answer is always “42.” (Songspiration.)

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South of the Border

U.S. stocks followed a similar pattern this week, gaining some ground early on before falling later in the week. The big three American indices, the Dow Jones, the S&P 500, and the Nasdaq composite, favored red over green. Many investors will be getting coal returns in their stockings for the year because energy is the only sector that went up. It will help if you take caution when planning for the following year, as the ghost of the financial past does not necessarily forecast the ghost of the financial future. What was hot last year may sizzle and fizzle. Diversification – which means investing in different types of sectors is your best defense at managing downside risk.

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Source: Google Finance​

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The midweek pullback was mainly a result of the U.S. Federal Reserve’s latest rate hike announcement. As expected, we saw another half-point rate hike, but the comments from the Fed that followed were not what investors wanted to hear. The central bank said it will continue hiking rates through 2023 and projected a higher-than-expected terminal rate of 5.1%. In case you’re wondering what the terminal rate is, check out the financial jargon word of the week!

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Risky ROI

Crypto

Source: Google Finance​

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Banished

While the crypto market managed to gain some ground this week, the aftermath of the FTX collapse continues to unfold behind the scenes. For starters, Sam Bankman-Fried, or Scam Bankster-Fraud as some call him, the ex-CEO of FTX, was arrested in the Bahamas this week. This came after the U.S. Attorney for the Southern District of New York shared a sealed indictment with the Bahamian government. His arrest marks the first concrete move by regulators to hold individuals accountable for the multi-billion dollar collapse of FTX last month.

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All of this hoop-la has caused some action up North as well. Authorities in Canada are taking measures to better protect Canadian cryptocurrency investors in the aftermath of the FTX collapse. In an update to crypto trading platforms operating in Canada, the Canadian Securities Administrators (CSA) announced a ban on crypto margin or leverage trading. The council emphasized that even with adopting these measures, crypto assets or any financial products related to crypto assets are high-risk investments, urging investors only to invest using a platform registered with CSA members.

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Stragglers

Canadian tech giant Shopify (TSX:SHOP), has struggled mightily this year, and while that’s no secret, you might be surprised by how their struggles have affected the S&P/TSX composite. As it stands, Shopify is down more than 60% year-to-date, shedding more than CAD 160 billion in market cap in the process. This decline has led to a 978-point drag on the S&P/TSX composite index. Without Shopify, the index would be down by only 2% instead of 6% on the year. Sure we could sit here all day talking about crazy “what if” scenarios, but there’s no denying that one stock accounting for two-thirds of an index’s losses is pretty significant. This information is helpful to consider for your portfolio. Even indices can be overweight in certain security positions.

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The effect Shopify is having isn’t the first time that a tech stock has caused problems on the index. Nortel Networks Corp.’s collapse was a 353-point drag in 2001, the index’s inaugural year. BlackBerry Ltd., then called Research In Motion, was the TSX’s most significant negative contributor in 2008, pulling the index down more than 300 points.

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Moderate and Mellow Market Methods

Sector Spotlight

Earlier this week, biopharmaceutical company Amgen Inc. Shelled out the big bucks, purchasing Horizon Therapeutics PLC for a whopping US $27 billion, making it this year’s largest healthcare acquisition. Amgen will pay $116.50 a share in cash, the companies said in a statement Monday, for a premium of about 48% since Horizon Therapeutics disclosed on Nov. 29 that it was in early talks with three suitors. Horizon shares gained as much as 15% on the news, while Amgen slipped by 1.5%.

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As pharmaceutical companies move past the overwhelming focus on Covid-19, they are resuming their search for innovative therapies, especially for those that treat rare diseases and cancer. In the business of drug development, M&A deals are just as important as scientific breakthroughs. Over the last few years pharmaceutical M&A deals hit a record high as established pharmaceutical companies turned to new biotechs for innovation.

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The deal for Horizon is the biggest in pharma since AstraZeneca Plc bought Alexion Pharmaceuticals for $39 billion in 2020. Horizon is developing drugs for conditions including lupus, alopecia, arthritis, and kidney transplant rejection. Meanwhile, Amgen is contending with the threat of diminished revenue as some of its most significant products will lose patent protection in the coming years.

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Meme Stock Stalkers

Pump-and-Dumpers

It’s all fun and games until someone commits securities fraud. The Department of Justice (DOJ) and the Securities Exchange Commission (SEC) recently charged seven social media influencers with using Twitter and Discord (not Reddit, surprisingly enough) to commit securities fraud that netted them more than US $100 million in illegal profits.

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Authorities alleged the defendants used the social media platforms to “pump” exchange-traded stocks in a scheme dating back to January 2020. Through widely followed Twitter accounts and stock trading chat rooms on Discord, these defendants allegedly “promoted themselves as successful traders,” according to an SEC press release, and encouraged followers to buy stocks they also purchased. What they didn’t do while promoting these stocks was disclose their plans to sell once share prices rose.

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Doing research when you invest may not seem as glamorous as getting in on the hype of a meme stock, but it’s essential to ask yourself, “what’s in it for them?” when you see someone hyping up a stock online.

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ESG

Driving Change

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Chrysler, Dodge, Jeep, and Citroen parent company Stellantis announced an agreement with Detroit-based energy provider DTE Energy to add 400 megawatts of new solar projects in Michigan, enabling the automotive manufacturer to make massive progress towards its sustainability goals. The deal marks the second largest-ever renewable energy purchase from a U.S. utility and significantly adds to the solar installations in the state of Michigan.

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Under the new agreement, Stellantis will buy clean energy through DTE’s voluntary renewable energy program, MIGreenPower. Stellantis said that by participating in the MIGreenPower program, it will be able to attribute 100% of its electricity use at 70 southeast Michigan sites to solar by 2026, reducing the company’s carbon emissions in North America by 50% and across its manufacturing facilities by 30%.

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Financial Jargon Word of the Week:

The terminal rate is the level at which a central bank is expected to stop raising interest rates. It’s the final stop on the rate hike schedule.

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In a sentence, please!

It’s starting to look like the Bank of Canada’s terminal rate is going to be higher than expected.

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Discover your Investor Profile and get customized free, action items specific to the way you invest!
Every week, we will be talking about the latest market news and strategies, aligned to keep you sharp and armed for opportunity and volatility.

This newsletter is geared to YOU, based on your own Finliti Investor Profile! We believe that every investor is unique and therefore, should be aware of their actual risk tolerance.

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Finliti Disclaimer

1. Finliti’s newsletter is published as an information service to our subscribers and may contain references to stocks, bonds, mutual funds, ETFs, cryptoassets, etc., but this should not be construed as direct or indirect advice or recommendation to any reader to buy or sell these assets.

2. Finliti believes the sources it quotes to be reliable, but does not guarantee their accuracy or completeness.

3. Finliti is not paid by any company to recommend its stocks.

4. Employees or publishers of Finliti’s newsletter may own the assets discussed in the publication for their own investment purposes.

5. Past results are not necessarily indicative of future performance.

6. The information provided is for general information services to our readers as a convenience the materials are not a substitute for obtaining professional advice vis-a-vis your personal situation.

7. Given the time critical nature of the market, the information in this article may become outdated and Finliti has no obligation to change the article.

8. Finliti Corporation is not a registered Investment Advisor or Broker Dealer. This newsletter relies on the “publisher’s exclusion” from the definition of Investment Advisor under Section 202(a)(11)(D) of the Investment Advisors Act of 1940and its corresponding state securities laws and on the exemption from registration under Section 34 (1) (1) of the Securities Act (Ontario) and its equivalents in Canada.

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