Berman's Call for Monday, Nov. 24, 2025

Key Concepts

• Market Volatility: The tendency for market prices to fluctuate significantly and rapidly.
• AI Trade: Investments focused on companies involved in Artificial Intelligence development and application.
• Valuation: The process of determining the current worth of an asset or company.
• Defensive Holdings: Investments that are expected to perform relatively well during economic downturns.
• Tax Loss Harvesting: Selling investments that have lost value to offset capital gains taxes.
• Covered Call Strategy: An options strategy where an investor sells call options on an asset they already own.
• Leveraged Play: An investment that uses borrowed money or financial derivatives to increase potential returns (and risks).
• Commodity Prices: The prices of raw materials such as oil, gas, and metals.
• Nominal GDP: The gross domestic product of a country measured in current prices, without adjusting for inflation.
• Total Return: The combined profit or loss of an investment, including capital appreciation and income.
• Capital Appreciation: An increase in the value of an asset.
• Dividend Income: Payments made by a corporation to its shareholders.
• Strategic Petroleum Reserve (SPR): Emergency stocks of petroleum held by the U.S. government.
• ETFs (Exchange Traded Funds): Investment funds traded on stock exchanges, similar to stocks.

Market Outlook and Investment Strategy

Larry Berman anticipates continued market volatility, suggesting that the recent rally in big US tech stocks, following NVIDIA's earnings, is not the start of a new upward trend. He advises investors concerned about valuations to use the current pop as an opportunity to rebalance their portfolios, potentially moving into more defensive holdings rather than expecting further significant equity gains. This volatility is also evident in risk assets like Bitcoin and the AI trade.

AI Stocks: Winners and Losers

While many investors group AI stocks together, Berman highlights that there will be distinct winners and losers. Alphabet (Google) is presented as a current winner, reaching a record high due to positive reviews for its Gemini AI program. This success, however, could potentially impact competitors like OpenAI, a private company whose valuation has been a subject of discussion. The rotation in leadership within market cycles is noted, with Warren Buffett's Berkshire Hathaway investing in Google, contrasting with Peter Thiel's sale of NVIDIA exposure. Berman believes Google has a significant advantage due to its existing search infrastructure, which others are building upon.

Bitcoin and Risk Assets

Berman reiterates his skepticism towards Bitcoin, predicting further selling pressure, especially as more retail investors become involved. He points to the recent surge and subsequent decline in Bitcoin's value, noting its correlation with equities rather than its previously argued uncorrelated status. Bitcoin is seen as a leading indicator, having shown weakness before equities.

ETF Analysis and Recommendations

• MST (Harvest MicroStrategy Enhanced High Income ETF): Berman strongly advises against this ETF, describing it as a leveraged play on Bitcoin that is "ultimately going to blow up." He warns that a significant correction in Bitcoin could lead this ETF to zero, deeming it suitable only for day traders looking to leverage Bitcoin, not for investors.
• Canadian Tire (CTCA): For Canadian Tire, Berman notes a broad range of analyst price targets, from $155 (Scotiabank) to $211 (RBC), with a consensus around $175. He suggests that if tax loss harvesting makes sense, investors could consider accumulating shares below $150, aligning with the most bearish analyst's one-year forward price target.
• Telus: Berman groups Telus with BCE and Rogers, expressing a general dislike for the telecommunications sector. He suggests that for dividend-focused investors, BCE offers better exposure to similar sectors with a more reliable dividend income stream and greater diversification. While Telus might present a buying opportunity due to potential tax loss selling, significant recovery is likely years away.
• BMO Broad Commodity ETF (Z.COM): Berman acknowledges Z.COM as a vehicle for commodity exposure but is cautious about adding it at current levels. He notes that historically, commodities have performed well during periods of strong nominal GDP growth and rising inflation. However, in environments without strong nominal GDP, commodity prices have underperformed. He anticipates potential short-term commodity price weakness before material strength, recommending buying on a dip rather than adding at current prices.
• HIS (Covered Call Enhanced Tech ETF): While acknowledging HIS as an income-oriented strategy for big tech, Berman dislikes the current timing due to high tech valuations. For more stable, dividend-like income after a market correction, he prefers defensive options. He suggests ZWU (Utilities ETF) as a more stable alternative for income generation with favorable tax treatment.
• European ETFs (ZM and ZE): Regarding European holdings, Berman advises being hedged to the currency (Canadian Dollar) for now, as the CAD is expected to continue underperforming. He suggests that at some point, when the Canadian Dollar strengthens, investors might consider unhedging or hedging foreign currency exposure.
• JP Morgan Equity Premium ETFs (JP and JQ): Berman finds the Innovator ETFs to be better for longer-term exposure compared to JP and JQ, which aim to capture S&P 500 or Nasdaq 100 returns with an options strategy to dampen volatility and enhance yield. While JP and JQ offer some downside protection, they have underperformed other similar vehicles over the years.
• MDA Space: Berman notes that space is a significant area for future investment. MDA experienced a speculative frenzy and has since corrected. At its current valuation, it looks interesting, but he cautions about its volatility tied to the space sector's performance. He is not deeply familiar with the company's fundamentals.
• Labrador Iron Ore Royalty (LEAF): Berman likes royalty metals and sees less risk in them compared to direct mining exposure. He views the iron ore space as important for future infrastructure but acknowledges potential challenges from new technologies. He is cautiously optimistic about LEAF, recommending buying on corrections rather than chasing strength. He anticipates sideways movement for the next 2-3 years, with a preferred buying range closer to $26-$27.

Educational Segment: Oil Prices

US Oil and Gas Supply Forecast

The Energy Information Agency (EIA) forecasts a peak in US oil and gas supply within the next few years. This, combined with potential progress in ending the Russia-Ukraine war and the US administration's desire for stable or lower oil prices, suggests short-term weakness in oil prices. OPEC+ overproduction and peak US supply further contribute to this outlook for the next few quarters.

Long-Term Oil Price Outlook

Looking long-term, the replenishment of the Strategic Petroleum Reserve (SPR) is expected to support oil prices. While this replenishment might not be significant until after US midterm elections, it will eventually lead to increased demand.

Energy ETFs and Total Return

Over the last 25 years, Canadian (ZCG) and US (XLE) energy ETFs have shown similar total returns of around 7% annually, with approximately 60% of this return coming from dividends. Capital appreciation has been minimal, with zero capital gain since the post-financial crisis oil peak, meaning returns have been primarily income-based. Berman emphasizes that the energy sector is not a growth sector.

Investment Recommendations for Energy

For income-oriented investors, Berman suggests parking money in covered call ETFs like NCC (Canadian focus) and XWA (global focus) for the energy sector. For more growth-oriented plays like ZCG and XLE, he recommends waiting for a 5-10% correction from current levels. He concludes that currently, oil and gas represent one of the few attractive areas for investment.

Conclusion

Larry Berman anticipates continued market volatility and advises a cautious approach, particularly for investors concerned about valuations. He highlights the potential for divergence within the AI sector and reiterates his skepticism towards Bitcoin. His recommendations lean towards defensive strategies, buying on dips, and focusing on sectors with stable income generation, such as utilities and, with caveats, energy. He stresses that the energy sector is primarily an income play, not a growth sector.