A Comment -- General Comments From an Expert (A Commentary)

Any ETFs that invest in options? Not directly but there are some ETFs that use options. Consider Bank of Montreal’s Covered Call Cdn Banks ETF (ZWB-T).

Pay down a mortgage or go into the stock market? Normally he would say pay down the debt, but if you are a high income earner, make your normal mortgage payments, maximize your RRSP and then use your refund to pay down the mortgage. If you do go into the stock market, go for growth.

Market. It’s been a big rally and the party will continue if Ben Bernanke decides to go with Q3. High gas prices will be his excuse. He’ll say we need the consumer to come back and they are getting squeezed on high gas prices. At least with inflation you have the potential of growing out of your problem. With deflation, it’s all gone.

Rare earth. The whole sector has been very hot recently There are some US names like Rare Earth Elements that has done very well. In Canada, Great Western Minerals (GWGX) is his favourite.

Market: Bull markets typically last 55-60 months so we are about a third the way through. The market will have a different flavour from here. We will go sideways until the fall. Now is an excellent time to build some cash for the summer when things bottom out. Focusing on stock picking and sector rotation.

Silver: Problem is that relationship between silver and gold has changed over time. You have to be very careful that you are not the last guy buying silver. He does not own it.

S&P cut the outlook on the US debt but they tend to do something after it becomes completely obvious. This should have been done a number of years ago. US has gotten into a worse and worse shape and they haven’t done anything about it. If they don’t shape up, it could potentially default in the next few years. There are a lot of actions they have to take to prevent this including raising taxes on the rich and corporations and cutting spending on the military.

Markets. Doesn’t like Buying at this time of year as stock markets don’t do much from May to early fall. Generally he does research and hopes he can Sell more stocks and look for Buys that he can do towards the end of the year.

Given the Japanese disaster are uranium stocks the kind of stocks a contrarian would look at now? He likes to see sectors that get hit. Unfortunately uranium hasn’t gotten hit badly enough where he could find any companies that were really interesting.

His stock filter. First step is that the stock has to be down at least 33% in the past year. Then he likes to find stocks that are near the bottom in the 10 year range but have traded at much higher levels for at least 10 years. Looks at financial ratios. Doesn’t like debt. Once he finds a company, He won’t buy into it for at least 6 months, but it could be 3 or 4 years. Normally likes to see at least 100% upside but often it’s 300%-400%.

Forestry? A lot of these companies have had big moves and a lot will probably move a lot further. Thinks there is a lot of room for upside but he is very wary after getting burnt by Abitibi as well as the way the US plays hardball. Definitely a contrarian area.

He has raised his cash reserves and taken quite a bit of profit in the 1st quarter and will see where the market wants to go from here. Portfolios are about 25%-30% cash. Mainly trimming positions. Important for investors to review their positions during the market cycle. There is a fair bit of risk in the market.

Gold. Staying market weight gold because it’s a bull market. Gold keeps going up and looks pretty good and there doesn’t seem to be any subsiding of the demand side of the equation. Supply/Demand relationship is quite positive.

Market Neutral Investing. Capturing the Alpha in Longs and Shorts while getting rid of the Beta. Doesn’t want any exposure to the markets movement either up or down. Wants all returns to be generated by Long positions outperforming short positions. Looks for companies with positive change in their fundamentals.

Market. Bearish. In the 1930’s, post the debt bubble in global markets, there was a period of time where you were essentially deleveraging in the system. We’ve had this for 18 months, but the quantitative easing that has gone on globally, essentially incentivised investors to re-lever. You can see it in margin rates and levels of debt and they haven’t come down at all. Wouldn’t be surprised to see more talk of austerity measures, especially in the US.