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

Best copper play? He owns 2 copper exposed companies; Teck Resources (TCK.B-T) and Hudson Bay Mining. Teck has copper and, unfortunately, metallurgical coal. It is generating cash in all of its businesses. This is the most liquid play. However, it has a Short interest like he has never seen before, primarily in the US. The more levered way to play copper is Hudson Bay Mining. At some point, sentiment will return, and when it does, these are the kind of names that can triple.

Markets. Back in late 1999 and into 2000 the S&P was hitting new highs, and it was something like 5 stocks that were causing this. The rest of the stocks were all falling to the wayside. Because the S&P is market cap weighted, the bigger they got the more they influenced and it was self-perpetuating. Right now, the average stock in the US is in a downtrend. He has cash that he is looking to spend, but his problem is that he believes valuations are extended on a lot of stocks. He is waiting for a pullback.

Energy. Since 1980, there have been some big ups and downs, but there is a lot of the market for oil that is really bouncing around between $20 and $40. Are we going back to a period when oil fluctuates between $20 and $40 for an extended period of time. If that is going to happen, that has to reset how you look at valuing companies, and even how governments get their revenues. The street is putting in $50-$60-$70 assumptions for next year. What if that is too much? This is something people have to think about. If he is going to put money back in this space, he would like to see prices stabilize for an extended period of time and start to go up. One of the safest places to put it in is the majors that have refining capacities. In the past that has proven to be an area of stability.

Markets. Thinks there was a Santa Claus rally, but thinks it came out early in September and October. We have a two-tier market. There are some things that are pro-cyclical doing really well, and then a bunch of defensive names that are doing really well. The risk/reward on the TSX is a pretty good market to make an investment in at these levels.

When 20, 50 and 200 day moving averages intersect at the same time, stocks normally takes off. When it comes to moving averages, he prefers what traders are looking at, which tends to be the 125 day. To check this out, do a 20, 50 and 200 day moving average on your chart. Mark out the inflection points. Then do a pure 125 moving average, and see if it is a little bit simpler. You might see that its gets rid of a lot of the noise and is a little bit better.

Market. Expects 2016 will be more of the same, i.e., volatility and uncertainty. There seems to be a lot of interesting things from a techno analysis perspective going on. The US 10 year 200 day moving average has turned up, which is usually a pretty good indicator that the trend has turned, and that happened at the end of October, in advance of the Fed raising rates in December. The two-year US yields have been rising for quite a long time, and popped again quite recently from October onwards in anticipation, so the yield curve is flattening. As long as it doesn’t get to the point where short rates go above long rates, then we are happy. Gold seems to be very close to giving a quarterly techno analysis Buy signal, and that will be the surprise in the 1^st quarter of the new year. The Commodity Research Bureau (CRB) Index, a basket of commodities, is pretty close to giving a new monthly Buy signal. Thinks inflation might be a surprise in 2016.

Markets. It has been very challenging, especially if you were a Canadian oriented investor. Diversifying to European and US equity markets is a theme that will need to continue into 2016. He thinks there will only be one or two rate increases next year. If the Fed were more aggressive it would mean there is more inflation. We are in a slow growth economic environment. You will see a lot of volatility next year. It is going to be tough for most investors to time the volatility. You have to be long term, be patient, and look for dividends. There are cheap equities in every sector because we are starting to price in recessionary risk to Canadian equities. Canada could outperform the US in the equity markets.

Mortgage REITs. They make money by borrowing short and lending long. It depends on how much rates are increased by the Fed. If the yield curve flattens it means US REITs may have to cut the dividends.

Markets. 2015 was another win for growth stocks. This probably has more to do with smaller caps versus larger caps. The larger cap growth names have held up pretty well, but if you look under the surface of the market, small-cap names, particularly in the commodity space in Canada, were terrible this year. As we near the end of tax loss selling, he expects we will see a pretty sharp bounce, which we are actually starting to see today. However, underlying fundamentals are still baseline negative. Today he wants to talk about the small-cap January effect, and will try to pick some of the more oversold names for a 6 week trade. Some of the small-cap names have been thrown out with the bathwater, and he has been picking up some names that have solid fundamentals and growth. This could include some that have a rollup acquisition strategy, where he thinks there are opportunities.

Gold? Thinks we are starting to see a bit of a turn in the US$, and that would be positive for the golds. His largest gold holding is, Tahoe (THO-T).

Market. He is still up for the year. Usually, from this point onwards, the market typically will get a bit of a Christmas rally because the tax loss selling is all done. On average, from here to the end of the year, the markets go up 1.5%, and if he gets that on top of his portfolio he will have an OK year, maybe up 4.5%. It is those years when you make 15%, 20%, 25% that people get excited. The indexes are off 7%-8%, but there are a lot of individual sectors that are off 50% or 60%. Now there is a lot of value in the market. There are a lot of growth stocks in Canada right now that are trading on single digit P/E ratios, and that is where the money is going to he made in 2016. Doesn’t think that the upside is necessarily in the indexes per se, it is in the subsectors where there is growth.

Markets. This US bull market is long in the tooth and is getting narrower and narrower, fewer and fewer stocks. He is pretty cautious right now. Portfolios have quite a bit more cash and a lot more bonds. The US job rate has been great and he sees utilization going well. The problem is that the markets themselves do not always couple with the market in the same timeframe. He sees defensive rotation happening such as into consumer staples, classic defensive type positions. Telecoms and utilities are starting to make some headway, even though there is a rising rate environment in the US.

Healthcare? In September, healthcare broke a long-term relative uptrend, which to him is a flag. For the bulk of 2014 and up to September 2015, he had been very overweight healthcare. As of September, he went back to market weight, and is a little more careful in his picks in healthcare. Prefers UnitedHealth Group.(UNH-N).

A US infrastructure stock? There are all kinds of infrastructure plays, but many of them have a very strong correlation with commodities. He worries about the stocks right now. The core names are all facing very tough headwinds. There is a time and place to be in the market, and this is not the time for infrastructure.

Markets. He is seeing volatility, which is what we have been waiting for. When a market gets stuck like ours has for the longest time, you need these triple digit kinds of days to get us back on track. When he gets that kind of thing, it shows him that something is about to change. He thinks it is going up. We have been playing off that 18,000 on the Dow down to 17,000, and thinks we are going to get back to 18,000, and the next test will take us through. He likes to see big moves on big volumes. Right now we are seening good volume. Likes the TSX better than the Dow. The TSX has melted down to 13,000sh. Doesn’t know what the catalyst will be to drive it higher, but is at a level now where it hasn’t been in a while.