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

Markets. He feels that the correction is healthy. It is necessary to have a healthy consolidation, a bit of a pullback, blow off some steam and shake “the loose leaves from the trees”, then continue to move forward. Everything gets a little ahead of itself. For example, Disney is down from its peak, but doesn't mean that it is a bad stock or company now. It just means that it got a little ahead of itself, so it was time for a pullback. The same thing has hapened to the market or sector.

Will the correction be higher than 10%? He recommends not getting ahead of yourself. He watches and listens to the market and doesn't try to tell the market where it should be going.

Markets. He is focusing on domestic facing companies, more domestic consumer interest companies. Focusing inside the US is a better strategy right now.

Will interest rates go up in September? We have a strengthening labour market, poor inflation firming not advancing too aggressively and reduced energy costs. There is a year lag when everything is balanced out. When you take these things into account and the need to move to policy normalization, the Feds have to do something in time. Regarding risk asset pricing, people are very nervous. People are sitting on their hands and waiting. There is a key note of uncertainity.

Markets. You want to be a little suspicious in August because volumes are normally light. Usually trading desks are being manned by younger people who are trying to move up. There are a bunch of areas between July and October that are good to be in. S&P 500 is still not in correction territory. He has been looking for that 2000/4000 level which happened around March/April. It has now broken down to the $1970 level. Are we going to have to visit the $1800 level? That is what next week will be about. Will it be broad-based? Will it be the pro-cyclical areas? Next week will be very important and what he expects to see is that it will probably keep pushing these downward levels to an extreme. There will be certain areas that might buck that trend, and those are the areas that he wants to identify, and which are good places to be. If the US joins the party, he expects there will be some bigger positions in some of those defensive spaces.

When asked about Ishare PHLX Semiconductors ETF (S0X-X). He believes that it is much more important to avoid big losses than to capture those big gain. He doesn't average down. He follows leadership. He believes when it is time to be out of the market it is time to be out of the market. Nothing wrong in sitting in bonds and cash. If you preserve capital, then you don't have to time that bottom.

US Markets. They have had fiscal pullbacks and monetary pullbacks. Thinks that the consumer is supported. Labour is firming. Gas pump prices are lower. They are doing okay.

Auto Sector. He wouldn't abandon the auto sector yet. It is sector that he has been a fan of. Magna on the Canadian side and Lear on the US side. The trend has been very significant and very positive. Lear has been taking positive steps recently. They have great cash flow creation and great capital return. Very constructive and positive moves. Average age of cars is 11+ years old . Sales rates for cars have been strong and continues to grow. These 2 companies look intact to him.

Caller has 60% in banks, (BMO), what should he do? Canadians have a strong home bias, in resources and Big Banks. Caller needs to diversify. There is an ecosystem between the banks/big oil/supporting industries that is about to go through a credit cycle on. Oil and gas exposure at Nova Scotia was higher then he expected. You need to be cautious because it's not just oil and gas exposure, it's the whole ecosystem. Estimated 125,000 job losses in Alberta, which are part of the ecosystem, (mortgages, car loans, consumer loans). He would be cautious of the banks.

Refining companies, should they not be rising as the oil price drops? Charts look fantastic, but look at forecast which is declining. So the price is built into the current price. Export ban in the US causing uncertainty, seasonality is going against you now. Take profits and be happy here.

Markets. There has been a " sea change" in reaction to worsening earnings. Japan is in an unhappy shape and getting worse. Even the States are drifting back to 1.75 or 1.5% growth. There has been a cyclical rebound from 2009, but there has not been a broad market growth. It has been driven by the recovery. If the FED follows through with their promise to increase interest rates, there are a bunch of companies that will benefit from it.

Canadian Banks. He looked at banks closely this morning and he noticed something alarming. Of the big five, two have given clear sell signals BNS-T and RY-T. The others have given conditional sell signals, violating technical sell signals. NA-T has set back to a support level that has been effective for 5 years. NA-T probably stands out as the best.

Oil and Gas sector Book value. He has data on the sector going back about 40 years and typically the index has bottomed either at 1.25 times book value or book value. This has always been a good time to buy energy stocks. The energy stocks are getting down there now. If companies start to run into losses that will mean book values are shrinking.

Canadian Industrial Sector – Auto Parts. He has liked auto parts in particular. MG-T and LNR-T benefit from a lower Canadian dollar although are diversified with plants around the world. You would have to think they are reasonably valued on this pullback. China is a different story altogether. He is not concerned about its impact on Canadian auto parts companies.

Markets. There are corrections in the market all the time. If you are a long-term holder of equities, you would see this as an opportunity. With this volatility you can actually buy companies that you have wanted to buy for a while, but the valuations just weren’t there. You should have a list of stocks that you like. For most companies, this volatility doesn’t change too many things, and over the long-term you should be able to grow your wealth. Doesn’t think the equity markets are going to fall apart. Rates are still low, dividend yields are still high and companies are still buying back their shares. When you get into September, the first couple of weeks are volatile. A 10% pullback in the market is not a bad thing. It washes out a lot of unnecessary speculation and it gets things started again. That is a healthy thing. He is not negative on the stock market. Canada is a little bit more difficult, but the US is certainly growing and there is good employment growth. Interest rates probably go up, but not aggressively. There is a slow turnaround that is happening in Europe. There are some good opportunities with some great companies.