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

Markets. Low oil prices eventually bleed through into economies and it is a huge plus. The economy will do that much better than it would otherwise. He has been looking at a lot of oil and gas but he has not played it well so far. Oil and gas is about as out of favour as you can get and that makes it contrarian investing.

Markets. We are in a battle between the deflationary debt and deleveraging, and the central banks printing money. This has been going on since 2009. In the smaller cap commodity side things have been very negative for 3 years now. We are heading into ‘pre-announcement season’. You are likely to see some pretty big misses and that could put downward pressure on equities. He is seeing some definite rolling over in global trade. We could be at a cyclical peak in the inventory cycle. He tries to find companies that have unique characteristics that are not dependant on short term cyclical factors. He shorts cyclical companies with negative currency exposure. We are heading into the weakest period of the year for metals.

Markets. On the US economy he is optimistic but not so much on the markets. The first quarter is going to be difficult. The strong dollar, lower exports, and is energy collapsing, but 2.5-3% growth should occur in the rest of the year. It will pick-up because of the price of gas. Americans live pay cheque to pay cheque and so this will translate into consumer spending. There is a lag until that really flows into retail sales. Canada is different with its bigger exposure to energy, which will bleed through to the rest of Canada. You add to that how emerging markets are still facing a lot of growth challenges and that will weigh on commodities. Also our consumers are quite levered. Canada is much more challenged. Just because we have been up for 6 years does not mean we can’t go for 7. But we have seen an increase in volatility. Earnings are not increasing right now, so the multiple would have to go higher for the market to go higher.

Markets. The US is better than Canada, not fabulous, but better. When people have jobs they spend money and when they spend money they drive the economy. He is not seeing any inflation in the US, well under 2% not counting energy and food. There is no increase in wages so someone is making money. Canada is not so good. The employment picture is mediocre and the oil price thing will affect the west. The low dollar should help Ontario and Quebec but we have yet to see it spill though. With regards to currencies, they always over shoot. $.82-$.84 is the correct range for the Canadian dollar right now. You have to pick stocks individually. A lot of REITs have yields of 6% and yet the treasury pays .75%, so if it goes up, does anyone really care? There is too much fuss about not very much.

Markets. Nothing is really happening in the markets. It is at a high and it will probably stay there. As energy goes up, we get an advantage over the States. Dabbling is fine. The possibility is that Iraq winds down. The US frackers will find better ways of producing as time goes on, so they are not worried. Canada is more on the war front. If you have no energy stocks at all then you should be looking at some. You should only have so much for now and don’t try to time the market. He likes Biotech and mid-caps in Canada.

Nat Gas prices. Gas has smaller moves than oil. Nat Gas’s price in North America is more insulated from the rest of the world than that of oil.

Gold. He favours holding gold because of the world’s problems. He always has something. The larger ones have a harder time growing, however.

Cera Operations IPO. The sector is hot. They have about 10 brands. They will sell off some of them. They have various wizards in the area of turn-arounds. It will go like hot cakes. If you could buy some shares opening day then buy a few. He probably will get some for the fund.

Markets. If you go back over the last year it is about the worst in 30 years for Canada for jobs. It is because of the oil sector. Canada has said they will not cut rates again but if jobs keep getting cut maybe there will be another one later this year. The Saudis are saying they will ride out the low oil prices. It is mostly the low production rigs that are getting cut in North America. It could be that oil stays weak longer than most people think. The debt levels in Greece are unsustainable so they have to leave at some point, but their pride might sustain this thing for several years. If Greece leaves the EU in a bad way it could wreak havoc. But if they do it in a sensible way it will be okay. It will just be a negative for financial markets.

Diversification. VXC-T is an ETF where you get the entire world in one ETF, without Canada. There are diversified companies but you still get company-specific risk. Vanguard Total world (VT-N) is a great one to diversify throughout the world. ETFs make asset allocation so eloquent.

Hedging against the Euro. You want exposure to the Euro. Use the unhedged ones when we are below parity sometime next year when QE ends. XIN-T is Canadian dollar hedged.

Fixed Income. It is going to be hard to generate a real return (after inflation) in this market. Laddered bond portfolios in the corporate bonds have credit risk. He likes target date ETFs. There is not a lot of interest rate risk. BMO has a couple and Royal has a couple.

Educational Segment. Qualitative and Quantitative assessment of current markets. Since 2012 we have had higher highs and higher lows. In October of last year we had the first lower low but then followed by a higher high. Will we see a higher high this time around? We can look at advance decline lines. Since 2012 the NASDAQ didn’t go lower than the NYSE until last fall. The NASDAQ is dropping and the NYSE is leveling. Small caps are now leading the rally and that is a good sign. They are not as dollar sensitive in earnings reports. Seasonals: It is year 3 of the presidential cycle, which is the most powerful. From March to June is the most powerful seasonal time for this year of the cycle.

Markets. Europe offers some opportunities, but it is only about 4.5% return when you translate back into US$. The US market usually trades at a premium to the world. Europe should be part of your portfolio. It is a multiyear bull run for the US market and dollar. Current weakness in the US$ is temporary but it lit a fire under stocks. Energy: Too early to nibble on it. We are still producing a lot. All the energy producers want to grow and hope someone else limits it. Wait until July or August and then it might time to nibble.

Copper High-grade. Once the demand signal is there, you want to put a shut down mine into production, but it takes a lot of time to bring a shut down mine back into production. It is going to be a challenged market. He does not see a spike in prices even in 2016.