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

Gold. The simple answer on this is “Don’t Buy It”. He has no interest in gold and is not going to buy it.

TFSA accounts? This is a wonderful vehicle. Great for the young investors. If the government lets it continue and lets it grow over time, people are going to have millions of dollars in their TFSAs when they retire.

Reset preferred shares? January was not a good month for these. The terrible wrinkle on these is that they were built for a rising rate environment, not a decreasing rate environment. It looks like interest rates are to be cut again. The good news is that they have already taken their hit and if you don’t expect further rate cuts past March, then you can stick with some of them. He wouldn’t Sell, as long as you own good quality preferred shares.

Economy. With a pullback in commodity prices, the whole economy has been getting a lot of tailwinds, which has been reflected in some of the companies related to manufacturing in the US as well as retailers. Energy has affected the US equity markets such as Starbucks, fast food companies, retailing groups, which are all hitting new highs. Right now it becomes a difficult exercise to pick the winners. Valuations look stretched to him, but he thinks there is room to grow from where we are.

Markets. The markets are nutso on the ‘patience’ word. Is the Fed going to push it down the road or not. They need 150k jobs to keep up with the population growth. About 50% of the last year’s job growth was related to fracking. The quality of the US employment rate is not fixed. The Fed definitely wants to try rising interest rates. If they don’t like what happens they may lower them again. Nothing is fixed in Greece. They have to leave the Euro at some point. They have significant challenges. They are just another can kicked down the road for 6 months. QE has been the backbone of the recovery including the European QE. We will see in March what the ECB’s program is going to look like. We may be in for a bit more volatility in Europe.

ETFs specializing in REITs. Prefers ZRE-T because it does not overweight the big ones and gives the small ones more of a real chance. FRF-T is an actively managed ETF and you might consider that. There is a smaller cap bias to the markets in the uptrends.

Educational Segment. 63 year old’s potential portfolio. VCE-T (30%) is an ETF that invests in Canada. XWD-T (40%) is the world index. XBB-T (30%) is the entire Canadian bond market (no emerging market exposure). It had a 2.8% annual return over the last 13 years with 13% standard deviation. That is probably not what you are hoping for. But from ‘09 to present the returns are quite good at 15%. Would he have sold in `08?

Markets. Looking for a lot of M&A over the next year in N.A. Small Caps. Small caps have underperformed over the last 4 years and he thinks they will catch up. We are at a point in the bull market where this just kind of thing happens. There are opportunities for the big guys in the area of acquisitions. A lot of Tech names are hitting new highs. People are looking to move out of the energy space. Small cap index is laden with energy and material stocks and this is why the index has underperformed over the last 4 years. He thinks people will start to move down to the smaller caps. About a third of his top picks have been taken out. If the market does not reward the small caps with a higher multiple, someone takes them out.

Markets. Sees this business cycle extending for 2 to 3 years. There are lots of catalysts for the US economy to move forward. The 7 year period for US loan defaults is ending. There are lower oil prices. Interest rates have made mortgages more affordable. Consumer savings has built up over the years and cap-x will get a boost because plant capacities are approaching 85% where they find they start to get tight on capacity. Major risks are geopolitical: Ukraine and Isis. Subprime lending on homes and autos is back where it was in 2008, which would be the risk to the US economy.

The venture exchange. They are venture companies so unless you are prepared to possibly lose all your money, you should not go near it. If the TSX is not working for you, then go internationally, not to the venture exchange. Suggested UL-N.

Markets. Bull market has been going on almost 6 years now and could keep going on. Doesn’t think the Central Bank accommodation is the key issue. A more important issue is that global growth is positive and accelerating. Global GDP growth came in at around 2.5% last year, and will certainly be closer to 3% this year. This is happening in an environment where the valuation backdrop is still generally supportive. Stocks are basically right in line with long-term averages. European and Japanese stocks look a little more attractive than North American or US stocks. Stocks, relative to the other main asset classes, specifically cash and bonds, probably offer a value for money versus the other alternatives. We haven’t had a decent correction in the market since 2007, and it has been unusual how little volatility there has been. The key drivers for equity performance are growth and valuation.

Good quality ETF’s in Asia, particularly Thailand, Indonesia and Laos? Not a huge fan of regional ETF’s, especially in those countries, as the markets are so shallow and so susceptible to fund flows that it can really be a volatile investment. Growth in East Asia, especially in Malaysia, has come down with the decline in oil prices. Thailand is still trying to recover from the decline in economic activity because of the political instability last year. Indonesia is still trying to pick up growth after the elections last year. He would suggest instead investing in these regions through either Jardine Matheson (JM-SP) or United Overseas Bank (SP) out of Singapore. Both are well-managed companies and pay good dividends.

Markets. The Dow and S&P 500 have hit all-time closing highs today. The only holdout right now is the NASDAQ and he is sure the NASDAQ will clear that. This will mean that all the major indices are breaking into all-time highs. The only thing that could spoil it is the currency wars that are going on. Most local governments that have their own currencies are trying to devalue their currency. We have the Cdn$, the British pound, the euro all being work down. Eventually the high in the US$ running upwards will eventually impair the earnings of the S&P 500, and we are going to gradually start Topping out. It doesn’t mean a Crash, but we will get this turning business and things are going to gradually start leaving the US and going global. Over the next year, investors should start reducing their US exposure and picking up some global stuff, including Canada. This currency war has all the banks fearful of raising rates, and that is going to continue for a while. A chart comparing the UK with the S&P 500 shows the S&P 500 breaking out above the 2007 highs. The UK is just trying to break out. Investors who are chasing yields right now and are buying into the dividend growth stuff are going to get harmed, so he would be very careful. One of the easiest trades out there has been going on the US$, and this is probably going to work for a little while yet, but he thinks we are near the end of that. Eventually we are going to see US internationals being punished by their high dollar which is impairing their earnings.

Energy. Basically the energy index bottomed in 1998, followed by a big run up. There was a spike in 2008, which dragged the TSE up to a false move. From that point on there is pretty much of a sideways move. He would suggest that we are just in a multiyear trading range. We could run up to the old highs of 2011 and 2014, but doesn’t think we are going to match that high for a long time yet. Be very careful.

US$? The strong dollar is a real problem for the Fed. They don’t dare hike rates, which could push the dollar higher. It is eventually going to create problems for US earnings. The natural course of the year is that as money leaves the US$, it will push the US$ down. He thinks the US$ has had its course.