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

Markets. There are 3 things driving the current market. 1.) The collapse of oil prices which has gone below what is economically sustainable over a longer period of time. 2.) The QE in the US which has ended which will ultimately lead to higher rates. 3.) Is the US economy strong enough to sustain the growth moving forward? Before this earnings season was announced, a lot of large caps in the US were telling us that it was going to be a great season, but what they ultimately forgot was that a lot of their earnings came from outside of the US, and we started to see the “earnings drag” hit because of the higher currencies. Thinks oil prices will ultimately move higher which will perhaps bring the Cdn$ back to a higher level.

European ETF, hedged or unhedged? He would rather go unhedged, because currency is part of the diversification by investing internationally. In terms of picking ETF’s versus individual stocks, he favours going directly. Thinks you will find mainly large companies in the ETF’s, and wonders why you just wouldn’t go direct.

Markets. [Larry was late as he was caught in winter weather.]

Do ETFs buy the actual stocks in them? When you put in a buy and there aren’t enough shares, they create them and have to buy the stocks contained. The reverse happens as well.

Educational Segment. If you don’t understand the markets are going to go up and down then you are not ready for the markets. The average investor’s return in the last year was 10% and the volatility was 10%. The ideal portfolio gives you the highest return possible with the lowest volatility.

Markets. He remains very cautious. The US economy is doing well, but investors don’t really understand what the central banks around the world are doing by creating all the liquidity to get growth going. It only gets to the banks, who invest it in more risk assets. It does not turn into growth. The global economy is a mess. We will continue to see volatility and little rallies. Money has gravitated to consumer staples and valuations in that sector are at all time highs. He is at 30-70% equities in his funds.

Oil. Prices will change. Costs are higher as they need a minimum of $70 to cover costs in the oil sands and $80 in the fracing world. It is extremely hard to say when there will be a recovery as there are a lot of moving parts. Certain oil stocks are going up every day.

Markets. He is looking for Canadian companies that can benefit from the weaker Cdn$, especially on exports to the US, or those that have revenues in the US. There is a lot to do and no reason to be totally negative.

Gold. Every portfolio should have some gold to balance out. Gold is reasonably stable. With the oil collapse where do you go for resources? You go to forest products perhaps and, selectively, you can go to gold. He is very interested in the longer term approach with Osisko Gold Royalties (OR-T), Integra (ICG-X) and Detour (DGC-T), which is absolutely phenomenal.

Minerals? Would now be a good time to start picking away at some of the companies? The time to buy them is when nobody else wants them, which is now. He would do some gentle buying in here. They are looking glamorous compared to oil and gas now. He would probably put HudBay Minerals (HBM-T) first.

Markets. Thinks the next little bit is going to be bumpy. You have lower oil prices which are showing up in the 1^st quarter in the US. The higher US$ is hurting international, which will also affect 1^st quarter earnings. The Greek fears will probably drag on for a while. However, you are going to have the compounding effect of European quantitative easing, which is going to help and underpin. At the end of the day, he thinks there will be a positive resolution in Greece. Lower energy, although it takes time, will eventually be a boon for consumers. A higher US$ will ultimately help American purchasing power.

Which bank, for a good dividend and lower downside risk? Bank of Nova Scotia (BNS-T) is the least tethered to Canada. If you think Canada is going to be a little bit dicey, this is one that you might want to look at. CIBC (CM-T) probably has the highest dividend and the lowest PE as well as having the highest capital levels.

Cdn$. A chart on the Canadian dollar dating back to 2005, showed it was at a peak in 2007-2008, and as the stock market and oil fell, the Loonie fell with it. A double bottom showed in 2009. This is happening again. He thinks we are going to see some sort of complex bottom, somewhere around the old lows at around $0.77 on the US$, and probably pretty soon. A similar pattern to oil.

Oil. Going back to mid-1980s there have been a lot of similar circumstances happening lately. Chart showed that oil fell from $31-$32 to around $10 in the mid-1980s,. The bottom in 1986 was complex with an up-and-down activity over several months. Oil then peaked at around $40 around 1990 and then dropped again and tested at around the same level in 1999. Again it was not a simple bottom. It then reached a peak early in 2008 at $147 and then took a big drop, but did not have a complex bottom. With this information, he feels there is a high probability of the former lows, high $30 or so over the next couple of months, but it will not be a simple turnaround, but will be like the last couple of times where there is a complex bottom. He plans on buying back in after the volatility has played itself out. There will be a great opportunity in oil, probably in the next 6-12 months. Watch the volatility and watch the breakout and it will be a great buying opportunity.

Markets. We are at an interesting point in economic history. The reality is that we have not had a point where the European, Japanese, Chinese and Bank of Canada are working together to add liquidity. In the long term this could contain some dangers. It is an inflationary phase that we won’t see until 2016. The next part of the equation is currency exchange. That will be more powerful than more people think. Now that we have a foreign exchange structure that is seeing the US dollar move dramatically against all other currencies, it will change things dramatically in 12 months or so.