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

Natural gas. Has mounted a little rally. There is a combination of factors. Inventory levels are still about 10% below where they were in the 5-year average last year, which has created a bit of a buffer. Also, exports into Mexico are starting to open up in 2015. Weather is the big guess. He anticipates a colder than average winter according to his energy forecaster.

New income splitting rules? His understanding is that you will be able to file a return in 2015 for your 2014 income and will be able to split up to $50,000 of income with your spouse. This works best for people who have one spouse who is earning a fair bit more than the other. The caveat is that you need to have a child under the age of 18 years in order to claim this. Feels that this really disproportionately favours the wealthy people.

This does not affect existing income splitting that retirees currently have.

Transferring money from an RRSP into RESPs? Any money you take out of your RRSP is taxable. If you can find a way to fund the RESP without raiding your RRSP, this would be a better way to do it.

Bond ETF fund for a 5 year hold, that would provide income and somewhat mitigate rising interest rates? He doesn't like any kind of a bond product. In this rate environment, there rates are ridiculously low and can't go lower; you are not going to make much money.

Markets. We are at an inflection point as it pertains to the US$ and oil. Today, there has been carnage in the energy stocks. We are into the shoulder season of retail shopping because of Black Friday and the holiday season. When you have the price of oil discounted by $3-$4, it puts a lot of money into the pockets of the consumer and into GDP numbers into countries like India, the US, China, Japan, who consume a lot of oil. There is an opportunity here for the economy to re-rate unemployment numbers to a more normal level as opposed to an inflated level.

Economy. Countries like Canada, Russia and Venezuela that rely very heavily on oil exports to balance deficits and budgets, they are facing the wrong end of the stick. There could be a ripple effect in certain parts of the economies. The 1st bellwether stocks, such as oilfield services and equipment, are already playing out in the stock market, and typically become the best and most important leading indicator in terms of operating efficiencies of these companies.

Markets. Currently he is having trouble finding Deep Value Stocks. He needs to Buy companies that are trading at less than their intrinsic value, where there is a large margin of safety. Companies that are strong financially and generate free cash flow, but are trading at valuations that offer a lot of upside, with hopefully minimal downside. After several years of a Bull market and an economy that is not doing very well, it is becoming difficult to find these companies. Globally stocks have been propped up by central banks’ stimulus. Low interest rates are fuelling a good part of the rally over the last 18 months. Investors are chasing yield, and many of them are buying stocks for dividends as if they are bonds that can never be cut or go down. That is always a bit worrisome. Previously had been able to find value in Europe and in Asia, but even that is getting a little tougher.

Asian/European volatility. Should equities be pulled back to North America? This is a difficult question to answer, but you would be better in North America, mainly because of the strength of the US economy, especially in some of the non-core, non-alpha names such as defence stocks, some of the retailers and leverage names to the housing cycle.

Update on your Value Japanese investments? Japan remains the cheapest market in the developed world, even in emerging markets. He has always liked that Japanese companies have very low debt levels, often zero debt. Fantastic corporate governance. CEOs are not motivated by stock options, but are motivated to build a better company to hand off to the next CEO. They have so many great engineering companies that are best in the world of what they do that no one has ever heard of before, because they are not consumer product companies.

Gold Bottom. If gold stays below $1100 for 6 months, half the mine production in the world shuts down (so he has heard). He believes it could only go down here for a spike and so now it is a great buying opportunity. He is nibbling here. We broke the double bottom and did not see a panic, so he sees this as a buying opportunity. It will be a great trading opportunity in the first half of next year.

Thinks interest rates will generally stay low, but could increase slightly in the second half of next year. Mortgage rates are driven by bond rates. You might want to lock in, especially if you want the security of having constant payments for 5 years.

Educational Segment. The US Election Mid Term Year. Thinks the democrats are not going to take the senate. You get an average of a down side of 1.5%. For the next week or two expect the markets to pull back a little. It is a buying opportunity. If you are a trader you take a little cash off the table. We are going higher into the year end.

Markets. He still sees value overseas. The correction is not over in Canada. In the US the correction was quick. Thinks in Canada and the US we still have to see a test of the lows. He is sniffing around on the energy side where he lightened up by selling a lower quality holding and is looking at a higher quality one. He likes Europe and South East Asia. He likes Chinese companies listed in Hong Kong or as ADRs in New York. He likes international companies that are headquartered in Europe, but most of the business is done elsewhere. He is watching those again now. It is a time to be in quality.

Canadian Market. You should be diversified, but don’t direct money to the resource stocks. Only buy companies that do a lot of business outside of Canada. CCL.B-T, for example, or an engineering company, or a life insurance company.

Markets. The double low in gold from last year was vulnerable. We just took it out. There is still more downside coming in gold. When it comes it could be a phenomenal buying opportunity. Get in when people are panicking.