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

Gold. There is a little bit of a lid of around $1,330 on gold right now. Seasonally there is a lot going for gold over the next couple of months. He thinks it just may break out, but as a conservative trader, he’ll wait for it to breakout before entering.

Stop loss orders. How do you set and adjust the Stop price in an up-trend? Rather than using physical stop losses, use trend lines and support levels. If you see the technical support has been broken, you don’t put in a Stop Loss or a Sell order, execute your trade at that time and give it a couple of days to see if it holds. Make your Stop Loss orders mental rather than physical.

Natural Gas. Very bullish on natural gas and natural gas stocks. Fort St. John, BC is considered the energy capital of BC. Activity levels are quite robust. The buzz on the street is very exciting. It is all centered around LNG projects that are unfolding including pipeline routings, etc. Happily, the LNG world in BC is in much better shape than the transmission of oil. Feels this will be a significant contributor to the outlook towards natural gas moving forward. There will be some projects that will happen prior to the creation of the huge LNG plants. The Bears on natural gas have been right for such a long time that that it is about time the Bulls got a better shake here. US shale gas plays really did upset the supply applecart in North America. For the 1^st time in a long time we are feeling more comfortable with the outlook for natural gas. While the shale plays have been great, the only shale play in the US that is really showing growth is the Marsalis in the US Northeast. Feels we are in a very vulnerable spot if we don’t get storage filled up to where it needs to be by the end of the injection season.

Canadian Energy. 2014 has been very solid so far for Canadian energy stocks, and it was just time for a catch-up. Still thinks there is a lot of room to go. Purchased about 15 stocks in the last week or so, so she doesn’t think this is the end of the energy cycle in Canada. The Canadian energy sector lagged behind even though many investors have seen a great run. Oil/gas stocks have been weak basically since 2008. It was such a prolonged downturn, that she is forecasting the run is going to last longer than many people expect. Has recently seen that a lot of the growth stocks with zero dividends, really were on fire. In addition, in the last couple of weeks, she has seen a lot of really high quality dividend companies come back.

Investing. He tends to do his investing bottom-up. Rates continue to drive a lot of the valuations in utilities and energy infrastructure, so he continues to pay attention to the high-level macro. ECB continues to be monetary easing, and the Fed policy continues to be accommodating. This is all positive from an equity valuation perspective.

Utilities. Have had a pretty good start into the 1^st half which has really been a function of declining bond yields. Feels this caught investors by surprise. Rates will likely back up into the 2^nd half, but at a slow and moderate pace. From that perspective, he feels there is going to be a bit of headwind for utilities, so he is fairly cautious in this area.

Industrials. These tend to correlate very well with economic and GDP growth. There are early-cycle, mid-cycle and late-cycle industrials, and he feels the early cycle trades have been and gone. Focusing on mid and late cycle non-residential and CapX cycles where there is still tailwind and a positive growth outlook.

Energy Infrastructure. Stretched valuations, but in the midst of a multiyear expansion. Fairly valued, but you know that there is more CapX coming down the line. There’s so much opportunity to deploy capital in this space, that ultimately these businesses are going to be worth more 2 to 5 years out.

Investing. Still finding value in REITs, up 8% year to date. He is seeing dividend vs. Gov’t of Canada rate is a very wide level. So these REITs are not expensive at all. Large Caps attract more of the foreign investment. It had dipped for a while, but the interest is coming back. We average 8%, but it is 18% in the US. He thinks, though, that you will see some of the capital coming back to Canada. If the economy in North America continues to improve then it will be very good for REITs. REITs are a little less sensitive in the past to interest rate spikes.

Markets. Investors seem to be handling the winding down of QE quite well. The market is prepared for it. QE has probably run its course in terms of effectiveness. The market is going to look at guidance from company management and will also concentrate on GDP figures. The Russel 2000 looks a little weaker. Stochastics and RSI are suggesting we are toppy.

Education Segment. VIX – Volatility Index. Markets actually do well in periods of low volatility. The VIX is low right now. There has not been a whole lot of movement lately. Low volatility means low options prices. You should not start selling your stocks because the VIX is low. Now there is a product that shorts the VIX (XIV-N and HVI-T). When the VIX is already starting to go up, this is a time to start using these products.

US Economy. We had a very disappointing first-quarter GDP number, and people became concerned. Then we had what amounted to quite positive employment news for June. Tomorrow we have retail sales and existing home sales, which will give further clues. He feels the US economy started to pick up steam in March, April and May, and we should start to see those results coming through. Everybody knows the US Federal Reserve are going to stop buying bonds by the fall, and it is really just a question after that, as to when they start taking rates back to what they would consider to be a normal level. The uncertainty is not of direction, but is of timing.

Markets. You have to be a stock picker in today’s market. Everybody recognizes that the indices in the US are at all-time highs, and close to all-time highs in Canada. You have to work a little harder and dig a little deeper. If you have strong companies with strong balance sheets, and if the market has a correction you can shrug it off.

What are your reasons for not being a fan of gaming stocks? When buying stocks for his clients, he envisages his name across a factory door, and questions if he would want his name on certain products. These companies pray primarily on the weak of will and the unsophisticated. There are no safeguards such as they have in casinos, for people with gambling problems.

Are “old tech” plays like Oracle and Cisco good investments? All these companies are migrating their operations to the Cloud. Cisco is replacing a lot of its hardware switching with soft switching. Companies like Microsoft have proved to be quite agile. These companies are all at very low multiples, at less than 12X earnings, and generally have very strong balance sheets. Probably less growth, but probably more stability.