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

Russia’s invasion of the Ukraine. How will this affect gold? There are 2 sorts of situations. In times of crisis, gold typically does well because, when people are not sure about outcomes, they feel gold will protect them. However, when people feel fear of situations, they sell everything and put it into the US$, which is ironic because the 2008 banking crisis which was falling apart with too much debt and yet the US$ rallied. Thinks you have to see how it plays out. There will be certain periods where the US$ will go up and expects there will be certain periods where gold will go up.

Markets. Thinks we are going to see a normalization of markets, which usually speaks to a 10% drawdown in the market. Feels that a lot of the smart money believes that, and they don’t want to get sucked into highfliers. Because of this, we are seeing the highfliers lose momentum and really pull back hard. This is probably the 1^st step in this correction process. A lot of value stocks that he was buying in November, December and even in January, that were completely forgotten, he is seeing a very good bid to those. It tells him that money is moving around and is looking for better opportunities, but doesn’t want to chase momentum. He wants to see money change from weak hands to strong hands. In order for strong hands to get involved, there has to be a discount, a value bias to whatever people are looking at.

US banking. Regional banks or large caps? He holds large caps. J.P. Morgan and Wells Fargo are in his portfolio. Likes them because they have critical mass to them and he doesn’t think they will ever be in a position where the rug will be pulled out from under them. They can take advantage of technology and scale it across their platform. However, he feels there is a very good argument for going smaller to Regions Financial (RF-N), etc. There are a ton of them out there.

Markets. China’s activity in factories has dropped for the 5^th straight month. DSUM continues to drop also. The government is challenged with some fiscal constraints and cannot stimulate. China’s growth dropping could be the next financial contagion. US factory numbers have bounced around quite a bit, but today’s number was a little weaker than expected. There is still risk of us going into a weaker period. It is not a good sign for the markets that we did into make a new high Friday and are selling off again today.

Bonds will always attract a flow of funds if stocks are weak. This year is probably the 10-20% correction in equities. The challenge is where the money going into bonds goes into the bond market in terms of term. You are better off with a laddered bond portfolio or ETF.

Educational Segment. Deals that might be too good to be true. Avoid fraud, identify theft and scams. His guest would have been duped by Madoff too. The rates were attainable and reasonable. Thought other people than her would have done her due diligence. The key was the lack of volatility. He would not tell people exactly how the option strategy worked. In the case of Earl Jones, he was not licensed. You need to make sure they have errors and omissions insurance.

Markets. Has concerns you would get from continued slowdown in China. If you saw a few more bankruptcies, some people say that would be good, rather than bailing them out. The number of stocks in the US has reduced due to M&A and so supply has reduced. That should be good. Capital spending is lagging. You could see more Cap-x spending and that would be good for markets. He is very picky about what he buys right now.

Markets. Roughly playing out as he expected. Had a bit of correction in January, but there is still a lot of money on the sidelines at very low rates and people are starting now to feel they are missing the boat. There are still a lot of spots that have good value. Feels economic growth will be more of the same. Ever since 2008 we have all these people worried about the world changing and things are never going to be good again. Every year, for the last 5 years, there is a slow, grudging growth around the economy. Initially it was powered by China and emerging markets. This year, you are really going to see the US pull the world forward, and that is pretty exciting. Consumer confidence is now starting to come along and he thinks the US is actually going to surprise us.

Markets. Still thinks we are long overdue for a healthy correction, but the market keeps wanting to chug along without it. Not selling anything, but not buying anything new. Has some healthy cash positions waiting for a correction. People should not be afraid of a correction. When the market has gone up, especially the US market, pretty much nonstop for 5 years, it is long overdue for a correction, but that is an opportunity to buy some stuff that you want with a little better valuation. Technology stocks will be the first to fall. Some other things will come down but money will flow into other things that are better value. Doesn’t expect Canadian market will fall as much because we are different. Our market is about 75% materials, commodities and financials whereas in the US, materials and commodities are a very small part of their market.

Markets. Fed’s talk on interest rates does not cause him to do anything. He was looking at Europe until two weeks ago. He has been buying VGK for some time and is comfortable, but on other ETFs he is holding back until we see what happens with Russia. Because VGK is Europe and 18 different Fed chairmen you can’t coordinate things that well. You are buying good global brands. He is glum on Canada. It is spring, but the dollar is tumbling. He does not see that halting any time soon. Has been buying XSP for years because of hedging, but last year switched to unhedged.

Dividends for companies in an ETF are normally paid out. ETFs pay distributions of various kinds, but issue statements later than the companies whose dividends they pay out.

5 or 6 months horizon, he would just do money market as opposed to laddered bonds. Prefers XSB-T to bonds directly.

Money Market Funds. Prefers over bank paper. Not a lot to differentiate them from each other. More liquid than a GIC.

This is a minor correction, not a crash.

Markets. Fed just announced at the end of Q4 that US household wealth is now at $80 trillion, which exceeds the old high in 2007 Q2 of around $68 trillion. This is a Fed that still, very much, has your back as an investor. Europe continues to get off the ground. China is still growing, maybe not as much. With investors being so pensive and willing to flee at the first sign, this is still a very healthy signal that this market still has a ways to go. Valuations are becoming a bit of a problem and things are more expensive than they were previously, but there are plenty of places for new investments if you look for them. He like companies that are cheap relative to their peers and companies that are more likely to boost dividends. Feels the oil/gas space in Canada is pretty compelling.