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

Uranium. Bullish on uranium long-term. The reality is that places like China and India are putting up so many nuclear power plants and that is where a lot of their electricity is going to come from. Also, Russian production will be fading out over the next few years, which will give uranium producers a chance to get higher prices. Long-term he is bullish, but not for the next 2 years.

Real return bonds? These yield about inflation plus 1.2%. If you are concerned about inflation and willing to live with a very low yield in a low inflation environment, but hedging yourself with regardless of what happens you are going to be covered, there is nothing inherently wrong with owning these in a “tax free” account.

Markets. Market is going to continue on as it has until the sentiment changes. There are a few things bubbling underneath below the radar screen such as secondary currencies like the ruble, Indonesian rupee and Turkish lira. They are having a difficult time lately, especially in the last couple of weeks. This started in May when the Fed had its 1^st salvo at getting the market ready for tapering and it has sort of accelerated. Some of these currencies are down 20%-30%, making those central banks a little bit nervous in trying to sell treasuries and US$ in trying to defend them. In a Seasonal Play, people will be looking at big cap value plays and financials along with some rotation into laggards and stocks that have been beaten up.

When comparing and investments, performance to a market index, what specific period of time do you usually use? You stick with the timeframe that you are interested in and the performance would be your measuring stick. There is no point in looking at a 3 month performance number if you are looking at a 2 year chart benchmark.

January Barometer. This is essentially the predictive power that January has on the rest of the year. Looking at positive Januaries over the last heat 5 years, 77% of the time, the market continues to be positive for the remaining 11 months of the year. There are about 29 negative Januaries and it is about 50/50 in terms of positive and negative outcomes for the remaining 11 months. An interesting stat, but there is not much predictability behind it.

January Effect. Basically the tendency for Investment Managers to take on increased risks. They want to get a jump on the benchmarks and this particularly affects small cap stocks. Generally the market is positive in the month of January. Average gains for the month is about 1.15% for the Dow Jones industrial and is positive about 66% of the time. Even though we’ve just had a couple of negative days, it is definitely not an omen for the rest of the month. The tremendous gains from last year are not exhausted. There is still room to go. Silver, copper, zinc, all the base metal stocks tend to do well. The 3 sectors you want to focus on during the 1^st quarter tend to be financials, materials and energy, basically the makeup of the TSX. (See Top Picks.) They tend to outperform the S&P 500 or the US markets between now and early March. Sectors you want to stay away from are utilities and consumer staples.

Markets. S&P and TSX have broken out from a technical point of view. When we look at fundamentals (trend of fair market value), it is weakening. The market could use a little bit of a correction and then let’s see how the individual stocks respond. He combines fundamentals with technicals. He looks at what the monetary authorities are doing and what they will probably do during the coming year and he sees quantitative easing programs not working out particularly well and he wonders if as this year moves on if we start to see the same weakening from Europe and Japan, could we see it in North America.

Canadian Banks in General. Earnings outlooks show very little earnings gains (momentum). There is not a lot driving it. When markets are moving up, people look for what to buy and decide to buy banks. That is what is driving them, rather than strong fundamental momentum. As interest rates start to go up we will start to see some tail winds, just as in insurance stocks.

Markets. Investors in the last few years have focused on the Federal Reserve and what it was going to do, but things have changed, probably starting last spring when Ben Bernkie announced he intended to taper and the market reacted so violently he decided to take a little bit of that back. Although they did start to taper in December, it is going to be very, very slow. We have now entered a period where the economy is going to start to stand on its own 2 feet. Some inflationary pressures are going to start to enter the market and we will start to see that affect the types of companies that will do well. This is not a roaring economy, it is a soft economy, but the feds action has worked. Some complacency will naturally be built into the market in certain parts and corrections are a solution to complacency. Corrections are normal.

Markets. We are in the midst of a Santa Clause rally. The January effect involves small cap moving. Usually the stocks that are the most beat up at the end of December have rebounded by mid-January as a group. The biggest trend he saw last year was the activist investors bullying companies to buy back their own shares. He is not encouraged by it.

Gold. $1180 is big time support and we are back there again. Thought Gold would be crushed today, but it wasn’t. He thinks the first few weeks in January should be quite good for the sector.

Investment Resolutions:

#1: Trade less and in a more strategic manor. Be focused and disciplines. Think with each trade.

#2. Pay off non-deductible debt as soon as you can, e.g. credit card debt, before investing.

#3. Generate an investment policy statement, 4-10 pages long, your mix, tolerance for risk, goals, etc.

#4. Don’t chase past returns. E.g. stock is up 50% so get into it.

#5. I will not attempt to time the market.

Frontier Markets. They are relatively volatile. He does not know of an ETF in Canada that addresses them. FM-N can be used in the US. FRN is another ETF for these markets.

Should one self-invest? It takes time, temperament and timing. He thinks investing is relatively simple but temperament is the hard part. As your accounts get bigger, using a full service advisor makes sense.

REITs. Doesn’t think you will get hurt too badly with REITs. But they will get hurt as rates go up. He is not sure that it will materialize in 2014 so in that case you could skate through 2014 with some REITs.