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

Dollar cost averaging. He is in favour of it. You defer your taxes until you sell, if you don’t trade.

Investment Resolutions (Continued):

#6. Read at least 1 book on investing or planning.

#7. Be sure to understand both risks and returns before investing.

#8. I will review my statements regularly.

#9. Seriously consider replacing more expensive products with cheaper ones. E.g. replace a mutual fund with an ETF.

#10. Carefully consider the tax impact of investment decisions.

Dimensional fund advisors: He is a huge proponent. He has been associated with them since they came to Canada. There is a tilt toward small cap and value.

Dividends from an indexed fund: You could take the cash or reinvest, but you get the dividends from the securities.

Copper ETFs. He doesn’t know of a Canadian one. Those that have copper included in a basket of things, they have all been dropping like a rock. COPX-N is a US ETF on copper.

Markets. Strength of Japanese Yen has hurt the export sector. But their stock market is up 80% in 2013. Their aging demographic will be a real problem in the near future. He thinks this is just a blip for Japan. UAE and Argentina had phenomenal years but are not accessible to Canadians.

Educational Segment. Making your own Market Calls. 2014 will probably have a 5% gain and a lot of ups and downs. When you generate opinions based on weak information, you have difficulty changing that opinion. Thinks S&P will test 2000 and TSX gets up to 14,200 and stays there. The Shiller PE for the S&P is very high right now. We are pricing in a lot of good news.

Markets. Don’t expect the same in 2014 as 2013. It was a spectacular year. Has expected a correction of 5-10% for a long time, but he views it as an opportunity to buy. Thinks markets will work their way higher over 2014 but it won’t be a straight line. He is finding it easier to identify things to lighten up on than to buy.

Canadian REITs. Interest rates are going up. It was a surprise to what extent they sold off earlier in the year. There may be some opportunity here. He likes Northern Property and RioCan.

Exit point for Insurance Companies. If Interest rates were to start going down, that would be the trigger to sell. He is favourable to insurance companies right now.

Markets. In the very short term, the market is very over bought. The Investor Intelligence chart is at the highest point since 1999. It indicates extreme bullish sentiment, which he thinks puts us into dangerous territory. Expects a correction of 10-15% soon. No one knows how tapering will affect the market. Rates have been repressed for so long that he is worried about the rebound effect. That would not be good for the market.

Markets. Market looks overvalued by a lot of metrics such as valuation versus the global central banks aggressive stances, particularly in Japan and the US. One of his big concerns is that we are re-flating the debt bubble. Debt levels are at record highs again. Ultimately, when the decline comes, it will make it more severe. He tends to be Long on companies that are experiencing positive fundamental change and Shorts companies that are experiencing negative fundamental trends.

Markets. 2014 looks good. Stocks are going to continue to do well in the US. Canada will underperform the US but still do well. Can’t see why stocks will not do as well as they did this year. People are worried about tapering but what really affects stocks in the long run are short rates going up and he doesn’t think this will happen until 2015. Long rates will go up, but eventually the long end of the bond curve is determined by inflation rates, which is relatively low. Economic growth globally is really improving. If pressure is put on the stock market because of tapering, that will be a good buying opportunity.

Which of the Canadian banks should be sold in order to move into something else? His view is that the Canadian banks are not expensive and they have good dividend yields. They will continue to plow along and you can expect to see 12%-15% rates of return over the next year. If he had to choose, he would get rid of Bank of Nova Scotia (BNS-T). (See Top Picks.)

Markets. We did not get the Santa Clause rally but we got a lot of Christmas presents early so what you saw was a lot of profit taking. The year is not over and we still have a few days over Christmas. Tax loss selling ended today. Resources did badly this year. 2014 will be a good year and especially for Canada. But it has been a stock picker’s market. Tech has been the place to be, resources the place to avoid and financials are somewhere in the middle.