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

Markets. REIT Index has traded back down to September lows and that is an opportunity to get back in. We are in the last bit of the stretch of downturn in REITS. Great companies are trading at a large discount to NAV. He got into wines over the last year. He pairs investments with Wine selections.

Markets. People are buying into this Bull Market, but in somewhat of a cowardly fashion. You are seeing a lot of chasing of the low beta, high dividend. That was their first move into the market, and they became very comfortable. A lot of individual investors did well over the last 4 years but we were hit in May with the interest-rate scare. This created some disenchantment with some of their holdings. Historically the next phase will be a shift into the higher beta, more cyclical, more growth oriented and names that do not have dividends. Whenever possible, he is shifting out of the dividend stocks and deploying money into growthier names. As a bull market matures you start to see more dispersion so the S&P 500 will show that in years, 5, 6 and 7, the best performing stocks are quite substantially different than the bottom performing stocks. A passive strategy will still do well, but active portfolio managers, getting into the right leadership in the market, are going to prove very beneficial going forward.

How do you determine which part of your clients assets should be in individual stocks versus ETFs, both in terms of percentage in each within the equity portfolio and also with respect to your particular choices? First of all, it depends on the ETF. He sees a lot of portfolio managers that decide they like a certain sector and believe that sector is going to begin to show emerging leadership and want to be in it so a lot of portfolio managers will allocate money immediately to that sector. In absence of doing full homework on individual names, they’ll use that as a placeholder. When he has that placeholder, he’ll then dig down deeper on those that he wants to own. He’ll also use ETFs for things that he does not particularly have expertise on. Although he uses ETFs, he still prefers individual stocks.

Markets. 30% surveyed think that the Fed could taper this meeting, but he does not think so. Debt ceiling is still a mid-Jan to Feb event. They don’t want to shut down the government again. He thinks actually March is more likely when they talk tapering again. Copper is at a 6 week high but it’s not relatively high right now, considering long term. Not sure if it means anything. Doesn’t think China is taking off in any way. German numbers were good, France was weaker but Europe was better overall. 2014 will be interesting to see if interest rates can go up and the economy still recovers.

Doesn’t think the FED wants to raise rates, but they want to pull back on QE stimulus. Because of lack of buying of bonds the rates will tend to go up a bit.

Nat. Gas. Everybody’s timeframe should be geared to what they are trying to do. If you are a buy and holder, then look at the 3-5 year picture, but if you are short term, then you will be trading every few days.

REITs. XRE-T is the equally weighted ETF. He compares to others. Thinks there is 5% risk on REITs to the downside at the beginning of the year. He will add to his position when it comes back 5%.

Educational Segment. Bonds. Canadian investors with fixed income in portfolios. Looking back to May of this year when they first started talking of tapering. 2.82% was the peak rate in the summer. If we start to see bonds break higher it would be meaningful. 3.5 would be the next place US bond yields would go to (3.25 in Canada). CBO-T is down 2%. ZCS-T has a small total return but a small price loss. Broad US bond market would be down since May because the CAD$ has declined. XLB-N is the worst performer, long government bonds.

Markets. Not much further multiple growth. Canada will be about the same as the US. He will be a bit more of a stock picker next year. You are looking for a combination of growth with some growth. You can’t buy yield for yield’s sake. Banks are a good example. In 2014, sectors to do better are financials, tech, health care. Energy has been a real laggard.

Markets. Tends to look for names that are undervalued, under researched and typically under owned by institutional investors. Focuses on bottom-up investing.

Would you consider a long-short strategy with Canadian airlines? How would you do this? Taking a longer-term view of the airlines, it has been a graveyard for investors. Air Canada was up 340% year to date and Transat (TRZ.B-T) was up about 140% and WestJet (WJA-T) was above 40%. An obvious Pairs strategy would be to go Long WestJet and Short Air Canada but WestJet has its own issues by going from one hub in Calgary to having 3 hubs. Doesn’t find this compelling from the long side or from the short side.

Markets. US has had an incredible run and even Canada, outside of the base metals and gold, had a pretty good run as well. Sentiment numbers indicate investors are pretty bullish. Typically, when you get to that kind of an extreme, you are ripe for a near-term pullback but thinks it would be pretty shallow and short-lived. Conditions for stocks to go up are still pretty good. Global growth is continuing to improve. We have low interest rates and a commitment from central banks around the world to keep them low. There is nothing really threatening in the way of inflation. More defensive, lower volatility of cash flow and higher yielding stocks tend to be much more interest-rate sensitive and don’t have the growth opportunities. If you give up little bit in yield, you can often have companies that have much more economic sensitivity and ability to function in a growing economy. In Canada, there are still opportunities in the financial and energy sectors.

Utilities for it for a 5 year plus outlook? This is one of the most interest-rate sensitive sectors. From a short-term perspective, they could bounce because they have been hit so hard. Next week there is a fed meeting where there is a 50/50 chance of tapering. It will be interesting what comes out of the tapering as well as the markets reaction. People are more used to the idea now and the fed has gone long way to explain that there is a difference between tapering and tightening. You may actually see a relief rally in these types of stocks if they taper. Problem is going to be in the growth of utilities and he thinks that is going to be a challenge.

Markets. Have been a number of impediments removed from the market this week. The budget compromise has taken the heat off there being another US government shutdown. The Volcker rule limiting the kind of risky stuff that the banks can do. Job reports show that things are definitely improving in the US, which will lead to higher wages, which will lead to more spending which will be reflected on the GDP. Cdn$ is too strong right now and is going to have to come down. Wouldn’t be surprised to see $0.90.

Copper? You could play this through HBP Comex Copper Bull+ (HKU-T) but that is a leverage copper play where you could lose money even if you are right. Another one is the Global X Copper Miners (COPX-N) which is a play on the copper miners themselves. Also, you could look at BMO S&P/TSX Base Metals (ZMT-T), a base metal play.