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

Oil/Natural Gas. Globally and in the US, things are looking pretty solid. Economic growth will finally get a bit of a kick start from the consumer in the US next year. Businesses will start finally spending the cash that is on their balance sheets. This is good for industrials. It all filters through when you have an economically sensitive commodity like oil or natural gas. This should put a bit into the commodity and, as a result, the stocks. Current price on oil is probably as good as you are probably going to get on a fundamental basis. $85-$100 is where crude is going to trade. To get it through $100 on the upside would take some sort of political supply shock. There is some demand destruction happening in crude because of more natural gas being used for power but, also we are living our lives more efficiently creating less demand in general on crude oil. Feels the spread between WTI and WCS will narrow by Q1 of next year. Mid 2014, Enbridge (ENB-T) will be bringing on another pipeline from Chicago down to Cushing, so there is light at the end of the tunnel. On natural gas, he is definitely seeing a lot of the basins reaching peak production. There is increased demand from coal to gas switching and there are declines in the shale gas wells starting to express themselves. The current quote of about $4 will be the new minimum and $4-$5 might be the quote we look at on NYMEX over the next couple of years, which is very positive for the low cost producers he likes to invest in.

Markets. December is the best month for the Toronto market for the whole year, but it is all happening in the last 2 weeks. One of the reasons is that it is Christmas and people are in a great mood and love to be buyers of stocks. Brokers are coming out with investment reports with positive projections. Analysts are finding that their 2015 estimates are too low and they have to research targets. Also, tax loss selling pressures come off in the latter part of December. People anticipate lots of good news when CEOs release fourth-quarter results. Companies have got a ton of cash on their books and they want to spend that money, so they decide to either expand their operations or do share buybacks. (See Top Picks.)

Silver. The real sweet spot comes in at around the beginning of January, right through until the end of February. Right now is a time when silver has a tendency to reach a fairly important low and starts to recover and level. This is more of an industrial than anything else and everything that is industrial commodity related, have all popped today. There was some real good technical action in the Chinese market yesterday. China bought crude oil, silver, copper, gold and these are the sections that are starting to catch a little bit of action. This usually doesn’t happen until the middle of summer, so they are earlier this year.

Is there a correlation between Technical Analysis and Fundamental Analysis or are they completely separate? These are very closely related. As a seasonality analyst, he looks for annual recurring events and looks to see if these events are happening in the current year. If Yes, then you have a seasonal trade.

Markets. Value is a moving target. He has to look at a lot more stocks to find one to buy right now. Not into the banks. Below tangible book, hidden assets, etc. are what he looks for. People are always looking over their shoulder even though markets have done so well. Better economic news could be a catalyst. Better earnings would be helpful. Lots of M&A. Weakness would be an indicator to buy. It’s a trading market and a stock picking market. Expects Santa Clause rally. The rotation from bonds into equities is happening.

Markets. 2014. Earnings estimates have not been ratcheted up as often happens on top-down analysis. Going into a period where you are looking out 9-12 months, the top-down analysts tend to be a little more buoyant than those looking at it, company by company. As we get closer to the reporting period, the numbers come down. 2014 is not at that point right now. Feels people have their feet on the ground and understand that we are late in the cycle. Earnings have done well, but you have to be realistic about what earnings can do given the economic background. We really haven’t had a normal cycle. Excesses that we normally see in 3, 4 and 5 years of economic growth are just not there. This leads him to think that maybe we are going to have an elongated cycle that will be more tepid. Time will tell. He tries to look at, company by company. Stock market isn’t really overvalued compared to what it has been in these types of environment in the past. Feels healthcare is a sector that has been held back because of the healthcare law that is having so much trouble getting into practice. This creates some opportunity.

Markets. What is the risk that investors take profits before year end? He thinks we do not have to worry about pull backs until January. There was very aggressive selling in TSX and S&P before the close on Friday but this happens about this time of the year. Excitement about Christmas sales occurs this time of year but over the weekend, reports were mediocre on retail sales. XRT is an equal weighted ETF on US retailing. He feels it is fairly fully priced at this point. XWB gets you into banks before earnings are released.

Risk. You have to know your sleep at night point. If the market only pulls back 5% if you are going in slowly, you get some at 3% down, some at 4, 5% and so on. The Fed tapering could occur in January and that will be an opportunity. But we may make gains before then.

US equities in TFSA? If you get dividends, there are foreign withholding taxes. You would not pay them with Canadian stocks.

Largest International Banks. ZUB gives equal exposure to US banks. EUFN is international banks outside of North America. He doesn’t think the crisis is over and EU could break up within 5 years.

ETF for American Banks in general. ZUB is currency hedged 100 equally weighted banks in the US. 1.5% dividend so it is about capital gains.

Educational Segment. Sleep at night portfolio is targeting 4% yield, and diversification. ZWA gives Dow with a covered call overlay so it gets the exposure but gets the yield up. It is a fund of ETFs. He is 44% US $ exposed. SDIV is a global dividend mutual fund that he is buying. About 7% yield. It’s beta to the world is about 1.

Markets. Believes we are in a place where we will have a global synchronous expansion. This should be good for Canada. Expects long term increase rates to increase. You want to be in plays with more growth. Consumer discretionary is a good place to be. Near term, the unemployment numbers are improving in the US. With Taper talk going from talk to action, she thinks it will actually occur in March at the earliest. Thinks this has already been factored into the markets. Crude oil she thinks will hit $90 and be an intermediate bottom.

Markets. It has been a pretty good year overall. TSX is up about 10% and the US is up unbelievably at 20% plus. If you look a little deeper into the markets, it is sort of a have and have not market. Resources, energy, materials and mining are not doing so well. He is participating a lot in the US and is continuing to expand his holdings there. When you have a market like this, there is always a concern about what is driving the market, is it just cheap money from central banks? However he is still pretty positive the way the underlying economies are still growing in the US, Europe and Japan.

Markets. S&P 500 had a 27% rally, which was somewhat surprising. A year ago, there were very few strategies who could see that strong a move. Market looks a little stretched right now but it is still cheap on a long-term basis, particularly compared to bonds. You can still make a long-term argument for stocks. Feels sentiment has gotten a little bit too placid. Too much complacency. You worry that there could be a pullback at any point in time. He is still overweight equities, but not as much. His average balance fund is maybe 110% of its normal equity weight. It was 125%-130% a year ago.