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

Economy. Likes the global dynamics. North America looks fine, Europe is recovering, China didn’t hard land like people expected and Japan is a wildcard to the upside. Emerging economies are not as bad as many people expected. Interest rates are going to stay low.

Markets. The gains in the markets are justified and there is no bubble. Probably in May of this year, we were at a valuation in the S&P 500 that was equivalent to 1992, before the bull run between 1992 and 2000. The US went down a lot and now it is coming up from the lows of March 9, and to everyone it looks like bubble because we have gone so far over a period of 5 years, but really in terms of valuations we have always been here in a normal market.

Economy. Thinks we are in a secular bull market on the US$. The last time we were in a secular bull market in the US$ was back in 1981 to 1986. Bull market inequities occurred between 1992 and 2000. The world of investing has become global. As the US$ goes up relative to all the other global currencies plus, then you’ll see valuations compared to all the other global markets and people are going to start allocating large portions of their portfolios to the US. This will probably come in the form of buying SPYDERS, which are large Cap Equities, which is his playground.

Markets. With markets at record highs, not so much in Canada, but certainly in the US, with profits at record highs, low interest rates, low inflation, and with potential for profits to go higher in 2014, markets are reasonably priced. He is finding great opportunities, mostly in the US. Canada is too narrow a market and he feels he is fully invested in the Canadian market. Likes companies with growing profits, companies that are trading P/E ratios less than the overall markets and companies that have been beaten down. Markets are cheap. He cares about corporate profits, low interest rates and low inflation.

Markets. Pretty excited about what is going on in the market. In the US, we are seeing a lot of economic indicators in the housing market and consumer sentiment and liquidity with the tapering not happening any time soon. Japan still has a stimulus program. There are also some signs in the UK. She is really focused on energy infrastructure. There have been some pretty positive announcements since she was on last. The Petronas Malaysian group has announced they are going to spend $35 billion in BC on their projects. Petronas has bought about $1.2 billion of Montne assets from Talisman (TLM-T) in the last few weeks, on top of what they bought from Progress Energy last year. Have about 27 rigs drilling for gas in the Western Canadian basin. 2^nd most active driller in Canada. The BC and Alberta premiers have come to an understanding of a framework for pipelines to the West Coast.

Energy Infrastructure Companies. This is in a very, very good sweet spot for 2 reasons. We have international companies coming in, but it is also because of the nature of the type of company versus the producers. In the Canadian energy space you’ve got the exploration and producers, which are kind of slaves to the commodity price. They go up and down with the drilling cycles. Infrastructure companies have a longer timeframe for their projects. They build projects, and get commitments from the producers of 7-10 years, which gives them the certainty of cash flow. They are a lot lower volatility.

Markets. Has been advising clients to load up the truck with equities. We are in the area now where seasonality kicks in and it’s a great time to be invested. There is that toxic US political machine that has taken a bit of a break now. Believes there will be another 10% taper in 2014, but this is in the market now, so it is not a big deal. S&P 500 is trading at 17X earnings and historically, it is not overvalued. If there is a correction, bring it on. It gives more opportunity to use a bigger truck. Feels Canadian market is in anti-bubble territory.

Gold. Going back 4 or 5 decades, every $1 that a gold company invested, they got back about $105. In the year 2000, for the same $1 invested they got back $1. Every gold stock that you want to look at and you chart it against bullion over a 1, 3 or 5 year period, there is only one gold stock that has outperformed bullion. Buying gold stocks makes absolutely no sense.

REIT ETFs. Was the selloff overdone and is there a buying opportunity here? Absolutely. There are 2 REIT ETFs. iShares S&P/TSX Capped REIT (XRE-T) and BMO Equal Weight REITs Index (ZRE-T). He much prefers the equal weight ETFs. REITs had a bad rap. Governments have not been raising rates. The 10 year U.S. Treasury bumped up a little bit, which are every dividend paying stock in Canada. A rising rate tells us the economy is improving. Money is still really, really cheap. He would be a buyer of the ZRE-T for sure and it has a 5.3% distribution.

Markets. Doesn’t feel that there is a bubble other than perhaps social media stocks and the high flying ones. In over all terms, doesn’t think we have the conditions that you normally see with a bubble such as new entrants to the market and huge use of leverage. Valuation rates are still pretty reasonable. Expects there will be a pullback at some point, but isn’t going to try to anticipate it. He is going to stay invested and enjoy the benefits of the rising market as long as it lasts and be prepared for that pull back. Getting a little more difficult to find those 12-13 times earnings companies, but there are companies at 15-16 times that are growing better than the market, which he will continue holding.

Limited partnerships. Should they be held inside or outside of registered account? If you have funds, both in and outside of your RRSP that you are investing, you should be holding limited partnerships, particularly US ones, outside of the RRSP. They face a very hefty withholding tax of about 40%, which you lose if you are holding it within a registered vehicle, but you don’t lose if holding it within the non-registered vehicles as you reclaim it from the foreign tax credit.

Markets. Dividends will still grow but the multiple expansion will be hard to come by and earnings growth will not be double digit. Calling for a correction is difficult. Timing is tough. You need some trigger. It is anyone’s predictions going forward. In the US almost everything is up but earnings growth has been single digit. He is content but cautious. The market does not fall in uniform and some will fall in excess so in a correction he goes for those that fall more than average.

Markets. He is finding value in a lot of industrial, cyclical type names. His portfolio right now is trading at under 12X earnings. Finding good value in Canadian energy, small caps and stocks that are trading at under 10X earnings, much less than the TSX Composite multiple, which is around 14 or 15 times. He feels that is a fair value, so anything lower than that he is happy to have a look at. These are great businesses, ones that have a higher return on equity than the index with better growth projections than the index. There is still good value out there. Doesn’t see a reason not to be in equities at this point. There are very low bond yields, low interest rates and very little inflation in the short/medium term.

Markets. Iraq’s deal with Iran reminded him of the excitement of when they killed Bin Laden. The then market high was the high for the next year. You had some profit taking occur at that time. Don’t sell everything but you might want to think about it if today is a weak closing. Sometimes physiological numbers are important but normally it matters for a day or two. If you were looking for an excuse to take profits in something, this may be the day. TSX is up only 2% in US$ terms, vs. US indices up in the 20’s Money is going into the bigger, global, more diversified companies.

Educational Segment. Some of the banks say if you drop the amount paid on excess reserves, people could get charged for deposits. The Fed stimulated with Buying, Operation Twist and now they are Tapering that program in 2014. There is a close correlation between fed balance sheet and the equity markets. Thinks they will kick the can again on the debt ceiling early next year. Thinks there will be a 5-10% pullback around that time.