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

Markets. This market is a different market than the mid ‘90s. There are some elements of momentum, but the valuations aren’t anywhere near the levels of back then. Going forward we have to rely on stock earnings to drive valuations instead of increasing multiples. This season has treated him very well. The average market beat of companies reporting has been about y70% and that is about where we are right now. Industrials, tech, will do well and consumer durables will suffer a bit. Clients’ portfolios change because of life changes, such as lotteries. Asset allocations stay the same otherwise.

Markets. Europe is a problem zone, especially in the periphery. Germany has really supported the European economy. The EU market is almost as strong as the US market. In the periphery, it is not going any more negative. Turn-arounds in housing, just like we saw some time ago in the US. Free trade agreement with Europe can’t be anything but good for us. A recovery in housing would be positive for the banks. In those regions, banks should improve. He is constructive on the US, slow and steady. He is not as focused as most on the tapering. He is more focused on the outlook for the economy, which the tapering will follow. Short term, it is a buying opportunity. He is focused on 5 years.

US Listed Indian Bank? He has nothing in India at the moment because of twin deficits. Tapering will be negative for the emerging markets. If you are nervous about the economy in a country, don’t own the banks for sure. A top holding is MS-N in global banks, which he feels is still a buy with a $35-38 target.

Chinese Banks on Hong Kong exchange. They are basically government. He has not enough vision on what the government wants to do. They use the banks to command the Chinese economy. Absence of transparency.

Japan debt 250% of GDP. It is going to get even bigger. They need to have a growth strategy in Japan. Consumption taxes going up. It is all internal debt so it is like they all owe each other.

Markets. 55 months is a lot for a bull market. 50 – 65 months is normal. Interest rates are what usually bring a bull market to an end. Deflation is the problem so this bull market has legs, certainly for the next 6 months. We are in a stock picking market. There is still a lot of value in Canada, but he does not buy in to the idea of the resource sector catching up. The yield curve is not suggesting this market, nor the economy, is going to slow down.

Lanexess (LXS-AG) EU is having this labeling law so tires are labeled according to noise, etc. and synthetic rubber demand should increase. Unloved right now but has great recovery potential. Now is an entry point.

DRIPS? If you can get shares at a discount and get shares you are loving, okay. He likes to get the money and then invest all his cash flow into one or two names he wants to accumulate. Great strategy for an individual investor. Likes to buy low valued companies with the dividends of high valued companies.

Markets. Debt Ceiling story is just noise unless it actually happens. They pushed the peanut (note it is not a can) down the road. At some point the debt will probably have to be paid. Growth is now 1-2% for a while. There are excess capacity issues to work through. The US is in a half way decent recovery. Europe is starting to recover. Things aren’t that bad but not at those levels to get overly excited. He stays with dividend growth and there is no reason to change that. He has looked in the cyclical areas as of late. The question is at what point should he get a little more aggressive in that rotation. But he will continue to have the back bone companies as well.

Markets. Now that the shutdown is over and the default is averted for the time being the equity markets should grind higher if the global economic data comes in well and corporate earnings are strong. One possible silver lining is that the Fed might further delay the tapering more so than we first thought. The Dow historically has 6 of 7 positive months to come. Still favours US stocks over Canadian 2:1 and now is focusing more on international and specifically Europe.

Markets. Feb 7^th we will have to deal with the debt ceiling again. They are kicking the can down the road. He wouldn’t avoid anything before then, but certainly there will be buying opportunities. He is focused on consumers. Staples do very well when people are risk adverse. Discretionary stocks should have more upside than staples going forward.

Markets. There is no big surprise that there was a deal today. He has a lot of cash and is encouraged by the fact that the US economy is doing better. Europe has bottomed in most countries. Transportation and housing are good sectors. He has been in Europe, in the beer drinking, rather than wine drinking countries. Northern Europe has done much better for the most part.

Housing Prospects in the US. Thinks the money is to be made in the building supply companies like IFP.A-T. Home renovation retailers will do well also. It can also be played through the banking system such as BBT-N and one of tonight’s top picks.

REITs. When interest rates moved up sharply, REITs got massacred. They do a lot of borrowing for their operations so the markets sent their prices down. The rates have not gone up as much as the market expected them to. He expects interest rates will go up in time, but valuations have been creeping back up. Northern Properties is one of his favourites. They have a lot of cash from exiting seniors’ housing. One of the lowest payout ratios in the business so there is lots of room to grow. REI.UN-T is a good second choice.

US / CAD$ Split. For the first time he now has more money outside of Canada than in. 55% of portfolio is outside of Canada. The Canadian market is still 75% commodities, materials and financials. We are very under diversified. US banks are in recovery mode. The CAD$ could go down to $0.90 and that would be good for you also.