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

Markets. BB-T – we are hearing news about another potential bidder. He has a strategy called coming out of the blue. His model price EBV negative 3 is $10.34 for BB, so he would not recommend it as a purchase until it breaks above that. There is a disconnect between what the balance sheet says it is worth and what the market says it is worth. He waits for a market connection to the balance sheet. He is seeing a secular bull in the US. The US dollar is cheap here and will go substantial higher over the next 3-5 years. There are so many game changers going on in the US. There are US long term things that will shake up world markets. It will see the US as the place of choice to be. You want to buy this market. The politicians are giving you an opportunity to buy things cheaper here.

Markets. In response to all of what is coming out of Washington he does nothing. He doesn’t react. There is just partisan dancing going on. He finds ETFs in the US of up to 27% of his portfolio. He is being opportunistic in Europe. There is an awful lot of money going into Europe right now. He does developed countries last now, rather than emerging markets. They are global businesses.

Purpose Investments. They just got going in the last few weeks. There are index based ETFs, Rules based ETFs and RAFI. It is hard for him to express an opinion on these new ones this soon. The volumes are pretty small. Some is investor money and some is seed money. These value added ETFs are a lot more expensive than index-based ETFs. There is room in Canada for this type of product.

Covered call is buying the stock and sell the option to someone else. You expect the stock to stay relatively where it is so you get the other guys cash. You can buy it back if you feel the stock is about to take a run-up.

ETF with dividends for TFSA. CDV gives you banks. XDV is well diversified. Look for one that is lower cost. Pick any major provider and go to their web site.

If you buy inter-listed stocks in Canada and sell options in the US, watch the currency because you can get badly beaten up.

ETN (exchange traded note), leveraged. A one week trading vehicle. He doesn’t buy exchange traded notes. He doesn’t buy anything he can’t buy 10 minutes later.

Markets. Markets do what they always do, which is surprise you the most that they can. They rally just when you think they probably won’t. He went neutral early September and about a week ago started buying back into this weakness and back to overweight again. Took money out of golds and moved it into the oil sector, industrials, and technology and some of it back into the US. He thinks it is a synchronous expansion we have right now. The data he sees coming out of Japan is astoundingly good and has been a nonfactor for a long time. China has achieved a soft landing. Feels that Europe has clearly turned. US is on a steady recovery path. A couple of the emerging economies such as Brazil and India are still tagging back, but even there the stock markets have bounced recently, which could be a precursor for a move there.

Gold. In late June gold looked like the stock market in early 2009. Everybody hated it. Why would you ever own it? Yet valuations were at all-time lows. It then had a great ride over the summer and created a beautiful head and shoulders where it checked back in September to the right shoulder. This could be the take off for a great move in gold. A lot of those levels where broken today and it is a little scary short-term. He is neutral on gold right now and has taken his weighting down.

Markets. This is the time of year when markets normally start on their upside. Seasonal strength is, on average, from Oct 28 to May 5, plus or minus 3 weeks. We are already into the period when seasonal strength could be starting. H

Has been some good evidence of that in the last couple of days when markets moved significantly higher. Suspects the 1^st one to move to an all-time high will be the Dow Jones transportation average (See Top Picks) and we are just about there right now. This summer, typical of most summers, markets are really volatile but with very little return. What he has done with his fund (HAC) is to be in cash until we get to the period of seasonal strength so effectively he is 100% cash and is reaching the stage where he will be investing, which could be as early as Tuesday. There are literally trillions of dollars sitting on the sideline waiting for the politicians to clean up their act. This is the time of year when economically sensitive sectors do really well. Things like technology, consumer discretionary, transportation, and the industrial sector do very well this time of year. Start putting your money into sectors to take advantage of the period of seasonal strength, which is just about to start.

Gold. The period of seasonal strength for gold is usually the end of June right through until the 3^rd or 4^th week of September. He was in this one, this year and made a good profit because he started to reduce his positions and actually eliminate them as the technical parameters started to turn negative. Do watch the technicals as well as seasonality.

Is the Dow in for a big reversal or can you see it continue to go up at the same pace? Touched an all-time high recently at around 15,815 and has subsequently backed off from the high of about 2 months ago to a recent low by about 6%. Now starting to bounce back. Technically it is starting to look very interesting. Was below its 20-50 day moving average as of yesterday. Strength today probably put it above those levels, which is an encouraging sign. Trend is definitely on the upside. If it breaks above the previous high, you can see a nice little triangle pattern that is being developed as well. Strength relative to the S&P has been negative in the last while. So you have some mixed technical indicators. We are just entering the seasonal strength of the Dow, so there’s a very good chance it will reach an all-time high very shortly.

Markets. Markets hung in remarkably well with all the bad news over the last little while. The shutdown is a temporary thing. The market is handling it very well. Mid-caps are outperforming large caps. Part of it is seasonal and part is that they are focused on the US economy. Valuation have expanded earnings multiples and so now selection is much more important. There is better growth in the mid-caps.

Markets. Feels the fed has thrown a curveball. The market was expecting a taper and they didn’t do it. With a new Fed chairman coming in January, the best thing the present chairman could do would be to start the tapering. If they don’t get started before she takes over, the politics are going to make it very difficult for her to start it after the fact. Expect they will do it before the end of the year.

Instead of buying a Straddle could I just as well Short the stock and buy a Call or, if the stock is paying a dividend, Buy the stock and Buy a Put? This is not the same strategy. A long Call and a long Put is simply a non-directional trade. If I’m shorting a stock and buying a Call, I’m taking a short bet and hedging my risks. If I go long a stock and Buy a Put to protect myself, I’m actually bullish. A Straddle is not a bullish trade, it is not a directional trade at all.