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

Markets. It is multiples that people are willing to pay, not earnings. With the announcement of QE, multiples started to expand. Discussions of when it will taper may have an impact if earnings are just sluggish at best. The key thing is what will allow you to sleep at night when structuring a portfolio. He uses bonds now even though interest rates are going up. Stocks may fall in the next little while.

[Caller asked about Fedex, Disney and Amex, which one?] Fedex has some growth profile but not in the next 3-5 years. Potentially some more growth in Disney, but he is cautious. AMEX may be the best bet for the next few years.

[Which Canadian Telecom stock against Verizon?] If they come in and compete, T-T may be the biggest beneficiary and may get a take-over attempt, not that the government would allow it.

Educational Segment. Protecting against volatility. A Sleep at night portfolio. List of tickers:

He will tilt the portfolio over the next 3 months. Understanding this for most people will be very, very important.

Markets. Maybe it is time to be a little contrarian to being defensive. We have been in an uptrend in earning indicators. Looks like rates will spike up. Sept 18/19 we get news about potential tapering and then there are German elections. There is still a lot of cash out there but there is a separation between correlations in stocks. If you can pick the right stocks you could do well. He has a US bias over Canada. Dividend payers and safety names and broader names in cyclicals. Likes technology and industrials as well as financials.

Markets. A little bit of weakness in the US, particularly near the end of the day, but seasonal. Historically September has been a relatively poor month. Overall, he remains pretty constructive medium to longer term. He is probably carrying a little bit more cash than he normally would about 6% compared to his normal 3%-4%.

P/E valuations? P/E depends on the sector and the growth rate of the company. It is important to look at this but the more important thing is the PEG ratio. If you understand the business model and you can see steady, consistent growth, at whatever rate that might be, you relate this back to the P/E and come to the PEG ratio. Ideally he would like to buy it at 1 or below, but more realistically at anything under 1.5 as a reasonable entry point.

Resources. Natural gas is almost 5 years being down, heavy oil stocks haven’t gone anywhere for a long time and even in mining, there hasn’t been a single good story. However, today the world of resource investing is kind of okay. On gold, he has no idea where it is going, but you normally get a bottom in the summer which ended up at the end of June rather than the beginning this year. Looks like there has been a real technical bounce, which should last until the end of the year. On copper we are in the summer and it seems awful, but if you get a tick up, it is into the fall which is where you will actually get a rise on these things. If you need to be in this, it has to be in the summer. China just has to turn up a bit, which is a probable scenario.

Markets. He has been holding about 40% cash this summer and just raised another 8%. There are some bargains already starting to appear, especially in the interest sensitive things. There are some values in some of the higher dividend stocks but the truly interest sensitive stuff like REITs, they are a 100% cash flow oriented security, there is no reinvestment. You can see the sector rotation out of this type of thing and into some of the former ugly ducklings like gold. His target for the S&P 500 would be around mid-1500, which is right around the 200 day moving average. This would be a level of support.

Markets. Looking for a possible double digit correction. Over the past few days, there has been some weakness in the S&P 500, which broke through a key level of support at the 50 day moving average. Also, it was a horizontal level of resistance back in June that we cracked at 1655. We are now bumping up against this today and are due for a bit of a bounce as we are oversold. Seasonably, equity markets are the weakest come September/October as well as being the most volatile. The NYC Advance/Decline Line has distinctly stopped and formed a double top. This gives indication that the breadth is waning, we are seeing fewer and fewer stocks making new highs, momentum is fading which leads to a typical correction of double digit percentages. Also, the percentage of stocks that trade above their 200 day moving averages is rolling over too. When you see this rollover, the average decline in equity markets is about 12% and you can expect the same this time. This gives you opportunity to get in, in the fall.

Natural Gas. Period of seasonal strength for natural gas is from September into December, basically before the cold weather sets in. Has shown some strength over the past few weeks but the overwhelming trend is still lower. Wait for a higher low before getting into this.

Markets. This is a time to be careful and pick your buying spots carefully. It is very normal for us to have a rough September and October and then typically to get into a fairly reasonable market in the November through May period. He wouldn’t be as aggressive on financials as he would be on other sectors.

Markets. Expects 2013 will be the same as 2010, 2011 and 2012 where expectations will come down and markets will provide better opportunities. Going forward, he is shifting his focus from Canada to the US.

Loblaw’s (L-T), Sobey’s, Canadian Tire (CTC.A-T), and Hudson Bay (HBC-T) are thinking of spinning off their real estate into REITs, which one would you purchase? Would you suggest the company stocks or wait for the IPO? (Loblaw’s is the only one that is trading at this time under the name of Choice Properties (CHP.UN-T)) Everyone is doing it and who knows what is next. It really comes down to the interest-rate environment. When rates are going up, these types of investments go down. He found that Choice Properties was a little bit more favourable to the parent company. Would prefer to own the common shares of the underlying company.

Oil/gas. The majority of the Junior sector, especially if they are natural gas, have had a really tough time. Trading below BV and significantly below NAV. Access to capital when your stock is below BV is pretty hard to do. Companies have had to grow from within cash flow and many companies have not shown the growth and have been penalized by the markets. Also, if you are gassy, you are in trouble because US gas price is in the $3.40’s but the Cdn price is even below that at $2.40. Nobody can make money at $2.40. However, economics still work for liquids rich gas, but the gas as a by-product, doesn’t really count. Demand for energy in the US is not very robust and US has increased its capacity to about 7.6 million barrels so the demand for foreign sources is not there. His bottom line is that 1) we have too much oil 2) we are ending the summer driving season in a couple of weeks 3) we have much too much oil in inventory and 4) too much supply by OPEC. All of this should drive the price of oil down and expects to see a correction in the Oct/Nov window along with some tax loss pressures. This will give a fabulous buying opportunity. Expects he will go from the neutral/bear camp to the bull camp at that time.