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

Markets. Majority of the TSX is made up of resource stocks and aside from resources, we also have banks and pipelines, which have been very popular and have done very well. A lot of those stocks had reached technical inflection points where they where significantly overbought and valuation was more than fair so when all this is aligned and you have Bernanke indicating optimism on the economy front and yield tightening, it was a good time to take profits for investors. She views the pullback as a mild correction. On the resource side she feels there is still a little more downside to come. Copper is getting to a point where it is attractively valued. If it breaks the $3 point, that will create a very strong buying opportunity.

Markets. China comes out with a data point every week and sometimes it’s good and sometimes it bad. They have so much potential to stimulate the economy. Any bad news you have to ignore a little bit because they can restart the program once again because they have so much reserve. On the Fed situation, he thinks it is just a regular, normal cycle. We have improving housing, improving employment and we have improving profits. Feels that investors have loaded up on utilities and REITs and they’ll have to restructure their portfolios because that game may be over.

Markets. Anticipates volatility to continue. Not such a terrible thing. We are ripe for some kind of correction. The tapering that is earlier than was anticipated was the trigger. Until you see growth rates at 5% you probably won’t see commodity markets go up. Looking to the US, to companies that can grow dividends.

Markets. Has been told that the down market is a temporary phase because there has essentially been a suckage of liquidity out of the market which is why you are seeing all asset classes fall. This is a temporary period that we need to get through and then hopefully we will resume an upward course for energy stocks.

Oil/gas. Has been an awful performer for over 2 years. Investors have not been rewarded for the risks they have taken. A lot of that stems, especially on oil, on concerns about the future price. Feels that this is a wall of worry that we have to surmount. Concerns are much misplaced, especially about US oil production. We have had a 2-year trend that people are extrapolating out to 2020 to say that the US will be oil independent, but when you look at some of the very best experts, they are suggesting that 2012 has been the peak year of growth. The best opportunity in his mind is in 4 categories 1) Canadian 2) light oil 3) Midcap and 4) non-yield.

Markets.. Sees a gradual improvement in the US Economy including in-house sales, industrial production and sales. Also, consumer confidence is getting better. More concerned about the Cdn economy. New bank governor in 2014 may reduce rates if we don’t have stronger economic growth.

Dividends. 80% of the S&P 500 pay dividends and about 77% on the TSE. There are 2 types of companies. 1) Those that can pay a steady dividend and not grow it and 2) those that grow their dividends. He is more interested in those companies that can grow their dividends.

Markets. Has been favouring foreign stocks for the last couple of years. For the foreseeable future, Cdn investors have to look outside of Canada, not just the US, but globally. Until now, he has avoided going directly into emerging markets. Looks for valuation, dividends and growth prospects. For the 1^st time in 35 years, his equity weightings are higher outside of Canada than in.

Markets. Doesn’t think there will be any change after this Wednesday’s Fed meeting. They won’t change until October. They may discuss future changes. The uptick on the unemployment rate prevents them doing anything now. Emerging market bonds have sold off dramatically in the last couple of months. But he thinks emerging markets both in equities and bonds are compelling. Thinks copper will dip below $3. He is negative for the next 6 months on Copper.

Markets. REITs have pulled off a little in the last few weeks. The world panicked at the Fed announcement and bond yield increase but this was very overdone. He focuses his portfolio to expect slowly increasing interest rates – 2.5% end of this year, 3% end of next year. He has sold off more highly levered plays. Don’t go for the higher yield these days.

Educational Segment. BXF-T is a way to play the bond market with strip bonds. He has non-couponed bonds in a ladder. But you can put these in a taxable account because there is no coupon. There is no management fee for the first year.

Markets. This is the end of a trend for the particular interest-sensitive stocks and the end of the 30 year bull market in bonds. We could have a pause in equities. The last thirty days in the markets has seen a big change and it is a shift of investors going out of interest-sensitive stocks and into cyclical names. Good time to move money out of bonds and into equities. He is positioned defensively for his clients – more cash than normal. We could see some choppiness in the markets in the next little while.

Long PG-N and Short JNJ-N? Great businesses but because of demand for yield have had huge moves and are trading at multiples that are too high for their growth profile. Not a bad pairs trade, but instead he would short staples ETF and long Cyclicals ETF.

Would silver ever pass by gold in price? It would have to go a long way so he doesn’t see that. Silver is a more leveraged way to play gold. Silver has more demands but gold is more of a currency. Likes gold and silver but has small positions. Every investor should have some small weighting of gold and silver as a hedge. He uses ETFs (GLD or SLV).

Markets. The US will experience pretty decent DGP growth but it will stretch out a little bit further. Relatively low inflation and high unemployment and lot more room for growth. You are starting to see the US economy turn in the right direction. Our economy in Canada will do well as the US does well. If a company in Canada exports to the US they will benefit. Likes good management teams, relatively strong balance sheet with good organic growth potential. Looks for dividend growers.