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

US Banks. Look ok. Have been moving strongly. They are beginning to have some profits taken. Thinks they will just move with the market over the next few months. They probably will correct to a certain extent.

Markets. Management, assets, payout ratio and leverage. 3 of 4 of these need to be favorable before he will allocate capital to the business.

Markets. Of all the asset classes, equities are still the best. If you want to own bonds and make 1% and pay half of that in tax and risk total devastation when interest rates go up, good luck. If gold does not go up when Cyprus tries to seize bank accounts, he doesn’t know what will make gold go up. Companies are making money and their profits are high. Because they are not hiring people, the job numbers are not spectacular but profit margins are really good.

Markets. He typically has 3%-10% cash in his portfolio and this is currently now at 7%. Always has a little bit on the sidelines to take advantage of any dips in some of the names that he likes. Expects this will be a volatile time over the next few months, particularly since the US market has had such a big rally here.

Markets. There was a bit of capitulation in the market and feels there was a “dump the resource stocks” sentiment. A lot of the resource stocks were down 5%-6% while non-resource stocks were down about .05%. He has been pretty light in resource stocks. In April, we are moving into a period of seasonal weakness and now is the time to go into your portfolio and sell the bottom 10%-15% of your low conviction stocks and then sit on that cash for a few months. June, July and August is the time to put that money back in the market.

Markets. He is focusing on the US because it is such an important part of the global economy. Next to this would be China because its growth has helped the rest of the world along. Even though Europe is going through troubles, it would be next because there are some good spots there, in particular in northern Europe. Lastly he would focus on Japan which has been very strong over the last several months. With the new prime minister and central banker, the yen has been weakening. As a result of the weakening yen, the Japanese market has been strengthening on the view that it is going to reflate. He is optimistic on healthcare, particularly in Asia but it is hard to find good stocks in healthcare in Asia. US has the leadership in healthcare.

Markets. Looking for a continued strong year. All the key ingredients are in place for 2013 for another attractive year in equities. Valuation climate is broadly supported and stocks are not particularly expensive in any of the major markets. Valuations are particularly attractive when compared to other asset classes. Bonds have negative real interest rates. Outlook for commodities continues to be mixed. Every central bank governor on the planet has communicated that the returns on cash will be zero in nominal terms and negative in real terms for a couple of years to come.

Gold. Has sold all his gold equities. Strictly speaking, gold is not a financial asset. Financial assets are stocks and bonds and they pay dividends and coupons which, you reinvest over and over again. This is one thing you want to give you the greatest odds of succeeding in investing. Every day the US economy is getting stronger and every day the moment when the fed backs off from quantitative easing and starts to look towards raising short-term interest rates, gets closer and closer. The downside risk when we get into that transition is tremendous.

Markets. He’d be a raving bull if the markets could do what they are doing without all the support of government injection of liquidity and artificially low interest rates. You have 100 Trillion dollars in unfunded liabilities in the US. They can’t decide where to cut; they can’t stop spending. There is gridlock. However, the markets are at all time highs and there are still risks in front of us. He would not rule out 1600 or 1700 for the S&P. Europe needs to stabilize and the US needs to keep kicking the can down the road.

Educational Segment. Are Markets Healthy. He looks at a series of charts:

Advance Decline Line broke out a couple of months ago making higher highs, good.

Percent of stocks making 52 week highs – a spike a couple of months ago and now fewer and fewer stocks are participating in the markets making new highs, bad.

Percentage companies above trend line (50 and 200 day) – Higher reading couple of months ago but now lower – looking ok right now but some weakness, neutral.

Call to Put ratio, neutral.

Sentiment readings, (bull vs. bear), neutral.

Summary: Ultimately there is a lot of confusion on the part of investors.

Markets. Central banks have flooded markets with capital. GICs are yielding 1-1.5%. It gets to the point where there is no alternative except for the equity markets. Stocks with good balance sheets and that pay dividends are hitting 52 week highs. These companies do well unless interest rates are rising, which he doesn’t see them doing in the short term. You would want to hold these for another 5 years. He is expecting weakness over the next 3 to 4 months. These companies do well unless interest rates are rising, which he doesn’t see them doing in the short term. He would be buying on weakness that we may see over the next 3 months.

Markets. Expecting slow growth globally. There will always be some issues such as environmental, weather and economic. Investors have to gear down a little and take some precautions. Look at different kinds of things that are out there. There are always thoughts that the stock market duplicates earnings growth, but that is really not the case. Just because markets are at an all-time high, it is not the greatest time to be an investor.

5 of the 6 big Canadian banks are having their annual meetings in April. What should retail investors look for at these meetings? The banks have had great Q4’s and great Q1’s in 2013. It is interesting to hear what they have to say but with a grain of salt probably. Will probably be hard-pressed to increase earnings. They will still attract investors who are looking for yield.

Markets. Nat. Gas. Has been a long term call of his. Everyone has drilled the most important parts of these plays and the rig count has come off. This tells people that you need north of $5 to ramp up activity enough. You have to be selective in Gas at this time. They have to be well managed, good growth rates, strong cost structures, good balance sheets. They will excel. We could see some lift in base metals in the second half of the year once China gets a strong foothold.

Markets. In the short term, he would like to see a pullback, but longer-term he is bullish on stocks. US economy is growing, but not fast enough to allow the Fed to change interest-rate policy. People have been worried about earnings growth but the reality is that you are seeing a little bit more coming from the top line growth, which is far more important. If there is a pullback, you should be a buyer because longer-term you are going to do better. This is a great market for looking for growing balance sheets and increased dividends. The opportunities are in the US.