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

Gold. With quantitative easing from central banks and, at the same time, governments, individuals and companies trying to deleverage, these 2 things are battling. Not bearish in the short to intermediate term of nominal prices of risk assets. There is Chinese fiscal stimulus, QE 3 and Infinity in the US and, in Japan it looks like there is another major round of stimulus coming. In terms of real economic growth and real growth in risk asset prices relative to underlying monetary inflation, he is still quite bearish. This leads him to be very, very bullish on precious metals and the underlying equities. This has been a switch for him. Gold is the place you have to be to play this increase in quantitative easing globally. There’s been 2 solid years of underperformance of gold stocks versus bullion. With QE 3 fully in place and with not only 40 billion of mortgages per month but the additional 45 billion in unsterilized in treasury purchases, plus the major news out of Japan with the new prime minister favouring a 3% inflation target, the Bank of Japan is going to have to do some major increases in their balance sheet.

Housing. Prices, in a gradual way, may fall 20 to 30% in various areas across the country. Long-term trend lines indicates this would just get you back to the trend line. Normally, in the long-term, housing prices should rise 5% a year in real terms. Because we had a doubling over a 12 year period, once the peak occurs (he believes occurred sometime this fall) you now have inventory building.

Small Caps. Market is feeling there will not be a resolution to the fiscal cliff situation so the market is selling off. From a macro environment, he is really looking at individual names and is getting opportunities with the selloff. Really not so much of a sector selection as it is a company by company choice depending on management, balance sheet, etc. Holding about 8% cash to be able to make purchases when the opportunity arises.

Markets. If you buy good companies, good balance sheets, dividend paying stocks that will continue to pay more and more dividends over the next several years, you should be fine. Feels the debt overhang at the sovereign level is going to take a long time to be reduced. It took Canada a long time so doesn’t see that other countries will be any shorter. Doesn’t expect to see excessive growth but there will be slow growth, which is fine, low inflation and low rates and in this environment you want to own a good dividend stock.

Markets. We are seeing a Santa Clause Rally and he expects it to continue until January 16^th. The bad news is what happens the year after a president is elected. The seasonality says the markets go down significantly until mid February, then later in the year go up. And we have the fiscal cliff and it will have impact during the first quarter. Seasonally, the TSE has gone up for the last 10 years at this time (3% average). You have [the end of] tax loss selling, end of year window dressing and small investors have a chance to invest when institutions are away for the holidays. There are year-end bonuses to invest. Once we get over the fiscal cliff, the uncertainties will disappear and markets could move up significantly. They will do all the things that have to be done by Jan 1 and then do the really big things later on.

Uranium Stocks. The price of Uranium has gone down until two weeks ago. The price bottomed and then the price went up 10%. Seasonality for these stocks is middle of December to May each year..

Educational Segment. Small Caps. Seasonal period is December 19 until March 7 each year (26 of 33 years). Tax loss selling is out of the way, institutional investors hold the highest quality securities at the end of year and then at the beginning of the year they tend to take on more risk. IWM-US is the most actively traded ETF for the Russel 2000. XCS-T is the non-top-60 companies in Canada. The fiscal cliff and the post-US-Election does not change this investment thesis.

Markets. Does not think the fiscal cliff will be an issue. What we are talking about is a mild slope into a mud pile. You have to stand back and look from 40,000 feet. The issue is that consumers are not spending and GDP is simply money supply and continues to grow, but money velocity is low. People simply aren’t spending. Markets will react until saner heads prevail. Then in February there is the debt ceiling. Investors need to think about whether we are getting near the end of this deleveraging cycle. If people start spending then you could get an explosive growth in the markets. Markets are driven by sentiment and headlines. We have not exactly had a Santa Clause rally. Thinks people should strategically invest and build a portfolio.

Weekly Options. They expire every week. Does not know when the TMX might offer them. They are not better on a longer time play or a less volatile stock. With a longer option you get more premium.

Deep in the Money Calls. High yielding stock. Purchase additional shares with premiums so you get more dividends on the same cost base? Nothing wrong with this strategy but generally he is buying this stock and selling this option in an income portfolio.

The only time an option gets exercised early is to capture a dividend. If the option has time value it is unlikely it will be exercised to collect the dividend.

Markets. Believes that going into next year people are hoping that we’ll see a little bit better towards the end of next year, but thinks the 1^st half is going to be very much like this year. Not only do we have to get over the fiscal cliff, but we’ve got to begin to see a little bit more recovery in the markets globally. We are still in the market where we have to be very, very selective.. Volatility of the earnings on the companies has been so severe that you really have to pick your places and try to find companies that you believe are selling at a discount to what you perceive to be their normalized earnings going forward over a period of time.

Markets. Next year is going to be interesting. There is a lot of opportunity. Canadian markets are starting to break out. Financials are starting to pick up. But energy stocks won’t go too far. We need to see some higher oil and/or natural gas prices. A bull run would probably be in the US as it has not gone higher in the last 12 years. It would be only certain sectors in Canada. Consumer staples would be good. A couple of stocks in a good sector are how you make money. 15-30% of portfolios are cash. He has been high in cash for the past two years. Cash has to be deployed at some point and he keeps looking at financials.

Timing. If you are going to take a position, is it a day trade or 3-6 months? Look at 3 year charts and apply moving averages.

Markets. Some people think that if you ride the indexes, you can effectively make GDP. The overall take on RIM is one of despair. The success of AAPL is on the back of the destruction of wealth in the whole sector. He would not hold it. He doesn’t like the industry. You can trade these but you need to sell at the right time. Most electronic products have some generic components in them and if you own those then whoever does well, you get the benefit.