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

Markets. Key theme in 2013 in Canadian equities is resource recovery. Is it going to happen? We have lagged global markets for two years. His focus is will it happen. He says they are putting money in and putting money in and do you want to bet against central banks. Favours equities tied to dividends. China and US are still growing. He always underweights commodities in portfolios. 3-5% of cash is on the sidelines. They have lots of dividend paying stocks

Canadian Banks. The best time to get in is when no one seems to like them. Fear about massive debt write downs… Now is a good time. TD-T, BNS-T are two favourites. Would prefer to get in on TD-T at $75, after the fiscal cliff does or doesn’t happen.

Markets. He tries to stay optimistic and to focus on what matters. Expects another year of record S&P profits next year. Things are going well but people don’t want to buy stocks. We are coming out of a financial crisis and people are shell-shocked. He focuses on good stocks with growing dividends, cheap valuations and there is no end to the list of them. We are having a modest recovery in the US and China is on the up and up. At the end of the day things seem to be pretty good. People need to take a deep breath and prepare their portfolios.

Tax Increase in US for Domestic and Foreign Investors in US stocks. The S&P has not gone up since the Bush tax cuts were enacted, so why should stock values go down as a result of increase? Tax rates in the US are at near 70 year lows. He does in fact advocate buying US stocks.

Markets. Thinks that it will get down to the wire and it will be a gradual thing come January. The chances of them letting it go, it would be ridiculous. If the US goes into a recession this time, Canada will be far greater than last time. It is unlikely that scenario would play out. She prefers a lot of US stocks because they look relatively attractive. Likes the lack of exposure to commodities. In Canada, likes Energy, dislikes Materials, mining. Likes Financial but it is fully values and that is the Canadian market.

Gold. Fundamentals keep getting stronger and stronger. The bond vigilantes are waking up. They are concerned about the bond bubble where there is a lot of money sitting with negative returns. Once that starts coming out, it will be a problem. IMS is questioning the current US$, the US currency reserve and are even looking at Canada. Yesterday the BRIC nations said they were going to be creating their own debt facility in competition to the IMS. By the end of the day most of the senior producers were back up and finished in the green. Gold had rebounded by half the amount. Very reminiscent of what happened when they closed the gold window in the 70s where they where really trying to suppress the price.

Markets. We are facing stagflation. All this money sitting in the bond market is going to leave, it’s going to have to because people are getting older and they need greater yields. A lot of pension funds are in that situation. Investors should be thinking about diversification.

Base Metals. He has become very cautious because we do not truly know what is going on in China right now. He would rather wait for an answer before jumping in.

Markets. Thinks things are looking good – no fiscal cliff problems. He has never seen a more difficult investment climate. Investors have to look at the situation and realize there are things we should be looking at – puts, shorting, inverse ETFs. Never say ‘It’s different this time.’ But he feels that it is this time. 15% cash is recommended. You need to look at these things 24x7 now. Investors need to become a little more cynical. Not doing anything without a stop.

Markets. There is an expectation that something is going to happen before Christmas or year-end on the Fiscal Cliff situation and as long as the commentary is positive, he thinks we keep going up to year-end but if that doesn’t happen, the market could see some definite weakness.

Dividend Stocks. At one end of this spectrum you have high yielders with very little growth but very stable cash flows. These tend to be very interest-rate sensitive. At the other end, you have companies with a lower yield but have the ability to grow the dividend over time. It’s actually the companies that can grow their dividends over time that outperform.

Markets. Markets are sensitive to such a degree that any headline or any nuance from a Fed or government official tends to move the market right now. Eventually, they will kick the can down the road. They have to come to an agreement soon.

Principal unprotected notes? Effectively a structured note where, most likely, the principal is guaranteed. You have an option on equities, commodities or some other structure. If they are “Principal at Risk” notes, you have a note but your payoff is pretty much uncertain. You have to link this to more of an equity or higher risk type of investment because of the payoff structure.

Preferred US shares equity REITs? Without knowing the specific name it goes to the argument “Would you lend a corporation this much money for this long?” Real estate is a good, long-term asset but you have to look at the REIT specifically. His problem with buying preferreds in REITs is that REITs have a lot of leverage, which ranks ahead of bonds and equities. You have very little protection and usually you are taking a lower distribution. His inclination would be to just buy the REIT.

(A Top Pick Jan 9/12. Up 9.8%.) Videotron 7.125% bond maturing January 15/20. Has had a great run to a point that it’s reached his risk/yield threshold. If you own, you could continue to Hold.