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

Markets. Markets seem to be a bit disappointed with Romney not winning the US election but on the bright side of things, you won’t see a political vacuum with a lame-duck government. He is comfortable enough to rotate out of some of the defensive stocks such as healthcare and consumer staples, which has done particularly well. Now rotating into some of the more cyclical areas because price opportunities are there. Also, seasonality factors are coming into play. Still holds about 17% cash, down from 25%. Prefers US stocks, which have outperformed Canada over the last 2 years by a very, very far margin. They have greater breadth and also feels relative strength is stronger.

Markets. Historically, just before the US presidential election, the market reaches a very important low, then goes higher right through until the following February. On average the Dow Jones industrial average goes up about 4%. Technicals are lining up for it to happen once again. October 28 is historically the low and the US market hit it on October 25 with the S&P 500 at 1,402. Canadian market actually happened on October 15 at 12,137. Markets have been going up slightly since that time. A word of caution; usually the markets go higher from just before the election until February except for the year 2000 with George Bush and we didn’t know who the president was going to be until the end of December to the end of January. That’s a possible scenario for this election as well.

Auto industry. Seasonality is very strong. People buy new cars in spring and that is when you get the best seasonality. Right around January through until March/April of each year is the time to be in the auto stocks.

Markets. Thinks the Americans will be pleased just because of some sort of resolution on the election. If Obama gets in he thinks it’s status quo and if Romney gets in some are going to be happy that there will be more pro-business policies.

Markets: Nothing is a given in this environment as to what the market will do after the election. If things weaken off here, what are they going to do? People are saying you have to fix the fiscal cliff. They have to balance the budget. But this is not the time. Romney would be better for the economy and the markets. It looks like Obama is ahead in the polls at this point. The G20 are going to send a message to the US regarding the fiscal cliff. They will say this is not the time and kick the can down the road but middle of next year the US debt will be downgraded and that will not be good for the markets.

Markets: The Canadian companies are not getting good global prices. If stocks are down and you can get good prices, this is good. Western Canadian Gas has gone from 2 to 3 dollars, but the opportunity is not there. Price is going up because drillers have stopped so he has gone out and bought a driller.

Emerging Markets ETFs: Second tier: EWM-N, IDX-N, THD-N, TUR-N are well suited, good demographics. But these would fall if the US fumble the fiscal cliff.

Educational Segment: Covered Call Strategy. He is very bullish on covered calls. You have to focus on time decay, volatility (Vix Indicators), do the timing. His guest talked about her approach. Sweet spot is from 3 to zero months because you loose 60% of the premium in that time (25-45days). Do it several times per year. REIT focus Canadian and US. e.g. IYR-N

Bonds. There are so many different scenarios that can happen with the US election because of the presidential choice but also the fiscal cliff and who controls the house. Doesn’t feel the bond market has much priced in because of the election at this point. Not much is changed in the last 6 months. We’re still seeing high unemployment, GDP growth and is softening somewhat. We are sort of going sideways or in the “clipping the coupon” phase. There isn’t really any danger in fixed income at the moment but is more about, where do you find the value.

Corporate BBB bonds? Is the only risk if a company goes bankrupt? Bankruptcy would probably be the major risk but BBB is rated investment grade and the chance of them defaulting is very, very low. One of the other risks is “term” risk. The longer the bond, the more price sensitive they are to yield changes. If you hold to maturity, there is no problem.

Canadian government bonds. What are the pros and cons if they are sold now? If you sold them now and took your gain, what would you do with the money? It’s never a bad thing to take a gain if you are up on them. Would you shorten or lengthen the term if you bought more bonds? He would probably Sell what you have and move further out. Also, the value now is in corporate bonds.

What is the attractiveness of real return bonds? They appear to offer only 0.2% real return and are generally long dated securities. What are the alternatives? These are really inflation protected bonds, which is great if inflation or inflation expectations are going up. We are currently in the low inflation environment. Not a big fan.

How much exposure should someone age 30 have to bonds? The rule of thumb is that your fixed income should equal your age so that a 30-year-old should have 30% of your portfolio in bonds.

Markets. On September 14, the S&P 500 peaked and has made successive lower highs. The question is, is this the start of the new intermediate correction or the advance of something more significant. Seasonably November is usually a good month and is also the start usually of a good 6 months investment period however, some technical analysts have cautioned.

Gold. Down about 2% on the day but seasonally, gold bullion and gold stocks typically do well in November. Bullion is up about 8%-9%. Seasonably gold usually runs from August through until February. We had the pause in Sept/Oct and are basically having a re-acceleration. (See Top Picks.)