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

Educational Segment. S&P closed last week at a very key trend-line. Last year coming off the lows in October, market came up and held the trend-line for a couple of weeks, broke inter-week and closed above. Trend-lines are interesting because you get an opportunity to put in a trade with a fairly tight stop. Thinks the market grinds higher into the end of the year even though expectations for earnings are lower. If we close back below 1420 then we start to get nervous.

Market. He is a little frustrated because what he is seeing is that the European analysts seem to be little different than the North American analysts. They tend to take a “follow the data” approach and Europe is definitely in a recession as far as he is concerned but they are not writing the price targets down and, as a consequence, prices for European equities are elevated relative to where they should be.

Canadian banks. Doesn’t feel they are a good buy at this time. They are effectively geared to move forward on the back of the Canadian economy, which has done very well over the last couple of years. Feels there are better opportunities in the US. US banks generally are well capitalized and they are at a point where the US economy is starting to recover.

Markets. It is reasonably likely to happen that the year will end positively. Short-term things that are still in front of us are China stimulus and the US fiscal cliff, the 2 big ones. Also, we don’t want Europe disintegrating. If these things were favourable, the market could be up another 5% in 6 months. He is now into the single digits in the cash he is holding.

Fiscal Cliff. In simple terms, if nothing different happened there would be tax increases in the US come Jan 1st along with spending cuts. If that were to happen, the average US consumer could have $1000 less in their pocket to spend. That would affect consumer spending and GDP would be softer. There would be a dip come January and that would be a fiscal cliff. Doesn’t think that is going to happen but is something we need to watch carefully for the next few months.

Markets. Better than expected readings on US consumer confidence and we are back to pre-recession highs but stocks are under pressure. Partly because the markets have had a very good run over the last few months. All the central banks have put in their stimulus packages and that has put away the doomsday scenario but it takes time for this to take effect. Now we have to go back to fundamentals and this is that profit growth is slowing. Companies are not very optimistic and are showing reduced guidance. With the US election, there is still uncertainty. Investors should wait as there is no sense in going in when volatility seems to be increasing.

Markets. It is the same as 2010. He was waiting for the market to break out above the 12,000 level and we could close the year above 13,000. Canadian markets tend to be strong this time of year (Nov/Dec) in energy and metal stocks, which have a lot of influence on the index. He was a big buyer at the beginning of September. He has been trimming interest rate-sensitive stocks like REITs.

Short Interest. A long time ago it had a lot more meaning. If you have derivatives trading against it, or pairs trading, you might have someone shorting but offsetting with options. Now a days short interest does not mean people are bearish on the stock.

Nat. Gas. Beautiful downtrend. When it bottoms it will be obvious. Clear bottom back in April. The last two lows have been higher than the previous. Buy HNU-T with a $15 stop and a 30-day moving average as your exit point (trailing stop).

Markets: Wrestling match between mushy economic conditions on one side and hopeful rallies on the other as banks pushed out stimulus. Savers are looking for something that gives them a little more yield. The core themes has been predictability. You need securities where you know they have the ability to pay and that ability is growing. Each rally that comes on behalf of one of the policy initiatives has been shorter and shorter.

Markets. This pullback is not unexpected. We had quite a good run into the end of Q3 with a couple of really positive developments including stimulus in China, some easing in Europe and the US Feds move. There is a bit of a pause now. Expect that we will end up higher by the end of the year and higher than we were at the end of Q3. Buying $40 billion a month of housing bonds will continue the improvement in the US housing market. Thinks China will get back more on a growth path. Big uncertainty is the US election but regardless of who wins, there will be a focus on what the agenda looks like in 2013, which will be helpful in removing some uncertainty.

Markets. Coming into Q3 earnings seasons which starts heavily in the US next week and estimates have come way down so it will be interesting to see how companies report. China uses 40% of all commodities so this has a large impact on Canada. Has a little bit of cash but he can see himself getting more defensive because of the global slowdown.

Markets. The time to buy stocks is when people are selling them, not when everybody loves them. He is a value investor which means that he is trying to find stocks in the stock market that are priced below what he thinks they are really worth. Currently, he is deemphasizing resource stocks. Because global growth is slow and there appears to be substantial stockpiles of coal and iron ore, in China for example, resource prices may be a little soggy for the next while. He continues to put emphasis on good dividend payers. Feels there are some US names that have very good value, particularly with the loonie at $1.02.

Agriculture. This is an industry that has been bid up because everybody understands the stories. 2 of the interesting companies to him are Syngenta (SYT-N) and Monsanto (MON-N), both of which are in chemically engineered crop management. But both have been bid up substantially and are difficult to buy at this price. Some people have played the sector through John Deere (DE-N) but this has been bid up as well. If there is a substantial correction in any of these names, it is not a bad time to buy in any of them as he believes the agriculture story is going to be a long story.

Commodities. Commodity sector had predicted a slowdown in the general markets months ago. It is only now that IMF and other economists are coming out and reinforcing the fact that the global economies are slowing down. Now commodity prices are starting to inch higher, which he feels is a precursor of better times to come in the economy for 2013. Feels the opportunities are in the equities because they have underperformed the underlying commodities. Sees opportunities in the Junior gold space as well as Junior gas names.