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

Do you use one indicator more than others in technical analysis? Essentially, you are looking at a range of prices that a stock is trading at over a certain period of time. You are looking to see if you are in the low end or high end of that range. If you are at the high-end this is a Sell signal and if you are at the low end, this is a Buy signal. A lot of indicators are trying to do different things but the signals are generally the same. He likes the MACD because it helps you visualize very quickly, what the momentum is.

Does technical analysis work on ETF’s? Absolutely. In fact it probably works even better. You have much more smoother movement without big gaps. It allows you to be tighter with your stops and with your trend lines. You don’t have to worry about company specific announcements, which tend to throw you off.

Markets: A rough day in the markets. We had a nice run since the spring and markets get tired and markets are wondering what to do next. No surprise expected from the fed tomorrow so now the time to take some chips off the table and enjoy the long weekend. 'Are we going to get a surprise?' is what people are asking. What is going to happen in Europe and in the US election. Ben will keep the carrot out in front instead of the full course meal. Issues will need some monetary intervention but there is no need to do something here that will take away from later firepower.

Markets. He is keeping an eye on global PMIs, which are pretty weak and speaks a lot to the resource sector. Also is watching the volatility index VIX, which is really low, touched 13.5 just a little while ago, and you have to go back to 2007 to find readings that low. Investors are generally fairly complacent. There has been a big move off the bottom, particularly in the S&P, and now there are all these policy related issues that are coming up. None of this is really overly bullish and particularly when we’ve had this really strong move in a short period of time. His cash position is low to mid $30’s. Sees risk in the next 3-4 week window but feels central banks will continue to ride to the rescue.

Market. He is finding growth in large cap in Healthcare and the techs are performing really well this year. Pretty good market for innovation for non-resourced based stocks. In the healthcare area there is a lot of innovation going on. We have gone through an interesting sort of hype cycle and a correction from that and we are now into realization of the benefits of new technology like gene sequencing and the ability to really target drugs better because of that.

Gold. He looks on this as more of a protection on the downside. Gold stocks have been badly damaged over the last 6-12 months and look pretty cheap right now. Gold is probably a good place to be looking right now in terms of value. Franco Nevada (FNV-T) and Silver Wheaton (SLW-T) may be better plays because you are playing royalties on the revenue side.

Financial Services. In his fund, he tends to compare Canadian banks to US banks and the Canadian ones have benefited by having real estate prices move up and up. Now there is a large call from US hedge funds to Short the Canadian real estate market. Sees more upside in some of the US banks such as Wells Fargo and Northern Trust. The 2 Canadian banks that he does like and owns are ones that have growth outside of Canada, Toronto Dominion (TD-T) and Bank of Nova Scotia (BNS-T).

Canadian banks. Doesn’t find them overly attractive compared to other stocks out there. They are expensive compared to other companies and other industries. Also, expensive compared to other banks in other countries. This is because they have done such a good job of being safe and because they are in a sheltered market giving them limited competition.

Gold. He is warm towards gold, but not hot.

Markets: Light volume yesterday and today. Could be a combination of those on holiday and those waiting for the Fed’s Friday announcement. There is not a lot of conviction out there. We are setting up for a perfect storm here because the market is really expecting something to happen. Lets not forget there are a whole lot of European meetings happening afterwards. Income is a big focus for him and so he is positioned cautiously. There are some good sectors to hold but for August he is holding more than normal cash values. Big pension plans are still very heavy in bonds.

REITs: Could stall if rates rise. He would have expected them to sell off a little harder in the last month when the 10 year increased but they held in here and some increased. There is just so much appetite for income. So rates have to go up significantly before it affects valuation. XRE-T represents Canadian REITs and has gone down 6 sessions but he is not alarmed yet. Fund flows are more important to REIT values than interest rates.

P.F. Chang’s China Bistro Senior Note 10.25% 2020 Bond. Stock is private since May. Novelty in the US. Casual, Asian cuisine. Locations in all the high traffic areas and high end shopping malls. Clear growth strategy has been laid out. Licensing its brand to frozen food manufacturers. Tweaking its menu between lunch and dinner to drive incremental margins.

Markets. Everyone is hoping there will be a QE 3 but he feels every time they have one it is less effective and it’s to the point it is not worthwhile. We have had a very good move in markets since June lows so a pull back wouldn’t be surprising. Expects a pullback because they are still dithering in Europe and China is still a question mark. The notion that Israel might attack Iran before the US election has given him some fear. He is holding 20%-40% of his portfolios in cash.

Gold. He is very bullish on gold. Within 12 months, he sees it up as high as $2300-$2500. As governments continue to debauch paper money and people are continually asking tough questions about the bonds that the Europeans are issuing, gold is going to come to the fore as something that doesn’t really depreciate in value.

What percentage of physical gold should an account have? For very conservative accounts, he has 5%. As you get to the balance growth models, they can be as high as 20% but with a minimum of 5%. Half of this would be in bullion and the other half in one or more very good stocks that have been wacked recently and where he sees great promise.