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

US Markets. Have concerns about the 2^nd half of the year. Volumes have been very low this summer and the recent rally was a low grade one. His worry is on the “fiscal cliff” concern on a variety of different initiatives that will automatically get implemented in the US. Could potentially shave as much as 4% off of GDP out of the equation if politicians don’t get their act together. Doesn’t think it will play out as well as the headlines. Currently he is going to sit aside because he feels there will be better opportunity between now and the end of the year to look at some of the US names. Currently market has gone up because of expectations of a QE 3 by the Fed that he feels they will push out for at least a few more months.

Canadian Market. Being an export-based economy we have to be very careful about some of the industries such as energy and materials. Feels the economic environment in Canada is fine. 2% growth is not great but better than other global regions. Continues to see earnings growth into 2013. Market doesn’t look cheap but doesn’t look really expensive. Still feels there is upside in the market from here.

Gold. The only commodity that he looks at technical charts on. Lower end of the band is about $1525 an ounce and the higher end is $1700 but he thinks it is going to be challenged to reach this so he thinks it’s between $1500 and $1600. Gold stocks have underperformed largely because of significant cash costs and inflation embedded in their operations. His top ranked stock in the gold sector is Franco Nevada (FNV-T).

Markets. US Federal Reserve minutes came out at 2 o’clock and the market turned around. He wasn’t too happy about it and prefers the market to stand on its own 2 feet. Have gone so long with the crutch of low interest rates, which were needed for the market to support itself. Once legislators and bureaucrats are in, it is hard to get them out. It looks like we are more likely to see QE 3 this fall than before the data came out. Doesn’t think the Federal Reserve has much left in the gun. He sees that more of the Risk On trade is back which means more of the commodity-based companies, not the financials.

Markets: Gold has seasonality that is in favour. US 10-year bonds are good today. Some tech stocks are on the go although you have to wait for the kids to go back to school. He doesn’t care so much about gold as a metal but the companies. Crude: Any time it crosses $95 it usually tacks on $10 on the upside. He is positive on oil and longer term on the oil and gas stocks. Copper is trying to break out but there are not any base metal stocks that show up on his buys.

Markets. Action has been fairly positive recently but not sure it is entirely justified by some of the global factors out there. Also, doesn’t think it is as simple as “people aren’t paying any attention because it is holiday time”. There are lots of things that could happen over the course of the fall. There are some interesting value that has been unlocked in companies globally. Company fundamentals have not necessarily been reflected in the equity market. Looking at ROE from a dividend perspective, relative to long-term interest rates, it shouldn’t be as much surprise as to where things have got to. There will be more focus on some of the global factors as we get into the fall. There will be some volatility going forward.

REITs. Have had an amazing run over the last few years. Generally trade very much in line with interest rates. He likes Cominar (CUF.UN-T) and Can Reit (?) but feels that both are nearing the end of their runs. A lot of the push for REITs has come from the declining interest rate picture and he doesn’t see interest rates going any lower.

Yields. Overvalued? If you are looking for yield with some sort of Delta (growth) going forward, stability and peace of mind, you will find that utilities, pipelines and REITs in particular still offer tax efficient incomes with a slope in growth to it with returns that are beating the market as a whole.

Markets. Some optimism has been built in that we are going to sell some more bonds. This is probably more important than the US side in the very short term. Feels there is money waiting on the sidelines so you could get a little bit of up fall run after September. The Canadian market has lagged the US. Energy has been very poor. Stocks are still dragging even though we have a $95 oil price. There are bank dividend increases coming next week.

Markets. Feels this is a stealth rally. There are a lot of non-believers in it. Sentiment has shifted too far negatively. People were legitimately worried that we were repeating 2008 again. We are on much better footing and the market is slowly starting to recognize that. Housing market in the US has clearly bottomed and has moved from a half 1 million annual starts to 700,000-800,000. Thinks it can move back over 1 million. Once you get the housing market going, you are creating jobs and more wealth. Auto sector is doing very well. US is sort of back in its role as the dominant player in the global scene, which makes a clear difference. There are shifts going on right now from areas like consumer stocks, which have been safe and sort of defensive. He feels more money will be shifting from defensive to cyclical economically sensitive stocks. Canada’s resource sector has been completely undervalued.

Economy. Thinks Europe is in the process of bottoming, but will take a while. China is really the wildcard but thinks it is still 7.5%-8% growth this year, and that is the low point.

Natural gas. Thinks this has bottomed but he has a hard time getting bullish that it is going to get a lot higher. Shale gas is bringing an endless supply which he thinks will dampen prices for a long period of time. Thinks we saw the worse when it dipped to about $2 MCF but he doesn’t think we are racing back to any of the old highs.

Financials. Feels the big upside is in the US banks especially in the ones that have really been pummelled such as Bank of America (BAC-N), CitiGroup (C-N) or J.P. Morgan (JPM-N) and feels there is a better recovery here. They are cheaper and trading at 50%-60% of BV, while Canadians are trading at 1.5%-2% times BV.

Markets: Sees a cyclical trend from 65-82. People compare this decade to then. Kept hitting peaks and troughs during that time in a 4-year cycle. In modern times, it toughed last in ’09. We are at the high point of this cycle, whether it is now or two months from now and a trough expected in 2014. Expects a sell off in September for seasonal reasons but there may be a rally over the winter but it will be the last kick at the can.

Oil broke out. It hit his first target of $92 and eventually broke through and next level is $102-$105. After that you have to see where the breakout occurs. Seasonal increases will occur at the end of October.