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

Weekly Options like in the US: Does not believe we will get them for a very long time until open interest increases a lot.

Vanguard Funds: Thought they would come storming into Canada with low fees and that was not the case. They told him the volume is not there yet. The VEE is certainly worth a look. He is not sure there is anything there that is really that different. He would like to see the price competitiveness come to it.

LEAPS: He doesn’t use them because they are not terribly liquid in most cases. Fine for an individual investors. Time value is expensive in LEAPs. Leaps are a long-term option.

Inflation Protection: You can look at real return bonds such as in XRB-T. He doesn’t think it protects against inflation. Just keep the duration of your bond portfolio short.

Oil. Markets are in a sort of tug of war between risks of a slowdown of the global economies offset by Saudi Arabia dictating production. Hopefully they will cut back some of their production. He is looking at higher oil prices at $90 to $100 for the next year. Thinks oil has bottomed. Oil sands producers do require $80 to $90 oil.

Gold. Lately has been trading more like a risk asset with investors selling it off just like every other investment. Thinks investors should be looking at it more as an alternative currency. The excess liquidity, created by countries spitting out lots of money, is inflationary in the long run, which bodes well for gold. He is looking for gold to reach $2013 in 2013.

Natural Gas. Expect prices to be choppy over the summer due to excess supply. We are already seeing increased demand, especially out of power generating companies, especially in the US. The percentage used has risen from 21% to 29% over the last 4 years. He is looking at $2.50 to $3 and significantly higher in a year when LNG terminals start to get constructed.

Markets. We are on the verge of seeing some key technical levels broken. The market is forming a base after the correction we've had enough last several months. On the cusp of breaking the 1360 all on the S&P 500. We are still in a bull market that started in March/09. We have one last leg left to hit around 1500. This recent period was just a consolidation period. This is the last leg and he thinks there is a pretty good chance of a major selloff after that. 2nd half of an election year tends to be the strongest part of the cycle.

TSX trend line. One of the problems is that in the short term it is in a downtrend. This is quite the opposite of the S&P 500 which has been trending up. The chart shows there is some support at around 11,300 with some resistance at around 11,700. He will not believe that this is in a new uptrend until it breaks 11,600-11,700 with with conviction and volume.

Technical indicators that you use to determine if it is time to buy or sell a stock? The main things you should look at are trend lines and formations. “Basing” is a formation and if a “base” breaks out, it is a new uptrend. Then you can start to look at some of the other indicators such as moving averages. He uses the “basic trend” and the “basic formation” and then looks at the 50 and 200 day moving averages.

His strategy is longer term. Last two years his theme has been focusing on dividend paying companies and this helped him though the volatility. We try to figure out every day what is going to happen to Europe. It is un-resolvable. Last couple of weeks he started taking up positions in energy and oils. Difference in gas prices in Canada vs. rest of world creates opportunities because of expected increase in M&A. He is seeing an increase in M&A but he does not screen for that. It is always a nice thing if it happens but you can base your investment on this outcome.

Canadian Banks: For the foreseeable future are stable and profitable and have ability to raise dividends. Bank stock makes more sense than a bond. Telcos make even more sense because they are less cyclical.

Cautious on the EU side. There was optimism and now there is realism. Markets may calm a bit after the EU summit but there is still headline risk. Whoever wins the US election will hopefully do the right thing for the markets.

Oil and gas services: Have been hit hard but will come back. Buy these over the summer for an increase into the fall. Prefers CFW.

Markets. He has only about 5% cash in his clients’ portfolios. He basically owns stocks that pay dividends, so gets paid while he waits. To him, it is not so much as being able to time the market as it is being in the market with a possibility that there is a rotation into the cyclicals.