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

Markets. Record highs on the TSX, but he is skeptical. Technically we are really overbought. Relative Strength Index (RSI) of the markets indicates that we are due for a correction. Typically when the RSI peaks, we are going to get a fairly good correction of 5%-7% some time in the next 90 days. This is not a perfect indicator, but probably right 75% of the time. For people who are fully invested or sitting on some leverage, now is a good time to trim your portfolio and build some cash. We have had a really strong market, and it is hard for him to see us going dramatically higher from here. He Shorts the Broker/Dealers because they are a mirror of the portfolio. When the market goes up, they go up faster, but when the market goes down, they go down faster. He is going to take it easy for the summer and look for opportunities. May-August is a quiet time for the markets, and gives him time to really look at stocks that he wants to add to the portfolios.

Markets. He sees opportunities in both Long and Short, and will make investments on both growth and value. Thinks there are a lot of opportunities in the Short side in some of the social media names. Cloud names for example, have a particular buzz and hype about them. (See Top Picks.) Often when you have a crowded or popular trade, it presents opportunities for the Short side. There are very few that he finds attractive in those areas. In the overall market, he doesn’t find valuations to be unattractive. When you have a certain sector, like techs, which he thinks is overvalued, by definition that means there has to be some sectors that are undervalued and his job is to find those on a stock specific level. His sweet spot is in mid-cap stocks because he can get out of a position when things are not working well.

Shorting Stocks. You have to be very careful about crowded trades such as Lululemon (LULU-Q). The downside is that when a stock gets to a certain level, you get the value players taking a look at it, and the value players can actually be painful on the Short side.

Investing in Asian demographics? Healthcare is one area that he looks at and the other is pharmaceuticals. In pharmaceuticals, he has played it through the generics because he doesn’t like taking a specific risk on a drug. In Canada, you essentially have one option, Valeant Pharmaceuticals (VRX-T), which he is not particularly fond of. He has gone into the US with a company called Mylan (MYL-Q). On a 5 year basis, it has been a rock steady name. With generics, you are not taking specific risks. If you are looking for a zippier way to play, there is the biotech space. Not a lot of biotech names in Canada but he does like RepliCel Life Sciences (RP-X), which takes a hair follicle and grows a cell, which can be re-injected so that the patient can re-create their own cells. US military is interested in this. Another use is in pattern baldness. Currently in phase 2 of trials, and that is where the real value comes.

Markets. This market reminds him of the 1986 markets. The market had gone up for 4.5 years' and everybody said it was too expensive, it's over, it's going to die, but it just took off. If anything, we are going to have a “Melt Up”, not a “Melt Down”. There is just so much cash on the sidelines. Every time this market tries to sell off, the money flows in. He focuses on Large Caps because you want to go where growth is. The difficulty in North America is that the economy is struggling at about a 2% growth. Easy money is made in economies that are growing faster, not slower. There are all kinds of emerging markets that are growing at double the rate that we are growing.

Emerging Markets. Thinks they have all turned in the last quarter. One after another, starting in February, they started to put bottoms in, and started to look better. This is sort of a stealth Bull, because everybody is focused on the S&P and Dow making new highs, and now the TSE has made a new high. These emerging markets turned the corner, and nobody cared, and that is always the best time to be participating in them.

India. India has done a 180° turn, from “impossible to get anything done”, to the new president saying “he would do everything to make sure things get done.” This changes money managers views on everything. India has been underweight in a lot of portfolios, so he thinks money is going to flow back in to that market. Had a relatively bad year, and yet still grew at 5%, double the North American growth rate.

Markets. If you are looking for a 2008 correction, you are mistaken. There would have to be some kind of real financial excess that would get us into real trouble such as housing, high-tech boom, etc. Things are reasonable enough that he thinks we can plow forward. As an investor, you need to be looking for opportunities. There are some good opportunities out there, but not across the board. There is a general expectation, where people think that sooner or later interest rates are going to rise and central banks are going to throttle down on things. Feels we are not going to have 3% growth out of the US. For investing you have to look into cheap sectors of the market, such as Energy. There are still good opportunities in the Financial sector including banks and REITs. The Materials sector is really cheap.

Economy. She is seeing a shift to a mid cycle. Instead of the latest and greatest app getting funded, it is actually industrial CapX and the broadening out of the business cycle, which is why energy is moving. It’s commodities (energy first and precious metals) in the 2^nd half. Had been favouring US over Canada, but now has Canada outperforming the US. However the US will continue its bull market. Currently prefers Value Stocks over Growth Stocks.

Markets. It’s Oliver’s call today! He was upset when Flaherty went into the banks to talk interest rates. When governments get involved, that is when the system starts not to work so he is glad the finance minster is taking a back off approach. Canada’s fiscal situation is amongst the best in the G20.

Gold Rates. Forecasting anything is really difficult. Anyone who is really good gets it right only 2/3rds of the time. No one knows the future. Thinks gold goes below $1200 before going above $1400. He might be right or wrong.

Educational Segment. ETFs: Equity Weightings and Returns. ZRE-T is equally weighted. Don’t get a single stock risk. New series has a quality type index. They have a European ETF with lower risk and higher returns: ZEQ-T. Canadians are often overweight Financials and Energy and this mitigates the risk of being in just those.

Markets. He is a stock picker and it is getting more and more difficult. He wouldn’t be surprised to see a bit of a correction. He is accumulating reserves on the side to take advantage of setbacks. The TSX is doing a bit of a catch up, but Energy is leading it. Materials are up almost 10%, but with lackluster performance in primary materials. It is a confused market. Investors should concentrate on at what price they are comfortable buying a stock and to watch for it.

Is it profitable to still be thinking of buying TOU-T and its peers? This has been the strongest sector of the TSX. It is difficult to find things that are you think have a sufficient margin of safety here. He has CPG-T and is thinking of taking some off the table at these levels. TOU-T he does not own, but does own PD-T.

Markets. Thinks the economic backdrop for equities looks pretty good. You almost have to take a look at the overall economy before you make your judgment as to what the market is going to do. We have a continuation of mixed signals from different areas, but the overall thrust of the global economy is forward. These days, it is being driven mostly out of the US. He is seeing some undervaluation, and it is most pronounced in small cap areas, but the general market has done phenomenally well for the last 5 years. A lot of stocks to reflect that, but a lot of them have been backed up by good strong earnings and cash flow progression in rising stock prices. However, some stocks are definitely getting a little pricier now. There is a certain momentum behind certain stocks while others continue to be left alone and ignored. If you are willing to dig in and find those opportunities, it’s great.