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

Contrarian Investing. Seasonality is very important to him. He does most of his buying in November and December during tax loss season. From March through to that point, it is very rarely that he Buys stocks. In November and December, it is very rare that he sells winners, because he wants to defer taxes. He is also looking at individual stocks and what they do over the course of a year. A lot of stocks have cycles, which can help with buying and selling. It’s an interesting time of the year because he used to call more CEOs and CFOs in August, and found a lot of them were away from their desks, often for a number of weeks. He now answers his calls and emails, but is not at his desk quite as often at this time of the year.

Medical marijuana? This is a tremendous growth industry and has gathered a lot of momentum. It wouldn’t surprise him to see some companies in the gold sphere, become medical marijuana companies. If they do, he would be very wary of those companies. People who constantly change sectors, often don’t know about the other sector and are just chasing the money, usually for themselves.

Markets. In this environment, it would be prudent to engage in some profit taking. We have had several years now of market gains. You never really make money in the stock market, until you actually sell it. In some cases, where he really likes and admires a company, and thinks it could continue to do well, he is just taking partial positions off. It is getting more and more difficult to find stocks that you consider to be outstanding value for the long term. He is trimming more in respect to weightings. Tries to run fairly concentrated portfolios, and typically has anywhere between 20 and 30 equity positions at any point in time. An average weighting for him would be 5%-6% depending on the risk profile of each portfolio.

Silver. What gets gold going gets silver going. We need inflation. Deflation is the bigger risk to the economic story for the next couple of years. We need Gold above $1500 and inflation in order to get another up-trend. If we get a washout in the next month or two it could be a great buying opportunity.

Educational Segment. Financial Literacy. Are you a smart consumer of financial media? The government wants to strengthen the skills of Canadians in financial matters. You can get ideas from TV, but you must do your own research. You need to have a plan as to when to get out. 65+ year olds’ bankruptcies have increased 600% over the last 20 years.

Markets. We had a bit of a sell off over the last couple of weeks. In Ontario, there has not been a day over 30 degrees in all of July and August. Usually Aug, Sept, and Oct are not terrific for energy stocks. He increased his cash weighting to 32%. Nat gas has fallen, but stocks that have been pounded in some cases do not get so much revenue from gas, but rather from oil. There are still opportunities although the easy money has been made this year.

Markets. September and October is a very difficult time some times. The record for a consistent decline during those few months is spotty at best. You have to be aware that it is out there, but who knows if it is going to hit. If it does, it will be for geopolitical reasons, specifically the Ukraine, and perhaps to a lesser extent what is going on in Iraq and the Palestinian/Israeli conflict. This could derail on a very short-term basis. Looking out 2-3 years, the US economy is going to finally get back to a more normal state of affairs. At that point, you might be pleasantly surprised by corporate revenues, corporate profits and perhaps P/E ratio expansion. A chart showing Forward P/E Ratios from 1977 to the current time had an average of 13.70, and as of last Friday we were 15.2X Forward Earnings on the S&P 500. Above the average, but not outrageously so. The most optimistic outlook for the PE ratio is 15. If it got up to 18 in today’s environment, he would be a Seller. Unless there is a cut off of oil from the Middle East, we’ll probably follow the US.

Markets. In July the markets were at all time highs. They were this week. He said there would be a correction after he was on last in July. The Dow came back 4% after he was on and then came back. Now markets are overvalued again. September is THE weakest month of the year. Beware, the ides of September. October in a mid-term election in the US is the bottom of the 4 year cycle so look for buying opportunities in October. Economically sensitive sectors would be the weakest in the month of September.

Gold. Strength is July to beginning of September or October. Gold has been slightly lower. Other gold stocks are actually in upward trends. He is still hopeful that the seasonality will still kick in. Buy when the US$ rolls over.

Seasonal investing through ETFs. Best time to buy the market on average is October 28^th. You want to be fully invested in equities until the beginning of May.

Markets. Everybody is talking about needing a correction, but if everyone is expecting one, it doesn’t really happen. A correction would be healthy, but the market keeps going up. There won’t be a 5%-10% correction, because there is so much cash sitting on the sidelines. Every time we fall 3%-4%, people see it as a buying opportunity. The dividend component of the Canadian market is healthy. It’s north of 3% on the index, which holds up well against the US index. Dividends pay you while you wait, and gives you a cushion on the downside in a correction. He is more in a position towards the growth side in dividends. Probably the most expensive area of the stock market is those stocks that have reasonable yield, but also are defensive businesses with good growth prospects. These have been expensive for a while.

Trailing stops? Basically a trailing stop is a “point” at which you are going to sell, that moves with the stock. If the stock goes up, the level of the stop goes up as well. The trouble with setting these stops is that you can get whipsawed. If you don’t set them at the right place and you enter some temporary volatility, you get Sold out and then the stock bounces back. Normally you set this outside of a normal standard deviation and set it below that. Also, the issue is that once you have Sold a stock, you then have to decide when to Buy it back, which is sometimes a very difficult decision to make.

Markets. He recovered very quickly from the crisis because of the banks. Canada is a very healthy economically and there are a lot of companies outside the resource sector that are not affected by the world economy. The world is recovering very slowly so it is a stock pickers market. Any rise in interest rates will be very gradual and will be put off. You need to go down the food chain into mid caps to chase yield. You need a solid company that can grow the dividends.

Markets. He is waiting for continuing progress with holdings he already has. September should assist us. He buys companies, so he is not concerned with the month, the Fed or war. He is trying not to sell because that seems to be wrong. There is a lot of money on the sidelines ready to be deployed.

Markets. Because this is such a slow recovery, she thinks it is going to be much longer than what we are used to, so she is not really concerned. Seasonality is not great as we have had lots of corrections in past Sept/Oct. Geopolitical events correct markets, but for really, really short durations. We are still more sensitive, since 2008, to financial events as opposed to geopolitical events. Central bank leaders have suggested that increases in interest-rats is going to be slow, so people are not really worried.