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

Markets. Don’t expect the same in 2014 as 2013. It was a spectacular year. Has expected a correction of 5-10% for a long time, but he views it as an opportunity to buy. Thinks markets will work their way higher over 2014 but it won’t be a straight line. He is finding it easier to identify things to lighten up on than to buy.

Canadian REITs. Interest rates are going up. It was a surprise to what extent they sold off earlier in the year. There may be some opportunity here. He likes Northern Property and RioCan.

Exit point for Insurance Companies. If Interest rates were to start going down, that would be the trigger to sell. He is favourable to insurance companies right now.

Markets. In the very short term, the market is very over bought. The Investor Intelligence chart is at the highest point since 1999. It indicates extreme bullish sentiment, which he thinks puts us into dangerous territory. Expects a correction of 10-15% soon. No one knows how tapering will affect the market. Rates have been repressed for so long that he is worried about the rebound effect. That would not be good for the market.

Markets. Market looks overvalued by a lot of metrics such as valuation versus the global central banks aggressive stances, particularly in Japan and the US. One of his big concerns is that we are re-flating the debt bubble. Debt levels are at record highs again. Ultimately, when the decline comes, it will make it more severe. He tends to be Long on companies that are experiencing positive fundamental change and Shorts companies that are experiencing negative fundamental trends.

Markets. 2014 looks good. Stocks are going to continue to do well in the US. Canada will underperform the US but still do well. Can’t see why stocks will not do as well as they did this year. People are worried about tapering but what really affects stocks in the long run are short rates going up and he doesn’t think this will happen until 2015. Long rates will go up, but eventually the long end of the bond curve is determined by inflation rates, which is relatively low. Economic growth globally is really improving. If pressure is put on the stock market because of tapering, that will be a good buying opportunity.

Which of the Canadian banks should be sold in order to move into something else? His view is that the Canadian banks are not expensive and they have good dividend yields. They will continue to plow along and you can expect to see 12%-15% rates of return over the next year. If he had to choose, he would get rid of Bank of Nova Scotia (BNS-T). (See Top Picks.)

Markets. We did not get the Santa Clause rally but we got a lot of Christmas presents early so what you saw was a lot of profit taking. The year is not over and we still have a few days over Christmas. Tax loss selling ended today. Resources did badly this year. 2014 will be a good year and especially for Canada. But it has been a stock picker’s market. Tech has been the place to be, resources the place to avoid and financials are somewhere in the middle.

Markets. US markets near record highs once again. Didn`t think they would announce tapering this month and they did. The market took it well. The market likes clarity. The seasonals are strong in December through mid-January. Thinks it goes to 1850 in the next couple of weeks, at which time he would take some money off the table. In the last two weeks he has heard very little chatter about how good or poor the Christmas season shopping has been. There has been pretty good discounting in stores. Storms in Canada may impact pre-Christmas shopping. Crude oil will trade from mid-$80s to $110 for the next couple of years. Pipelines could make a difference in getting Canadian oil sold at world prices.

Educational Segment. Market Breadth is Breaking Down. Chart 1 compared the NASDAQ index with the number of NASDAQ stocks making 52 week highs. They are diverging. 52 week highs are going down while market is going up. This often leads to a period of consolidation, 3 so far this year. We are seeing weaker and weaker participation. Chart 2 is percentage of stocks above their own 200 day moving average. Almost all are below that average near the time of major bottoms (>80%). Usually 75-80% are above this point at market highs. The number of stocks above 200 day average is currently declining. Chart 3 is advance/decline line. Showed how in 1998 this number peaked but markets went higher for 18 months with less and less stocks participating.

Markets. It’s been a mixed year. Some emerging markets have been quite flat. Canada has been pretty good and the US side has been spectacular. Up until a year or so ago, money coming from the federal reserve went to emerging markets. That changed a year ago. Looks like money flows are heading towards developed markets. Early tapering will keep helping for the time being. We will get a correction at some point. In a bull market, corrections are quick and not that extensive. Difficult to know when during next year it will come.

Markets. He is a “Buy and Hold” investor and monitors and switches when appropriate. He is a very patient investor. His best ones are ones that were made 3 years ago. His criteria are good quality companies with reasonable prices in industries where he can sleep at night. Still seeing lots and lots of value in the market. There is no other alternative except for good quality stocks. Has been fully invested 4 years and doesn’t see that changing. Avoiding anything interest-rate sensitive. There are a number of great Canadian success stories that have done really well in 2013 and expects that to continue. Believes the economy is going to improve in 2014 and interest rates are going to rise, but will stay very, very low.

Interest rates. Expect they will rise in late 2014. The taper talk is done and he can see interest-rate/inflation going higher. The economy is strong and it is time to get rolling. If the GDP goes up and interest rates go up, he could see 10 year bonds at 5% in the next few years.

Pipelines. An interest sensitive sector with a high valuation. What he likes about pipelines and the whole sector is the irreplaceable assets and that big, big, booming exposure to oil sands and the demand for crude. Good companies but feels the upside has been all priced in. He likes and owns Keyera (KEY-T) and Pembina (PPL-T).

Markets. Thinks we are already in the Santa Claus rally. We survived the taper talk, which seemed to have created instability and negativity, but the actual taper itself seemed to create “certainty”. This is a wonderful illustration about how markets actually trade. They are very scared by uncertainty but the minute you have certainty there was a huge rally off the $10 billion taper as well as the certainty about interest rates. The message is that there is no inflation visible in a 1-2 year forecast. Business can go ahead with a lot of investment on a lot of the capital side, with certainty that they are not going to get crushed by rising rates in the near future. It also tells consumers that they can go ahead and loosen the purse strings and, if an American, buy that house and car.