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

Financials. Canadian financial services is a terrific industry as a group. We have an oligopoly and when you have this, they do not compete as hard as they might and everybody makes lots of money. In the most recent quarter, all the capital ratios and profit margins are very strong. We now have the best IPO season that we’ve had for 10 years and all of them are going to make a lot of money on investment banking. He likes the technology sector in the US as it is so difficult to find these in Canada. He does own 2 US banks, J.P. Morgan (JPM-N) and Goldman Sachs (GS-N), both of which are going to benefit tremendously from this big IPO boom.

Technology. He owns technology companies in the US, simply because it is so difficult to invest in that sector in Canada. He owns companies like Qualcomm (QCOM-Q), Apple (AAPL-Q) and Microsoft (MSFT-Q). There are no equivalents in Canada.

REITs. What we saw last May when the “taper caper” started and everybody was panicking about interest rates, the REITs also fell off very sharply, mostly around 15%. While some of the utilities and pipelines and other interest sensitives came back, we haven’t seen the REITs come back. They are still at the discounted price from last summer. Buy them now and you get the great yield plus probably capital appreciation.

Biotech. This industry is characterized by really, really big companies that have been successful, brought products to market and have made a lot of money. There are hundreds and hundreds of tiny little companies that may or may not get it right. Mostly they don’t get it right. Biotech is the ultimate risky game. Picking a winning biotech company is not unlike playing the lottery.

Markets. Thinks we are still in a bull market and not surprised to see it a little soft. Had a very good run and thinks it will have a very good run come the spring. Weather conditions slowed the economy quite a bit. Looking for a year that gets stronger in the economy, which will keep markets going up. We are seeing the beginning of the cycle where economies get better so that they can stand on their own 2 feet and don’t need all the accommodation from central banks. Housing market is strengthening. Expects to see more consumer spending. Lots of room for a very conventional recovery. Liking infrastructure a lot as well as consumer discretionary. Likes the pipelines and doesn’t think the interest-rate threat is imminent enough to cause us to sell things that are held for yield purposes.

Markets. 5^th anniversary of the start of the US bull market. He is sitting on a fair amount of cash on the sidelines. US markets were a little ahead of fundamentals last year, but they are holding. Barring Geopolitical effects, the recovery is taking hold. Thinks he will get an opportunity to load up on opportunities. He thinks there are bargains in energy. Financials are okay and represent fair value. It is a stock picker’s market. Market pullbacks are a buying opportunity.

Holding only banks. If you have a very large nest egg, and can live off the dividends, you could make a case that banks are an adequate diversification. He likes to see diversification across different industries.

Tonight's show was purely on taxes and there were no opinions expressed about stocks or bonds.

Markets. Thinks TSX will outperform S&P. He moved positions back into Canada and thinks it will continue for the remainder of this year. Canadian stocks present an opportunity. Materials and Energy are attracting a lot of interest. Q2 and 3 should be volatile, but Q4 should offer opportunities.

Markets. The market is moving a little ahead of earnings and we will see disappointment when the earnings come in lower. Emerging markets are where to look for value. Don’t go in when the knife is falling, but wait until there is some stability. He is snooping around Russian and eastern European stocks. He has some dry powder. He looks at job data, Mastercard spending, but it is a bumpy ride for the US. Asia is still significantly ahead of other parts of the world and Latin America is falling into a hole. He is focusing on companies that have very good fiscal balance sheets.

Markets. Earnings are good to justify stock price. Earnings a year ago were just about under expectations so there was a lot of multiple expansions. Going forward you won’t see the same multiple expansion so we need that earnings growth to continue and she expects 9% earnings growth this year. China have announced that they want to grow GDP at 7.5%. The shadow banking environment has been a concern. The Chinese usually achieve what they want. Stocks are still the most attractive place to find growth.

Markets. It’s been 5 years since the great recession. We all anticipated some slow growth, but right now we are going backward a little. Job growth, housing starts, and retail sales just aren’t happening. We could be just a little overvalued. He’s never been a big GDP guy, but if you look at GDP percentages, we are really up there. In Canada our markets are doing okay because we were in the doldrums for so long. The risk/reward ratio does not seem to be there. Investors should rally think about and study stocks and ETFs they are thinking of purchasing. With ETFs you can see a trend in the markets and buy it. ETFs are great for that.

Payout Ratio Greater than One – Is it Legal? Be careful with them. A lot of oil stocks are over 1. Sometimes they have high payout ratios and it is not going to survive. Don’t buy something where it is well over 1.

Mutual Funds vs. ETFs. Actively Managed ETFs can be very similar to a mutual fund but the ETF is cheaper. ETFs are more liquid.

Markets. On the whole, major miners’ all in cost of gold is $1400/oz. Gold is $1325 an ounce so they are not making money. If you stop sustaining your businesses you can bring costs down but then your business goes away. You need to replace every oz of gold you produce or you lose your reserves. He thinks we are now in a peak discovery period. Unless we see a real increase in the gold price he doesn’t see how we make the discoveries to keep up with production.