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

DRIPS? If you can get shares at a discount and get shares you are loving, okay. He likes to get the money and then invest all his cash flow into one or two names he wants to accumulate. Great strategy for an individual investor. Likes to buy low valued companies with the dividends of high valued companies.

Markets. Debt Ceiling story is just noise unless it actually happens. They pushed the peanut (note it is not a can) down the road. At some point the debt will probably have to be paid. Growth is now 1-2% for a while. There are excess capacity issues to work through. The US is in a half way decent recovery. Europe is starting to recover. Things aren’t that bad but not at those levels to get overly excited. He stays with dividend growth and there is no reason to change that. He has looked in the cyclical areas as of late. The question is at what point should he get a little more aggressive in that rotation. But he will continue to have the back bone companies as well.

Markets. Now that the shutdown is over and the default is averted for the time being the equity markets should grind higher if the global economic data comes in well and corporate earnings are strong. One possible silver lining is that the Fed might further delay the tapering more so than we first thought. The Dow historically has 6 of 7 positive months to come. Still favours US stocks over Canadian 2:1 and now is focusing more on international and specifically Europe.

Markets. Feb 7^th we will have to deal with the debt ceiling again. They are kicking the can down the road. He wouldn’t avoid anything before then, but certainly there will be buying opportunities. He is focused on consumers. Staples do very well when people are risk adverse. Discretionary stocks should have more upside than staples going forward.

Markets. There is no big surprise that there was a deal today. He has a lot of cash and is encouraged by the fact that the US economy is doing better. Europe has bottomed in most countries. Transportation and housing are good sectors. He has been in Europe, in the beer drinking, rather than wine drinking countries. Northern Europe has done much better for the most part.

Housing Prospects in the US. Thinks the money is to be made in the building supply companies like IFP.A-T. Home renovation retailers will do well also. It can also be played through the banking system such as BBT-N and one of tonight’s top picks.

REITs. When interest rates moved up sharply, REITs got massacred. They do a lot of borrowing for their operations so the markets sent their prices down. The rates have not gone up as much as the market expected them to. He expects interest rates will go up in time, but valuations have been creeping back up. Northern Properties is one of his favourites. They have a lot of cash from exiting seniors’ housing. One of the lowest payout ratios in the business so there is lots of room to grow. REI.UN-T is a good second choice.

US / CAD$ Split. For the first time he now has more money outside of Canada than in. 55% of portfolio is outside of Canada. The Canadian market is still 75% commodities, materials and financials. We are very under diversified. US banks are in recovery mode. The CAD$ could go down to $0.90 and that would be good for you also.

Markets. BB-T – we are hearing news about another potential bidder. He has a strategy called coming out of the blue. His model price EBV negative 3 is $10.34 for BB, so he would not recommend it as a purchase until it breaks above that. There is a disconnect between what the balance sheet says it is worth and what the market says it is worth. He waits for a market connection to the balance sheet. He is seeing a secular bull in the US. The US dollar is cheap here and will go substantial higher over the next 3-5 years. There are so many game changers going on in the US. There are US long term things that will shake up world markets. It will see the US as the place of choice to be. You want to buy this market. The politicians are giving you an opportunity to buy things cheaper here.

Markets. In response to all of what is coming out of Washington he does nothing. He doesn’t react. There is just partisan dancing going on. He finds ETFs in the US of up to 27% of his portfolio. He is being opportunistic in Europe. There is an awful lot of money going into Europe right now. He does developed countries last now, rather than emerging markets. They are global businesses.

Purpose Investments. They just got going in the last few weeks. There are index based ETFs, Rules based ETFs and RAFI. It is hard for him to express an opinion on these new ones this soon. The volumes are pretty small. Some is investor money and some is seed money. These value added ETFs are a lot more expensive than index-based ETFs. There is room in Canada for this type of product.

Covered call is buying the stock and sell the option to someone else. You expect the stock to stay relatively where it is so you get the other guys cash. You can buy it back if you feel the stock is about to take a run-up.

ETF with dividends for TFSA. CDV gives you banks. XDV is well diversified. Look for one that is lower cost. Pick any major provider and go to their web site.

If you buy inter-listed stocks in Canada and sell options in the US, watch the currency because you can get badly beaten up.

ETN (exchange traded note), leveraged. A one week trading vehicle. He doesn’t buy exchange traded notes. He doesn’t buy anything he can’t buy 10 minutes later.