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

Markets. Markets do what they always do, which is surprise you the most that they can. They rally just when you think they probably won’t. He went neutral early September and about a week ago started buying back into this weakness and back to overweight again. Took money out of golds and moved it into the oil sector, industrials, and technology and some of it back into the US. He thinks it is a synchronous expansion we have right now. The data he sees coming out of Japan is astoundingly good and has been a nonfactor for a long time. China has achieved a soft landing. Feels that Europe has clearly turned. US is on a steady recovery path. A couple of the emerging economies such as Brazil and India are still tagging back, but even there the stock markets have bounced recently, which could be a precursor for a move there.

Gold. In late June gold looked like the stock market in early 2009. Everybody hated it. Why would you ever own it? Yet valuations were at all-time lows. It then had a great ride over the summer and created a beautiful head and shoulders where it checked back in September to the right shoulder. This could be the take off for a great move in gold. A lot of those levels where broken today and it is a little scary short-term. He is neutral on gold right now and has taken his weighting down.

Markets. This is the time of year when markets normally start on their upside. Seasonal strength is, on average, from Oct 28 to May 5, plus or minus 3 weeks. We are already into the period when seasonal strength could be starting. H

Has been some good evidence of that in the last couple of days when markets moved significantly higher. Suspects the 1^st one to move to an all-time high will be the Dow Jones transportation average (See Top Picks) and we are just about there right now. This summer, typical of most summers, markets are really volatile but with very little return. What he has done with his fund (HAC) is to be in cash until we get to the period of seasonal strength so effectively he is 100% cash and is reaching the stage where he will be investing, which could be as early as Tuesday. There are literally trillions of dollars sitting on the sideline waiting for the politicians to clean up their act. This is the time of year when economically sensitive sectors do really well. Things like technology, consumer discretionary, transportation, and the industrial sector do very well this time of year. Start putting your money into sectors to take advantage of the period of seasonal strength, which is just about to start.

Gold. The period of seasonal strength for gold is usually the end of June right through until the 3^rd or 4^th week of September. He was in this one, this year and made a good profit because he started to reduce his positions and actually eliminate them as the technical parameters started to turn negative. Do watch the technicals as well as seasonality.

Is the Dow in for a big reversal or can you see it continue to go up at the same pace? Touched an all-time high recently at around 15,815 and has subsequently backed off from the high of about 2 months ago to a recent low by about 6%. Now starting to bounce back. Technically it is starting to look very interesting. Was below its 20-50 day moving average as of yesterday. Strength today probably put it above those levels, which is an encouraging sign. Trend is definitely on the upside. If it breaks above the previous high, you can see a nice little triangle pattern that is being developed as well. Strength relative to the S&P has been negative in the last while. So you have some mixed technical indicators. We are just entering the seasonal strength of the Dow, so there’s a very good chance it will reach an all-time high very shortly.

Markets. Markets hung in remarkably well with all the bad news over the last little while. The shutdown is a temporary thing. The market is handling it very well. Mid-caps are outperforming large caps. Part of it is seasonal and part is that they are focused on the US economy. Valuation have expanded earnings multiples and so now selection is much more important. There is better growth in the mid-caps.

Markets. Feels the fed has thrown a curveball. The market was expecting a taper and they didn’t do it. With a new Fed chairman coming in January, the best thing the present chairman could do would be to start the tapering. If they don’t get started before she takes over, the politics are going to make it very difficult for her to start it after the fact. Expect they will do it before the end of the year.

Instead of buying a Straddle could I just as well Short the stock and buy a Call or, if the stock is paying a dividend, Buy the stock and Buy a Put? This is not the same strategy. A long Call and a long Put is simply a non-directional trade. If I’m shorting a stock and buying a Call, I’m taking a short bet and hedging my risks. If I go long a stock and Buy a Put to protect myself, I’m actually bullish. A Straddle is not a bullish trade, it is not a directional trade at all.

Any guidelines in buying back “in the money” covered Calls? Let’s say you had a stock that is trading at $50 a share and you sell a $55 Call option and you pick up a couple of bucks. Then the stock rallies past $55 and you are now in a position where the stock could be called away but you don’t want that to happen because you think there is more upside. You Buy the option back and roll it up to a higher strike price. It would be closed out at a loss quite likely and then roll it up to maybe a $60 Call. The point he would do this at is the point where the option has gone in the money and it depends on whether or not he thinks the underlying stock has continuing growth behind it. If it was a gold or oil stock, he would let it be called away.

Markets. Because October is a challenging month on a seasonal basis, plus the freeze up that is going on in Washington, from a technical analysis perspective, it looks like we are in an intermediate correction and he could see an S&P 500 pull back of 6%-10% giving a buying opportunity as there is lots of time left in this bull market.

Markets. Government shutdown & debt ceiling is all noise. His clients are up this month. Clearly good news for Canada as it is smarter this time. Looks like the plan is to do an increase short term for the debt ceiling. A good business is a good business. He is 100% invested. Stocks are the best place to be and he is also in some bonds and convertible shares. You cannot be in cash. Valuations on companies he is interested in are very constructive. Stay away from emerging markets because they have not done well, although he likes companies that have some exposure to emerging markets. He stays away from gold, base and precious metals as well as resources. Avoid anything with a PE over 15 or 20. He increased US exposure to 30%.

REITs’ Recovery. Interest rates have come back off a bit but we all know they are not going down to 2%. REITs will have to prove they can raise rates, get good retainers into Canada and show the Canadian economy is improving.

Economy. IMF lowered their growth outlook for the global economy from 3.1% to 2.9% for 2013 and 3.20% to 2.6% for 2014. This is because of the Washington induced uncertainty that has come out which is creating uncertainty globally. This is not the 1^st time that Washington has had challenges in terms of debt ceilings or budgets. If the market sells off between 3%-7%, it is a healthy level to get back in.

Crude oil. Believes $103 price is sustainable. Geopolitical tensions (Syria) pushed the prices north of $110 a barrel and then once the Russians and Syria struck a deal so that the US would not invade, the price pulled back to $103 level. $95 to $105 level is healthy for oil. As global economies recover this bodes well for oil.

Economy. Debt ceiling problems in the US shouldn’t have an effect on markets, but it certainly can and is starting to show up. Rate of interest on one month treasury bills is way above what a three-month treasury bill is. There are signs of legitimate stress in the system, but US government is not going to default on their debts. This is an opportunity for investors if things get carried away and people start to panic and run for the exits. Seeing some signs of stabilization of the global economy. Europe has stopped going down. China seems to be basing and their electricity production and rail traffic is increasing.