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

US Markets. We are currently just above the 2008 peak and it is hard to imagine that we are at a new secondary run from here. Feels markets are priced for a little bit of a come off, but nothing spectacular. Jury is out on what the environment is right now. Looking at some of the metrics and some of the sentiment, we are in an overbought scenario. Looking at VIX (volatility index), we are at an exceptional low level. There is a good cause for correction, but as to the level of it, he doesn’t think there is a huge downside from here.

Markets. He doesn’t try to deal with the macro issues. He didn’t pay attention to the issue of QE easing, which ended up not happening. He picks good stocks, regardless of market direction. Opportunities are mid caps. They are under researched on the sell side and under owned by institutions. These are the sweet spot. He is constantly short stocks. He was one of the only funds in 2008 that had a gain.

Markets. We are seeing a bottom process on gold and also a bottom. We are definitely in the bottoming process or well beyond it. It feels like the bottom now. New money is starting to come into the sector. He is not expecting tax loss selling this year in resource and precious metals. If you have no exposure you should build a position over time.

Is the mining atmosphere in Ecuador turning positive? It became obvious the country was not very mining friendly. He is still skeptical that investment dollars will flow into this country. He is still wait and see.

Markets. Thinks markets are going from a “hope” phase to a “growth” phase. Equity markets are leading indicators and transportation, railroads and industrials are up 20%-25% year to date. These portend a greater broad-based economic recovery. We have gone from high volatility and hope, to low-mid-volatility and are now seeing normalized PEs. We are starting to see stocks with breadth of recovery and starting to see dividend paying companies that are really growing dividends and free cash flow. Those are the ones that are going to power through this growth phase for the next 3-5 years of the cycle. He sees a 3 to 5-year bull market in equities.

Pipelines. Highly differentiated by regions, geography and subsector. Pipeline business has been quite reliable in the US. You have to pick the right region, country, as well as the right pipeline operating company. Canadian pipelines have been a good trade for as long as it has lasted but is now taking a bit of a pause and is settling in its space. He would not be allocating away from energy but you have to be in the right region and the right company. Also, look at balance sheets. (See Top Picks.)

Preferred stocks are still trading at a little bit of a premium. Over the next 3-5 years you will get your coupon, but a good correction has already taken place considering the QE tapering that has occurred. Thinks we will stabilize for a number of months. You could get the 4% average yield or go for common stocks. Common shares will fall more than preferreds.

Educational Segment. Model Portfolio Update. Sept/Oct are often the challenging months. No change is needed this time. We are defensive and are getting a pretty good yield. The total return is somewhat soft based on the fixed income holding. Last week we added gold but it pulled back. The High Volatility Put Write Strategy did well. If the market tanks it could really be hit. What could viewers do going forward. We are underweight Europe. If Europe starts to get cheap we might want to rotate into it. No trades this week.

Markets. The new Federal Reserve chairman is significant to the markets. With Summers stepping back the markets are liking it. Larry likes the new favourite. But we are up against the August highs in US markets. We may get news on tapering this Wednesday and the market may not like it, so it could pull back. He is positive on markets, although not on the US economy, as long as the fed keeps up stimulus. With Syrian tensions easing in the last couple of weeks we could see some premium coming out of the crude markets. If we close below $102 then the breakout has failed and we will come back to the old trading range of $88 to $95 in the later part of the year.

Markets. It is the end of Summers’ rally J He is quite bullish on the markets so is on the long side. In Europe manufacturing activity is picking up. Economies are stabilizing quite quickly. Europe could be a very interesting place to invest going forward. Likes N.A companies with exposure to EU as well as Chinese companies. Retail spending within China is really pretty good.

Correction in September? Generally not a great time for the markets so not surprised people are talking correction. He does not sit and wait for it. Macro economics have a lot of positives that makes him think the rally can continue. Is seeing a recovery in Europe. The data is stabilizing. There is still an impetuous to stimulate economies around the world by governments.

REITs and their future growth prospects. Highly yield sensitive securities. As interest rates move up these stocks drop. But his outlook is for yield to stabilize here. An interesting time to take a look at those that don’t have big capital requirements. REI.UN-T is the benchmark in the industry and should perform well. Focus on high quality names that don’t need a lot of capital.

Markets. We are in the latter innings of this bull market in all likelihood. The S&P 500, rather than the TSX, is up over 20% over the last year, but this is more related to monetary policy, rather than growth in profits or growth in the economy. Markets should realign with fundamentals over the next year. The odds favour the Fed tapering by cutting back to 75 billion a month. That seems to be the majority of economists’ forecasts. He is concentrated in the dividend paying/growing areas which has been very choppy over the last few months. Feels that investors should be into some of the stocks that have been underperforming in the last while. For example, telcos have had very significant cutbacks.

Do you buy/sell according to market conditions or do you buy a reasonable company and hang on? He looks at stocks on 1) a 3-5 year view on their earnings per share growth or cash flow as well as 2) their potential for increasing dividends. Those companies that have strong, predictable growth and overall returns, in the low double digits area, tend to be his core holdings. Also, in a one-year timeframe, does a Buy, Sell forecast on a price, he would buy or sell. This leads him to buy new holdings or trim existing ones.

Canadian banks. What he particularly likes about these is that the PE multiple has compressed by about 1.5 points over the last 10 year average. Stocks are not expensive. There has been a lot of fear about a slowdown in the Canadian economy, although it hasn’t really impacted the domestic earnings of the Canadian banks yet. He sees 5%-10% earnings growth over the next 3-5 years and dividends should grow in line.