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

Resources. Natural gas is almost 5 years being down, heavy oil stocks haven’t gone anywhere for a long time and even in mining, there hasn’t been a single good story. However, today the world of resource investing is kind of okay. On gold, he has no idea where it is going, but you normally get a bottom in the summer which ended up at the end of June rather than the beginning this year. Looks like there has been a real technical bounce, which should last until the end of the year. On copper we are in the summer and it seems awful, but if you get a tick up, it is into the fall which is where you will actually get a rise on these things. If you need to be in this, it has to be in the summer. China just has to turn up a bit, which is a probable scenario.

Markets. He has been holding about 40% cash this summer and just raised another 8%. There are some bargains already starting to appear, especially in the interest sensitive things. There are some values in some of the higher dividend stocks but the truly interest sensitive stuff like REITs, they are a 100% cash flow oriented security, there is no reinvestment. You can see the sector rotation out of this type of thing and into some of the former ugly ducklings like gold. His target for the S&P 500 would be around mid-1500, which is right around the 200 day moving average. This would be a level of support.

Markets. Looking for a possible double digit correction. Over the past few days, there has been some weakness in the S&P 500, which broke through a key level of support at the 50 day moving average. Also, it was a horizontal level of resistance back in June that we cracked at 1655. We are now bumping up against this today and are due for a bit of a bounce as we are oversold. Seasonably, equity markets are the weakest come September/October as well as being the most volatile. The NYC Advance/Decline Line has distinctly stopped and formed a double top. This gives indication that the breadth is waning, we are seeing fewer and fewer stocks making new highs, momentum is fading which leads to a typical correction of double digit percentages. Also, the percentage of stocks that trade above their 200 day moving averages is rolling over too. When you see this rollover, the average decline in equity markets is about 12% and you can expect the same this time. This gives you opportunity to get in, in the fall.

Natural Gas. Period of seasonal strength for natural gas is from September into December, basically before the cold weather sets in. Has shown some strength over the past few weeks but the overwhelming trend is still lower. Wait for a higher low before getting into this.

Markets. This is a time to be careful and pick your buying spots carefully. It is very normal for us to have a rough September and October and then typically to get into a fairly reasonable market in the November through May period. He wouldn’t be as aggressive on financials as he would be on other sectors.

Markets. Expects 2013 will be the same as 2010, 2011 and 2012 where expectations will come down and markets will provide better opportunities. Going forward, he is shifting his focus from Canada to the US.

Loblaw’s (L-T), Sobey’s, Canadian Tire (CTC.A-T), and Hudson Bay (HBC-T) are thinking of spinning off their real estate into REITs, which one would you purchase? Would you suggest the company stocks or wait for the IPO? (Loblaw’s is the only one that is trading at this time under the name of Choice Properties (CHP.UN-T)) Everyone is doing it and who knows what is next. It really comes down to the interest-rate environment. When rates are going up, these types of investments go down. He found that Choice Properties was a little bit more favourable to the parent company. Would prefer to own the common shares of the underlying company.

Oil/gas. The majority of the Junior sector, especially if they are natural gas, have had a really tough time. Trading below BV and significantly below NAV. Access to capital when your stock is below BV is pretty hard to do. Companies have had to grow from within cash flow and many companies have not shown the growth and have been penalized by the markets. Also, if you are gassy, you are in trouble because US gas price is in the $3.40’s but the Cdn price is even below that at $2.40. Nobody can make money at $2.40. However, economics still work for liquids rich gas, but the gas as a by-product, doesn’t really count. Demand for energy in the US is not very robust and US has increased its capacity to about 7.6 million barrels so the demand for foreign sources is not there. His bottom line is that 1) we have too much oil 2) we are ending the summer driving season in a couple of weeks 3) we have much too much oil in inventory and 4) too much supply by OPEC. All of this should drive the price of oil down and expects to see a correction in the Oct/Nov window along with some tax loss pressures. This will give a fabulous buying opportunity. Expects he will go from the neutral/bear camp to the bull camp at that time.

Markets. The great rotation out of bonds and into equities – he thinks it doesn’t matter. Markets are up because earnings are going up. The bond market has collapsed but the equity market does not care. He thinks the great rotation will be within the market. Sees rotation into materials, tech, industrials. There could be a pause that refreshes, rather than a correction. Advance/decline line of the S&P is showing a top. But it is not a breakdown. The price trend has not been broken. It's just a bit concerning.

Hindenburg Omen. Has to do with advance/declines. He thinks it is a lot of nonsense. The next crash will probably not happen for another 15 years. Focus on reality.

Markets. The correction is not overdone. Many people have been expecting a correction for many months. They are normal and happen fairly often, at least every couple of years, 10% or better. There has to be a balance of risk and reward in the marketplace. The skittishness is rather healthy because it keeps the market grounded. He is more interested in what the companies do. It gives stock prices a solid floor. There is a danger of being underinvested in this market. There are those on the sidelines that try to time the markets. You need to set the proper asset mix as a foundation for your portfolio.

Markets. Some of the regulations around capital requirements cause banks to hold fewer treasuries. The fed has noticed spreads on prices for bond dealers are widening out a bit. AGG-N represents the bond market. He finds bonds attractive in the short term.

[Caller asked about debt ceiling affecting Dow] Thinks there will be a prime time debate in Sept/Oct. and could contribute to a correction (5-6%). Step into this with DOW below 1600. Consider ZWA-T instead.

What do you hold to protect against US going into default? Varies with each investor. Depends on whether you need income. Maybe use a bear ETF, or put options.

Educational Segment. Chart of global equity index and fixed income index. Stocks were at the top of the channel, during May, 2013. We got some correction but now they bounced back. Stocks are expensive relative to bonds. Looking at the last 4 tops, the corrections were sometimes significant and sometimes not. Keep some powder dry but don’t sell everything, or move all to fixed income.