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

Gold. This is a very seasonal product. You want to buy gold and gold stocks around the middle of July and play it right through until around the end of September. You should not be in gold at this time of year.

Markets. Seasonality occurs because of a series of recurring events. Markets tend to go up from November right through until the end of April. Has done it again this year. A couple of things to watch. First of all, you have 1^st quarter earnings reports. You also have economic reports coming out. Next week, economic data is not going to be so great either. First-quarter results on the S&P 500 and TSX 60 companies are expected to be zero on a year-over-year basis. TSX 60 stocks have started to hibernate. TSE composite’s had a double top pattern on the downside that was completed about 3 weeks ago. Stay away from the Toronto market.

He was on the show in May 11/12. For the next 6 weeks, the S&P 500 dropped 10.5% so it was a good time to be in cash or cash equivalents. The same thing happened with the TSX which had a 9.4% drop. It was a good time to hide. He went 100% cash. He has the same recommendations this year in his 2 Top Picks.

Buy 90 day treasury bills. Doesn’t stay in this all the time. Last year he went into fertilizer stocks around the end of June and went into gold equities around the beginning of July. Those 2 sectors have very strong seasonality at that time.

Markets. Currently, he has the most favourable outlook on Nat. Gas. Last year it bottomed at $2 and is at $4 now with considerable upside from here. There are vast amounts out there but it is a question of at what price is it economically viable to extract it. Recently, US Nat Gas companies have been performing better so for the time being he would look at the Canadian companies. Gold – he subscribes to the longer term thesis that with central banks racing to debase currencies it will result in inflation which drives gold. There was some talk in the fed speech of withdrawing QE.

Markets. In real terms, we are only back to 1997 levels. Although we are back to 1997 in real terms, inflation-adjusted, earnings have risen 45%, so we have much better value today than we had in 1997. Feels there is a lot more pessimism in this rally compared to the late 90s. Gets more worried when things are going really well because he sees opportunities when things aren’t going well. Investors should be very, very careful. Some of the safe/conservative investments are getting to levels that are outside their normalized valuation ranges. They are there because people are looking for a place to hide or gain an advantage in income or yield and they think their capital is absolutely safe. Some of these investments might be ahead of themselves in terms of capital depreciation.

Markets. Have been having some kind of a correction. Hitting new highs but has paused in the last few weeks and we are now, hopefully, into our 3^rd day in a row Up in US markets. Had thought a correction was overdue and he has some cash so on a decent correction, he would like to spend a little more. Has started to reduce his bond positions. They were 30% and he will bring it down to about 20% over the year. Risk/reward in bonds is too high and the outlook for stocks is much better.

Markets. Thinks we should believe in the US bull market but should believe that it will go up at the rate it has been, without an air pocket. Starting to see cracks in the US employment report which suggest that the effects of the payroll tax holiday and the sequester may be starting to kick in. If we have a couple of more data points like that, and you combine that with the ongoing problems in Europe, there might be a bit of a stall at least to this bull market. He would be adding on weakness. Japan is becoming a more attractive place to invest right now if you can do it in a currency hedged way.

Markets. Equity markets are driven by earnings on one side and monetary policy has an impact as well. We have been in a market that has been driven by monetary policy because the most economically sensitive group is just not really participating. We got another big boost as yield investors when the Bank of Japan publicly came out to say they were going to basically double money supply. In effect what they have said is that they were going to make bond purchases in excess of twice what the US Fed is doing. This basically means you are buying in bonds and creating liquidity in the system. 97% of bonds are owned by Japanese insurance companies. They have historically scoured the earth for yield so they are readily selling those bonds at .4 of 1% returns and turning around and looking around the globe at REITs, midstream energy assets, things that generate cash flow as a proxy on bonds and we are a big beneficiary of this in North America. He is more pro-US markets than Canadian at this point.

Markets. Economic recovery in the US is chugging along. Going forward, the profit growth scenario is very important so she is really looking this earnings season to see what the companies are saying and if they still think the outlook remains unchanged or if there is a negative bias. Earnings are expected to grow this quarter. Not very much, just 1.5%, a slower pace. The year as a whole of around 8% might be a little more positive given the strength of the US$.

Markets. Lousy jobs numbers Friday. US market originally went off 1.5% and then rallied back. It underlines that people are under invested. Thinks the market will roll over 3-5% over the next month or two. An opportunity for people to put money to work. People see a breakout in the US markets. If the US keeps throwing money and liquidity at this thing he doesn’t see why it won’t keep going. At least for now they are kicking the can down the road.

Oil. European markets, Brent crude has become the world benchmark. If we break through $105 then west Texas will break as well and we move back to 52 week lows. But Canadian energy stocks are discounting a pretty poor outcome.

Money Market ETFs. If you are with a discount broker then find their money market fund as it will be cheaper to acquire than an ETF.

Education Sector. The mystery of the 200 day moving average. It is the simple average price of the last 200 days of closes. People wanted to know that the long term trend was and this was easy to calculate and track by hand. There are about 252 trading days in the year and computers can calculate this average easily but this average stuck. Friday the TSX hit this average. When we got to this average in November 2011, it kept going. This year it bounced back. As support level it didn’t hold in 2011. We don’t know without the benefit of hindsight, what it will do this time. He likes the markets now that the TSX has pulled back and it is not a bad place to nibble.

Markets. The great rotation out of bonds and into equities hasn’t happened yet. We have seen a rotation into the defensive theme. The effect of each successive QE had been progressively less and less. Financials usually run on longer in the spring than the others.

Resources. There are several reasons for underperformance which has been going on for about 2 years now. A lot of investors got gun shy at the time of the Fukushima nuclear disaster. Another problem is the difference between US oil prices and Canadian oil prices. Finally, there has been chronic undersupply of commodities in the past and now all of a sudden, as prices are starting to get higher, supplies started to come on stream. He likes to pick companies that are at or close to production and are therefore generating cash flows with low cash costs.