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

5 of the 6 big Canadian banks are having their annual meetings in April. What should retail investors look for at these meetings? The banks have had great Q4’s and great Q1’s in 2013. It is interesting to hear what they have to say but with a grain of salt probably. Will probably be hard-pressed to increase earnings. They will still attract investors who are looking for yield.

Markets. Nat. Gas. Has been a long term call of his. Everyone has drilled the most important parts of these plays and the rig count has come off. This tells people that you need north of $5 to ramp up activity enough. You have to be selective in Gas at this time. They have to be well managed, good growth rates, strong cost structures, good balance sheets. They will excel. We could see some lift in base metals in the second half of the year once China gets a strong foothold.

Markets. In the short term, he would like to see a pullback, but longer-term he is bullish on stocks. US economy is growing, but not fast enough to allow the Fed to change interest-rate policy. People have been worried about earnings growth but the reality is that you are seeing a little bit more coming from the top line growth, which is far more important. If there is a pullback, you should be a buyer because longer-term you are going to do better. This is a great market for looking for growing balance sheets and increased dividends. The opportunities are in the US.

Markets. There are stocks that are getting beaten up but still have great upside. There are a lot of great opportunities in the market. With the markets hitting these highs, some stocks are getting a bit pricey so you have to be choosy.

Markets. Constructive on the market because of a lack of any alternative right now. With rates continuing to be so low and confidence starting to creep back into the retail investor, you don’t want to be too, too bullish but, at the same time, you don’t want to be running for the hills. Right now we have gone through a couple of the early stages of the bull market. We are now sort of in the optimism stage and could have another year or 18 months before we get into the euphoric stage. Valuations are still pretty reasonable.

Markets. If the Cyprus situation had happened 2 years ago, the markets would’ve taken it a lot harder. If you could somehow delete those items from your headlines over the last couple of weeks, he is not sure that people would even have known that Cyprus even happened. He is finding value in the US right now. It has many positive factors right now including creditor expansion where the banks are starting to lend again. This gives a couple of positive spinoffs. 1) Consumers are starting to borrow again after years of paying down debt and 2) for businesses in the 4^th quarter of 2012 we finally saw an uptick in borrowing.

Markets. He is still defensive, but rotating into more growthier names. Although the energy/resource side of the market appears cheap there are a lot of things trading $.50 on the dollar. If you have patience, there is some good value there. Canadian banks still look fine with 4%-5% dividends and a little bit of growth.

Markets. Dutch finance minister announced a radical change in how they re-structure banks, with big depositors to take a hit. If you lose confidence in the banking system and can’t trust it then the system doesn’t work any more. It’s toxic. It’s time for the depositor to look at the quality of the bank. He is a bull if the central banks pull their support away. Stocks are not cheap nor expensive, relative to historical price earnings ratios. Markets could go 40% higher if people come out of bonds and into equities. 57% of Spanish youth under 25 are out of work. They need to leave the Euro and depreciate the currency and sell things cheaply to the rest of the world so the youth can go back to work. Austerity is not working with debt at the level it is. A trillion US$ deficit over the next fiscal year. US will be buying the same amount in bonds.

Gold. It’s a puzzle how Spain and Portugal are showing problems and there are fears of a European bank run, yet gold has sold off. Doesn’t believe central banks are trying to manipulate gold price. There may be a ceiling as to how high gold can go in terms of consuming it for jewelry. Gold will go higher but not at the clip it has been.

Educational Segment. Tracking European Sentiment through an ETF. EUFN allows following the market sentiment. The European financial sector made highs in 2010/2011 but US XLF-N just recently took out highs and made higher highs. The trend line of the last 6-8 months has broken, though. Europe is starting to break down here, lead by the financials and that is problematic. Watch this closely. If Europe is going to be healthy then European banks need to be healthy.

Markets. Cyprus is what they should have done all along – make sure insured depositors are covered and uninsured depositors are not. We as investors have to be concerned about this. When there is a weak banking sector in any country we have to worry about contagion. The markets are in for a rougher ride than we have seen for the last 9 months.

Markets. The Cyprus situation demonstrates the complexities of what is going on in Europe. You can expect more dysfunctional commentary coming out of Europe. It is many different countries, a lot of different constituencies, a lot of politics involved and a lot of big problems that are very, very difficult to solve. Expect they will continue to muddle their way through this. Spain is a big deal. Once Spain starts to go, then Portugal starts to go, etc. Equity markets having risen so much, he thinks they are susceptible to shocks and wouldn’t surprise him to see selloffs on uncertainty.

How does the volume affect the price of a stock? Some companies trade very well even though they have low volume because they are not widely followed. It does mean they can be a lot more volatile. On stocks like this, you should use price limits and be sensitive to the price you pay and be prepared to hold them for a considerable length of time and ignore short-term swings.

Heard that central bankers printed over $12 trillion in the last 5 years. In 2008 and 2009, a lot of people were shown to have behaved very, very poorly and the central banks stepped in the breach to help a lot of people out. We continue to work our way through this crisis. There is no right answer.

Markets. Markets are going to have to endure the financial turmoil of the euro zone, Cyprus, etc. for years to come. If it’s not Cyprus, it will be somebody else next year. You have to be careful with your stock selection and be reasonably defensive in the kind of stocks you have in your portfolio. There is not much else you can do. She is concentrating on dividend growers as this demonstrates the company is doing well. Resources are not the kind of stocks you want to own in this kind of environment because you have the commodity risk, financial risk, geographical risk, etc.