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

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.

Commodities. Expects fairly flat growth in global economies. Supply/demand in copper is balanced this year so copper as well as oil are trading within their ranges. Expects copper to trade between $3.20 and $3.80 this year and oil from $80 to $90. Until we see stronger growth and stronger demand coming for these commodities, will probably see them trading around these ranges. Expects commodities to have a fairly tight situation for 2-3 years. In the juniors, a lot of stocks have pricing at very low valuation. On the producers’ side in the copper space, consensus is still too high. She’ll be looking for lower levels before stepping in.

Markets. Things are playing out as he expected. His plan was to raise cash at the end of March and he did indeed raise it to 43%. There are seasonal factors – TSX peaks out at the end of March and if you look at the S&P there was divergence, which was a warning sign to him. The spring peak just happened a little early. We are at a critical point in the US 5 year cycle and it was due to a peak around this time of this year. The commercial hedgers were net short the market over the last several weeks. Speculators and retail investors created a lot of inflows of money into the markets. There is usually a tendency for markets to bottom out between June and October, so he is looking at support levels. S&P has support levels of 1450, 1350, and 1150, but he doesn’t know which one it will bounce off of and wants to hold lots of cash until then. He is shorter term defensive and longer term bullish.

Stochastics are a fast moving indicator and you might want to look at that for day trading.

US Banks. Look ok. Have been moving strongly. They are beginning to have some profits taken. Thinks they will just move with the market over the next few months. They probably will correct to a certain extent.

Markets. Management, assets, payout ratio and leverage. 3 of 4 of these need to be favorable before he will allocate capital to the business.

Markets. Of all the asset classes, equities are still the best. If you want to own bonds and make 1% and pay half of that in tax and risk total devastation when interest rates go up, good luck. If gold does not go up when Cyprus tries to seize bank accounts, he doesn’t know what will make gold go up. Companies are making money and their profits are high. Because they are not hiring people, the job numbers are not spectacular but profit margins are really good.

Markets. He typically has 3%-10% cash in his portfolio and this is currently now at 7%. Always has a little bit on the sidelines to take advantage of any dips in some of the names that he likes. Expects this will be a volatile time over the next few months, particularly since the US market has had such a big rally here.

Markets. There was a bit of capitulation in the market and feels there was a “dump the resource stocks” sentiment. A lot of the resource stocks were down 5%-6% while non-resource stocks were down about .05%. He has been pretty light in resource stocks. In April, we are moving into a period of seasonal weakness and now is the time to go into your portfolio and sell the bottom 10%-15% of your low conviction stocks and then sit on that cash for a few months. June, July and August is the time to put that money back in the market.

Markets. He is focusing on the US because it is such an important part of the global economy. Next to this would be China because its growth has helped the rest of the world along. Even though Europe is going through troubles, it would be next because there are some good spots there, in particular in northern Europe. Lastly he would focus on Japan which has been very strong over the last several months. With the new prime minister and central banker, the yen has been weakening. As a result of the weakening yen, the Japanese market has been strengthening on the view that it is going to reflate. He is optimistic on healthcare, particularly in Asia but it is hard to find good stocks in healthcare in Asia. US has the leadership in healthcare.

Markets. Looking for a continued strong year. All the key ingredients are in place for 2013 for another attractive year in equities. Valuation climate is broadly supported and stocks are not particularly expensive in any of the major markets. Valuations are particularly attractive when compared to other asset classes. Bonds have negative real interest rates. Outlook for commodities continues to be mixed. Every central bank governor on the planet has communicated that the returns on cash will be zero in nominal terms and negative in real terms for a couple of years to come.

Gold. Has sold all his gold equities. Strictly speaking, gold is not a financial asset. Financial assets are stocks and bonds and they pay dividends and coupons which, you reinvest over and over again. This is one thing you want to give you the greatest odds of succeeding in investing. Every day the US economy is getting stronger and every day the moment when the fed backs off from quantitative easing and starts to look towards raising short-term interest rates, gets closer and closer. The downside risk when we get into that transition is tremendous.

Markets. He’d be a raving bull if the markets could do what they are doing without all the support of government injection of liquidity and artificially low interest rates. You have 100 Trillion dollars in unfunded liabilities in the US. They can’t decide where to cut; they can’t stop spending. There is gridlock. However, the markets are at all time highs and there are still risks in front of us. He would not rule out 1600 or 1700 for the S&P. Europe needs to stabilize and the US needs to keep kicking the can down the road.

Educational Segment. Are Markets Healthy. He looks at a series of charts:

Advance Decline Line broke out a couple of months ago making higher highs, good.

Percent of stocks making 52 week highs – a spike a couple of months ago and now fewer and fewer stocks are participating in the markets making new highs, bad.

Percentage companies above trend line (50 and 200 day) – Higher reading couple of months ago but now lower – looking ok right now but some weakness, neutral.

Call to Put ratio, neutral.

Sentiment readings, (bull vs. bear), neutral.

Summary: Ultimately there is a lot of confusion on the part of investors.