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

Gold. There are a lot of negative comments, but they are not really looking at the big picture. The big picture keeps getting stronger and stronger and we should come back and review what is going on right now. When there is a spread between reality and perception is when you really make money. He has never seen this spread bigger than what is going on right now. Physical demand is outstripping production by a huge amount. Most of that deficit is coming out of the central banks. Central banks have gotten rid of the gold. The Germans have started to ask for their gold, so the music is stopping.

Markets. The pull back is more of an opportunity to put some of the cash you have to work. Markets go through cycles. Retail investors are cautious about getting back into equities. There is still some runway in this bull market. She is bottom up but selective in picking her spots.

Resource Stocks. Thinks the pressure they are under has to continue. Junior market is pretty much dead. A lot of them are desperate for financing, which they are not going to get. Shareholder destruction is breathtaking. The one good thing is that they are going to be more careful in expanding. Some of these projects are going to get shelved, or mothballed at the very least. Production growth will be reined in, which will hopefully moderate supply, which will bring prices more into balance and that will allow them to start over.

Markets. Generally constructive on the markets overall. In the low interest-rate environment, where are you going to go? You can’t hold your money in bonds. He read that there are tens of billions of dollars sitting in GICs and the ones in 5 year holdings are going to mature soon. If people are looking at solid, blue chips that pay good dividends, they don’t have to grow much.

US financials. Thinks these are going to lead the way. Have slowly fixed their balance sheets. Housing market is coming back so mortgages will be coming back on side. (See Top Picks.)

Gold. doesn’t perceive gold to be cheap by any means. Wouldn’t surprise him if the price came down further. Very, very difficult for him to find gold companies now that fit on his Watch List.

Gasoline. One of the strongest seasonal trades from the end of January through to the end of April. 14 of the past 15 periods had an average gain of 21.9%. This is a time when refiners are going from winter gasoline to summer gasoline and they shut down their refineries and do their maintenance, so inventories of gasoline start moving lower. (See Top Picks)

Markets. Historically, in the year after a US president is elected, markets go up right through until the 1^st week in February. Then the market tends to take a bit of a shallow dive until the end of March. After that, the markets then move higher and by May they are at new highs and the market historically peaks right at the end of the year. Any weakness you see in the next 3-4 weeks is a buying opportunity, particularly in sectors that have strong seasonality at this time of year.

Gold. The best time to own gold is around the middle of July until the end of September.

Markets. He now has his own research firm. He does not invest so he offers conflict-free opinions. The great rotation out of bonds into stocks is actually starting to happen. 1.5% interest rates are not going to cut it. Studied bull markets. They are always criticized when they start. 2008 is still in people’s memory. Valuations are not reflecting the reality of corporate performance.

Markets. We are seeing a continued search for yield. Some of the utilities, telcos and pipelines today have extraordinary multiples. Investors clearly understand that they are not going to get rich in bonds or preferred shares, so are looking for something else and prepared to take equity risks. They are bidding up prices. We are seeing movement away from precious metals and from materials in general and some movement into cyclicals such as industrials and consumer stocks. Expect in the next few months there will be a significant pullback because people get over exuberance, buy stocks and then you have a 5%-10% pull back. But with interest rates this low and with the multiples on the major indices really overextended, you are paying $7 for $1 of earnings but $50 for $1 of interest when you are buying bonds.

Markets. Markets are going up and he has never seen people so worried. We just went through an answer to the fiscal cliff and on March 1 they will get the sequester. We are actually seeing a secular move in the change in the US federal government in terms of trying to balance the deficit. They don’t have to do it all. They may have 1%-2% of GDP. The market loves the fact that the government is getting a hold of their budget deficit. Equities, in terms of valuation, are enjoying this fact and this is what we are seeing. His shop is looking at this as the start of a bull market that could last 5-8 years.

Markets. There are 9 insiders selling for every one buying. Some of this was tax changes in the US. The last time it was like this was last March and it lead into a market correction. The previous time it was this high was 2001. They are looking at their company’s own share prices and wondering if this isn’t a good time to take some money off the table. Dumb money (least sophisticated) is buying. The Russell 2000 is outperforming the S&P500, which indicates the market is taking on more risk. Risk is returning to the market. This is usually an indication of a top - sometime over the next couple of months.

Market Correction. S&P peaked around 1550-1565 several times in last few years. A typical bull market is about 4 years. The typical bear market is less than a year. We are at 3.8 years so are due for a bull market peak (next few months). Expects 10-20% correction and then it will be a great buying opportunity again.

Gold. He has a 6% position in his equity portfolio and is unhappy with it. $1600 support level hopefully will hold, otherwise it is at $1550. If it gets below that then sell it. He is holding for now. There is a big cycle of gold that is coming to a peak right now but you can trade it in the short term.