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

Oil. does well from July to September. Don’t go in now as there is usually a lull. It has not broken out right now. You want to see a breakout.

Markets. Sell in May and Go Away. We came away from a strength on May 5^th. The S&P tends to lower .5% in this period and TSX drops 1.5%. There are opportunities out there. Some sectors do better at this time of year. Buy staples, health care, utilities, and anything that yields do better. Works on both Bay and Wall streets. He looks for a positive trend, wants to confirm the trend before he goes in. Sell in May and Selectively Go Away. You don’t want to end up with a half percent loss. Anything with a yield tends to do very well.

Markets. There are some very clear and long lived themes that continue to perform very well. The companies that are highly economically sensitive are not doing as well and companies that are benefiting from monetary policy and have a good dividend policy. Investors lack income replacement. Highly cyclicals are doing well, but consumer cyclicals are benefiting. Companies and sectors where their ability to pay is improving are doing well. Telecom, Real Estate Investment Trusts, and Pharmaceutical. These companies are willing to pay out more of their earnings. He avoids materials, energy producers, and golds.

When Interest Rates Go Back Up: Banks are good at managing their liabilities. Will not pose a problem. Higher interest rates allow them to widen out their spreads. Higher rates will mean economic growth and this will mean more loan growth, so you would expect banks to do very well.

Markets. On an inflation-adjusted basis we are only back to 1997 levels. But earnings are 45% higher. He feels there is some more room for upside to stocks but we are pushing fully valued. You have to be a really good stock picker. He is a bottom up manager but one has to be aware of where one is from a top down view.

Markets. Seasonality can get moved to left or right. He did not see any of his resource stocks move. But today we saw a little bit of pick-up. Doesn’t know if it will last. It could be a short term play. The TSX is not back to the ‘07’ highs. For the S&P we are at an all time high. We have a breakout from ’07’ high. We have to find out more about this high. Maybe it just sucks in more money. We see strength in defensive names. It is really a trading market.

(Top Pick May 14/12, Down 5.93%) Gold bullion.

Oil and/or Nat Gas Seasonality. We are getting a counter seasonal action. Sometimes it gets shifted. Oil did a little test recently. He would look at oil over Nat Gas right now.

Markets. Markets are grinding higher, although Toronto is lagging. Central banks need to continue to intervene. Earnings are continuing to increase, even if at a lower pace. Given all the asset classes, she sees no reason for a major pullback. Put money in dividend-paying strong companies. 35% of her portfolios are international, predominantly US or multinationals. If growth continues then you can start increasing exposure in cyclicals. She has very little base metal exposure nor energy. What she worries about is what she doesn’t know because that is what will cause a pullback.

Markets. We still have to see a complete wash-out in gold stocks, a capitulation. Bull markets usually end with blowouts and bear markets usually end with capitulations. Thinks we got started and doesn’t know when it will finish. We could wait until the summer low for that. There are too many gold companies out there and some will go away. The TSX venture has always had its performance from the top 10% of the listings. So this is a stock pickers market. First look at management: should have been serially successful. The ‘A’ teams are priced very, very cheaply. He is a gold bug. Believes the same thesis from when everyone was bullish is still in place now. We will see a range of takeovers eventually. He also sees a discovery cycle.

Markets. Chart of the total return index of the S&P looking back 15 years. He drew a trend line from 2000 to 2007 and then to where we are now. It underlines the need to diversify. Canada has been a terrible place to be over the last 3 years. It is 4% return per year in US$ but for Canadians it is zero because the CAN$ moved. You can buy ETFs that hedge.

Education Segment. To Diversify or Not. Canadians tend to concentrate in Canada so we are overweight commodities, mining, etc. In the last 3 years the world has done 10% per year including dividends and 75% of that return is from the US. The rest of the world has done a couple of percent. The US market is about 47% of the world. Canada is 4% of the world. China is 2% in the world index.

Markets. He is optimistic on equities outside of Canada because of less exposure to commodities, materials, oil and gas, and gold. These sectors will lag for 3-5 years. Although global demand is moving at a healthy pace, all of the above are priced in Canadian dollars and they will be weaker. The US will lead us out of the economic recession over the next 3-5 years. The US will lead us into a higher interest rate environment over the next 12-24 months and add strength to their dollar. Apartment REITs do the best in a rising interest rate environment.

(Top Pick May 9/12, Up 20.6%) 99 Cents Only Stores 11% Bond maturing Dec 15/19.

Algeco Scotsman 10.74% 10/15/2019. Modular building space. Works with mining camps, oil and gas sites, and government buildings. Very well established company throwing off a ton of free cash flow. There is no stock. Well diversified. Western and Eastern European companies.