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

Banks. What % of a portfolio should be put in large Cnd banks? What % would you put in bank of Nova Scotia (BNS-T) versus others? Depends on your portfolio, outlook, objectives and risk tolerances. He is more bullish on the market than he has been in a while, which might cause him to purchase more cyclical stocks, growth oriented vehicles, etc. For his clients portfolios, he is getting roughly 3.5%-4.5% with capital gains of 4%-6% for a total anticipated return of 10%. If you’re looking to shoot the lights out, you shouldn’t be in banks. Scotia is not his favourite at the moment. (See Top Picks.)

What would be your hot pick in the water sector? He wouldn’t buy water utilities. He wants people that purify water, conserve water, recycle it, etc. Within that parameter, he has a Top Pick. There are also 2 others he may consider buying, Xylem (XYL-N) and Watts Water Technologies (WTS-N) but has probably gone past his point right now.

Educational Segment. There is a push for transparency on fees. ETFs are great that way. Nobody works for free. Front end load says you pay the fee upfront when buying a fund. A deferred sales charge charges the client when they get out. ‘F’ class is where the fee is charged outside of the funds.

Markets. When Obama came in he had to deal with the financial crisis, but this term he has to deal with a divided house and the grid lock. February will be very interesting. He thinks the US can fix a lot of these issues but they have to make hard choices. They are going to kick the can down the road and this could overhang the markets much of 2013. The markets are acting well and we are making new highs now. But the market is going to test the highs from 2000 and 2007. As we start to get stronger we should consider taking some money off the table.

Markets. We know there are still problems with the US budget spending and that will come out in the next 6 weeks to 3 months. But Obama is dealing with a better economy than last term. He was in crisis management mode but now he can think about policy. The S&P did better than TSX because it is more diversified. He is not changing his investment policy in Obama term 2. He likes dividends and golds. He says it is time to put your contrarian hat on, but dividends are still the main focus.

Yellow Media Bond. 80 cents on the dollar when the new bonds were issued. He is going to be transitioning out of them in the next year. You get well compensated for owning a distressed bond.

Markets. January 2012, January 2011 and January 2010 data was improving globally. Investors bought on that and were very disappointed each summer. Feels it is different this time in that you have 1) US housing on board 2) better ECB backstop now 3) better growth in China. Politically there is a Federal Reserve that doesn’t have an expiry date on their purchases. The implication of this is that you are going to see money tease out of the bond market over the next year, which will have implications for various sectors.

Your criteria for Protection Strategies? Do you use Put buying versus Call selling and Stop Losses? Does your criteria change based on the size of the trading range, volatility of the stock or pays a dividend or not? Uses all of the above. You want to be really efficient. Need to have a toolkit in place. You want to have an option ability in place so that you can empower it to do things when it’s logical. Put Buying is usually expensive and the Put usually expires worthless. Selling Calls is easier. You get the premium but it really depends on the situation.

What are some of the key parameters to look for in a potential stock? Price and safety and it is really nice if you have a dividend yield that is sustainable. It really comes down to price. Even if it is not a very good thesis, but is mispriced below where it should be, that’s an opportunity.

Double bull and bear ETFs. If the markets are trending, then holding them works in your favour. But if they go up and down on the way up, it really hurts the NAV in rebalancing.

Markets. Market valuations overall, particularly in the US, are at little on the elevated side. Believes that all this global quantitative easing stuff are going to keep values up and we are going to find out it is not a “stock market” but is a “market of stocks”. Feels there are some sectors that you can do well in this year. Thinks there is a bubble forming in the income stocks. People are so starved for yield that they are starting to reach for it.

Is Short Selling ethical? A lot of people think short selling is not ethical but he thinks it has a definite place in the market. If you feel that a company is overvalued, or that the company has been putting out unethical numbers, why not say that you dislike this and take a position.

Do you use trailing stop loss orders on any stocks that you own? He doesn’t use stops at all. Thinks they are a fools game. If the stock goes down in value he wants to know why and if he should take a tax loss. If he had used Stops, many of his big money winners would not have happened.

Do you recognize any companies in the Healthcare Insurance Field that has great growth potential in the US in the next 6-12 months? He never knows within 6 to 12 months. Right now he has none on his list.

Markets. It’s still a 4 year old bull market. They end on Euphoria, which we are a long way from. Fixed income yields are very low and valuations are reasonable in equities. Looks like another year like last year. Thinks Canada will move in tandem with US this year. Would rather be invested south of the border. More diversity and you won’t get hit with exchange rates. Likes global industrial companies.