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

In the next year do you see a 3%-3.5% 10 year U.S. Treasury? If so, what impact is it going to have on utilities and dividends? Expects there will be higher yields over the next several years. One of the problems is that people concentrate on the short end of the curve which the Fed has the ability to change. It is really the long end of the curve, 10-30 that makes a difference. Doesn’t think rates are going up substantially so if you see a large pullback in any these companies, he would look to buy them.

Is there any arbitrage advantage in holding Canadian stocks out of the US exchanges because of the currency valuations? He would feel that any advantage would be arbitraged away by sophisticated traders who buy the currency, etc. Brokerages charge you a lot of money for foreign exchange so make sure you are not getting ripped off.

Markets. Looks like bond yields are going up and we are going to touch 2.50 on the 10 year US treasuries and perhaps something similar in Canada but he doesn’t think they are going to go up enough in the short term to cause much damage to stocks. Technically, markets are overbought. Bull/bear ratio is close to 3 and that traditionally calls for a correction. Margins are at record levels which is worrisome. However, price/earnings ratio based on forward earnings on the S&P 500 is 14.3 which historically has been between 7 and 22 since World War II. Looking out 2 to 3 years, he is very bullish.

Gold. Likes gold but thinks we have to see some basing and we are in the process of seeing that between $1300 and $1400. Because of the continuous printing of money, which has been a total debauchery of the currency, at some point, they are going to have to have a new currency system and gold will play a key part and the price of gold will be very much higher.

What would your favourite stock be assuming the Keystone pipeline gets approved? What immediately springs to mind would be Crescent Point (CPG-T), mainly because you would see a narrowing of the spreads. Also, Canadian Natural Resources (CNQ-T). TransCanada (TRP-T) would have a bit of a run.

Bell Canada (BCE-T), Telus (T-T) or Rogers (RCI.B-T)? There are a couple of interesting things that have happened in the last few days. First of all Telus trying to buy Mobilicity. He is not sure this is going to work. If it doesn’t, then the question becomes what happens to these marginal players. If the marginal new producers fall by the wayside, then the government is going to have to rethink its competition policy. Of the 3 companies listed, he feels Rogers has the best potential growth rate at this time and is probably the cheapest in terms of P/E ratios. BCE is a well-run company but growth is not there is much as there is for the other 2.

US economy is slowly picking up. The housing sector is coming back. There is a rumour that they've found a reservoir of oil, containing 50 billion barrels which will make the US energy independent. This is great news for the government and for consumers as it will lower gas prices. The US dollar will be gaining against the Canadian dollar so it's best to invest in the States so you get the gain from the investment as well as the gain from the US dollar rising against the Canadian dollar.

Markets. S&P 500 is looking a little frothy and getting away from the 200 day moving average by about 15%. Doesn’t happen often but when it does, you are looking at a 100% drop in the S&P 500. Don’t be afraid of the inverse ETF (shorting the S&P) for a very short term trade. Will feel a lot more comfortable once the summer is over.

Markets. Thinks the current rally has legs. Foremost is the excitement with the economy which is picking up. Whether this is because of housing prices, which are strong or the employment gains, these are all leading to consumer confidence and better economic outlooks for the US. This is spreading down to corporate earnings, which are strong. Companies continue to do buybacks. There may be pullbacks, but if so, they should be bought.

Markets. Doesn’t think Fed will cut rates. Canada should underperform because of Commodities. Dollar should drift back to $0.90US by 2014. China is a manufactured economy and will grow at 6-8% for the next few years.

Banks. He would wait here. Maybe the earnings come out and you get a tiny pop. The US market is stretched so there is a correction coming and Canadian banks will come back to recent lows. For new money, be patient.

Uranium sector. Likes it long term. Uranium prices are holding in the $50 range. There will be a lot less supply going forward. It will take time to come back. It is completely depressed right now. Nibble away during weakness in the summer. Potential to for stocks to double in 3-5 years.

Educational Segment. How to get more Bang for Your Buck. How to protect your portfolio as the Canadian dollar weakens. Looking for $0.90 dollar in the next year. Our banks may underperform other markets in the world. BMO have a couple of other fixed income ETFs - hedged and unhedged. You can play US sectors in Canadian, hedged or unhedged dollars. One with a higher dividend is just south of 4%. If Canadian dollar goes to 90 cents but you get a 4% dividend, you might not get any impact from a 10% correction in the US market. You have a choice to access the US market with hedged or unhedged ETFs. You don’t pay US estate tax for High Net Worth investors, using Canadian ETFs investing in the US.

Markets. There are a bunch of red flags in the US. A little different in Canada. Sentiment amongst investors has become overly bullish. Debt levels (margin debt) and short covering. Just like 2007. We are at 3 standard deviations from normal. The last three times this happened, you saw a 10% correction shortly thereafter. Gains in the markets recently are fueled by short covering. He is a little bit more short than normal. He will look at shorting the more cyclical areas of the market. It could be the end of this bull market, perhaps it was last week in that reversal. It will take a little time to play out. We are close to a major peak in global assets.

Market – This is a 48 month old rebound Bull Market. The previous Bull ran 60 months and this one could run longer. The modern Bulls are running longer than the historic Bulls. This is probably because of the global economy. Expect this could rage on for another 12-16 months. He also expects a normal sector rotation into the ones that are lagging. This could favour Canadian energy and materials. In normal sector rotation, the leading sectors are financials, utilities and telecoms which are interest sensitive. Healthcare and industrial would follow. The laggards are energy and materials. 2 examples of places to avoid are utilities (SPDR Utilities –XLU) and REITs (iShares Cdn Reit – XRE). He would definitely go to energy and materials.