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

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.

Markets. Central banks have flooded markets with capital. GICs are yielding 1-1.5%. It gets to the point where there is no alternative except for the equity markets. Stocks with good balance sheets and that pay dividends are hitting 52 week highs. These companies do well unless interest rates are rising, which he doesn’t see them doing in the short term. You would want to hold these for another 5 years. He is expecting weakness over the next 3 to 4 months. These companies do well unless interest rates are rising, which he doesn’t see them doing in the short term. He would be buying on weakness that we may see over the next 3 months.

Markets. Expecting slow growth globally. There will always be some issues such as environmental, weather and economic. Investors have to gear down a little and take some precautions. Look at different kinds of things that are out there. There are always thoughts that the stock market duplicates earnings growth, but that is really not the case. Just because markets are at an all-time high, it is not the greatest time to be an investor.

5 of the 6 big Canadian banks are having their annual meetings in April. What should retail investors look for at these meetings? The banks have had great Q4’s and great Q1’s in 2013. It is interesting to hear what they have to say but with a grain of salt probably. Will probably be hard-pressed to increase earnings. They will still attract investors who are looking for yield.

Markets. Nat. Gas. Has been a long term call of his. Everyone has drilled the most important parts of these plays and the rig count has come off. This tells people that you need north of $5 to ramp up activity enough. You have to be selective in Gas at this time. They have to be well managed, good growth rates, strong cost structures, good balance sheets. They will excel. We could see some lift in base metals in the second half of the year once China gets a strong foothold.

Markets. In the short term, he would like to see a pullback, but longer-term he is bullish on stocks. US economy is growing, but not fast enough to allow the Fed to change interest-rate policy. People have been worried about earnings growth but the reality is that you are seeing a little bit more coming from the top line growth, which is far more important. If there is a pullback, you should be a buyer because longer-term you are going to do better. This is a great market for looking for growing balance sheets and increased dividends. The opportunities are in the US.

Markets. There are stocks that are getting beaten up but still have great upside. There are a lot of great opportunities in the market. With the markets hitting these highs, some stocks are getting a bit pricey so you have to be choosy.

Markets. Constructive on the market because of a lack of any alternative right now. With rates continuing to be so low and confidence starting to creep back into the retail investor, you don’t want to be too, too bullish but, at the same time, you don’t want to be running for the hills. Right now we have gone through a couple of the early stages of the bull market. We are now sort of in the optimism stage and could have another year or 18 months before we get into the euphoric stage. Valuations are still pretty reasonable.

Markets. If the Cyprus situation had happened 2 years ago, the markets would’ve taken it a lot harder. If you could somehow delete those items from your headlines over the last couple of weeks, he is not sure that people would even have known that Cyprus even happened. He is finding value in the US right now. It has many positive factors right now including creditor expansion where the banks are starting to lend again. This gives a couple of positive spinoffs. 1) Consumers are starting to borrow again after years of paying down debt and 2) for businesses in the 4^th quarter of 2012 we finally saw an uptick in borrowing.

Markets. He is still defensive, but rotating into more growthier names. Although the energy/resource side of the market appears cheap there are a lot of things trading $.50 on the dollar. If you have patience, there is some good value there. Canadian banks still look fine with 4%-5% dividends and a little bit of growth.

Markets. Dutch finance minister announced a radical change in how they re-structure banks, with big depositors to take a hit. If you lose confidence in the banking system and can’t trust it then the system doesn’t work any more. It’s toxic. It’s time for the depositor to look at the quality of the bank. He is a bull if the central banks pull their support away. Stocks are not cheap nor expensive, relative to historical price earnings ratios. Markets could go 40% higher if people come out of bonds and into equities. 57% of Spanish youth under 25 are out of work. They need to leave the Euro and depreciate the currency and sell things cheaply to the rest of the world so the youth can go back to work. Austerity is not working with debt at the level it is. A trillion US$ deficit over the next fiscal year. US will be buying the same amount in bonds.

Gold. It’s a puzzle how Spain and Portugal are showing problems and there are fears of a European bank run, yet gold has sold off. Doesn’t believe central banks are trying to manipulate gold price. There may be a ceiling as to how high gold can go in terms of consuming it for jewelry. Gold will go higher but not at the clip it has been.

Educational Segment. Tracking European Sentiment through an ETF. EUFN allows following the market sentiment. The European financial sector made highs in 2010/2011 but US XLF-N just recently took out highs and made higher highs. The trend line of the last 6-8 months has broken, though. Europe is starting to break down here, lead by the financials and that is problematic. Watch this closely. If Europe is going to be healthy then European banks need to be healthy.