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

Nat Gas. Is it support or breakdown? There is a lot of supply over the next few years. The move below $2 was an extreme. It will now trade within a range for 3-5 years. FCG is a way to play it in the US. He has been nibbling at ECA.

Educational Segment. Is it time to sell-in-May-and-go-away? Year to date chart on the Dow. It crossed it’s 50 day average to start the year. It has been straight up generally but now we have a pause. Next chart has 7 Dow stocks and some have started to break down. IBM had a major break down recently. 3M – lower lows and lower highs. GE is starting to roll over now. At a market peak, the stocks start to roll over one by one. There’s lots of other signals, but this has been going into play for a couple of months. We are starting to see more and more of a decay. Go away, but where are we going down to? He is looking for a relatively minor correction – 5-10%. If the trend line from 2009 breaks then it will be different and we get a more significant correction.

Markets. Revenue growth is missing. Margin growth is expanding but can that continue. What is positive is that 70% of companies beat estimates. Stocks are not extremely expensive if you think the global economy is recovering. If top line comes in as it should you would see a lot of momentum. Materials are overweight. Recovering housing in the US and earnings momentum are catalysts. Seeing a little bit of risk-on but is it sustainable? What is happening to China? Can they support he materials and what they are producing? He is positive on gold and there was a bounce in copper prices. He is less cautious on the copper front but positive on gold.

Markets. The underlying economic data has continued to decelerate. Manufacturing, income and survey data in the US has all been weak as we have come out of the 1^st quarter and head into the 2^nd quarter. Earnings, by any measures, were not spectacular. He focuses on free cash flow in companies.

Markets. We are in a very, very slow measured recovery and people are justly worried about how sustainable it is. US is growing, housing prices are firming up and employment is creeping back, numbers in the US appear to be going in the right direction. There have been some major corrections in materials and energy and longer-term investors should be starting to pick away at these.

Insurance companies versus big banks? He owns a little bit in both sectors. Insurance companies were very hard hit during the financial crisis and have gone a long way in mitigating their exposure to the markets. Have revamped their business lines to a great extent and are now selling more profitable, less front-end load products. In a diversified portfolio, there is no reason why you can’t have a little bit of both.

Gold. A lot of central banks have leased out their gold. For governments and individuals to get their physical gold, it will take years because it has been leased out. In the last 2 days, the equivalent of 27,000 tons of physical gold was sold in the paper market. As we get to the end game, there is going to be a spread between the paper market and the physical market. To him the paper market is worthless. Price of gold might have come down, but the gold price hasn’t. To him, you have to own the producers. Nothing else matters.

Markets. Bullish on wall street. With this volatility in gold he is only deploying new cash in the US markets. If he has a lot of hedge ETFs he gets some that are not hedged. He has been using the VB, which is 660 stocks, generally more diversified and mid cap, generally lower cost. He has never been a gold bug. There are some good trading opportunities for those that want to trade gold. The XIUs are as a far as he is willing to go.

Leveraged ETFs. Doesn`t like leveraged ETFs. Not for investing.

Markets. Earnings have been relatively good and will be reasonable through this year. We got a pullback in the TSX but he would like to see it in the S&P and Dow. He is sitting on about 8% cash. Thinks he will be able to start buying into May or June. Looks for companies with a nice balance sheet that pay a good dividend. In the US economic numbers are not that robust but in the 3^rd and 4^th quarters you will see it is very different. There is an opportunity to buy European companies and to do quite well with them down the road, but there will be volatility.

Market. There are worries about the commodity sector, which dominates the TSE and this is an area where he is somewhat underweight. Has been moving his weight up in foreign equities. When he runs his wider screens, he is finding better quality companies at even more attractive valuations in the US market. A lot of companies he owns have been growing their dividends at 10%-15%. Likes the iPhone and Tablet market. (See Top Picks.)

Markets. 1^st quarter we had a big run as we have historically had, which was on the back of the RRSP and the 401K in the US. Typically after Q1 we see a slowdown. Then towards the end of the 4^th quarter the market starts to pick up and repeat the cycle. Intensity of the 1^st quarter was actually stronger than it has been in the last 4 years. He is expecting the US to continue to recover. Industrial production is continuing to improve, as it has done in the last 4 years, and coming off a very low employment level. Europe is getting the bite of austerity and that is starting to show up in a number of companies’ earnings. Also higher taxes are there, so slower growth in Europe is going to be the main thing moving forward. Asia generally is recovering. India is an interesting pocket and has had some interesting numbers. Latin America generally is going to have a slower period of growth, really on the back of lower commodities. Generally modest growth globally but there will be some pockets to pick up for those looking for global exposure.

Japanese automakers, Toyota and Honda, taking into account currency risk? He is a real sceptic of ??? economics which is ultimately driving down the currency. To believe that there is not going to be any response globally from the Japanese devaluing their currency is a little naïve. If the Japanese are going to decrease the value of the yen to stimulate export demand, you are either going to see some currency battles or trade barriers, etc. Thinks this is just a phantom run. Wait and see for it to break down.

Markets. Canadian market has been lagging, mainly because of our resource exposure as opposed to the emphasis in the US on non-resource names. He has been taking some risks off since the middle of March, partly on the “Sell in May and Go Away”, which now seems to have stretched to April.

Long and Short strategies. Use technicals, fundamentals or a combination of the 2? As a fundamental investor, he doesn’t use any technical analysis. When he is positive on one company, he looks for an opposite side to pair it with. He generally uses pairs but not always. Sometimes he’ll have a lot of conviction on the situation where it requires a Short.