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

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.

Markets. Cyprus is what they should have done all along – make sure insured depositors are covered and uninsured depositors are not. We as investors have to be concerned about this. When there is a weak banking sector in any country we have to worry about contagion. The markets are in for a rougher ride than we have seen for the last 9 months.

Markets. The Cyprus situation demonstrates the complexities of what is going on in Europe. You can expect more dysfunctional commentary coming out of Europe. It is many different countries, a lot of different constituencies, a lot of politics involved and a lot of big problems that are very, very difficult to solve. Expect they will continue to muddle their way through this. Spain is a big deal. Once Spain starts to go, then Portugal starts to go, etc. Equity markets having risen so much, he thinks they are susceptible to shocks and wouldn’t surprise him to see selloffs on uncertainty.

How does the volume affect the price of a stock? Some companies trade very well even though they have low volume because they are not widely followed. It does mean they can be a lot more volatile. On stocks like this, you should use price limits and be sensitive to the price you pay and be prepared to hold them for a considerable length of time and ignore short-term swings.

Heard that central bankers printed over $12 trillion in the last 5 years. In 2008 and 2009, a lot of people were shown to have behaved very, very poorly and the central banks stepped in the breach to help a lot of people out. We continue to work our way through this crisis. There is no right answer.

Markets. Markets are going to have to endure the financial turmoil of the euro zone, Cyprus, etc. for years to come. If it’s not Cyprus, it will be somebody else next year. You have to be careful with your stock selection and be reasonably defensive in the kind of stocks you have in your portfolio. There is not much else you can do. She is concentrating on dividend growers as this demonstrates the company is doing well. Resources are not the kind of stocks you want to own in this kind of environment because you have the commodity risk, financial risk, geographical risk, etc.

Gold. A lot of people in Europe are questioning that if the Cyprus government can take charge of people’s savings accounts, why can’t it happen to us. This is the weak link of Europe. Russians have said they are not going to loan to Cyprus, which has a lot of consequences. Bottom line, this is a fight between Germany and Russia. Thinks there will be a run on the banks when they open. Feels the risk factor is back on and gold is going to start to go higher.

Natural gas. Thinks the market is going to correct itself as more and more people start to use natural gas. It makes a lot of sense for utilities, trucks, etc. There is a big lobby push between US coal people and natural gas lobby. He is still not ready to invest in this sector.

Uranium. If he were to play the uranium sector, he would go with Uranium Participation (U-T) until he saw some price movement. At some point, uranium is needed as an energy component. If you are patient and want to start adding, this is a good place to be. Too early for him at this point.

Markets. Optimistic. It will be a solid year for equities. US economy is recovering. China is bottoming and coming out. Europe is a train wreck. The two biggest economies in the world are going to show decent growth. We may not be a leading indicator in Canada. He was in Switzerland recently and had to say that that part of Europe seemed to be fine. In Canada, he likes the consumer sector, and energy.

How do year end capital gain distributions on ETF products impact both registered and unregistered accounts? Do mutual funds treat this process the same? Both mutual funds and ETF’s are treated the same way. It is not surprising to see 10 times as much trading activity in the mutual fund as there is in an ETF. This does not affect registered accounts, but in a taxable account, that increased trading activity leads to increased capital gains and capital losses.

Pros and cons of index ETF’s versus those that are fundamentally based such as CUD-T? 6 of one and half a dozen of the other. Fundamental indexing is basically a screen where you have 4 equal weighted screens (25% each) that basically create a value tilt to your indexing and is not weighted like a traditional index is. If you like a value bias, then you should like the fundamental indexes more. If you want to track what you are reading in the paper, then you would want a cap weighted index.