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

Educational Segment. How to Manage an ETF Portfolio. Maryanne Wiley is the Guest. Look at 2012. Record inflows into the category. ETFs worldwide passed the two $trillion mark last week. There is talk of investors not getting back into the markets but now they are getting back in and choosing to use some ETFs. Transparency is important as is access. They provide better ways to do so. Investors are becoming wiser, living longer and need more money to get through retirement. They can increase returns or reduce costs and ETFs do a little bit of both. There are lots of places you can learn more together about the products or how to put together a portfolio.

Diversified Income Portfolio:

Aggressive Portfolio (Approximately the weighting of the world, for someone who has a number of years to retirement):

Markets. Thinks this year will be better than last. His US fund is up 8% this year. A lot of good things are coming together but he is cautious. Likes US financials and few Euro financials. RIM looks good. It is due for a pause and would buy on a pullback at $15.11 if he didn’t own it. Sees over double in earnings. Not sure what it will do tomorrow.

Economy. US economy, housing market and a lot of the core industrial sectors are picking up and a lot of these are key drivers for the US. Equities, relative to government bonds, look very cheap. Thinks the rotation out of bonds and into stocks is happening but it won’t be happening quickly.

How do you mitigate upside risks for Short positions? He doesn’t buy Call Options against Shorts but keeps the position size modest as a percent of the overall portfolio. Also makes sure the stock has an active trading volume in order to make a quick decision if necessary. Tends to be cautious when there is an overly shorted stock when there is a high level of Short interest.

Commodities. 2013 looks like it is going to be a lot better than 2012. More optimistic on the economic front and expects commodities will stay better than what we have seen in the last year. Also, doesn’t expect them to break out, but very healthy levels for copper, oil and gas. Believes natural gas made an important bottom in 2012. We may have a retest to $2.20 in the shoulder season. Expects crude oil will stay in the very narrow range it is already in and is healthy around $80-$90.

Lumber. Big surprise came from the demand from China but expects the demand to be quite strong. Expects a very strong tone is being sent for the lumber season for years to come.

Gold. Expects prices will be range bound over the next 2 years at $1550-$1800. As the economy gets stronger, there will probably be more demand coming from the consumer front, where currently demands are coming from the investors side. As investments bullion sells off and the economy picks up, she expects to see emerging-market consumers picking up bullion. She’s constructive on the gold price but doesn’t expect gold will be a leading sector in 2013.

Markets. There is a lot more stimulus going on in the US versus what is happening in Canada. Mining and oil are acting as a drag on Canadian portfolios. Feels there is a fair amount of Cdn $’s that is heading south, which is a much more interesting market. Doesn’t think this is going to go on forever but in the short term this is probably going to be the way the market goes. Expect the TSX will run up to 13,000 before we run into any real resistance.

(A Top Pick Jan 20/12. Down 1.72%.) Sprott Gold Bullion Fund Series F – SPR 226. This has worked a lot better than gold stocks.

Markets. Lenovo would have to offer a premium for RIM. The risk is that they don’t buy it. It is a bad omen because they are the garbage collectors of high tech. If it doesn’t get taken over then he is very negative on the prospects of RIM. He is trying to find back door plays on a US housing recovery play where the price is not in the stock. Prefers US equities over Canadian but because he is not bullish on copper oil or gold. Thinks they will be done with Chinese infrastructure in 2016.

Markets. Both Canada and US will probably extend a little bit. Canada probably more than the US, where he likes oil services, energies and gold producers. S&P is capped at 15,500. When you are not in a secular bull market, sometimes breakout suck in some buyers but then don’t persist. So they are not a confirmation now. This is the third peak in a 10 year chart.

Reason for $15 discrepancy between world price oil and domestic? Who benefits? WTI is the crude selling out of the US, trades at a discount to Brent because we can’t get that out of the US fast enough to get the world prices. Brent is increasing in value because of the problems in the Middle East. The 3^rd dynamic is Canadian oil, which is land locked. Canadian exploration and production companies get hurt by this because they can’t realize high enough margins to compete.

Markets. Typically we see a rallying in Q1 and this year is no different than the last 4 years. A lot of RRSP money coming into Canada as well 41Ks in the US and both are moving into the markets. This will be followed by a slow down in May and then you have a bit of a run up towards the end of the year. Doesn’t think we’ll see a big drop off but doesn’t expect we will sustain this level of growth of the markets moving forward. US market will probably move higher slowly over time.

Global growth. Last year, Asia sold off quite significantly. There was a lot of concern around a slow down in China and that really proved not to be the case. There was some good value in the Asian markets. He would like to pick up some good quality European names but they have very elevated valuations from his perspective. Asia is probably the area for additional capital for him.

Ethiopia as a fertilizer producer? Will it become a potash producer? When you look at the supply chain dynamics, particularly in Africa, a lot of the mining that has gone on, gold mining in particular, when the companies pull out you have the infrastructure of roads. There are some tricky operators who have figured out how to take that negative of empty pits into something positive. China has invested $4.5 billion into the interior of Africa as a sort of a swap for some of the natural resources.