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

Agriculture. Not just about population demographics but things like population growth in consumption patterns and how they are changing. Between now and 2050, population is trending towards 9 billion people. Just to feed this we have to increase output by about 75%. Last year some US crop fields where impaired 35 to 40%. One of the single best ways to increase crop yields is through fertilizers. Fertilizer companies will not only benefit from short-term crop problems but also long-term changes in consumption patterns.

Timber. Still in early stages of US housing recovery. 2012 was about consumption. China’s engines were starting to idle a little bit faster. Hurricane Sandy had $50 billion of damage. Many homes had to be re-roofed. Insurance money is starting to show up and is pushing the economy. Looking at the lumber gap you can see things like Chinese orders, pulp, lumber and even log orders. Month to month, pulp orders are up 15%, lumber up 16%-17% and in the last 12 months up 48%. This is only the 2^nd inning of an 11 inning game for timber.

Markets. 3 things have happened.

1. China is turning the corner, which relieves us of one major worry.

2. Europe continues to bumble along. They’ve been able to talk about a single bank supervisor by the end of this year. Bond yields in Italy and other countries are declining.

3. US is a major worry but there seems to be a willingness to accept the idea that the Senate and the House will do something to avoid dealing with the serious issues. Longer-term it will be a potential disaster if they don’t.

Summary: Markets are overbought and they could pull back 3%-5% for any particular reason. He would use this correction to Buy.

Bonds. Expects to see a great rotation out of bonds and into stocks in a fairly big way. According to statistics, there were trillions flowing into bond funds over the past year or 2 or 3. This has worked out pretty well. However, he now thinks people are going to take a very good look at the possibility or likelihood that yields are going to rise and therefore will lose money and bond holdings will decline. The only choice you have is straight to the stocks.

Strategies. What happens if 2013 does not turn out to be as good as expected? You can do a number of things. He is fairly agile and can move to cash. In the past 3 years he has been as high as 40% in cash. He would pick stocks that were fully priced or ones that he’d lost faith in and raise cash with them. One obvious solution would be to Short but this is something he doesn’t do. Another possibility, which he has never done, is to Buy a reverse leveraged ETF which he perceives as one risk too far forward.

Banks. What % of a portfolio should be put in large Cnd banks? What % would you put in bank of Nova Scotia (BNS-T) versus others? Depends on your portfolio, outlook, objectives and risk tolerances. He is more bullish on the market than he has been in a while, which might cause him to purchase more cyclical stocks, growth oriented vehicles, etc. For his clients portfolios, he is getting roughly 3.5%-4.5% with capital gains of 4%-6% for a total anticipated return of 10%. If you’re looking to shoot the lights out, you shouldn’t be in banks. Scotia is not his favourite at the moment. (See Top Picks.)

What would be your hot pick in the water sector? He wouldn’t buy water utilities. He wants people that purify water, conserve water, recycle it, etc. Within that parameter, he has a Top Pick. There are also 2 others he may consider buying, Xylem (XYL-N) and Watts Water Technologies (WTS-N) but has probably gone past his point right now.

Educational Segment. There is a push for transparency on fees. ETFs are great that way. Nobody works for free. Front end load says you pay the fee upfront when buying a fund. A deferred sales charge charges the client when they get out. ‘F’ class is where the fee is charged outside of the funds.

Markets. When Obama came in he had to deal with the financial crisis, but this term he has to deal with a divided house and the grid lock. February will be very interesting. He thinks the US can fix a lot of these issues but they have to make hard choices. They are going to kick the can down the road and this could overhang the markets much of 2013. The markets are acting well and we are making new highs now. But the market is going to test the highs from 2000 and 2007. As we start to get stronger we should consider taking some money off the table.

Markets. We know there are still problems with the US budget spending and that will come out in the next 6 weeks to 3 months. But Obama is dealing with a better economy than last term. He was in crisis management mode but now he can think about policy. The S&P did better than TSX because it is more diversified. He is not changing his investment policy in Obama term 2. He likes dividends and golds. He says it is time to put your contrarian hat on, but dividends are still the main focus.

Yellow Media Bond. 80 cents on the dollar when the new bonds were issued. He is going to be transitioning out of them in the next year. You get well compensated for owning a distressed bond.

Markets. January 2012, January 2011 and January 2010 data was improving globally. Investors bought on that and were very disappointed each summer. Feels it is different this time in that you have 1) US housing on board 2) better ECB backstop now 3) better growth in China. Politically there is a Federal Reserve that doesn’t have an expiry date on their purchases. The implication of this is that you are going to see money tease out of the bond market over the next year, which will have implications for various sectors.

Your criteria for Protection Strategies? Do you use Put buying versus Call selling and Stop Losses? Does your criteria change based on the size of the trading range, volatility of the stock or pays a dividend or not? Uses all of the above. You want to be really efficient. Need to have a toolkit in place. You want to have an option ability in place so that you can empower it to do things when it’s logical. Put Buying is usually expensive and the Put usually expires worthless. Selling Calls is easier. You get the premium but it really depends on the situation.

What are some of the key parameters to look for in a potential stock? Price and safety and it is really nice if you have a dividend yield that is sustainable. It really comes down to price. Even if it is not a very good thesis, but is mispriced below where it should be, that’s an opportunity.

Double bull and bear ETFs. If the markets are trending, then holding them works in your favour. But if they go up and down on the way up, it really hurts the NAV in rebalancing.