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

Sell deep in money calls for high dividends stocks and use funds to purchase additional shares of the same underlying security to lever the position to receive more dividends. Problem is that you are trying to extract time value. Deep in the money don't take advantage of the time value you could get. Chances of getting called away are good before X-div date. Not a good ideas because you give up too much advantage.

Buying back in-the-money covered calls. Doesn't normally do it but today he did it. Time value is very low and then he will buy back option and then re-sell it 6 months later. He did it because of the US election and its impacts on oil. He was removing hedges.

Buying back calls to roll further out. I will do it under certain circumstances. If he has squeezed as much time value out of it as reasonable. He gets a better commission for “Call/Writes” when he does this.

ETFs being over bought or oversold. In general it is not an issue. They create more units as required.

Bull Put Spreads. Not a bad strategy. He would prefer to just sell the put. For the retailer there is a big spread between bid and ask that really chops into your spread.

Agriculture. There is no ETF for just Canadian agriculture. There are not enough stocks to make an index. You might as well just buy the stocks. He prefers COW although it has not performed well for him.

Options above or below. Depends on how much leverage you want. Depends on risk threshold. The more out of the money you are the less likely you are to win.

Corporate profit margins are pretty high (record highs) in the US since QE 2. It is going to be difficult to maintain them in a slowing revenue environment. Companies are saying it is a very, very difficult environment out there. We are in a secular bear market. You are seeing cost pressures with energy and food pricing being high. He has a higher percentage ($35%) of investable cash on the sidelines and will allocate it to the US market. He is waiting for a correction of at least 10%.

Markets. Feels the TSX is in a bit of a range 11,000 to 13,000 and he is not sure what gets us out. US elections, US cliff coming, nothing really happening in Europe, maybe hitting bottom and improving. The new thing is a kind of mixed earnings season in the US but is not as bad in Canada.

Markets. In the short-term, he is cautious and is awaiting the US presidential election as well as the composition of the house. This is crucial on whether they can reach a compromise on the fiscal cliff between the election and the sitting of the new Congress. Has a longer-term bullish outlook for the US, which is supported by the improvement seen in housing, the continuation of the auto production and feels that bottoming in China is going to help.

US housing stocks. Longer-term, if you believe the J.P. Morgan (JPM-N) projections, there is a long way to go in housing. He wouldn’t buy a housing stock like a homebuilder but would prefer related stocks that would benefit such as Home Depot (HD-N). However, this is gone up a bit too much for him so buy this on a pull back. He has also been looking at Watts Water Technology (WTS-N) but it also has to pull back to around $30-$33.

Markets. Feels this soft period is transitory and he is generally bullish on equities. There are a lot of reasons he feels the US equity market is in good shape. There are some macro headwinds and we are in a bit of a rough patch from an earnings standpoint this quarter, in part caused by those headwinds, but these things pass. The consumer in the US has been very resilient and domestically based companies are doing fairly well. In the last month or so he has made a couple of changes to bring down his weighting on the internationally exposed industrials and inserted a few more domestically oriented companies. (See Top Picks.)

As a Canadian investor, under what conditions should he consider investing in a US company where there are 2 similar companies? There is a tax advantage in owning Canadian companies that are paying dividends so if dividends are a big part of your strategy, then you would prefer to own a Canadian company. There also will be some currency exposure that you have to take into consideration. Basically, Canada is represented by 3 industries, energy, materials and the banks. The US has all 10 of the major sectors covered. He thinks this is a great time to be looking at those sectors in the US.

Markets. Earnings picture of many major companies indicates a slowing global growth profile. US and Canadian equities are pretty good places to be relative to a lot of the other alternatives. Europe has many more issues than we have in North America. Looking at equities relative to bonds, he thinks the value pendulum has very much swung in favour of equities. On most metrics, people would classify equities as cheap as they ever have been relative to bonds, at least over the last 4 or 5 decades. As long as the US economy doesn’t dive into a deep recession and companies have a lot of cash on their balance sheets he thinks things are going to be okay.

Markets. Doesn’t focus on the day-to-day but focuses on long-term. Equities are still the best house in a bad neighbourhood and there are no other alternatives. Still focused on dividend paying stocks and companies that have a history of raising dividends over time. Took advantage in the last couple of weeks to put more money into the US as the Cdn$ was going up. Have pulled the reins back a bit on commodity stocks as he feels that China is really slowing down.