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

Oil. Inventories in the US went up shockingly in the wintertime. Normally you have massive drawdowns on a weekly basis. We had 5.9 million barrels growth in total inventory and we are now at 97.5 days. Normally at this time of year you would be low 90s and, after winter is over (February & March), you would be in the low 80s. Also, we may be facing the fiscal cliff in the US. Near-term price range he expects, would be maybe $75 on the downside and maybe $95 if there is any Middle East ruptures or concerns.

Natural gas. Inventories are at record levels and the supply continues to grow. Demand, however, is growing very rapidly in the US, especially from the electricity side of it. With coal at under $4, natural gas wins the market share. There is quite a bit of demand growth here.

Markets. Whatever happens, we are going to continue to be in a low growth economic environment into 2013 and we need to accept that. Whether the driver comes out of the US, out of Europe or out of China, there are some positive things that we can look to in each of those different scenarios. Global growth is going to remain slow and we are going to have to deal with that environment. People need to be very cautious in this environment about precisely what kind of companies they own and what the yield represents. However, they also need to be cognizant of the alternatives to the equity market of very low yielding fixed incomes.

Caller is thinking of putting 30% (3 of his stocks) of his RRIF into Singapore. Notion of putting 3 stocks as 30% of your portfolio seems excessive. He would much prefer to see a portfolio that was diversified with no more than 3%-5% in each holding. No problem with putting 30% of your portfolio outside of Canada.

(A Top Pick Nov 22/11. Up 16.63%.) Videotron 6.875% bonds maturing July 15/21.

Markets. Fiscal cliff is a little bit of a red herring. Feels that everything is baked in prior to that. There has been a shift towards more defensive names. We have long bonds in Canada and US jumping up to the top of the asset class categories. 2013 is going to be a bit of a slower year. We have a shorter-term cycle from June to September ahead of the Fed and then a longer-term cycle from 2010. Both are kind of getting a little soft.

Markets. Not sure if it is a cliff or a little avalanche. It is a broad increase in income taxes. If they do nothing then next year there will be a recession. They have to pass this. Whether they like it or not it has to happen. You will have sluggish economic numbers for a couple of years. The S7P would be at a new high if it were not for the financials. If they were participating in this rally, then we would be way up. Corporate financials are way up. Next year depends on the choices they make. Volatility for sure. They are trying to kick the can down the road.

Rails in the US. They are beaten down and he just bought some in the last few weeks. NSC-N as an example. Kind of ok here. We will be into a choppy trading range for the next year.

Educational Segment. Brokers and Advisors having Fiduciary Relationship. Vast majority of advisors and brokers are not a portfolio manager and so do not. Portfolio managers have discretion over portfolios. Advisors have an obligation to their employer. If they sell something they don’t get paid. However, there is value in an advisor getting clients to put money into a mutual find instead of spending it. Debt levels are growing and growing in Canada because kids coming out of school are not taught even how to balance a cheque book.

Markets. Key theme in 2013 in Canadian equities is resource recovery. Is it going to happen? We have lagged global markets for two years. His focus is will it happen. He says they are putting money in and putting money in and do you want to bet against central banks. Favours equities tied to dividends. China and US are still growing. He always underweights commodities in portfolios. 3-5% of cash is on the sidelines. They have lots of dividend paying stocks

Canadian Banks. The best time to get in is when no one seems to like them. Fear about massive debt write downs… Now is a good time. TD-T, BNS-T are two favourites. Would prefer to get in on TD-T at $75, after the fiscal cliff does or doesn’t happen.

Markets. He tries to stay optimistic and to focus on what matters. Expects another year of record S&P profits next year. Things are going well but people don’t want to buy stocks. We are coming out of a financial crisis and people are shell-shocked. He focuses on good stocks with growing dividends, cheap valuations and there is no end to the list of them. We are having a modest recovery in the US and China is on the up and up. At the end of the day things seem to be pretty good. People need to take a deep breath and prepare their portfolios.

Tax Increase in US for Domestic and Foreign Investors in US stocks. The S&P has not gone up since the Bush tax cuts were enacted, so why should stock values go down as a result of increase? Tax rates in the US are at near 70 year lows. He does in fact advocate buying US stocks.

Markets. Thinks that it will get down to the wire and it will be a gradual thing come January. The chances of them letting it go, it would be ridiculous. If the US goes into a recession this time, Canada will be far greater than last time. It is unlikely that scenario would play out. She prefers a lot of US stocks because they look relatively attractive. Likes the lack of exposure to commodities. In Canada, likes Energy, dislikes Materials, mining. Likes Financial but it is fully values and that is the Canadian market.

Gold. Fundamentals keep getting stronger and stronger. The bond vigilantes are waking up. They are concerned about the bond bubble where there is a lot of money sitting with negative returns. Once that starts coming out, it will be a problem. IMS is questioning the current US$, the US currency reserve and are even looking at Canada. Yesterday the BRIC nations said they were going to be creating their own debt facility in competition to the IMS. By the end of the day most of the senior producers were back up and finished in the green. Gold had rebounded by half the amount. Very reminiscent of what happened when they closed the gold window in the 70s where they where really trying to suppress the price.