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

Elliott Wave Theory says we are at the end of the super cycle and about to have a major contraction. How do we prepare? We are not at the end of a super cycle or in a major contraction. Elliott people think you go into a cycle, then another cycle and another cycle and when you get to that point, the world is going to collapse. Historically it has not done this. End of a cycle always coincides with a major bankruptcy period.

Gold. The up trend line was broken in late 2011 and is now trying to keep the roughly $1700 area. Currently there is a down trend line and we have to get above that for gold itself to get going.

Stock price range where moving averages are not so useful such as junior mining stocks? This is correct. If you have some stocks that are in the $0.50-$0.75 range moving averages are not going to help you very much. You should really be looking at trend lines.

TSX. Feels market is pretty range bound and volatility will continue. 11,000 on the downside and 13,000 on the upside and we are smack dab in the middle. Earnings growth is slowing so one of the tailwinds is now dissipating. Second question is interest rates and have they hit bottom at 1.75%-2% 10 year level in the US. He is now looking for a bit of direction.

Does the proposed Bank of Canada interest rate hike hurt or help the banks? Interest rates have been set artificially low and are now returning. The question is, why are rates going to go up. Going up because the economy has some life to it, which is the best news for the world, let alone banking stocks because we are returning to growth and an environment that will be replacing fear with a little bit of optimism.

Markets. The recent pullback is a natural occurrence. There was a strong gain from the fall of last year until now, especially in the US market, not as much in the Canadian market. There is a lot of positive news coming out of the US leading out from some of the darker corners of the recession.

Euro. Euro zone is so bad and yet the euro itself does nothing but goes up. What is going on? The euro is very popular and very liquid to trade. Breached back in 2010 at the $1.30 level, which was the resistant point. You want to be very careful with the $1.30 level. Chart shows a high in late 2009 and another one in early 2011 giving it a bit of a downward trend, giving it a wedge. This could turn around, especially if the US economy picks up. Going down to $1.20-$1.15 looks very likely. If it breaks $1.25, he feels it will definitely go down.

Home building. This is one of the leading indicators. As homes are built, the rest of the economy picks up afterwards when people have to feel those homes. This is a good sector to look at. Had a great day today. Doesn't expect to see a huge rally but it is an initial indicator.

Moving averages when entering or exiting positions? 50 or 200 day moving averages are great ways to Enter or Exit or to place Stops. He prefers the 250 day moving average and to look at the interaction between them and if they are crossing over. If the 50 is way above the 200, then we are in an uptrend and there is a strong likelihood that there will be a reversion back to the 200. The further out you go, the more likely it is. He uses a Moving Stop when a stock is moving up in order to lock in his profits.

He likes Natural Gas over a given horizon. Going forward there is still some down side in the near term. In 12 months you will see a robust recovery in prices. Chesapeake shut in significant natural gas production after cutting cap x to less than 1/3 rd. $4-$5 gas in 12 months is reasonable. He is cautious on crude oil given current demand. It is well supplied. Thinks Brent will correct to $100.

Markets. Taking a more cautious approach right now and going more to the defensive type of sectors such as health care and consumer staples. Trimming off some positions that have done well. There are a couple of near-term risks such as the forthcoming French elections. Made through to October are weaker months. As we get into the latter part of the year, this improving US economic data and the improving corporate earnings data will continue to push markets higher.

Markets. Expects the market to appreciate at a greater than normal rate over the next couple of years. Earnings are driving the market and that is the thing that he always looks at. 3 things really drive the market, 1) earnings 2) interest rates 3) psychology. Psychology has been severe over the last few years and has been hiding the underlying strength of the earnings. There will still be some volatility but the market has an opportunity to move to a more normalized valuation, which would call for about a 15% move upwards from here.

The newspapers are saying that in the last two years the first quarter was good and the second was not. There is cash on the sidelines ready to catch the rally on the second time round. Stocks aren’t expensive. He has about 10% in cash and 10% in corporate debt to be deployed if he would like to. He wants to accumulate more the names he is already in.

Economic indicators. As a contrarian investor you pay attention to these? He doesn't focus on individual economic indicators but more on the general economy. Right now, debt levels of different countries are key. Also interested in money supply and how it has expanded.

Is there a best time of the year to sell REITs or are they long-term holds? There are seasonal ties to some extent. Right now they should be weak, but it's not. Interest rates have just stayed totally low. Also, REIT structures are very good in that everybody is making money and improving their balance sheets.