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

Market: He has been putting in a number of bids and mostly he is not getting filled. He does most of his buying in November/December. He is happy to buy this time of year if on dips. He holds 21 right now and goes as high as 25. He is not concerned about racing into the market. His thinking on how to approach the markets has not changed. There is more volatility right now, but with that comes better chance of gains if you play it right. Thinks market will be more erratic going forward than 10 years ago because of computer trading.

Market: We need to re-define equity investing. The way we manage them is being questioned. Asset allocation is becoming much more volatile. Now he uses Growth Payout Sustainability. We need a regret-free investing approach.

Market: Doesn’t own APPL because it is too tied to one guy and products were too trendy. He and his clients were buying because stocks were on sale. Difference between now and 2008 is that he is getting cheques in the mail from clients. This time corporate earnings are so terrific. TD bank says we had zero growth in second quarter and maybe Canada goes into recession if US does. He thinks economic is weak. He was worried about higher interest rates and inflation but now thinks it is pushed out to 2013 and later and so does not look for inflation protection. He wants dividends and growth. Utilities (e.g. telecommunications and pipelines are better than bonds). He felt he would come in one day and gold would go down hundreds of points in 1-3 days. He thought it was a bubble. Doesn’t know about long-term trend.

Market: We are lucky in Canada that we have opportunities for income stocks. You can get income yields in excess of 4,5 or 7%. US are saying they are keeping interest rates low for a couple of years.

Market: Markets have been in a lot of turmoil. From the reaction in the markets, they seem to be discounting some sort of QE 3. The benefits from QE1 and 2 are getting less and less going forward so he is not sure how much benefit there will be going forward. We need to address structural issues occurring the US right now. Doesn’t put much stock in the triple bottom of 11,020. He has been doing some buying over the last months. He is a bargain hunter and is looking for them at this time. If one takes a more sober view and horizon is more than a year or two you can get some very compelling dividend yields that can make the fixed income market look poor. He hasn’t changed his philosophy or style since 2008.

How do you tell the difference between a value stock and value trap? Sometimes it is impossible to tell the difference. This is why often value investors are thrown into contrarian investors. There’s always the element of surprise where you buy something and it goes up to your target price. It’s a dilemma.

What gold companies to consider: There are a number of gold companies you could look at. ABX, G, ELD, and so on. There has been a lag between the commodity and the stocks and between those and the small caps. There IS a reason to old a gold position of 5-10% at most at this time.

Canadian Banks: Likes the valuation on the banks. They pulled back significantly in the last month in sympathy to global banks. BMO lead off with good earnings today. He would not worry about quarter-to-quarter earnings. Good profitability going forward. A good place to be looking for income.

Derivatives: Is a financial instrument that takes its value off another financial instrument. E.g. puts and calls, futures, swaps, credit default swaps. Derivative is priced on a formula that is the perceived volatility and the time until the derivative matures.

Widening on of the Panama Canal. Might take some business away from rails. CNR would be affected more so than CP. When you look at Rail, you are looking more at the economy. More and more you will see use of rails for long haul within North America. Has not see any models comparing Sea to Rail. He owns CP.

Oil. Could see it over $100 this summer but could also see it $10 lower. Will probably not break 100 because of the weaker economy. A lot of Canadian companies are in Colombia and doing extremely well.

Market. Have been preparing for a downturn for a couple of months after seeing a double top earlier in the year. His stock portfolios are about 30% cash and hedged. Chart shows strong support at the beginning of last year at around 11,700. There is a downward channel from about March with lower lows and lower highs but he is looking for a little bit of support at this time. He is starting to buy but is very cautious.

Gold. Chart shows a steep rise which is panic buying and the rally is going to end soon. The price of gold is not sustainable. Would be very cautious right now on exposing your portfolio to gold.

Moving averages? More volatile a stock, the longer moving average you want. If you use incorrect values you are going to be in and out of the stock too often. He uses 50, 100 and 200 as he likes to see the interactions. When they spread apart, you should be selling or putting tight stops in. When they are all bunched up, that is a sign for buying.

Markets. Looks at the current situation as an opportunity. In spite of all the noise and fear, he is not seeing a breakdown economically, such as a failure of a European bank. Has been a painful couple of months in the market. Cyclical stocks have been absolutely hammered.