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

Converting a diversified portfolio into ETFs instead? Before doing this you should look at the tax implications. Every portfolio he manages has iUnits S&P/TSX 60 (XIU-T) in it as well as the iShares S&P 500 (CAD-Hedged) ETF (XSP-T).

Copper? Bullish on copper and a lot of the base metals. There isn’t a specific copper ETF right now but there’s going to be one coming from BMO in the next week or two. He would be more inclined to look at the S&P/TSX Base Metals ETF (ZMT-T), which has a bunch of metals in there.

Markets. TSX hit a high for the year on Jan 3/11. Dropped 150 points so we’ve been in a flat correction, which he expects to continue until mid-February. After that look for a continuation in the upward movement. Looking for a target of 15,500 this year. In the midst of the presidential cycle which is the sweet spot until June. S&P 50. He has a target of 1,450.

Gold. Broke a short term support level today of around 1315. Usually from around the end of January until the end of February it climbs higher because 1) Chinese new year (Feb 3) and 2) the PEDAC convention around the beginning of March.

Oil. Very strong seasonality from around the 3rd week in February through until May. A little too early to go in on a trade but has a hunch it’s going to be a really good one coming in the spring. Looking for oil to hit $100 per barrel by some time this summer.

Copper. Historically its sweet spot is from around the end of January though until May. Expects this will happen again this year. Demand for copper will increase as economies improve. Inventory levels are at historic lows.

Entry and Exit points? Starting point is to know the seasonality of the sector involved. (Can be found on his son’s site at www.equityclock.com) You then want to look at technicals. as to whether it has been overbought or oversold based on short term momentum indicators. You also want to look at fundamentals.

Gold. One of the better indicators for gold is the 200-day moving average. Ever since 2002, when gold has come down to the 200 day moving average it has been a classic opportunity to Buy. This would be around $1285 and we are not there yet. Doesn’t think it will get down there since the US$ is under pressure.

Gold. Risky play. Gold does not do well in a rising interest rate environment. If the US economy is on a track of better growth and getting down its deficit, then gold is not the currency you want to be in.

Corning (GLW-N) or Suncor (SU-T)? You are better off in energy so Suncor would be his choice. A terrific company with long life assets and growing production. Expects dividends will start to grow. Buy on a pullback.

MiGaming (?). Software company that works with resorts and phone companies for gambling solutions. Also have arrangements with some countries to do national lotteries. Very well run company. Stock is exceptionally thin. Likes the long term but will take a while for them to kick the contracts in and get them going.

We had a tremendous rally from August through the end of the year. He got to a point where 75-80% of stocks were participating in the rally. At year-end we were seeing some deterioration in short term indicators. They are pointing more to a correction than anything else. You are coming up to Chinese New Year and there is concern over order patterns. There was a lot built into stocks in the short run, based on upcoming earnings. In a bull market you do get big pullbacks in commodities. Silver and Gold had a big run last year. He exited the precious metals during the last 3 weeks. When you look at intermediate, oily names, they continue to look constructive. Within the sector there are some real starts. Also anything to do with capital spending shows strength. Companies have cash on their balance sheets and are continuing to spend it.

Gold. Feels it is heading into bubble territory. Historically, until about 5 years ago, about 90% demand came from jewelry and industrial uses with investors only accounting for 10%. By 2010 about 40% demand came from investors in the form of ETF’s, bullion, etc. Because of prices, people are buying less jewelry. Investors are not going to be able to keep the price of gold up by themselves if there is no primary demand.

Canadian Banks? In spectacular shape. Expanding and have money for acquisitions. Have all had a great run off the lows. Economy is growing but not at an incredibly healthy rate. Mortgages are going to slow down. Not a lot of value but are safe and comfortable stocks to hold on to. Dividends will be rising in the next 18 months or so.

US Illinois 6.9% bonds due March/35? Spread on these bonds versus other municipalities and states, is wider than anyone else’s. Illinois is in really bad shape. Running a $13 billion deficit. Desperate to raise taxes but pension liabilities overwhelm everything else. Credit rating is presently A+ but is on negative credit watch.