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

Gold. Gold has a particular promise for a couple of reasons. Primarily people are starting to question Central bankers and their ability to turn things around. They are conducting weird scientific experiments with monetary policy and negative interest rates. Feels gold is going to start to draw attention as people begin to question the invincibility of Central bankers. (See Top Picks.)

Juniors. This year he thinks we are finally in the turn. Things are starting to look up for the juniors. There has been a PDAC curse, i.e. a tendency through the years for the resource sector, juniors in particular, to trend up during the 1^st quarter, and for everybody to get excited. However, a couple of weeks after, it fails and for the rest of the year it is a long downward trend and misery. There have been 3 violations of the curse, 2003, 2006 and then 2009. This year started off horrible for all levels of equities. He was down in the 1^st few weeks in his “bottom fishing” edition of 100 companies, but in the 3^rd and 4^th week it has turned around and is up 40%. Gold has finally surprised us on the upside. The big concern is if the gold rally is sustainable.

Metals & Mining. Has been pretty negative for the last 4+ years, but in November he thinks he saw a fundamental change in currency and gold prices. He has been buying more into the precious metals sector. Feels this rally in the gold price is long term bullish. It may have a pullback in the near term. Serious investors are recognizing that gold is an asset to have right now. He also feels it is fortunate that we have not seen the silver price rise yet along with gold. Globally we are looking at the major equity markets turning over, currencies are being devalued across the board, and in many countries we are looking at zero to negative interest rates. At that point, gold actually makes sense. This time we are actually seeing gold going up in US$, which is very different.

Base Metals. These are in their bottoming process. It could take a while. It depends on global demand, and he doesn’t see it picking up this year, maybe into next year.

Silver. Much more volatile than gold, and we haven’t seen it jump yet. The reason is that we haven’t seen the wing nuts and tin hat guys jump in yet.

Metals & Mining. For the past few years, we have had a push up in gold during the 1^st quarter. This year we have seen the same push up on gold prices, but thinks it is more sustainable because on the underlying fundamentals on the supply side, production levels are flattening to going down. People are curtailing production and there are not very many development projects being put on line. Also, there is very little expiration, either from the majors to the juniors. Long-term, 5-10 years down the road, it looks very good.

Markets. Gold is being pushed up because it was so oversold. The move to lower interest rates is also pushing the price up. We saw a 35 year bull market in government bonds and he feels the bond market is running long in the tooth. So the market in gold is closer to the beginning than the end. He would not be surprised to see the rally in physical commodities coming in a couple of years. Equity financing will be difficult for small companies. The big banks are not as involved in their financing.

Zinc Market. He thinks we have to wait a little longer for it to come back. He does not see demand increasing for a couple of years. We are not seeing demand creation from low prices. When zinc comes back it REALLY rewards you.

Markets. House prices are collapsing in Hong Kong. China is trying to cool housing prices there. China over the last 5 years was borrowing 2 to 2-1/2 of GDP to get their 7% growth. When you normalize that, they are growing at 4.5%, decent. In the next 5 years they expect 6.5%, but borrowing 3% of GDP, so the real growth will be 3%. It is going down and so the demand for imports is in a downtrend. We have to think that their real estate will impact Vancouver.

Banks. There is risk for another market downturn this year. The catalyst will be about credit and credit risk. Buy when we go to or below the lows of January.

Educational Segment. Negative Interest Rates. The yield to maturity in the world in bonds is 1%. The central bank in the US controls short interest rates as well as to supply and drain liquidity from the marketplace. Quantitative easing is a more permanent operation. He believes interest rates will stay low for some time. US debt to GDP shot up during the Ragan years. Then in the Lehman moment, they borrowed 9 trillion dollars.

Markets. For the small investor, you can’t “trade” in these markets. You can’t Buy on a Monday and Sell on a Friday and make money. You have to look beyond the noise. That can be painful at times, the same as it is for professional investors. Focus on companies that have enduring qualities that will be able to sail through the turbulence. Try to avoid turbulence in both directions, whether the market is going down or up. Focus on companies you want to hold for 3-5 years, and that hopefully you are going to get a triple over 5 years. Over the last few years, he has been investing in knowledge based industries. His weighting in the different areas has been fairly consistent over the last 12-18 months. Has about a 10% weighting in energy, but no other natural resources. Also, holding about 10% in cash. Other than that everything is in technology, healthcare or financials.

Canadian Banks? Thinks the outlook for banks is solid, if not getting better. The biggest issue overhanging them right now would be concerns on oil/gas loans going soft. With a rebound in oil now, it changes dynamics quite significantly. Most of their mortgage portfolios are insured. Dividend yields average 5%-5.5%, and we are basically in a zero interest rate environment. He likes Royal (RY-T).

Readings. For viewers who like BNN, Jason would recommend the book “Market Masters” by Robin R Speziale, which will give you an inside view on how the Experts on this program think and look at stocks.

Economy. He is not looking for a strong period of economic growth, and thinks it is going to be more of the same. We have to recognize that the great recession is a lot like the Great Depression in that it takes quite a while to work its way through. We are a long way in, and growth is still not there, until we get some of our debt problems sorted out. However, so far we are not doing badly compared to what happened in 1929 and the 30s. For investors, why not buy a nice dividend paying Canadian stock, and just collect your dividend and not worry about the ups and downs in the market?