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

Markets. 2015 was another win for growth stocks. This probably has more to do with smaller caps versus larger caps. The larger cap growth names have held up pretty well, but if you look under the surface of the market, small-cap names, particularly in the commodity space in Canada, were terrible this year. As we near the end of tax loss selling, he expects we will see a pretty sharp bounce, which we are actually starting to see today. However, underlying fundamentals are still baseline negative. Today he wants to talk about the small-cap January effect, and will try to pick some of the more oversold names for a 6 week trade. Some of the small-cap names have been thrown out with the bathwater, and he has been picking up some names that have solid fundamentals and growth. This could include some that have a rollup acquisition strategy, where he thinks there are opportunities.

Gold? Thinks we are starting to see a bit of a turn in the US$, and that would be positive for the golds. His largest gold holding is, Tahoe (THO-T).

Market. He is still up for the year. Usually, from this point onwards, the market typically will get a bit of a Christmas rally because the tax loss selling is all done. On average, from here to the end of the year, the markets go up 1.5%, and if he gets that on top of his portfolio he will have an OK year, maybe up 4.5%. It is those years when you make 15%, 20%, 25% that people get excited. The indexes are off 7%-8%, but there are a lot of individual sectors that are off 50% or 60%. Now there is a lot of value in the market. There are a lot of growth stocks in Canada right now that are trading on single digit P/E ratios, and that is where the money is going to he made in 2016. Doesn’t think that the upside is necessarily in the indexes per se, it is in the subsectors where there is growth.

Markets. This US bull market is long in the tooth and is getting narrower and narrower, fewer and fewer stocks. He is pretty cautious right now. Portfolios have quite a bit more cash and a lot more bonds. The US job rate has been great and he sees utilization going well. The problem is that the markets themselves do not always couple with the market in the same timeframe. He sees defensive rotation happening such as into consumer staples, classic defensive type positions. Telecoms and utilities are starting to make some headway, even though there is a rising rate environment in the US.

Healthcare? In September, healthcare broke a long-term relative uptrend, which to him is a flag. For the bulk of 2014 and up to September 2015, he had been very overweight healthcare. As of September, he went back to market weight, and is a little more careful in his picks in healthcare. Prefers UnitedHealth Group.(UNH-N).

A US infrastructure stock? There are all kinds of infrastructure plays, but many of them have a very strong correlation with commodities. He worries about the stocks right now. The core names are all facing very tough headwinds. There is a time and place to be in the market, and this is not the time for infrastructure.

Markets. He is seeing volatility, which is what we have been waiting for. When a market gets stuck like ours has for the longest time, you need these triple digit kinds of days to get us back on track. When he gets that kind of thing, it shows him that something is about to change. He thinks it is going up. We have been playing off that 18,000 on the Dow down to 17,000, and thinks we are going to get back to 18,000, and the next test will take us through. He likes to see big moves on big volumes. Right now we are seening good volume. Likes the TSX better than the Dow. The TSX has melted down to 13,000sh. Doesn’t know what the catalyst will be to drive it higher, but is at a level now where it hasn’t been in a while.

Energy. Markets move on crude oil strength. It’s down $70, and then moves up $0.30 and you see people rallying. There are Short positions going on, because it is easy to keep selling something that keeps going down, but the first couple of days up, there is going to be some panic, and that will be our 1^st upside falling for a bit and this is where the trades will start, swing in the TSX. He is not seeing any Buying but is seeing more Selling, which gets him excited. Looking for that one big throw up, and “get out of everything” kind of thing. We are getting close. Percentagewise this is way oversold. Even if you don’t believe that it is going higher, it is going to stop

Markets. The Canadian market has a Santa Clause rally 84% of the time and the Russell 2000 even more often. The Materials Sector comes back 4.7% average and goes up 100% of the time. Industrials are up 90% of the time. Everything is lining up this year. The market is already up since the low of December 14^th. Santa Clause rallies run until January 6^th. The next two months are then rather flat.

Hedge Canadian Dollar? The Canadian dollar is in a downward trend and there is no sign it is trying to bottom. The US$ appears to have peaked about 100. During the last three weeks it looks to be rolling over against a basket of other currencies. This probably means the Canadian dollar does not have a lot further to go down. He is not looking for much upside pressure either.

TSX Venture Exchange. The chart is not good. A distinct downward trend. The stocks are still under tax loss selling until the end of this week. Seasonally metals bottom around the beginning of December. After tax loss selling the stocks should rebound.

Educational Segment. The Electoral Seasonality. During a presidential election year, the US market slightly underperforms the average. There is not much change earlier in the year. But super Tuesday is March 1^st when 14 primaries happen. Around the end of May they have their candidates and from there until the beginning of September, the US market outperforms what it usually does. The market then goes down until just before the election. This year they changed the election laws regarding campaign spending (Super Packs). After the election on November 8^th, the markets go higher until the end of the year.

Markets. Guns Not Butter. A nation has to apply resources to either military or consumer goods. We are setting ourselves up for a modern crusade. Guns may perform better than butter. He is referring to the US going into conflict in the Middle East. Investors should overweight Industrials, Technology, and Energy, but not the consumer names. Tax loss selling will probably last a few more days in energy and then give way to the Santa Clause rally. The consumer sector has marched along without any tax loss selling. Energy stocks have been oversold and should bounce back in January. He has a bullish outlook for 2016 due to the Eliot Wave Structure. We are about to enter wave 5, the advance.

Markets. Tax Loss Selling. This is the 1^st opportunity that most people have had in 4 or 5 years, or even longer. Tax Loss Selling is a way to trigger some capital losses that you can use going back 3 years or going forward indefinitely, to offset capital gains that you might have had. The thing you have to think of more than anything else is the “superficial loss rule”. There are many securities and many ETF’s that you can buy that are a substitute. You can buy one and sell the other on the same day, trigger a capital loss, but still be exposed to that sector you like. The problem is, if you buy back the same security within 30 days or less, the loss will be denied. This only applies to money that is in a taxable account, and it is a great strategy.

Is there any advantage for a Canadian to continue investing in the US now using Canadian dollars? If you are thinking of selling some Canadian equities in order to buy US dollars, he would not. Feels the Cdn$ is close to a bottom, so this is pretty close to a time when you should consider repositioning your US positions back to Cdn$, because the Cdn$ is so cheap relatively speaking.