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

Market. What else are you going to buy? You have the situation with bonds and low interest rates. Interest rates are going higher eventually in the US at some time, and that is going to hurt bond prices. Equities are at a relatively OK price. Dividends are going up. There are big takeovers today. Thinks the psychology is far worse than the reality. Canada is in a bit of a slowdown, but the US is doing very, very well and is carrying the rest of the world. It needs the rest of the world to catch up with it. Healthcare is volatile, but we had a healthcare sector that really got cut in half in less then a month. Company fortunes don’t change that much in 30 days. Two months ago everything was great and they were growing very, very fast. Now you have companies that are 8X earnings. Nothing has changed in the companies. Apple (AAPL-Q) is trading at 13 or 14 times earnings and sitting on $230 billion in cash. Huge cash and no risk on the balance sheet with lots of growth potential and is going to benefit from international expansion. In the 80s and 90s, you had a growing tech company growing at 25 to 30 times earnings. Now they have all been taken down to 14-16 times earnings, which is ridiculous for a company that has no debt that is growing at 30%-40% with a great market share. You want to own all sectors. You don’t want to have to decide the next one that is going to win. The problem in Canada is that more than 50% is financial and energy. If you have 35% financial, which is what the TSX is, you are taking a bet on the banks. He doesn’t like to bet, he likes to invest.

Energy. Canadian oil sands has been a big move for the sector, because now suddenly people are looking at it and saying where are these prices for a long-term player. You have Suncor (SU-T) as a 50 year player and they are buying Canadian Oil Sands (COS-T). They came in with a very good premium, but it is still less then half of where it was a year ago. Thinks the sector has bounce potential. The supply reaction is starting, and will probably take another year. Probably the worst is over, but he is not predicting $100 oil. A lot of these companies are trading as if they are going bankrupt, but if you look at the balance sheet on some of these names, some companies with no debt are trading like they were going to go out of business, which is ridiculous.

Silver. Thinks the silver market is OK, but if silver and gold can’t move up when there is a China crisis and currency crisis, he really doubts it is going to do a whole lot until inflation kicks in. In terms of the next 5 or 6 months, or maybe a year, he doesn’t see too much exciting happening in precious metals.

Markets. The 3^rd quarter was downright ugly, but the markets have rallied since the mid-August lows. They have come up quite a bit. There has been a rally going on for 7 days or so, and it is being driven by all the junk that is mostly beaten up. You have industrials, energy and materials companies leading that charge. There is still weakness in healthcare stocks. It is a very unnerving market because you have to be cautious as an investor, as it is not high quality stuff that is moving. He is not of the view that the China story is resolved and you might have another leg to go on. Even though it seems like a temporary bottom has been put in for oil and many other commodities, this could reverse very easily. All eyes are on earnings, and expectations are for negative earnings growth, especially south of the border, of roughly 4%. This is mostly due to energy which is going to be dramatically lower.

Energy. He doesn’t think that the rallies will be sustained. There was a 5% pullback in crude yesterday. Chinese data was really weak today, which led the market lower.

Markets. We got what we were expecting since his last appearance. He squared some positions and covered some short positions. Now the global economic data has started to roll over. The US is standing alone now. The European data has been terrible, China has slowed, as has Brazil, and so on. We are heading back down to terribly slow global growth. Mining stocks have exploded recently and it is mostly due to short covering. This has been an overdue bounce. He is 10-15% cash and was at 25%. He is building cash up again.

Healthcare Sector. GILD-Q is a very cheap stock, but the problem is the growth ahead for them. They are cutting the price of one drug over 90%. He prefers playing the sector through IBB-N. There is a lot of money moving from healthcare over to oil. He wants to stand clear for a while until the air clears.

Markets. You want to take advantage of these bottom patterns. We had a double bottom a few days ago. You want to take advantage of that pattern to enter seasonal trades. However, there is still a hurtle ahead. It is the 200 day. We are about to test that level. We are still below that moving average, which is in fact curling lower. If we are unable to exceed this average it will be like 2008. In 2011 we saw a similar scenario. Aug’11 saw a pull back, a test of the lows, it rallied to the 200 day, then it took some time to get above it. We still have some time to see which way it is going to go. The TSX is at a critical point. It either rallies higher or pulls back.

Energy Stocks. December can be a great time to buy these stocks, after the first week. Energy can benefit this time of the year. We have seen phenomenal strength over the last couple of weeks. There was a lot of short covering. No one wants to be short going into earnings season. We are now coming up to resistance in XLE-N. Lower highs and lower lows are not positive for the energy sector. Also, seasonality is not favourable into the fourth quarter. There is not enough to say this thing has legs from here. Stay away from energy for a while.

Nat Gas. It is looking bleak. It can be strong here from Sept to Dec, the inventory build season, but we had a significant breakdown in Nat Gas prices. We are still in a downward trend. It is not lined up the way you want to see these kinds of seasonal trades do. If you want to go into Nat Gas players, go to FCG-N, rather than an individual stock.

Markets. It’s nice to see a bit of a recovery, but he does not trust it. He is still heavily in cash. Look for companies with lots of cash and generating free cash flow. Get back to fundamentals – bottom up. There is a lot of noise about what causes a correction, but he feels it is simply valuation. Stocks are expensive and professionals know it and that is what caused most of the selloff. He thinks people underestimate how much the market has been hurt by the oil price. It is a good time to start picking away at oil stocks.

Markets. The TSX has bounced off the bottom at 13k twice now. It is a psychological and a technical level. A lot of the volatility is caused by news stories. It was overvalued. Earnings over the last three quarters had been slowing. After September he underperformed the market. He has been buying two energy stocks recently. Since the markets have bottomed his clients have outperformed. Interest rates are lower for longer. Equity markets are going get single digit increases in earnings. Stay the course and enjoy your dividends. There will be companies that increase their dividends next year – at least half of them he predicts.

Drips. He does not use them, but advises retail investors to use them if they don’t need the money. Most of his clients need the dividend. For younger clients he prefers to take in the dividends and then buy the best stocks at the time.

Markets. The Saudis are accomplishing what they set out to do which was to protect their market share. They were targeting the rapid growth in the shale oil industry. He thinks they will keep going for a while and then eventually the oil price has to go up just for them to balance their own fiscal budget. We know the pain is there for them as well. The expectation is that the demand will get stronger. He doubts the Saudis see Canada’s light oil production as significant. The drilling activity in Canada is one third what it once was.

Markets. The numbers on Friday were pretty poor so he was surprised at the market reaction. September and October are not really good months, but maybe this rally has legs. In Nov/Dec he thinks it will start ticking up. Canada may outperform the US. Earnings expectations are pretty dismal so he would not be surprised if we get the surprise movement upward. You have the global economy that is growing, and North America is growing too. There has been so much cost cutting that maybe we can get 5-7% by year end.