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

Private vs. Public REITs. If interest rates go up then cap rates change. It does not matter if the REIT is private or public. When interest rates go up, the outskirts are hurt more and the big cities are hurt less.

$10k to invest? First, use a TFSA. With this small an amount, he would use a bank ETF (e.g. ZEB-T, 4.3% dividend) with half and a REIT ETF with the other half. This will be efficient and sufficiently diversified.

He looked at short interest in three stocks. It is massive. It would currently take 84 days to cover MEQ-T’s short positions based on their average daily volume. TD-T is 7 days. LNF-T in 61 days. These shorts are going to be in real trouble if we see a turnaround like we have in the last couple of weeks. We think it is the US that is shorting a basket of Canadian stocks. They don’t realize that with our volumes it is not that easy to buy back your position to cover it. He thinks they are wrong in shorting these stocks. The retail investor does not get to see these charts normally.

Markets. The IMF has downgraded global growth. He thinks it is prudent to be cautious. There are any number of macro events to give you trouble. The Fed has left uncertainly over interest rates. He is not seeing any reason to get into the market yet. There is more downside. A double bottom would help with a Santa Cause rally. For very high quality companies, you could start buying now. But there are times to be invested and times not to be invested. He is sitting on a lot of cash right now.

US Regional Banks. KRE-N is an ETF to look at. It looks at all the regional banks. You have to be careful of balance sheet positions. Some are liability sensitive and some are asset sensitive. The former benefit from lowering rates, the latter from rising rates, so you want the latter. You should see a wave of consolidation coming. If you start to see a wave of M & A, this should benefit them.

Markets. AAPL-Q broke its 200 day moving average in August and then more bellwethers after that: GS-N is another as is DIS-N. Now we are getting a rally. He thinks we are seeing a rotation out of health care, consumer and some financials into harder assets including energy and materials. Energy has shot up past financials so far this month.

Markets. Canada needs to diversify instead of exporting 70% to the US. Keystone XL is a good example. The acquisition of COS-T could be the first of several cases of the guys with big balance sheets coming in to acquire something in the energy sector.

Momentum ETFs. E.g. First Asset Momentum ETFs. He mentions those that make up the majority of the market. He is not a momentum guy so these don’t appeal to him. He feels these are excellent momentum ETFs.

QE4? He thinks the Fed WILL raise interest rates and one raise is priced into the markets. He thinks they will do half moves. They want to get off zero and they want to test it. Probably sometime next year.

In flows and Out flows of ETFs. E.g. SPY-N, being the largest in the world. Market Makers can liquidate units, or create more, so there does not have to be a balance of buyers and sellers of the ETFs.

Markets. Timing of any Fed rate increase, slowdown of China and emerging markets, and valuation have been plaguing markets all year. There is a relief rally on feelings that a rate increase has moved further out based on numbers released. When he sees opportunities he steps in, but recommends investors keep something on the sidelines. Value is appearing in US large cap tech, European financials and Japan. He thinks China is a value trap and it is too early to step in. There is no question that stronger players use opportunities such as in our energy sector to do M & A.

Real Estate or REIT valuation. The sector has been buoyed by low interest rates. It will feel pain as rates start to rise. He has been watching what they pay for acquisitions. It will be hard to deliver long term value to investors.

Educational Segment. Turning the Volatility Index into the Opportunity Index. The VIX index has been nicknamed the ‘fear’ index. That is wrong. Turn it upside down and call it the ‘Opportunity Index’. It is VIX divided by the square root of 12 get the monthly number and by the square root of 252 to get the daily number. When the opportunity index is below the decline of the S&P from 52 week highs, that is a period of opportunity.

Markets. The markets are testing the lows, but he does not know if it is over. He is finding it a lot easier to find good value. He looks at a percentage of stocks above their 200 day moving average. It was below 20% last week, which tells you the market is pretty beaten up. There has been a lot of internal damage that has taken place. The financial world revolves around selling transactions where as his job is to manage money, so he does jump at things. He is seeing robust signs in the economy. The global demand for oil is hitting record highs. US economic activity is a little slow, but it is in the range of normalcy. The European crisis seems to have melted away for now.

Markets. Job numbers were a little disappointing. We are seeing some slowing in the data. It gives the bears more ammunition. They can argue it is the beginning of a global recession. At the end of the day it will be another buying opportunity. You’ve seen some indicators in China that shows there is a slowdown in the deceleration. If you look at the dividend yield in the S&P vs. the 10 year T-bill in the US, where would you put your money? As long as you are in a global expansion, you should buy stocks. Valuations are now down and create great buying opportunities. He is constructively picking away at them. The epileptic moves we saw recently are over.