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

Gold based or gold companies income producing ETF? This is Covered Call ETF’s that are on gold stocks. He is not a big fan. Not sure that a weaker US$ is going to push up the value of gold significantly. To get a significant rise in gold, you would have to get significant inflation. That is when gold performs the best. However, a gold ETF that has Covered Calls tends to bring in all of the premium, and then they pay it all out.

Markets. Wal-Mart (WMT-N) just rolled over the market. He would never expect it to be down 8-9% on news that is not that big. They are having trouble against Amazon and he thought that was in the stock price. Retail is tough. Uber is a threat to Fed Ex if they do home delivery services. If retailers move into Canada and can offer the same prices, then watch out. You can’t do stupid things in a correction. People should just hold on and sit tight. You never know if you are catching a falling knife so he does average down.

Preferred shares. They have been obliterated this year. You take a lot of risk with perpetuals. He would spread his money around and perhaps buy some resets.

Banks. There is no point owning all the banks and he does not recommend an ETF, so you have to kick a couple out. He likes TD-T, BNS-T, and NA-T. NA-T was beaten up the worst. The valuations are very attractive.

Markets. Markets go through cycles and what we are seeing now is the downside of a cycle. The naysayers are getting more publicity than anyone. We are seeing a lot of volatility. Margin is at very high levels and there are a lot of margin calls when markets go down. Good stocks go down with all the rest, but this is the opportunity to reposition your portfolio for the next cycle. He thinks we are closer to the bottom than we were before. You have to look at companies that can be opportunistic in these conditions. If a takeover means your company is now with a stronger company, then it is worth more, even if you are not back to breakeven. Wal-Mart is an example of an overreaction. Often these are opportunities more than anything else. As a value investor, he sits back and looks at his watch list and gets ready to nibble. People have become so attuned to quarter to quarter thinking, but it is necessary to look out over an entire business cycle. He looks at this from a 3-5 year time horizon. People are forced to buy equities with interest rates where they are. There is no absolutely safe haven. It is becoming more and more difficult for the Fed to raise rates this year.

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.