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

Educational Segment. If you don’t understand the markets are going to go up and down then you are not ready for the markets. The average investor’s return in the last year was 10% and the volatility was 10%. The ideal portfolio gives you the highest return possible with the lowest volatility.

Markets. He remains very cautious. The US economy is doing well, but investors don’t really understand what the central banks around the world are doing by creating all the liquidity to get growth going. It only gets to the banks, who invest it in more risk assets. It does not turn into growth. The global economy is a mess. We will continue to see volatility and little rallies. Money has gravitated to consumer staples and valuations in that sector are at all time highs. He is at 30-70% equities in his funds.

Oil. Prices will change. Costs are higher as they need a minimum of $70 to cover costs in the oil sands and $80 in the fracing world. It is extremely hard to say when there will be a recovery as there are a lot of moving parts. Certain oil stocks are going up every day.

Markets. He is looking for Canadian companies that can benefit from the weaker Cdn$, especially on exports to the US, or those that have revenues in the US. There is a lot to do and no reason to be totally negative.

Gold. Every portfolio should have some gold to balance out. Gold is reasonably stable. With the oil collapse where do you go for resources? You go to forest products perhaps and, selectively, you can go to gold. He is very interested in the longer term approach with Osisko Gold Royalties (OR-T), Integra (ICG-X) and Detour (DGC-T), which is absolutely phenomenal.

Minerals? Would now be a good time to start picking away at some of the companies? The time to buy them is when nobody else wants them, which is now. He would do some gentle buying in here. They are looking glamorous compared to oil and gas now. He would probably put HudBay Minerals (HBM-T) first.

Markets. Thinks the next little bit is going to be bumpy. You have lower oil prices which are showing up in the 1^st quarter in the US. The higher US$ is hurting international, which will also affect 1^st quarter earnings. The Greek fears will probably drag on for a while. However, you are going to have the compounding effect of European quantitative easing, which is going to help and underpin. At the end of the day, he thinks there will be a positive resolution in Greece. Lower energy, although it takes time, will eventually be a boon for consumers. A higher US$ will ultimately help American purchasing power.

Which bank, for a good dividend and lower downside risk? Bank of Nova Scotia (BNS-T) is the least tethered to Canada. If you think Canada is going to be a little bit dicey, this is one that you might want to look at. CIBC (CM-T) probably has the highest dividend and the lowest PE as well as having the highest capital levels.

Cdn$. A chart on the Canadian dollar dating back to 2005, showed it was at a peak in 2007-2008, and as the stock market and oil fell, the Loonie fell with it. A double bottom showed in 2009. This is happening again. He thinks we are going to see some sort of complex bottom, somewhere around the old lows at around $0.77 on the US$, and probably pretty soon. A similar pattern to oil.

Oil. Going back to mid-1980s there have been a lot of similar circumstances happening lately. Chart showed that oil fell from $31-$32 to around $10 in the mid-1980s,. The bottom in 1986 was complex with an up-and-down activity over several months. Oil then peaked at around $40 around 1990 and then dropped again and tested at around the same level in 1999. Again it was not a simple bottom. It then reached a peak early in 2008 at $147 and then took a big drop, but did not have a complex bottom. With this information, he feels there is a high probability of the former lows, high $30 or so over the next couple of months, but it will not be a simple turnaround, but will be like the last couple of times where there is a complex bottom. He plans on buying back in after the volatility has played itself out. There will be a great opportunity in oil, probably in the next 6-12 months. Watch the volatility and watch the breakout and it will be a great buying opportunity.

Markets. We are at an interesting point in economic history. The reality is that we have not had a point where the European, Japanese, Chinese and Bank of Canada are working together to add liquidity. In the long term this could contain some dangers. It is an inflationary phase that we won’t see until 2016. The next part of the equation is currency exchange. That will be more powerful than more people think. Now that we have a foreign exchange structure that is seeing the US dollar move dramatically against all other currencies, it will change things dramatically in 12 months or so.

REITs are pushing forward as much of the refinancing as they can. The lower interest rates are a benefit and then they want to lock them in for as long as possible.

Air Canada Bonds 7.625% maturing 2019 (Top Pick Feb 28/14, Up 14.75% Total Return) The slow down in Western Canada could moderate air travel for a few years.

REIT rules in Canada. He would love to see more flexibility. Changes in 2006 involved rules that were too draconian. He doesn’t see rule changes in the US coming to Canada.

Markets. Thinks interest rates will be lower, longer than people think. The Bank of Canada is worried about a slower Canadian Economy. We are in the phase where the oil price drop is now affecting other areas of the market. Oil is very little of the US economy compared to Canada. The world has not changed that much. Earnings came out from a lot of companies and all they said was that the dollar was affecting them. Yet commodities have collapsed. China may be slowing down faster than people think.