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Markets. There was a little bit of sell the news in France, but it was the lowest turnout (40%) and 10% did not mark either party on the ballot. He is pessimistic about it. Political risk has passed a hurtle but has not turned the corner on risk because of the Italian election coming up. Italy is far bigger a risk than France in terms of their debt. Markets have anticipated the victory and the currency has been up over the last couple of weeks. It is the last part of S&P earnings. The last leg is the retailers. News coming out of department stores shouldn’t be that rosy and will put a damper on this earnings season. A lot of good news is priced in. Chasing performance this late in the cycle is a fool’s game. He is in the sell-the-news mode.

ZPW-T vs. ZPH-T. ZPH-T is hedged against currency risk. The cost of hedging is the differential in the cost of writing the forward contract. He is fully hedged on all portfolios. The CAD$ may go back to $.80. If markets sell off and contracts come into the money they may get taken out. A 20% down for the market will cause many of their stocks to come down into the money.

ZPW-T vs. ZPH-T. ZPH-T is hedged against currency risk. The cost of hedging is the differential in the cost of writing the forward contract. He is fully hedged on all portfolios. The CAD$ may go back to $.80. If markets sell off and contracts come into the money they may get taken out. A 20% down for the market will cause many of their stocks to come down into the money.

They have secured high interest savings accounts with various institutions. They have generated a pretty decent yield and turned it into an ETF yielding about 1%. It is pretty good yield for a money market.

He likes the engineering space because they will benefit from infrastructure spending. They are breaking out to all time highs. This is a bullish thing for the stock. Forward earnings estimates make this not look that expensive. Stay with it until we start to break trend, moving below $43. (Analysts’ target $51.50). He does not like the risk/reward and so does not like it. He does not like it short term. You can stick with it if the trend continues, but there is not a lot of upside potential.

There is always foreign tax withholdings. You need to focus on the diversification of being in other parts of the world. The benefits you get from diversification globally override tax considerations. It has been a pretty clear ride up and is his favourite way to play Europe.

Infrastructure and pipelines. The pipeline sector is not cheap. Lots of money is going in because there is great dividends. He holds this through ZWU-T. It has a covered call overlay and high dividends. He would not jump into VSN-T because it has flat lined after the takeover offer.

Educational Segment. When you invest globally, currency is the most important consideration. It makes a huge difference to your return. He showed a chart of long term returns of international ETFs with and without currency hedges. Currency explains about 70% of the difference in returns. It is the biggest factor over the years. This is not the best time to get into Europe except with a currency hedged, covered call ETF.

Markets. The one stop investing Fad: This time it is ETFs that mimic indexes. Since the bottom of 2009 the ETFs have beaten the value investment managers overall. Increasingly it has become the ‘thing’ to invest in ETFs and forget the value people. Money is ‘gushing’ into index ETFs and they tend to chase the very highly and very low valued stocks. Then what you get is a lopsided structure. The problem is when you get into a bear market and money gushes out. The high valued stocks crash worse. He has been here before. In 1971 he remembers the ‘nifty 50’ stocks that had outperformed all the way up to 1971. But this was the top of the market and these 50 stocks were off 80% by 1974. Many of them never came back after that. Now they are doing it again with ETFs. When the media grasps it and hypes it, then you know you are close to the end.

The problem with it is that the stock is fairly well valued. There has not been a lot of movement in the earnings for quite a while. It has been trading about its fair market value. It needs its earnings moving.

The stock is very extended. The rails have had a great run. The problem is that it started at book value and is now at about 5.5 times book and it is not going to do that again. He is not knocking the company and the management, but the problem is that it is ‘in the market’ already. It is VERY expensive.

After that enormous run we had he thinks oil will settle down to where it is supposed to be. CPG-T will have to adjust to current price levels and get costs down so you can get more valuation.

The concept is wonderful. The down side is that it is trading at a horrendous price to book and has no earnings. It is highly volatile. A great company and a great concept. When the market comes off, these companies will REALLY come off. There is tremendous investment risk.

They have been buying back stock and it has not done much for the valuation. He thinks they should be reinvesting in the business. Anything above fair market value gets him worried. You are riding a bit of momentum, but not value.

GWO-T vs. MFC-T. MFC-T has the advantage of being a very diversified company, globally. They have done well from that diversification. He tends to prefer it to GWO-T, although he might use its weakness to buy.