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

Markets. To him, Canada has done as well as, if not better, than any other developed market globally. However, going forward he feels you are still a little better off getting money out of Canada. He began rebalancing portfolios at the beginning of the quarter, early July, and the rebalancing will be done at the end of the quarter.

Broad-based ETF’s such as VDU-T, VCN-T and VUN-T. Strategy of holding these versus ETF’s based on indexes tracking smaller baskets? He likes the more broadly based ETF’s as you are diversifying away from risk and getting more small companies. Diversification lowers risk and adding small-cap names historically increases returns.

An emerging market ETF that excludes Russia? There are many emerging market ETF’s, but they all have exposure to Russia. There are a lot that have minimal exposure.

Minimizing taxes when creating a will? To do this, you have to do lots of gifting while you are alive. Whatever you have in your estate will be part of your terminal tax return. If you have a spouse, you can name them as your beneficiary of your RRSP or RIFF, which will create a spousal rollover with no taxes. For regular ordinary investments in a taxable account, try not to have them in a taxable account when you die, just give it away before that happens. Legally you are allowed to give about $10,000 per person, per family member, per year. However, if you are giving away a marketable security, there may be a taxable capital gain/capital loss. If you give securities to charity without selling them, they will give you the receipt for the value on the day they receive it.

For a senior, do you prefer Index ETF’s weighted by countries/economies or by industry-specific ETF’s? He always prefers to diversify by geography than by sector. Geography products are cheaper and their benchmarks are easier to follow. As a result, you can build a more diversified portfolio.

ETF’s versus stock picking? Stock picking is lower cost because ETF’s might cost 35-40 basis points on average for a basket of stocks where individual stocks cost nothing. However, you might need 35 or 40 stocks and still not have the diversification as an ETF. Also, there is the cost of transactions for buying and selling stocks. There is also more risk with individual stocks.

Markets. It is very hard to tell what the market is going to do in the next quarter or two, which causes a lot of anxiety for people, especially investors who haven’t been in the market and are wondering what to do. If you keep it simple and cut the forest from the trees, it makes it a lot easier. She focuses on company valuations. They have obviously gone up, as the market has done well in the last few years. Not anywhere near the point where it is getting a bit crazy and too high. If the geopolitical situation gets out of hand, she would be buying into those dips. It is becoming increasingly important to being selective. Likes US financials, which still has fear. Also, the large cap technology side, where there is the concern of who is going to be the next player.

Markets. The US is improving and economic numbers are looking increasingly normal, however, there is a disconnect between the improving economic numbers. The numbers for both the US and Canadian economies were better than expected. Meanwhile bond yields are going down. As a result, there is a risk that yields may end up increasing, and as a result, he ends up favouring stocks over bonds. Stocks are reasonably priced at about a 15 multiple both in Canada and the US and thinks that earnings will continue to grow quite well. On tech stocks, we are now seeing a lot of the large-cap stocks breaking out of a 7-10 year sideways band. While they are increasing in price, he feels there are others that will end up doing better.

Markets. There’s been push and pull in place for a couple of months. Eventually we will get an interest rate hike. But the push and pull is definitely giving us an opportunity. There are a number of high quality German companies that have been hit hard due to the Ukraine. The lack of US interest rate was a stimulus last year. This is a multi-year trade moving up. We are seeing lots of M&A as a way for US companies to grow.

Australian Banks – Dividend strength. They have massive reserves. Over time that has made itself into the economy. Given that it is an ADR, the Australian dollar has been high and it has been hard for repatriation for earnings outside of Australia. He has a negative view on the country. He’d like to see a lower Australian dollar. You can buy one of them now, however.

Markets. He is still pretty well fully invested. He is not a Market Timer, but just buys businesses that he thinks are good value. Not overly concerned about having a correction, as he thinks it will be rather muted. If you bought the S&P on the day before it peaked in 2011, you would still have a 12% annualized rate of return, over that 3.5 year period. If we see markets fall, cash will come in and underpin it.

Canadian Banks. Do you buy and hold? He tends to hold them. His favourite has always been Toronto Dominion (TD-T). If you were coming in with cash and looking to buy one bank, it would be TD. If you are looking to buy 2 banks, the 2^nd one would probably be the Bank of Montreal (BMO-T). The commonality between the 2 is the exposure to the US market.

Markets. He uses a number of top-down indicators including short-term and longer-term ones. Right now they are all positioned very favourably. His portfolios are currently on offence, which means they are close to fully invested. Showed a Presidential Cycle Patterns chart, which showed the first 2 years as typically fairly flat as far as returns go. Going into the 3^rd and 4^th year there were fairly strong numbers. Starting September and going out into April and May of the 3^rd year is when it tends to have the strongest performance. This is where we are heading right now. Historically, September is the only month that actually has a long-term negative rate of return. He would not be surprised to see a correction this September.

Markets. Indicators seem to be overbought, herd mentality is very bullish which is the point at which we should be getting nervous, but when you overlay that with where we are in the seasonal part of the year, this is a defensive time of the year. October is the one for the big splash moves. September is our worst month of the year. There are fundamental things such as the QE ending, Europe possibly in a deflationary situation, and we had a great Q2 GDP, he thinks there are a lot of things that are going to converge over the next month or 2, to see where we are at. To have defensive positions now makes a lot of sense. It is where you place your money once you get a bit more guidance.

Oil. The critical level is $90, and the crude oil chart shows we are just around there at $93.73. If we break down through that $90, it probably means we go to the mid-$80. The price of oil could fall and yet you could have a really good oil investment run-up, simply based on how it executes and whatever area of the market it is in.