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

Consumer Discretionary. Thinks we are going to see some pent-up demand on the spending side. As job numbers continue to be strong across North America, that is putting money in people’s pockets. Their confidence is coming back. The American consumer is under leveraged and they love to spend. Once they know their job is secure, they are going to be buying the new home, the new car, etc.

Markets. BNS looking to sell off stake in CI Financial after it was thought they would buy them out. CI has been the darling of asset management. BNS probably saw they could get a good dollar for it and evaluated how it fitted in with their strategy. S&P is at an all time high, but there are concerns. VIX's low meaning investors are complacent. Small caps have been underperforming while the broad market has been setting highs. Small caps usually lead. Market usually gets softer at this time of year. This big divergence between small and large concerns him so he is cautious. We are at a major support level for the Russell 2000. This is when the big drops occur in the market. You have to be more defensive right now.

Combinations of technical indicators to decide on selling stocks. Every investor is different. There is no one set indicator. He has target dates to get into and out of a sector. Looks at moving averages and short term momentum indicators. Stochastics, RSI, etc.

Gold bullion is July 12 until beginning of Oct, seasonally. And end of Sept for gold stocks. The trade has worked quite well in recent years. He would start looking at gold a month earlier.

Markets. We always hear that there is a market correction coming, but it would be awfully nice to know “when” this correction was coming. Consensus seems to be that “it is happening”. He is looking at market internals to see on the short term where these internals are pointing to when it comes to market direction. On the S&P 500, the options for the put/call ratio, which usually trades between .6 and .86, closed on Friday at .72. It needs many days below .6 to point to a market top. Also, looked at Total Ticks and on Friday the closing Ticks was about 147. We need 700 to point to a market top. Intraday on the plus side, Ticks were at about 1100 and it needs to be at 1500 to be at a market top. All these things plus others are saying we are nowhere near a top. Indicators are telling you not to be afraid to buy something. Bear in mind that these are very short term indicators. You can use these indicators to trade the S&P 500 as well.

ETFs. Better than mutual funds to invest in? He does not own any mutual funds. There are a lot more advantages with ETFs because you can trade them throughout the day. Also, they are a lot cheaper. You know exactly what is in an ETF. Calls can be written on them. Expect mutual funds will be making some changes some day to make them just as popular as ETFs.

Telcos. Has 2 issues with telcos. Revenue stream is from wireline and wireless. We know that wireline is going to be nonexistent at some point in time. When it comes to wireless, it is probably getting saturation in the marketplace as well. Over the next 12 months, you are probably going to collect the dividend from telcos, but you are not going to get a lot of growth. If he was going to pick one it would probably be Telus (T-T) only because he thinks customer service is a lot better than others. Manitoba (MBT-T) will be a takeout at some point in time.

Uranium stocks? So much depends on what Japan is doing and their reactor situation. Thinks they are going to come on stream again and that Japan does not have any choice, but to pick up the nuclear power situation. If there is some pick up in uranium, you have to look at Cameco (CCO-T) or Uranium Participation (U-T) because they are the big ones and if money starts piling in, especially from the US, this is where they will go. But there will be some short-term pressure on these companies.

Interest Rates. Thinks they are going to stay low for at least a year. We are getting improvements in the economy, probably better than what we were doing in the fall. However, we are still getting muted inflation, there are no wage gains and consumer debt levels are high. The consumer really isn’t in a position to spend their way out of this so it is going to be a muted recovery. Federal reserve still has to finish the ending of the quantitative easing program. We are probably looking out about a year before we can get serious about talking about interest-rate increases. Also, any increases will be slow and incremental. The best place to be is the short end of the curve in short dated maturities. For the last 18 months, he has been overweight in corporates in his broad mandated portfolios and of short duration.

Preferred shares as a fixed income vehicle? Preferred shares are really undervalued at this time. It’s a really misunderstood market that doesn’t have a lot of institutional players. We are playing catch up at this stage and he thinks they are really great value. Prefers insurance companies over banks as there is more yield in them. You are receiving dividends, not interest so you get a preferential tax treatment.

Target bond ETFs. This is a basket of bonds, very short, around a maturity date. The ETF will terminate, usually late in the year, of that date. For example, with a target date of 2018, the company will wind down that ETF on Nov 30/18. Most of the bonds will mature at that time. As it gets closer and closer to maturity, the actual value will get closer to the original NAV and they will distribute whatever is left at the end. An example of a target bond ETF would be RBC Target 2014 Corp. Bond ETF (RQB-T).

Interest rates of corporate debt versus yields of their preferred shares? Would this differ between perpetuals and resets if both are trading below par? The gap between the bond yield and the preferred does matter somewhat and tend to follow what the corporate bonds do. We measure things in fixed incomes with the spread, usually over Canada so resets tend to be spread off of the 5-year Canada. However, the relationship is very, very loose because you also have the equity on the other side and the pref yield cannot be driven lower than the common.

Laddered bonds coming due and interest rates are atrocious. Should this be put into preferred shares? If the money is RRSP, you are not going to get the tax advantage of preferred shares, but you will still get a really decent yield. He would think that is where the value is. You are taking a step down in the capital structure, but preferreds look and act so much like bonds and you are getting all the pickup in yield, it is well worthwhile to look at.

Is now a good time to buy Real Return Bonds for 2026 for a ladder? Not a big fan of Real Return bonds. A Real Return bond usually has a fixed coupon plus it pays whenever the CPI rate is. These really came out for pension fund managers that had an established book of business that they were paying out indexed to inflation. You really have to ask yourself whether or not there is going to be inflation because this is what they were designed for.

Safest and most secure place to park cash for 10 months? There are options such as floating rate funds and he would recommend a floating rate preferred which gives you some protection if rates go up. Trading with a yield of about 3%.