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

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%.

Brookfield Preferred Shares Series E. (BRF.PR.E-T) Really likes these. These are one of the ones that he thinks it should do better. 5% dividend. Trading at around $21 so the current running yield is almost 6%.

Markets. We know the Fed will have a difficult time normalizing interest rates so they announced they are testing a facility related to term deposits. They are going to be asking members of the Federal reserve to submit bids to help mom up the liquidity of the stimulus. They are going to do it for about 8 weeks, but there is no plan to change interest rates. Pay attention next week if you are a fixed income investor. This largely got ignored last week by the markets, however. The ECB is still talking about stimulus. They will be doing something in June. The markets actually make their highs in June, but it does not rhyme.

ZAG-T is the cheapest way to get the bond market in Canada. ZCS-T is a laddered portfolio. Doesn’t think interest rates are going up until the end of next year.

What sectors look expensive? Which have underperformed? Being in the right sector is a key way to re-balance portfolios for superior returns. XIC-T is the broader Canada Market. Thinks energy (XEG) is a bit expensive, so deemphasize it. Thinks gold will dip below $1200. This would be the buy for the next 4 or 5 years.

Canadian Dollar. We have seen a huge volatility in the Canadian economy and if you smooth it our over 6 months you see it is weakening. Thinks Canadian dollar will be centered around $0.90USD.

Educational Segment. Smart Indexing or Smart Beta. New improved ETFs. Alphadex is a proprietary stock screening process. Growth and value factors. They eliminate the bottom quarter of the list and break the rest into quintiles to be weighted differently. They beat their benchmark over 5 years.

Markets. Markets are fairly valued with pockets over and pockets undervalued. He selects those that are undervalued. He would be buying on any type of selloff in the market. He buys 20-25 stocks.

Rotation out of Growth and into Value stocks? He focuses on value plays. He doesn’t think it is changing in the markets.

Banks or Insurance Companies. He is in insurance more than banks. He does own SLF-T. He is also looking at AIG. The banks will be fine long term.

Markets. S&P 500 and Dow made new records today, but it doesn’t feel that good in terms of the market because, if you are in the tech stocks, you would have done really well earlier in the year, but there were some pretty big corrections in the last few weeks. Same thing with health care and energy. This is going to be a market where money is going to be going around chasing the area that hasn’t moved as much. There might have been a difference between the big cap, the mid-cap and small cap as well. Has been pretty aggressive in the market over the last 4 months and started pulling back a little bit ahead of the correction, but perhaps should’ve done more. Feels the market will perform well overall into the year end. What is challenging is that a lot of stocks have run pretty hard and are getting expensive. Transition is difficult and he thinks the market will broaden out into the end of the year.

Markets. He looks at stocks rather than indexes, because an index can mislead you. We’ve had a tremendous run-up in energy and a lot of the TSX is made up of energy stocks which makes the index go up, but that doesn’t mean that every stock is overvalued. There is no sign in the Canadian economy of overheating. If anything, it is quite the contrary. Today there was a jobs report that was frankly depressing. Economists had expected a modest increase, but we had -29,000 in jobs, mostly full-time which erased the gains we had made last month. There are no signs in Canada of inflation or shortage of employees. Instead we hear of companies leaving town. There is no incentive for the Bank of Canada to tighten things up. This recovery has been much slower and much more prolonged than anybody expected. It is only this month that the number of people employed in the US got back to the number that it was in July 2008.

Markets. Congratulations to anyone who took the seasonal approach this year. If you bought the market this year in October and held until now, you realized 9% plus dividends as a return. We are going into a period of volatility. He is now 10% invested in the market. The economically sensitive sectors are giving technical sell signals. Earlier this week mines and metals gave sell signals. Energy sector yesterday had a breakdown on the 20 day moving average. These sectors are most vulnerable to a correction. He is in XLP, consumer staples. This is the time of year that bond prices tend to do well. There are opportunities in the summer time to buy on weakness.