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

US Banks have not done well generally this year. They are considered from a fundamental view point as tough. Loan growth is anemic, but deposit growth is fine. If the economy moves to a normal run rate, there is a lot of opportunity in US banks. BAC would not be his favourite. Prefers C-N.

Markets. What we are seeing now in equity markets are like 2007. QE is starting to be removed from the system. He looks at market sentiment, margin debt and long term valuation and we are now seeing them in the top decile or more so. It is never a time to be a long only investor when the market is flashing these three signals. The broader deleveraging cycle will take hold after the QE is removed. You would not see a new fed chairman react to a market selloff. She wants to establish her credibility early.

Markets. People are scrambling to get their money in for the end of RRSP season. Check the most recent notice of assessment. People might want to get a jump in for 2014 to invest it now. The TFSA might make more sense than an RRSP if you are earning relatively little, e.g. near retirement. Mutual fund fees are too high. Minister of Ontario wants to get more involved in regulating financial planners.

4% rule for people retiring in 30s and 40s. 4% withdrawal per year is sustainable unless you hit an awful situation like ’08. He doesn’t recommend it unless you are in your 60s and have a balanced portfolio.

If you sell to trigger capital losses, make sure you don’t buy the security back within 30 days. Contributing something ‘in kind’ to an RRSP triggers a capital gain unless it is a loss and then you lose the loss and can’t claim it. If you just sell the security you can’t buy the same security in the RRSP within 30 days to claim a loss.

Behavioral Finance. We all have behavioral quirks. Most people who sell ‘A’ to buy ‘B’ would have done better a year later if they kept ‘A’. His bias is to trade less. Sell those things that are up to take money out of your RRIF.

Think of your carry forward room because it carries forward for the rest of your life. If you contribute a huge portion of your salary in one year you will get a huge tax savings.

They have US$ accounts even for RRSPs so that you do the currency conversion only once but you have to think of the US tax consequences (e.g. dividends) as well as currency swings when you come to convert the money from the account back to CAD$.

Sell stocks to buy ETFs? Most people in only stocks don’t have good international exposure. Many people aren’t even diversified across sectors, so he supports moving to ETFs.

RESP with Bonds? He doesn’t recommend income for the first 9 or 10 years. $80k portfolio after 18 years would be enough for a Canadian University but may not be enough out of country.

Markets. Emerging market guys were concerned about tapering, but leaders have said interest rates will remain low. S&P 500 at a new high today and he thinks it will go higher still. He doesn’t like the reasons we are going higher, however. We are probably making a very long term low in gold. It could play out over the next few years.

TFSA and RESP – What to buy. VT-N is the total world. XWD-T is very similar except no emerging markets. As RESP comes close to being needed, move to something safer.

Educational Segment. Pay attention to the outliers. Look at a risk/return curve for a market. Sometimes a stock does not lie close to that curve, e.g. more return for the given risk. SPY-US chart shown. Expects it to get to $200 and then he will hedge it with options.

Markets. We recently saw a soft patch of numbers, but they are weather related. We are in the midst of an economic expansion and it will continue. Bank of Canada will eventually follow the Fed who will eventually raise rates after tapering QE. We had a spike up at the new year on the 10 years and then they pulled back a little. The bull market in bonds has gone on for 30 years. The bull market ended last year. You haven’t seen back to back losses in Canadian bonds since the ‘60s. Thinks we will have a small positive for all bonds this year. It will be an underperforming asset. You want to be overweight corporate bonds.

Real Return Bonds. Long term, inflation-protected returns guaranteed by the government. Real yields got very, very low over the last few years. There is still a long way to go to get real yields where they need to be. Should be a very, very small position.