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

Educational Segment. Seeking Alpha. Guest was Bobby Ng of FT Portfolios Canada. Beta is basically the market return. The game is to try to beat it. Some very innovative companies have tried to re-weight indexes to try to beat markets and that is ‘Seeking Alpha’. The Alphadex method is a screening method. Start with a broad based market and break up securities between growth vs. value and then rank them based on a variety of factors that differ between growth and value. Get rid of the bottom 25%. The top tier gets a one-third weighting. The ETF portfolio gets rebalanced on a quarterly or semiannual basis. E.g. FDY-T, FUD-T, FDE-T

Markets. This is probably a needed and justified correction. We have all known for some time that at some point we were going to have to ease off from the amount of liquidity. In that transition, we hit a bumpy road, which we are on now. Thinks markets are acting rationally. As we move through the summer, that uncertainty will go away and markets will steady up. He is underweight the market and very underweight resource stocks. He is slowly covering a lot of his Shorts. If people have any resource stocks left in their portfolio, with the exception perhaps of energy, and those stocks are down 15%-20% for the year, he would be selling them now. Expects we will have a bumpy summer and then all of a sudden in September tax loss selling on those companies is going to be significant through to December. If you have any gold stocks, get out of them now. You can buy it back in January for way less than what it is going for now.

Gold. Drivers for gold is inflation, economy as well as fear factors. Hasn’t really seen the 3 factors at work over the last few years since it hit $1900. With the spike in interest rates, the cost of carry has gone up significantly. The fear is that if rates continue to rise and the economy and markets are doing better, what is the better pay off for gold investors and the holders of bullion. She thinks it would be more likely on the downside. She feels gold will be staying at around $1200. There is a seasonality trade but she is cautious on this metal.

Markets. Majority of the TSX is made up of resource stocks and aside from resources, we also have banks and pipelines, which have been very popular and have done very well. A lot of those stocks had reached technical inflection points where they where significantly overbought and valuation was more than fair so when all this is aligned and you have Bernanke indicating optimism on the economy front and yield tightening, it was a good time to take profits for investors. She views the pullback as a mild correction. On the resource side she feels there is still a little more downside to come. Copper is getting to a point where it is attractively valued. If it breaks the $3 point, that will create a very strong buying opportunity.

Markets. China comes out with a data point every week and sometimes it’s good and sometimes it bad. They have so much potential to stimulate the economy. Any bad news you have to ignore a little bit because they can restart the program once again because they have so much reserve. On the Fed situation, he thinks it is just a regular, normal cycle. We have improving housing, improving employment and we have improving profits. Feels that investors have loaded up on utilities and REITs and they’ll have to restructure their portfolios because that game may be over.

Markets. Anticipates volatility to continue. Not such a terrible thing. We are ripe for some kind of correction. The tapering that is earlier than was anticipated was the trigger. Until you see growth rates at 5% you probably won’t see commodity markets go up. Looking to the US, to companies that can grow dividends.

Markets. Has been told that the down market is a temporary phase because there has essentially been a suckage of liquidity out of the market which is why you are seeing all asset classes fall. This is a temporary period that we need to get through and then hopefully we will resume an upward course for energy stocks.

Oil/gas. Has been an awful performer for over 2 years. Investors have not been rewarded for the risks they have taken. A lot of that stems, especially on oil, on concerns about the future price. Feels that this is a wall of worry that we have to surmount. Concerns are much misplaced, especially about US oil production. We have had a 2-year trend that people are extrapolating out to 2020 to say that the US will be oil independent, but when you look at some of the very best experts, they are suggesting that 2012 has been the peak year of growth. The best opportunity in his mind is in 4 categories 1) Canadian 2) light oil 3) Midcap and 4) non-yield.

Markets.. Sees a gradual improvement in the US Economy including in-house sales, industrial production and sales. Also, consumer confidence is getting better. More concerned about the Cdn economy. New bank governor in 2014 may reduce rates if we don’t have stronger economic growth.

Dividends. 80% of the S&P 500 pay dividends and about 77% on the TSE. There are 2 types of companies. 1) Those that can pay a steady dividend and not grow it and 2) those that grow their dividends. He is more interested in those companies that can grow their dividends.

Markets. Has been favouring foreign stocks for the last couple of years. For the foreseeable future, Cdn investors have to look outside of Canada, not just the US, but globally. Until now, he has avoided going directly into emerging markets. Looks for valuation, dividends and growth prospects. For the 1^st time in 35 years, his equity weightings are higher outside of Canada than in.

Markets. Doesn’t think there will be any change after this Wednesday’s Fed meeting. They won’t change until October. They may discuss future changes. The uptick on the unemployment rate prevents them doing anything now. Emerging market bonds have sold off dramatically in the last couple of months. But he thinks emerging markets both in equities and bonds are compelling. Thinks copper will dip below $3. He is negative for the next 6 months on Copper.

Markets. REITs have pulled off a little in the last few weeks. The world panicked at the Fed announcement and bond yield increase but this was very overdone. He focuses his portfolio to expect slowly increasing interest rates – 2.5% end of this year, 3% end of next year. He has sold off more highly levered plays. Don’t go for the higher yield these days.

Educational Segment. BXF-T is a way to play the bond market with strip bonds. He has non-couponed bonds in a ladder. But you can put these in a taxable account because there is no coupon. There is no management fee for the first year.

Markets. This is the end of a trend for the particular interest-sensitive stocks and the end of the 30 year bull market in bonds. We could have a pause in equities. The last thirty days in the markets has seen a big change and it is a shift of investors going out of interest-sensitive stocks and into cyclical names. Good time to move money out of bonds and into equities. He is positioned defensively for his clients – more cash than normal. We could see some choppiness in the markets in the next little while.