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

Markets. Seasonality can get moved to left or right. He did not see any of his resource stocks move. But today we saw a little bit of pick-up. Doesn’t know if it will last. It could be a short term play. The TSX is not back to the ‘07’ highs. For the S&P we are at an all time high. We have a breakout from ’07’ high. We have to find out more about this high. Maybe it just sucks in more money. We see strength in defensive names. It is really a trading market.

(Top Pick May 14/12, Down 5.93%) Gold bullion.

Oil and/or Nat Gas Seasonality. We are getting a counter seasonal action. Sometimes it gets shifted. Oil did a little test recently. He would look at oil over Nat Gas right now.

Markets. Markets are grinding higher, although Toronto is lagging. Central banks need to continue to intervene. Earnings are continuing to increase, even if at a lower pace. Given all the asset classes, she sees no reason for a major pullback. Put money in dividend-paying strong companies. 35% of her portfolios are international, predominantly US or multinationals. If growth continues then you can start increasing exposure in cyclicals. She has very little base metal exposure nor energy. What she worries about is what she doesn’t know because that is what will cause a pullback.

Markets. We still have to see a complete wash-out in gold stocks, a capitulation. Bull markets usually end with blowouts and bear markets usually end with capitulations. Thinks we got started and doesn’t know when it will finish. We could wait until the summer low for that. There are too many gold companies out there and some will go away. The TSX venture has always had its performance from the top 10% of the listings. So this is a stock pickers market. First look at management: should have been serially successful. The ‘A’ teams are priced very, very cheaply. He is a gold bug. Believes the same thesis from when everyone was bullish is still in place now. We will see a range of takeovers eventually. He also sees a discovery cycle.

Markets. Chart of the total return index of the S&P looking back 15 years. He drew a trend line from 2000 to 2007 and then to where we are now. It underlines the need to diversify. Canada has been a terrible place to be over the last 3 years. It is 4% return per year in US$ but for Canadians it is zero because the CAN$ moved. You can buy ETFs that hedge.

Education Segment. To Diversify or Not. Canadians tend to concentrate in Canada so we are overweight commodities, mining, etc. In the last 3 years the world has done 10% per year including dividends and 75% of that return is from the US. The rest of the world has done a couple of percent. The US market is about 47% of the world. Canada is 4% of the world. China is 2% in the world index.

Markets. He is optimistic on equities outside of Canada because of less exposure to commodities, materials, oil and gas, and gold. These sectors will lag for 3-5 years. Although global demand is moving at a healthy pace, all of the above are priced in Canadian dollars and they will be weaker. The US will lead us out of the economic recession over the next 3-5 years. The US will lead us into a higher interest rate environment over the next 12-24 months and add strength to their dollar. Apartment REITs do the best in a rising interest rate environment.

(Top Pick May 9/12, Up 20.6%) 99 Cents Only Stores 11% Bond maturing Dec 15/19.

Algeco Scotsman 10.74% 10/15/2019. Modular building space. Works with mining camps, oil and gas sites, and government buildings. Very well established company throwing off a ton of free cash flow. There is no stock. Well diversified. Western and Eastern European companies.

Bonds. These are a terrible investment right now. Measuring them against inflation, the long-term performance indicates they should earn 2% more than inflation for government bonds and 3% for corporates. We are closer to zero. Also, the earnings yield on the S&P 500 should be about the same as U.S. Treasury bonds but the gulf is about 3%. After-tax bonds make no sense at all for a taxable investor, compared to the dividends on the underlying common of the same company.

Ontario Hydro bonds 10.125% do October 15/21 for $12,000. Currently worth $29,000. What should I do? You have to keep this one until maturity because at the time you bought it, the compound yield to maturity was a lot higher than yields are now.

What rules do I follow when dealing with long/short pair trades on bonds? Very difficult for an individual to short a bond as you would have to borrow them. Also, if you are going to short something, the bid/ask spread had better be pretty tight. Not for the average investor.

Owns an inflation protected fund with the thought of holding long-term and is up about 15% in 2 years. Stick to my original plan or take my profits? Real return bonds have done very well in the last 3-4 years. If you hold until maturity you’ll get that return over the CPI.

Real return bonds have been trending downwards. What is their future in the TSX marketplace? These are here to stay until the government decides it is too expensive to issue them. Real return bonds have a big role to play with most of the institutional investors.