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

Since the Options market is dominated by banks, and large firms with elite talent, should the average retail investor stay away? No! What you have to understand is “what do you want options” to do. He uses options for his clients, which are senior in age, and there’s nothing wrong with using them. You need to educate yourself and they can be an excellent tool.

Markets. Strong showing after the Fed dumped $40 billion additional stimulus into its economy. This was on the back of the German announcement earlier in the week, which was really required to bring some kind of stability to Europe. US activity really distorts the overall picture. If this hadn’t occurred, what you would see is a slow steady growth by European companies, reporting lower and lower earnings giving good buying opportunities. Whereas in the US, they are effectively saying they are going to fight their way out of trouble so anything that has an opportunity to respond positively to inflation will rally. High beta stocks are going to move, which we are now seeing. He is waiting to buy in Europe but the prices just aren’t there because of all the stimulus and all the money sloshing around the world. Making it very difficult for a value investor right now.

1)Since the US Feds telegraphed the buy of $40 billion a month, or half $1 trillion a year, won’t the Wall Street people just front run the mortgage backed securities? They’ve always done this and will continue to do so in the future. If Wall Street does not make a lot of money, then the engines in the US are now working appropriately.

2)Also, where does the $40 billion a month come from? For lack of a better term, the money is being printed. This tells you the US economy is going to inflate their way out of the situation. This worries him as it leads to inflation.

Economy. The ECB and the US Fed are just kicking the can down the road. Ultimately, austerity has to come into play and deleveraging has to occur. If all the poor institutions had been allowed to fall apart in 2008, it would have been a lot cleaner fall and would have allowed the economy to resuscitate a lot sooner. By keeping interest rates ultra cheap, all it does is create bubbles where people are borrowing-through car loans or mortgages when they really can’t afford it, especially if interest rates start to rise at some point in time.

Markets. NASDAQ and the S&P 500 have had big returns but that has been dominated by Apple (AAPL-Q), which is 20% of the index. If you take Apple off the equation, then returns on the US are pretty much the same as other places globally except for some of the BRIC countries that are actually negative. For his clients he has been taking a little profit off the table from the consumer names because they are the ones along with utilities that everyone has gone to hide. For people with 100% exposure to equities, he has them in about 20% cash and the rest would be about 10%.

Markets: When you look at how the announcement went from the fed, many bond traders had bought in advance and so now there was a bit of a sell off. He is not buying long government bonds. Long-term yields have definitely started a long-term rise. We should see corporate yields of bonds go up to where they were before the summer.

Provincial Bonds: Great investment. Extra 10 basis points. Risk on Ontario vs BC is negligible. Good for a buy and hold investor.

Real Return Bonds. Real Return Bonds have an inflation component. So if they fall, they only fall by half. When rates rise 1% over the next year, this one will fall 15%.

(Top Pick Nov 04/11, Up 3.94%) Province of Ontario 4.4%

TCA.PR-U, 5.6%. Perpetual, currently yielding 5.46%. Recommending even though he thinks rates are going higher. Thinks this will stay flat as yields go up because of decreasing credit risk. It is callable next October and they could take you out for a 4% return on the year.

Today's Fed announcement. This is not a big splash of new liquidity. They are buying mortgages so the banks can get mortgages off the books to drive the housing market. This just judges the economy.

Flint Energy Services: 7.5%, 06/15/2019 - 7 years, probably called in 2015 at 3.75%. Was taken over and became investment grade. Because it became an orphan, no one really follows it so it trades a little cheap.

Markets. A lot of the stimulus was already baked into the market despite the fact that there was a bit of a rally today. At this point he is not sure how far the market can rally from the current stimulus program. Prefers US stocks as there is broader breadth and you can choose from many different areas and is much more defensive.

Stop Losses? His Sell criteria is based on 3 factors. 1.) If there is a decline in the fundamentals of the Quant tables that he uses. 2.) If a company misses its earnings, once or two quarters in a row. 3.) Stop Losses. He looks at where the 200 day moving average is and depending on the volatility of the company his stop loss is 10% to 15% below the 200 day moving average.

Markets. He is seeing so much value in this market. Obviously dividend payers have done really, really well. Some of the US payers have done okay but if you are going to have gains throughout the rest of the year, probably you’ll have more from names that have underperformed. TSX still has to catch-up to the S&P 500. Commodity names, cyclical names, beaten up performers shouldn’t be sold simply because they have done poorly.