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

Net worth is about half in home and vacation property and half in stocks and bonds. Portfolio allocation and level of REITs? You don’t need any REITs or investment in Real Estate. 10% is about as far as he would go.

Good strategy to construct an RRSP solely using ETF’s? Yes it would. Most people with an RRSP, it is bulk of their nest egg. You are a lot more diversified as a typical ETF has 40, 50, 60 or more companies in it.

Markets. Investors are fatigued with all the headlines and don’t know where to go. Front page news has not been positive. There is less and less conviction out there. Has been buying a little more than what he has been selling in the last 2 months when he sees opportunities. For the mot part his focus has been on dividends. A key area he has been focusing on lately has been Cdn banks.

Economy. Talked about a credit bubble and its ramifications in the past. 2 ways this is going to be resolved. 1) A default of all debt, whether sovereign, corporate, public or household or 2) it’s going to be inflated (printed) away. Default solution is not politically palatable so it will ultimately be inflated away by central banks. Since March/09 we have had a liquidity recovery driven by central bank intervention. China is slowing, Europe is in a deep recession and he thinks US is heading for a recession. Canada will ultimately be pulled along. Over the next 6-12 months this will become pretty clear. Risk assets are going to fall in the 20%-30% range over the next 18 months. The one asset class that he thinks will survive and do well is gold. Looking for significant correction on Canadian housing over the next 12 months.

Better to invest in the emerging market or in North America? Stay away from the emerging market. They get hurt first and much harder in a downturn. Thinks you will see China and the BRIC countries lead to the downside.

Markets. This is a Sell on Strength and Buy on Weakness environment. Market has been overreacting to good news on the upside and bad news on the downside and thinks we are in this channel for some period of time. With the events in Europe taking up everyone’s attention, appearance of a slowdown in the US in terms of manufacturing and not so robust gains in employment, and the fact that the Chinese have stepped back from the buying of commodities.

Markets. Expect we will continue having a bumpy ride through the summer. There is complacency that we will see QE or some other policy move but realistically, taking interest rates from 1% to 0.05% to 0.025% has limited impact. He looks for companies with significant cash flows, defensive and yield property.

Natural Gas. This has been really weak. They’ve been finding lots through North America using new technologies. Recent bounce is probably weather related. This is still early for this..

Markets. World has become one over the last 10 years. Doesn't matter where the stock is from anymore, you just want to buy best of breed global companies. As markets became one, it was harder and harder for money managers to add value because of volatility in the market. Today, people are more comfortable buying condos Toronto than buying a good solid dividend paying global company. Fear in the market and apathy to equity investing has become so large that good fundamental approaches to investing, such as growth, payout and sustainability have been categorically abandoned. Canadians have done a pretty good job of buying the banks, income trusts and a lot of dividend paying stocks. Outside of Canada there are big problems. Canadian style should be exported globally.

European telecoms? He doesn't hold any of these or European financial banks. There is nothing wrong with them but he is concerned about sustainability of dividends.

Global dividend companies. 15% withholding tax on the ADRs in the US. Also, no 50% tax credit dividend that you get with Canadian stocks. This gives you less than half what you get with Canadian dividends. Comment? This is correct. Foreign companies have an approximate 15% plus withholding tax. For every dividend $ you get from global markets, you only get about $0.85 in your pocket. This is not bad if you are trying to diversify your income.

Global Industrials. Economic indicators are all decelerating. Looks like the US Manufacturing economy is contracting, which doesn’t bode well for future earnings growth. We’ll have to watch this earning’s season to see if earnings will continue to grow. Expects Europe will continue to muddle along with tiny baby steps. Her cash levels are anywhere from 15% to 40% depending on the type of investor she is dealing with. Prefers to stay with boring, defensive type names.

REITS. Good sector as she feels that rates will stay low for a couple of years. She looks for companies that have a good record of distribution, with refinancing so there is a long term to their debt outstanding, long term leases, relatively high occupancy rates and little chance of hiccups when rents are renewed. (See Top Picks.)

Canadian Banks. She owns Toronto Dominion (TD-T) Royal (RY-T) and Bank of Montreal (BMO-T). Likes the banks as a group. The 5 big banks have not cut their dividends since World War II and in fact, have been fully growing them. For an income investor who wants dividend income, you’ll get it with the banks. (See Top Picks.)

Markets. From what she is seeing, things are still slowing down but she is expecting a rally sometime in the fall and into the new year. We'll be tired of hearing about Europe at that time and election campaigning will get into full swing. If there is any QE, it will probably be at the end of August. Going into an election, things seem to be a little more upbeat. It's generally the year after the 1st year of a new term that tends to be a little slow.