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

Gold. Gold stocks have underperformed substantially compared to the bullion itself. Feels that the stocks should perform relatively well against gold bullion this year.

Economies. Spanish banks got a bailout and the markets were excited for about 50 minutes. This is like alcohol, you need a bigger one each time. If they had done this 3-4 months ago, it probably would have had a much bigger effect with a decent rally. Spain itself has a debt to GDP of about 120% and need to raise $70 billion. Has 25% unemployment and 50% youth unemployment and a collapsing property market. Spain is really important as it is the 5th biggest economy in Europe. It is too big to be saved. It puts the whole of the European stabilization fund in jeopardy. We could see a very sharp, painful decline over the next few weeks until such time as "here comes the cavalry".

Markets. Expects the European situation is going to require a lot more pain before everybody comes together and comes up with a solution. This patch up job is useless because you patch up one thing and next week there is something else. Expect it will take years before you have a well functioning Europe. US is becoming a beneficiary of all that European turmoil. Looking for some value and good entry points in US stocks. She is currently in a large cash position waiting for a better opportunity. Seasonality usually works.

Volatility seems to be with us to stay. Down the road you can see all kinds of things that are going to add to it. You can still make money if you pick the right stocks and look for dividend instead of capital gains. The banks seem to be just as volatile as ever. He always has some fixed income content. 10-15% cash or liquid securities. Also a significant gold content, which has been a drag.

When you think of al the stimulus that has been thrown at the market over the last couple of years, the economy is hitting a stumbling block. It’s tough for investors because markets are giving signals one way and the politicians the other. You have to pick your spots. Money is getting deployed in yield-oriented investments. That’s where the money is going. Corporations have cash but are not making acquisitions but they are raising dividends.

Markets. The global macro picture with what is happening in Europe is clearly what the drag on the market is. There recently has been a bounce off the oversold levels. There are also issues with seemingly slowing economic growth in the US as well is in China. Favours the US market over Canada as it is much more defensive than the TSX. The TSX is highly geared towards finances and resources.

REITs. Is it a good time to get in now? With interest rates at all-time lows and 10 year treasuries at 1.6% or so and 10 year government of Canada at 1.7% or so, REITs give you that excellent yield potential. They should continue to do well as long as interest rates remain flat or even go lower. The S&P/TSX Capped REIT (XRE-T) is a good way of getting into it as well as the Equal Weight REITs Index (ZRE-T).

Markets. She generally runs with transactional cash and is currently higher than she normally would be at between 5% and 6%. Selective in putting money to work the fields investors should be patient here.

Markets. We are in the middle “of the year doldrums” in addition to all the global problems. His clients are remaining in yield plays with good dividends and possibly take advantage of very low prices, rather than selling.

Stocks are cheap and N.A. markets are way oversold. He has been doing some buying. European markets will muddle through. Lots of high quality companies that are relatively free of impact from the European situation. Seeing lower growth and demand from Asian China India and Europe.

Constructing RRSPs solely using ETFs? Absolutely yes. This is a good strategy. Use multiple asset classes and don't overweight one.

Small caps future? He believes there is a small cap premium and that over long time horizon, 10 years or more, will have a return premium of 1%, 2%, 3% above large caps. You do need to be patient.

ETF wrap products and costs versus holding ETF's individually? A wrap is where you buy a bundle of 4, 5, 6 ETF's in one ticket. He likes this one for 2 specific situations, TFSA or an RESP, things that you can only put in $2500 or $5000 a year and you want a diversified portfolio.

Markets. His quant model continues to push up stocks that are reasonably valued but the macro overview indicates that at the moment we are in a risk-off market but people don't care. Market is oversold, but not enough yet and there is more washout to come and then it will be time to look at some of the bargains. Golds are typically the leaders coming out in market rebounds and this is already starting to happen.

Yields. The 10 year bond yield, both Canada and US, is artificially low. This is a product of fear, concerns around deflation with the D leveraging of households in the US, potential or existing inflation in Europe and the slowdown in China. Clearly this is gone further than what normal fundamentals would take you to. The question is, how will it unwind itself. Well it snap back to a normalized rate immediately or will it gradually back up? He thinks economic growth globally will be muted for some time. In this kind of environment, REITs should do very well in terms of total returns and in terms of valuations.