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

Straddle? Fairly simple strategy where on a $50 stock you buy a $50 Call and a $50 Put. Whichever way it goes, hopefully you will make money, provided that whichever direction it heads, it moves enough to cover the costs of both sides of the trade. He uses these but only around a particular event where there is going to be extreme volatility and you know roughly what day it is going to be such as a court decision, etc. If you are buying out a couple of months, you will get killed because of erosion of time.

Selling Short or using a Put Option. What's the difference? It depends on what you could benefit and how much you are willing to risk. When buying a Put you at least know up front how much you are going to lose. With shorting, you don't know. A Put is a lot less risky than Shorting.

Options. Hasn't been a lot of movement because the market is in a trading range so being able to write options and collect cash flow seems to be the strategy of choice right now.

Canadian housing bubble? What is different about the Canadian residential housing market is that housing is bought by folks for the right reasons i.e. people that want to live in them as their principal residence. They are not overleveraged unlike the US. The incentive is to pay down the mortgage as quickly as possible. He doesn't see a housing bubble. There is positive immigration, people have jobs and they need a place to live.

Real estate operating corporations versus REITs? The major difference is that REITs are a more tax efficient structure. Wouldn't be fussed about the difference.

High-yield bonds. These have a pretty decent correlation with stocks. When stocks are doing better like today's US market, usually credit spreads are tightening for high-yield bonds. The spread today, in the US, is in excess of 8% so you are getting yields of between 9% and 10% versus less than 1% for a 5 year government bond. Cdn high-yield bonds are very sparse, so in general they trade with US bonds but depends on a bond by bond basis.

Pipelines have been the “go to” names for investors that have been flying to safety. As volatility continues in Europe, questions about Asia and continuing questions about North America pipelines have gone to sky-high valuations. If interest rates go back up and there is a pickup in economic activity, he would expect to see a general softness for the pipelines.

Are REITs cyclical and do they get a pop this time of the year? They are cyclical to the degree, especially when during a downward economic environment a lot more vacancy. With no inflation fears, low mortgage reinvestment rates plus high occupancy levels Canada has pretty well skated through with no cyclical side effects. REITs such as Riocan (REI.UN-T), H&R (HR.UN-T), Canadian REI (REF.UN-T) and Dundee (D.UN-T) are very good value here.

Fees: A Morning Star Employee did Research on fees that has shown that when you look at mutual funds you do better by choosing the cheapest funds blindly. 58% of the time the lower cost funds perform better than the higher cost funds.

Wealth Management Company: Cost matters in both products and fees. When you interview, interview the individual you will be assigned to. You should have someone of like mind. Ask them about their trading philosophy.

At what point do you let a stock go (small caps)? It is case by case. A lot of people sell ‘A’ to buy ‘B’ only have ‘A’ do better the following year. If you liked it when you bought it and nothing has changed, then you should consider holding it even if the price has gone down.

Investing Approach: Be broadly diversified, tax effective, cost effective, and with products you don’t have to trade very much. He is research-based. Rigorous research and academic proof.

REITs: are going to be a lot more volatile that GIC will be but the yield will be higher. With Real Estate there is always the chance of the underlying asset dropping. Some think Real Estate is due for a correction. Would not go totally into REITs. Moving some from GICs into REITs would be defensible.

TFSAs and Tax Loss Selling: It doesn’t apply. You can’t take advantage of a capital loss inside a TFSA, but there is also no tax on gains.

Insured Annuity: is wise. Not a lot of people use them. You buy both an annuity and an insurance policy and the annuity pays the insurance premiums. The insurance proceeds are there for the beneficiary if you pass away.