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

Fixed Income. The quest for yield is ongoing and there is some low hanging fruit in the investment grade space but you have to be a little selective now. Bond market has had a great run for the last several years but there is still some great value out there.

Interest rates. His view is that there will be an interest rate increase over the next 2 years. You're going to see start to see the Bank of Canada make its move maybe later this year, first of next year. He sees 2% in the 18 month horizon.

Ontario bonds? Ontario is probably lagging the other provinces in getting its fiscal situation in order but they have a credible five-year plan to bring the budget back into balance. Relative to Canada bonds, they are looking pretty cheap right now.

Canadian high-yield ETF’s? The majority of the ETF’s in Canada just sort of track the US markets and put on a Canadian dollar hedge. This is a good trade and he does like the market and is relatively cheap right now.

Looks for leadership positions in their industry, track record of value to shareholders, and visible growth opportunities. The US accounts for more than a third of global GDP. Economy is enough to move global GDP growth. IMF upped estimate for global GDP growth last week, mostly because of US. Financial services (banks) are very well capitalized. Automotive sector is coming back. Real Estate is the laggard. Merging markets are slowing down and therefore the TSX is slowing down.

Samsung: Emerging feud amongst third generation of family. He tries to stay out of the fashionable part of the tech space. You have to buy this on the Korean exchange. Are challenging Apple. Launching Galaxy in London in a couple of weeks.

Markets. There has been a liquidity driven strong market since Oct/11 but none of the underlying problems has really gone away, particularly in Europe, but China is also slowing down. Feels there is another 20% downside from here. He is still not totally convinced that the US is out of recession danger and the odds are about 50-50. His Cdn portfolio has about 20% cash.

S&P 500. Wonderful run, close to 22% in New York in the 1st 2 months of the year. Prices got a bit extended. Feels portfolio managers are very happy with their 22% performance. Won't get too much money coming into the market immediately, but if the market pulls back there will be some new buying coming in. The pullback should take this month and probably half of next month.

TSX. 2 major sectors that drive this, financials which is 25% of the index and energy, another 25% are not doing very well so you have 50% of the index that is meandering. We are in a bull market but don't forget, the bottom was in March/09 and we just passed March/12 so you shouldn't be surprised that the market gets a little bit tired. This will probably last until the US election.

Elliott Wave Theory says we are at the end of the super cycle and about to have a major contraction. How do we prepare? We are not at the end of a super cycle or in a major contraction. Elliott people think you go into a cycle, then another cycle and another cycle and when you get to that point, the world is going to collapse. Historically it has not done this. End of a cycle always coincides with a major bankruptcy period.

Gold. The up trend line was broken in late 2011 and is now trying to keep the roughly $1700 area. Currently there is a down trend line and we have to get above that for gold itself to get going.

Stock price range where moving averages are not so useful such as junior mining stocks? This is correct. If you have some stocks that are in the $0.50-$0.75 range moving averages are not going to help you very much. You should really be looking at trend lines.

TSX. Feels market is pretty range bound and volatility will continue. 11,000 on the downside and 13,000 on the upside and we are smack dab in the middle. Earnings growth is slowing so one of the tailwinds is now dissipating. Second question is interest rates and have they hit bottom at 1.75%-2% 10 year level in the US. He is now looking for a bit of direction.

Does the proposed Bank of Canada interest rate hike hurt or help the banks? Interest rates have been set artificially low and are now returning. The question is, why are rates going to go up. Going up because the economy has some life to it, which is the best news for the world, let alone banking stocks because we are returning to growth and an environment that will be replacing fear with a little bit of optimism.

Markets. The recent pullback is a natural occurrence. There was a strong gain from the fall of last year until now, especially in the US market, not as much in the Canadian market. There is a lot of positive news coming out of the US leading out from some of the darker corners of the recession.