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

Oil. Stocks have been lagging tremendously. Index is down 16% year to date while oil is up 8%. Looking into December and into 2012, the energy sector probably has the strongest fundamentals of any sector. Emerging economic oil demand continues to be exceptionally strong and will continue to be so.

Energy infrastructure assets. This is his number one theme that he is focusing on. Pipelines, gas processors, transmission companies, truckers etc. That whole space is benefiting from a rise in production and he doesn't see any sign of that changing anytime soon.

Market: S&P downgraded the debt of a number of US banks. Europe needs all the hope they can get. The US is in better shape than 2008 even if not as good as Canada. Portfolios are pretty defensive and have 12-13% cash. He has never seen the volatility we have now in the past. He is using the volatility to do some buying. Is looking at things that have economic sensitivity right now.

Canadian Banks and CMHC mortgages: Have a huge exposure to Canadian mortgage market, but not as much as CMHC, which takes on most of the risk. He is upset that CMHC is so loose in how they let people et mortgages.

Convertible bonds seem to have a lot of turmoil in the last while versus straight bonds? Key to convertibles is the underlying company. When the equity price sinks, bonds start to acquire their basic intrinsic value and they lose their conversion value. In markets like this, the bid/ask spread becomes wider. Straight bonds have been rallying as government yields have been falling.

When a bond matures, what value is returned to the holder? Original par value? That is correct. At maturity you get 2 payments. The principal value plus the final interest payment. If you paid a premium, you would have got an income stream that was higher than you would have received with a par bond.

Risks of inflation linked bonds? Would you buy for a balanced portfolio? Yes, he would bite on for a balanced portfolio but right now is not recommending them. They are long-term, long-duration with considerable price risk.

Ontario credit rating? Structural deficit of $15 billion-$17 billion with a likely yearly deficit until 2016 or beyond. With its $250 billion estimated debt what are the chances of a downgrade? Chances are reasonable that there will be a downgrade but not in the near term.

GE Capital Canada 5.1% due June 1/16. 4.6% yield to maturity. Should I sell? This is a strong AA credit globally and has survived the worst of the worst.

Commodity cycle. Thanks this is busted for the moment. One of the key differences we are going to see this cycle versus 2007-2008 is that demand from the BRIC (Brazil, Russia, India and China) will be less. Doesn't think that China has the ability to continue stimulating their economy, particularly in their real estate sector. Demand for commodities from them may decline this time.

Gold. Bad news in Europe and bad news in the US. This is all good news for gold. Look at the 10 year chart, keep your eye on the rising tide and ignore the bobbing cork.

Copper. Bad news out of China, bad news continuing out of Europe, horrible news out of the US so demand for copper is diminishing. However, copper supplies are also diminishing. No matter what the news is, we'll always be replacing wiring, plumbing etc. Neutral on copper but is not bullish on base metals at this time.

Need to be disciplined, and purge emotion. Set asset allocation at a time that is as neutral emotionally as possible. Review on an ongoing basis. Stick to your asset mix, and within those asset classes take advantage of the companies that you think will do well over time, and don't let the macro issues effect your decisions.

Question: how to buy US equities from a Canadian account? Avoid constant exchange, every transaction is a hit on the exchange. Setup a US account, transfer money in and out of US account less often to avoid the exchange hit. If you are doing it through an RSP (which can't be in a US account), then look into discount brokerages (TD, Scotia) matching the exhange rate if you are buying/selling on same day. Tax implications are capital gains tax, withholding tax on dividends.