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

Market: There will be continued volatility because of what is happening in Europe. There is a little more worry now. The volatility is the new normal right now. He is in a little more cash right now. The problems will be knocked off the list one at a time and that will give the market more room to move up. Italy and Spain are the worry as they are larger. Probably the US will recover of this really soft patch. He is ready to buy in some dips but he is not ready to do that right now. Raised cash in economically sensitive areas. Stay with blue chip and dividend payers.

REITs: .TTRE-T. Canadian REITs have a lot of breadth. Turmoil in Europe does not affect a strip mall in Woodbridge. As long as Europe does not affect world banks, REITs should be ok. XRE is a reasonable way to go but Riocan is a way to go.

Government Bonds. Yields of government bonds are at all-time low. Looks like a slowdown in the US economy through the summer and everyone is piling into the bonds. Yields of 2.9% for 10-year bonds are not much of an investment. Very challenging market and is not a “buy and hold” time.

Tax-free savings accounts. The most secure bonds are government but they are not yielded very much. Likes the cable and telcos sectors. (See Top Picks.)

Bond ETF's. You will lose money if interest rates rise. To protect this from inflation, you would have to have a long, short component to your fixed income strategy. The only way to do this is to hedge out interest rates on your own or put your money with a long-short manager in the fixed income space.

Construction of corporate strip bond portfolio and how far out should the term be? Effectively this is a leveraged bond. If looking at a long-term, such as 30 years, it really trades at about 120%-130% of your actual bond. If you think interest rates are going down, you should buy them otherwise, sell them.

Canadian bank preferreds? Essentially an equity investment that pays a fixed coupon. Some coupons are perpetual, which don't have the maturity date and will behave just like a bond, i.e., will go down in the lower interest rate environment.

24-year Gov. of Ontario bonds at 4.6%? No danger of bankruptcy so will probably pay all your coupons and your principal back at maturity. 4.6% has to be within 50-75 basis points of the lowest yield you could ever receive. Over the next 5-10 years, it will yield around 7%-7.5% but you would see a capital depreciation of about 35%. He always tries to avoid capital loss.

Floating-rate bonds? Securities where interest rates changes every 3 months. The problem with them is that they are extremely illiquid. Also they look more like bank loans in terms of how they are structured and tend to have bank loan spreads. You could take the same risk and invest in a fixed rate product and get a better all round risk return.

Buy Videotron 6.78%, 2021 and Short GOC 3.25%, 2021. Videotron has all the fundamentals of an investment grade company and yet still are high yield. They're on the move and doing good things and spread is almost double what the other cable companies are offering.

(A Top Pick April 12/11. Up 0.6%.) Buy Cdn$ and Sell US$. Buying Cdn$ at around $1.01 or $102.5 and selling it at $1.05 is a good, low risk way to earn some income. 0% interest rate policy in the US is to 1) inflate asset prices and 2) devalue the US$.

(A Top Pick Apr 12/11. Down 4.3%.) Short 10-Year GOC bonds. Still likes this strategy.

Markets. Expecting a strong rally in the 2nd half of the year. Feels the global economic recovery is still intact and there is a lot of negative news packed into the market. He has a lot of stocks in his coverage lists that that are trading at very reasonable multiples for 2011-2012. Once all the issues relating to the different European problems blow over, people will realize that there are great values available.

Value investing. Entails a lot of things, discipline, patience and focus. Right now, there is incredible volatility and a lot of irrationality and emotion in the marketplace. The least path of resistance is to Sell. He looks at discount to book value and tangible book as well as P/E and cash flow multiples. Also look for hidden assets. Goodwill is worth zero.

Markets. Expects a slow summer with acceleration in the 2nd half. Something like last year. Inventory numbers indicate that Q2 grew about 3% in the US, which is good, but it is slow growth. The only way to make money is to be active in the market.