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

Is it a good time to be buying high dividend US stocks with the strong Cdn$? Would discourage looking at US stocks based on making a bet on the exchange rate. First you should see if the US market is appropriately valued. What does it do to your portfolio with what you already own and does it double up on anything you already have?

What happens to Options when a company is acquired? Options Clearing Corp is mandated to change the options contract.

Deep in the Money Call Options (e.g. $50 stock with a $30 Strike Price) versus underlying stocks? Not a real fan of these because if you are going into the options market you are effectively gaining the advantage of having limited risks.

Manulife’s Income Plus. Doesn’t like it at all. Ridiculously expensive. Also the trouble Manulife is having with its balance sheet might also be a problem.

When should you consider borrowing money to invest in equities? There are 2 times. When interest rates are low and the market is egregiously cheap such as 2008. (Market is probably fairly priced today.) The other time is when you use something like a Macquarie Equity plus product (?) where you can guarantee that you are not going to lose money but this is expensive.

RRSP or TFSA if you only have enough funds for one? He wouldn’t split but would put it in one or the other. If you are making over $82,000 the RRSP will give you a bigger refund, but under $41,000 the TFSA. Between these two either one or the other.

Likes Equity Linked GICs but doesn’t like Principal Protected Notes. Very similar but PPNs tend to be quite expensive and you have to hold them for a very long time. The GICs are only 3.5 years and you are guaranteed to make money.

Assessing management? Past is a pretty good indicator of future success. Senior management and their team should be significant owners, preferably 10%.

4.25% Canada Real Return Bonds due 12/01/21. Basically government pays a fixed rate of interest and every 6 months will pay you the interest as well as the value of the bond by the amount the CPI has gone up in the last 6 months. You benefit from inflation.

Every announcement since August regarding QE2 has pushed the markets higher. A lot of participants are looking for a correction, but you can correct in price or in time. Something stays at the same price, time passes, and it has gone through a correction by waiting out the overbought condition. Market is continuing on until a correction develops. With bonds, currencies and markets, there is a lot in motion right now.

SHORT GOLD? He is long gold. Is looking at buying a little bit more. If you are short gold, you have to take profit. He would cover now. It is in the zone for him to add.

(New investor.) Probably an ETF that is fairly diversified that represents the broad market indices. An S&P 500 or and Index fund would be wise. Possibly a mix between the US and Canada.

(Brent versus West Texas crude?) Serving different markets with differing transportation costs. You find this in commodity markets all the time.

Rising interest rates affecting bonds bought over par? Generally if interest rates rise from 1 year to 30 years, all bonds fall. It’s like a teeter-totter in that the closer you are to the center, the less that bonds are affected by the move. 3 to 4 years his sweet spot.

Top Short Short the 10-Year 2.625% US Treasury bonds due Nov 15/20. Bearish on bonds as the economy is coming back very nicely.