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

BMO Deposit Notes Due 7/17/18. This is a straight deposit note. He likes it and would not sell it here unless you want to place your capital somewhere else.

What is a real return bond: Bonds that are indexed to the CPI. So a 3% bond has it’s capital indexed to the CPI and then the 3% is paid on the new principle. Not his favorite vehicle until there is inflation. They do fluctuation in price so you have to hold them to maturity.

30 year Gov’t of Canada Bond 4% 6/1/2041. Capital gain possibility in next couple of months. There is room for long bonds to rally. It’s a short-term play – 3 to 6 months.

(Top Pick May 8/09, Up 11% Total Return) Bell Canada 02/15/2017 5%.

(Top Pick May 8/09, Up almost 2% Total Return) Shorted Gov’t of Canada 06/1/2011 1.25%.

(Top Pick May 8/09, Up 31%) Trinidad Drilling 7.75% 07/31/2012. Liked the company. Bond was so far out of the money it was trading on their bond value and had no conversion value.

Protecting in an increasing interest rate environment: A laddered bond portfolio does this. 7 portions – 1 year, 2 year, 3 year, etc. and get one seventh of your money back every year to re-invest at higher rates. He put together a corporate, laddered for his clients.

A bond is secured by something real. A debenture is not secured. All Government bonds are actually debentures. ‘Bond’ is also used as a generic term.

Preferred vs. Common: Preference is not to invest in Preferred shares anyway. He suggests bonds and common shares.

Yield curve is a forecaster of growth. 2 Year rate since January has increased about 60 points. This is much more than the longer end. The market has already moved ahead of the Bank of Canada.

Tier 1 bonds from Scotia and TD for the next 10 years for income: They are a good hold. They yield quite a lot more than regular bonds. They are actually capital trust securities. They dump mortgages into these securities. They are little further down on the bank’s balance sheet and attract a higher yield as a result.

Strip Bonds: A fully compounding vehicle with no periodic interest payments to re-invest, good for the RRSP. In a taxable account you would be paying tax on interest you are not receiving.

Greek government is talking through its hat and some who are trying to put together a rescue package are not buying it. Greek debt was downgraded to junk status. This is quite a serious situation for the credit market. There’s going to have to be a write down of some size. His view is that it is not as bad as it looks in Canada. It will be a subdued recovery and inflation is not going to be a problem. The Canadian economy is going to come off the boil and the Bank of Canada does not have to raise rates.

Rates are rising at the banks with Mortgages. Equities will outperform fixed income. Profit growth is coming through now. Valuations are realistic for where we are now. Value is in more defensive or health care names. Banks are still a good long-term prospect. Insurance companies have lagged. She is focused on yields. The biggest risk is significantly higher rates than anticipated.

We are in a credible rally, a bull market. A lot of people still haven’t bought into the rally. Emerging market demand is increasing and one of the best ways to play that is through Canadian resource stocks. Gold is less economically sensitive, so not the best. He is fully invested. Focuses on companies that are growing production or resources.