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

Why is Gold going in the opposite direction to gold stocks? He does not agree. Look at the XGD-T. You have some resistance from the highs of a few months ago and will see natural selling there. If gold gets to $1350 there is potential for more gains. He thinks we need to break above that, however.

Educational Segment. Hedging the Canadian Dollar. Currency explains about 70% of the difference in returns between markets. In Canada, the US$ is key. Currency differences are caused by imports, exports and interest rate differentials. We are range bound to 70-80 cents for the next few years. You want to hedge when the Canadian dollar is at the low end of the scale (.73 or below).

Markets. He used to buy only companies that were very low in valuation, but this meant that sometimes he missed wonderful companies that had years and years of growth ahead of them. So now he thinks you should have a bit of both in your portfolio. A Company that is expensive can maintain its growth so be a good investment. Lack of a dividend is not necessarily a deal breaker. He never buys companies with terrible balance sheets that don’t pay a dividend. Negative sentiment only makes you look dumb for a short time. Don’t get wound up about themes that may not come to pass, e.g. Potash over the last few years, where the world has to ear.

Lumber prices have gone parabolic, but there is a softwood lumber dispute with the US. This is pushing up and yet holding back stocks. We don’t know what the US government is going to do. The last softwood lumber dispute turned out to be nothing.

Market. Feels the market is pretty benign right now. The concern many people have is that valuations are a little high. Doesn’t think that another year like 2016 is going to repeat itself anytime soon, but also there is no reason for things to pull back either.

Assessing a financial advisor? You should ask what their credentials are. How transparent are they regarding how much they are paid. How much do they care about you? Are they really trying to solve your problems?

3 equal percentage ETF’s portfolio, including Canadian, US and international. Good strategy? He generally prefers the Vanguard products because they tend to be the cheapest and tend to have many, many hundreds of stocks that make up the ETF. He would look at Vanguard Canadian (VCD-T), Vanguard US Broad Market (VUS-T) and ??? VUD.

What do you buy for income to reduce your stock allocation? There are generally 3 things. 1) Principal Protected Notes, 2) an offering memorandum structured product called the 4 Quadrant Fund by Timber Creek, which is making money out of real estate with public, and private debt. You could also use BMO’s ETF Emerging Markets Bond Hedged (ZEF-T)

Withdrawing from an RSP to eliminate a mortgage? If you take any money out of an RSP it gets added to your taxable income in the year of the withdrawal. Unless it is really desperate, he would not do this.

Where should an 18-year-old put $146 for an RSP? He would put this into a TFSA instead. An 18-year-old would be in a very low tax bracket and $146 is not very much of an RSP payment.

Can stocks that have no capital value be claimed as a Capital Loss? Yes. You have to claim an election when you do your taxes, and you should be able to verify very easily that the things are now worthless and as a result, whatever you paid, is now a capital loss.

How do you calculate the “All In” cost of buying a home above and beyond the simple purchase price and closing costs? Most people would say that you shouldn’t spend more than 30% of your regular income on mortgage payments. There are other things including closing costs, land transfer tax, cost of maintenance, property insurance, and anything you have to do to furnish the home.

Is it prudent to put US ETF’s or US stocks in a TFSA? He doesn’t recommend putting US stocks into TFSA’s because of certain advantages being lost because of the dividend.

If a company lowers or eliminates the dividend, should the stock be sold? A rational investor should be indifferent to a company’s dividend policy, however when a company used to have a dividend and the dividend is cut, it generally means that paying of the dividend was a bit presumptuous, and perhaps it was a company that shouldn’t have been paying a dividend in the 1^st place.

What happens to Principal Protected Notes if rates rise or the market drops? Most of them are based on either a benchmark or a basket of 15 or 20 stocks. What happens to interest rates is of absolutely no consequence regards to a PPN. However, if the benchmark and/or reference portfolios drops in value, you are not going to make any money. You get your principal back if you hold to maturity.