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

ETF Voting Rights? Every company is going to be different, but many companies have the management that try to match their voting to the mandate of the ETF. There are also some that will even use an independent consultant giving them a third-party counsel.

Sector rotation in TFSA’s? A high risk-high reward strategy. If you are going to swing for the fences, it probably makes a little more sense to do it in a TFSA. What you have to weigh is your tolerance for risks in the strategy you are pursuing. Depending on how the winds are blowing, you can do very well if you are right, but you could lose probably more if you are wrong. (Remember you do not get to claim a tax loss in a TFSA.)

Market Call Tonight is focused on Income Taxes, not investing.

Market. The year started off with a dramatic decline, and then all of a sudden reversed course. At the beginning of the year there was a disconnect between what we thought was a reasonably good economy, except for the commodity prices, and a market that was discounting the next major recession. It may have been just a bit of sellers from Sovereign Wealth Funds, who were dependent on oil. Doesn’t feel it is markedly expensive, but not screamingly cheap either. Both here and in the US, particularly in the US, equity holders in mutual funds have been heading for the exits.

Markets. Rates are not going up. Banks need some caution after being punished. We seem to be dealing with hidden inflation, such as a hamburger bun being half as thick. We are not out of the tunnel with oil, but we are seeing the light at the end. He woke up wondering what stock he would use for his third top pick today and decided to go with his best sector, which is gold. The US election is up in the air because the candidates are so poor.

Canadian railways. Both are giant stocks. CP-T has much more profile in the market. It is hard to know what will happen. Commodities raging in the market might help them. You can continue to hold them but they are not likely to go up much. He prefers CP-T, but in fact would prefer to be elsewhere than railways.

Gold. It could get to $1300. If it does then the stocks should rage even more than they are now.

Markets. We have had a nice recovery led by energy and materials, which are alive for the 1^st time in a few years. Canada is outperforming the US and the Cdn$ is up. Thinks there is a bit of a pullback coming on oil, and if it pulled back $5 that wouldn’t be unusual. Investors should be patient and pick their spots. When oil goes to $50, sometime in the next year, and the Cdn$ dips to $.81-$.82, he could see the bank of Canada acting to try to soften the dollar a bit, which obviously would help the economy. Expects the market to be pretty choppy from here because we have had that nice V shape recovery. We are overdue for a pullback.

A US Bank ETF? Doesn’t know ETF’s, because he buys stocks individually. The only banks he owns is Toronto Dominion (TD-T) and Bank of Nova Scotia (BNS-T), the ones that are half non-Canadian. You get paid to wait in the Canadian banks because of the roughly 4% yield. A big regional US bank might be of interest, and if rates go up you will do fine.

Market. The market seems to be a little bit better, but he doesn’t know why. The economy doesn’t seem better. Thinks people are accepting that interest rates are not going to move. Lower interest rates mean higher stock prices. Oil prices are coming back a little, and there are a few green shoots in mining. The stock market leads the economy, and we are seeing fundraising happening in Junior mining. A bullish sign if the market is right.

Economy. The Fed came out with no changes to the overnight rate. The market sold off and the dollar skyrocketed, and then that was all reversed. US is really paying quite a bit more attention to global growth now. The labour market has improved, which is the signal the market has been looking for in the last 6-9 months, so let’s get on with the rate hikes. Thinks they are feeling that global growth is not quite where it needs to be, so that a stronger US$ would not do anybody any good and are trying to keep the US$ in check. This is working very well for Canadian investors as our dollar has rallied, energy has rallied, commodities have rallied. As a result, we have to be a little bit careful. The US$ might be being held down by the Fed, and the Fed alone. There could be a snap back on the other side. To him there is no doubt that the Cdn$ hits $.80 and finds resistance there. The US$ is actually breaking out of a 20-year trend, so we have to step back a little. A lot of people were really upset when they didn’t have enough US exposure last year. That has now turned upside down. Some people that made a move too quickly into the US last year, are getting their head handed to them. Anybody who stayed in Canada and ignored the noise is probably having a pretty good year. Would recommend people to stay diversified between the 2 currencies. There are lots of great opportunities in both currencies.

Market. The market has been rallying about 17% from January 20, a pretty sharp upward rally in 2 short months. He does a lot of pair trading which takes out a lot of market risk, but when everything went up, it made it tough for him during March and April. A lot of euphoria has been built in to the market, but typically summer months are slower, and investors should perhaps be thinking about getting some protection in their portfolios.

Markets. This is a choppy world. In general, we are through the worst of things. We had a horrific start to the year. Thinks the Fed is a nonissue right now. It is going to be about earnings. Apple just reported and earnings were terrible and the stock was down about 8%. Twitter is down over 10%. Very stock specific and he thinks we are going to see more of that. Increasingly in the tech world, it is a Facebook, Google world, with Apple looking a little bit slow to the party. The overall economy is still slow, which is why he thinks the Fed will still be on the sidelines. You still have to be a stock picker. What the market is highlighting is that you have to be more focused on the names that you do own. Owning a basket is not going to be as successful as it has been, because you have these very stock specific stories.

Markets. Companies play a game by talking down their numbers, and then beat them. He showed a chart of profits. They are falling this year, even after backing out financials and energy. Non-GAAP compared to GAAP earnings are widening. Real earnings, not adjusted for accounting, are really falling. He is very cynical with how Wall Street plays games with earnings. We are very late in the cycle. There are not years of earnings growth ahead of us.

Currency hedging. You want to hedge for 5 years if the dollar gets below 73 cents.