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

When the Fed raises rates, long term US bonds will drop, but would Canadian bonds follow suit? There is no guarantee that long term US bonds will drop if Fed raises rates. The yield curve could flatten, bonds don't fall as much as you think they would. Canada will probably underperform here. Can't see anything happening here with bonds and our weak economy.

Sherritt bonds 8% 2018 It is always a challenge to hold individual high yield bonds and Sherritt is in hard times and he doesn't like the credit. He thinks it is one of those cases where you might want to get your money back, half of it or all of it. . Real risk here, the nickel market is extremely weak here. They have nickel in Cuba and they have a new project which isn't doing very well. They paid their dividend last quarter, but they recorded a sizable loss. He doesn't like their credit. A speculative security at this time.

Bombardier 7.35% , 2026 bonds (B BBD'B-T) He doesn't like to see individual investors buying specific high yield bonds. It could blow up on you. Bombardier will survive. They will pay their interest and they have good sponsorship. He recommends holding these bonds, but it is a weak hold.

What would a bond portfolio for new clients look like? He recommends 20% in ETFs and high yield managed funds and 80 % in laddered funds.

Telus Bond matures in January 26, 2021, 3.60% Recent shift at the top was a surprise, and could be unsettling for shareholders. However, he feels that it doesn't change the credit and the new CEO, a former CEO, should be able to regain the reins pretty quickly. It fits in with his overall rolling down the curve strategy and having a varety of well diversified group. He favours non-cyclical companies, consumer oriented if possible. He avoids the energy, metal and oil sectors. He respects the new CEO.

Bank of Montreal Bond matures March 16, 2022, 2.12% This is a safety of principle.. The maturity made sense to him. The bonds are relatively close to par, not giant premiums. He feels the bonds are safe because it is with a bank, especially if you own other bonds with shorter maturities.

Shoppers Drug Mart Bond, matures May 24, 2018, 2.36% Likes the credit. They are either A or A+ or A-. They are staying away from triple B securities.

What is the risk of holding a bond ETF as opposed to individual corporate bonds if held to maturity? #1. ETFs never mature, if they do , they just rollover into another bond within the the contents of what the ETF stands for.. While individual bonds, you know exactly when and how much you are getting back. #2. ETFs are better diversified, it is harder to diversify with bonds unless you have a bigger portfolio. #3 There is a risk if all ETFs investors decided that they wanted their money out at the same time. If you own an individual bond you are certain of what you are going to get back.

Scotia Bank Bonds. They are high quality, they are A+ bonds, safe investment with a lower yield. Sleep at night bonds with no worries at all. He doesn't favour any bank bonds over another, but they offer different types. You have to examine each issue very carefully.

Caller has a portfolio of 1.5 million and would like a 5 % return. He feels that you have to accept what the market is giving you right now. When people start arguing with the market you usually lose. You can't get 5% for investment grade bonds right now. You can get 2 to 2.5%. He recommends high yield bond funds. BCE common yield is pretty close to 5 %. Also, high quality companies such as the banks, BCE and Power Corps could give you 4%. .

Caller want's to know if Canada 5 year bond has prices baked in, in regards to the oil price erosion. The last cut wasn't a surprise, and the yeilds actually went up since the bank cut it's rate on July 21. Market is still uncertain if the rate will be cut again. In the meantime we will see firming in the US rates which will mitigate anymore decline in 5 year bond yields.

Caller wants to understand Strip Bonds. Zero coupon bond originally was from a Bond with 6 coupons on it, that would be torn off for each payment. They would “strip” them off and sell them separately. These were zero interest bonds, that were sold at a big discount from their face value. Maturing in 10 years. $50 today would have a guaranteed compounded return from now until then. They were government issued triple A, or double A securities. Ideal for RSP. They can also be traded. These days the yields are so low there isn't any demand for strip bonds. If you want a fixed amount in the future, you can buy it today as an investment.

What percent of a portfolio would you allocate to bonds for two people entering retirment and how would you allocate it? There is no one answer. Depends on confort level. With bond yields so low these days it's tempting to focus on the equity portion.

Brookfield Preferred Share Series E. He's confused as to what this share does. Complicated formula for calculating dividends and you can convert it to fixed assets. Doesn't know why they sell these things. He likes Brookfield itself, things won't get any worse for them, so hold them if you have them. Don't buy though.

Markets. This is still a market where growth is hard to come by. The economy continues to muddle along at around 2.3% GDP. Consumer confidence seems to be fairly low, in spite of gasoline prices being down about 25% year-over-year. They’re spending a lot of money on new cars, so a lot of extra free cash is going towards car payments rather than spending at the mall. Costco reported June numbers, and year-over-year is literally unchanged, which is unusual. Retailers are concerned about “back to School” growth as well as a couple of retailers that specialize in teens, who are not flocking to the malls either. Small business loans have grown to a new 10 year high. That is good, because it typically leads GDP growth and CapX growth by about 2 to 5 months. The question is what might get this market to break out of that trading band if it turns out that we see an acceleration of GDP growth in the 2^nd half of the year. As long as inflation doesn’t come roaring back with that, he thinks the markets have the ability to move higher. The market is expecting a slight increase in interest rates at the end of the year, but that is not a cold shower on the market historically. In the last 2 days, the leader in Healthcare seems to have given back what it has gained. High beta stocks across the board have been hit, but longer-term he thinks demographics continue to be quite good for healthcare stocks.