Paul Gardner, CFA

Yes and no. His firm thinks, as do most people, that the bond market is now safe to get involved in even at the retail level. When we were dealing with 0-2% interest rates, it was very hard to give clients the classic 60/40 portfolio. On top of that, we had that train of higher rates coming at us, resulting in a 20% drop in your bond portfolio. 

It's been negative the last 2 years. Now that the Fed's done its job hiking rates, perhaps there's one more, the best value is at the shorter (2-year) end of the yield curve and investment-grade credits. You get a good 5-6% yield on those type of investments. The bond market's in better, though not great, shape.

The US is going to have to deal with a flood of issuance at the federal and corporate levels. Everyone's been holding their breath, as they didn't want to issue expensive bonds. But now they're going to have to, as rollovers are happening.

Investment-grade credit, especially, is the sweet spot of the bond curve, where you'll get 5.5-6%. Earlier this year, he got rid of his longer-dated maturities (10 years out), and loaded up on 2-year credit. That's the biggest bang for your dollar in that curve.

Everyone's dreaming that central banks are going to pivot to lower rates in the spring of next year. There's a collective hope on this. But what's so wrong with having rates here? 

You can't trigger either this consumer overspend, or this housing problem in Canada, if you're just going to lower mortgage rates again and ratchet the housing market up again. We know the dynamics are terrible on supply/demand, and with everyone holding onto their cheap mortgages. But they're going to have to renew. 

There has to be a period of time where we settle with a rational level of interest rates. Inflation's still 3% or so. If you do the math, you can't have -1% real rates. You should probably be hovering around 4-6% for government bond  yields.

Near-zero interest rates lasted way too long, distorting the market. Society breaks down because of this. The wealthy, asset-rich person did so well over the last 10 years because of rates being zero, it just manipulated the whole asset market. 

There's a come-to-God moment when that's not happening anymore. Whether it's real estate or private assets, these things have to be revalued, and that's what we'll see over the next year or two. That includes the stock market. 

The stock market's discounted a fair bit, and everyone's optimistic for the Christmas rally. If nothing happens in the next week or so, then we'll probably get a bit of that. The problem is that in the first quarter of 2024, you're dealing with higher input and labour costs. We're also dealing with a slowdown, if not a recession. Earnings are going to be challenged.

Over-levered. Properties aren't performing as well. Geographic distribution requires them to be experts globally, which is a problem. CEO resigned, change in management. Whole sector's under stress, low quality gets hit harder.

Prefers this one. Better investment than DIR.UN. Steadier assets. Backed more by management. Only weakness is that US properties are suffering a bit. 

DIR.UN has good numbers, but issued equity in September, instead of selling assets, to get leverage down. Motivated by externally managed contract remuneration based on assets under management. Stock fell. Can't support management on any level. Supply's coming on, so the story's getting tired.

Prefers GRT.UN, a better investment than DIR.UN. Steadier assets. Backed more by management. Only weakness is that US properties are suffering a bit. 

DIR.UN has good numbers, but issued equity in September, instead of selling assets, to get leverage down. Motivated by externally managed contract remuneration based on assets under management. Stock fell. Can't support management on any level. Supply's coming on, so the story's getting tired.

Bankruptcy is extreme. And he bought it just a week ago. He's not bullish on office or retail, but it gets to the point where it's been hit so hard, you have to put in 1 of 3 real estate chips on a name like this. Premier asset, trading at a 30% discount. There will be a recovery, but it will take a while. Its smaller floor plans are appealing. 

Yields almost 11%, but he thinks it's sustainable. Sold data centres earlier this year, so that helped their leverage.

If you had to be in real estate over the last year and a half, the places to be were industrial and multi-residential. Avoided office and retail because of the pandemic.

But for the first time in a year and a half, he sold his multi-residential because it had outperformed. He's not bullish on office or retail, but it gets to the point where it's been hit so hard, you have to put 1 of 3 real estate chips to work. There will be a recovery, but it will take a while. So many headwinds towards office right now. In 2025, vacant office space in Toronto will be at 25%.

For the last year and a half, he's been incredibly defensive on the bank side. But you have to own something, because it's too big a sector not to.

He'd recommend NA. The most defensive of all the banks because they don't have to deal with mortgage issues. They do more custodial services and have an investment arm. Reasonable 1.2x price to book, PE around 9x. Outperformed all the other banks. Conservative.

For the last year and a half, he's been incredibly defensive on the bank side, owning a small position. But you have to own something, because it's too big a sector not to. He'd recommend NA. The most defensive of all the banks. Outperformed all the other banks. Conservative.

He often has a different opinion than others on the TFSA. A lot of people use it for high-beta stocks with high rates of return. He thinks you should go in the opposite direction and put interest-earning investments in there such as high yield, mortgage investments, GICs, or even REITs.

As investors, pure income is taxed at the highest level. So the best place to put fixed income is in your TFSA. For example, put in an Atrium Mortgage (AI). It gives you a 10% yield, but it's tax free.

Fell on hard times. Repositioning. Cut distribution. Exposure to office and retail. Leverage is too high, needing refinancing at higher levels. There's another chance of a downdraft in equity markets, so you want high quality.

Weak last quarter, but recovering on renewed guidance for double-digit growth. Unique because of high barriers to entry. Very good at acquiring. Should do well in a recession. Cheap. Falls between industrial and multi-residential.

Took profits and redeployed. Not enough apartments in Canada. Threat to mess with the REIT tax structure has gone away. Rent market is very tight, with rents going up at least 6-8%. Only issue is rent control in Ontario.