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

(Pro shares short bond ETFs. Couldn't understand. Anyone know the symbols?-Bill) An interesting way to take a leveraged play on US treasury yields moving higher. This started to happen but this market is a short end on the yield curve that has been rising. Haven't performed as well as would have been expected. Treasuries are the ultimate safe haven and if crises continue to happen, long-term treasuries should perform well. He doesn't expect this to happen. Good for short-term trading during the next 6 months.

Tier 1 Bonds. Any problems with these in the future? Have had a stellar performance over the last 12-18 months. Believe they will eventually be grand fathered so would be a “buy and hold”. Still offer a good yield.

5-month U.S. Treasury bills. Great place to hide until the end of the seasonal weakness. Historically you want to get back in the market around the beginning of October. This gives you 5 months of cash until the next period of seasonal strength clicks in.

Markets. Looking for a downside risk from now to September of 10% for the S&P 500 and Dow. Historically, in the midterm election year, the markets have peaked around the 3rd week of April. From that point on, they have a steady decline until the end of September. In the Canadian market, the ideal time to buy is near the end of October when the market starts to go higher.

Stop/Loss? When you are wrong, you want to be wrong to only a very small degree. He looks at it at 7.5% from the stock’s high and then again when it reaches minus 10% and then he does an analysis of when to Sell. It all depends on the company, sector, etc.

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.