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

(Top Pick May 08/09, Up 14%) Bell Canada 5 02/15/17 Bonds.

REAL RETURN BONDS: Apposed to them because he thought they were expensive, but they have been selling off. They are risky securities. Suggests tracking the spread between these and government bonds to get an idea of the inflation rate.

BOND ETF RISKS: Pay their interest quarterly. There is a reinvestment risk. The yield of the bonds assumes reinvestment of coupons at the same rate.

CORPERATE BONDS WITH MATURITIES OUT TO 2035: He would not buy a corporate bond that long a term. Only buys long-term government bonds. Nothing longer than 5 or 7 years.

MIN INVESTMENT IN CORPORATE BONDS: $10,000 would be the absolute minimum for the minimum commission. If you need to invest less, go for the ETF market. E.g. XTB.

PH&N High Yield Bond Fund: Likes it. It’s really a medium yield fund. Closer to investment grade securities in it. Good money managers.

A lot of people were looking for a strong growth year, but this has been called into question. He has been in the pro-growth camp but is watching the market grind sideways. He is getting ready to change his mind.

We are going to wait a long time for the US to raise rates (9 months to a year). The problem is the economy. 10% unemployment. There is a massive de-leveraging going on in the world. A lot of people with credit card debt are just paying down debt. A long, slow, grinding ride. There is going to be growth because inventories are low. There is a risk we see in China and India. They were building inventory on commodities. Even emerging markets are going to have a tough time.

Preferreds trade on their own dynamic. There are different kinds. When you have a negative market and liquidity dries up a bit, preferreds may under perform.

Everything is oscillating. One day the market is sensitive to one piece of information and the next day not. Mainly he is holding. Moving late in to some of the new fangled plays. The electronic age has provided some brilliant tools, bit sometimes to have to take time to assess things. He sees no great advances, but there are opportunities. He fears a little because we have done so well on commodities in the last year.

Good companies are beating estimates on revenue and on costs. CPI shows the consumer is still hurt. Companies that are positioned to take advantage of this will do better. Lot of European countries are talking about helping Greece but there’s no action so until the market sees action it will continue to linger. Trying to find best companies with strongest balance sheets.

How the governments rescued the global credit crisis has come home to roust as sovereign debt problems. This will be a test of the market’s willingness to assume risk. The risk appetite in Canada has returned to the bond market. Spreads are approaching near normal conditions.

Canadian Banks. For some banks, the common is actually higher than the bond, which concerns her – is there a dividend cut coming (unlikely). It’s a case of how profitable the US banks will be with the new rules.

Bond fund managers are looking to avoid those parts of the yield curve that will be hurt the worst with the anticipated interest rate increases.

Morgan Staley senior 2/23/2017, 4.9%. Almost 2% more than equivalent Canadian bond. They are a leader in the financial services market. Changes in the financial industry will actually be helpful to bond holders.