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

Markets. It looks like oil went down too far, too fast and is now recovering on short covering. The fundamentals have not changed that much since January, so he would not be surprised to see it roll over here. No one knows where the US dollar is going. He is not increasing energy exposure up here. All the currencies are going up against the US dollar. He spent some money in Canada and is hoping things come off so he can invest more. He only spent a little in Canada. The US is a little expensive. In the US you are getting bankruptcies in energy.

Software. He historically does not invest in technology. He has OTC-T, however. He likes how they are growing by acquisition. It is decent value here and he likes the management.

Oil price over 5 to 10 years. He does not like predicting anything. No one predicted oil would go into the $30s, let alone below. He thinks it will be between $30-$50 over the next few years. Historically, commodities don’t turn quickly. Make sure an oil stock has a good balance sheet.

Canadian Dollar. He believes the dollar got overdone on the downside. It could be vulnerable, but he does not see it going down to $0.59 like others.

Markets. He is not an advocate of “Sell in May and go away” or of using Stop Losses for his clients. To him, there is very little evidence that people can do it reliably and consistently. You have to time both getting out and getting back in. The things you can control are your costs, asset allocation and your turn over, and these of the types of things that he tries to focus on as a portfolio manager. He can’t control whether the market is going to go up or down this month, this quarter or this year. Doesn’t try to predict what is going to happen, but rather manages and reacts to what has already happened.

Percentage on fixed income? His asset allocation, all else being equal, is an old rule of thumb with a New World wrinkle. People usually say that your age is the percentage of your fixed income. He would say that your age times the decimal of your age is a good target for your fixed income, until about age 70 where it tops out at 50-50. For example, if you are 50 years of age, 50X.50 = 25%, so 25% of your income. 60 years of age is 60X.6 = 36% of your income. By the time you are 71 years of age, when you have to convert your RRSP to a RIF, that is when you get to 50-50. The reason for this is that we are all living much longer.

30% cash in RRSP and TFSA for a 43-year-old. Too high? Too high. This money should be working. Use a formula of 43X .43= 20% in total income. If you have no other income, then the most you should have would be 20% in cash. You can be more aggressive and he wouldn’t hesitate to do so.

Analysts’ price targets of a year or more? Doesn’t believe anybody can reliably project what is going to happen, and he would be very leery of anyone who purports to have that kind of insight into markets.

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.