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

Portfolio Construction. Canada is a little more than 3% of the world. You should have a bigger portion because of the dividend tax credit and only for that reason. The US is 53% of the world. VT-N is the entire world index, for example. Start there, recognizing that Canada has 3%. Part of your portfolio construction is related to your means and your ability to take risk.

Educational Segment. Super Tuesday. The political establishment is mortified at what Donald Trump has been able to do. You have this rip in the party. Texas is key here. Trump has been able to win because the Republican party is split. Texas is tomorrow night (Super Tuesday). After that Trump may be able to be challenged. He has not said one thing that is economically decent. The markets are not likely to go down on Wednesday because you have the March 10th ECB announcement. Then you want to wait for March 15^th, after that volatility will increase. You want to take down the risk after the 15^th.

Market. The S&P was range bound for basically the whole year in 2015 at 2040-2135. It dropped below that in August and at the beginning of this year. We are now in another range, where 1950 is really the cap, and this is the 3^rd time we have tried to get through 1950. We have to get above that and stay above it in order to be positive. Consumer Staples has been the leading sector and is breaking above its last highs. When defensive sectors are leading at this time of year, that typically means the market is really nervous. The same thing is happening with utilities. If the market starts to go up at this point, those 2 sectors will actually suffer a bit.

Precious Metals. Gold and silver have done extremely well. They are both trading inversely to the market. From a seasonal basis, you typically see them fall off here. Gold still might have some legs here.

WTI Oil? This has been crushed for so long, but we are starting to see a little bit of strength. Demand is still expected to go up. Factoring in all the different arguments, at some point there is going to have to be an inventory draw. All the market really needs is for something to be less negative. If there is one time of year when seasonality kicks in, it is at this time of year. He is showing resistance to be at around $34.50, so if it can get above that, that is positive.

Markets_. We are in for choppy markets for the 1^st half of the year. This is unusual volatility. Fundamentals are a lot stronger than what the market would indicate, but there is a lot of fear and just enough uncertainty everywhere to keep it like a bungee jump. There are some worrisome things, but also some great bargains in terms of the multiples things are trading at. There is emerging market debt, low oil price and uncertainty over China, which will keep volatility high, but this is not 2008. There is no evidence anywhere of credit markets freezing up or of world trade coming to a halt. Feels it is a market correction, a “10% once in 3 year” event, not a “30% once in 30 year” event.

Personal Finances. A lot of people are standoffish with markets and investing their RRSP contribution. You can contribute the money, but not invest it. You can wait a week, month or a year. RRSP contributions are declining year over year. Part of it is because of a challenging economy and part of it is diversion to TFSAs. Demographics are showing up and more people are retired. If you are earning $45k or less it is definitely the TFSA that you should be contributing to. From there to $90k it is a push to know and above then it is definitely the RRSP. The TFSA has gone back to $5.5k and the RRSP max is $24,930 at $139k earnings. It is 18% of the previous year’s earnings less any pension adjustment. You can go back to age 18 to use your RRSP contribution room. The provincial budget is giving us details of a cap and trade carbon tax and they are eager to give poorer people an education, which will help us. People should look to avoid having carbon in their portfolio because it will be taxed.

Zero or negative rates. Banks will not pay you to take out a mortgage. Canada could get negative rates, but he does not think we will actually get them. Bonds would get a lift. He has not used Bond ETFs for years because rates are so low. He uses a bond global mutual fund that gets a better point on the yield curve.

30% cash. He would not do this but will not stand in the way. A year later the caller might have non-buyer’s remorse.

Take CPP as soon as possible? You can get them as early as age 60, normally 65 or as late as 70 at an enhanced payout, but what if you don’t live that long. If you take it early and invest in your TFSA with the funds then you have a ‘self administered CPP’. This applies only if you don’t need the money to live on. If you live to mid 90s, then you are better to wait until age 70 to collect.

There is no magic number as to how to distribute between stocks and ETFs. He allocates equities equally between Canada/US and the International. If you include emerging markets in International, then make it a quarter Canada, Quarter US, Quarter emerging markets and the last quarter to the rest. Canada has way too much home country bias. He thinks the Canadian dollar has hit its low and bounced and there is not a lot to lose over the next year in currency changes.

ETF Fees. They come out of the fund slowly so you don’t see it. The lowest cost product will outperform on average. The less MER the more you get to keep. Other than MER there is the trading expense, and trading can get you hit with capital gains for tax purposes.

Oil. You have to decide what your entry point will be. He got a lot of unsolicited orders to buy when oil was $45 a barrel. He is of the opinion that oil will be lower for longer. It will be higher in three to five years. People are under estimating how long this can last.

Owning only all the banks: ultra concentration risk. You are taking sector and country risk. Banks around the world have seen better days. They won’t come back to the way they used to do for a generation.

Markets. The US market is holding up a lot better than the rest of the world. The MSCI has shown the rest of the world to be in a bear market. The US indicates have not dropped enough to be considered in a bear market. There could be room for further downside, but it is not a reason to stay out of the US. You should sharpen your pencils. The Fed has concluded the QE program and started the move back to normalized interest rates. We are still operating in the wake of the great recession. Canada is still subject to the huge disequilibrium in the price of oil. We are at the mercy of being price takers in the oil market. It is going to be a challenging environment for Canada to replace energy with manufacturing.