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

Markets. Thinks markets will grind higher. Earnings have been better than expected. Analysts often get too pessimistic. They were making predictions in the midst of a correction. There is global and US growth. The market is trading at 14 times earnings – not cheap, but not expensive. Yields are still pretty juicy on dividend payers. Lower energy prices mean consumers fill up for less and spend more at the department store. If you look at oil prices in Edmonton (not WTI), they have not changed much. Being a Canadian producer is not so bad right now. Would not be surprised if we rally 4-5% going into the new year.

TFSA. Keep your preferred shares outside of the TFSA because of preferred tax treatment of the income and put REITs in the TFSA.

Markets. About 90% of the US companies she holds have reported earnings and have come in better than expected. Earnings so far are up about 10% year-over-year. Going in, it was about 6%. Doing this is one of the reasons the US market has done so well off the lows in October. TSX has a larger energy component and there is a cautious tone because none of the companies really know what is going to happen in 2015. The US economy recovery is definitely underway with strong employment numbers and very strong manufacturing activity. The “new order” number was actually at 64, a very high number, which is a good signal for future business activity. GDP has come in at 3.5% for the 3rd quarter, better than expected. Because of lower energy prices, consumer is at a new recovery high, a good signal for future consumer spending. Going forward, as long as we don't see a deep recession in Europe and China stays at the 7%-7.5% level, and as long as the US companies can still post relatively attractive profit growth, then equities have more upside. There are still geopolitical risks in the Middle East and Russia, which is always a concern.

Markets. There have been 5 modern bull markets since 1974. The average bull market is about 2500 days. Our current one is over 2000 days, so we have around 300 days left. The bull is getting long in the tooth, so the question is, what do you do about it. Indexing is probably not going to work the way it did. He would suggest that you move away from indexing products and get more accurate information. Or you could embrace “The Dominant Theme”, a secular trend within the bull market such as lumber. Lumber is one of the few commodities that is operating counter cyclical to the broader commodity markets. A chart showing lumber versus crude showed crude peaking in the midst of the financial crisis in 2007-2008. At the same time, there was a massive downtrend in lumber. Since then, lumber has had a very nice advance and well under the radar screen. There are other dominant themes such as aerospace, healthcare, food and to a certain degree, technology. He also thinks we are going to see improvements in metals and mining, along with a topping process in financials. It will be slow and gradual, but if you are in early you can take advantage of it. What he would like to see is the commodity under pressure with the equity stocks (producers) holding up.

TSX? Thinks this will outperform over the next 6 to 9 months to a year. Also, thinks it will outperform the US markets. Money has been piling into the US markets and he thinks we will get a surprise and see the Canadian market outperform.

Markets. US earnings. 90% of the S&P has reported. The numbers are great. We have progressed from a B+ to a firm A. MCD-N disappointed, but it is not systemic. Earnings drive markets. The stronger US dollar might detract from earnings. 30% of recent stock price appreciation is from share buy backs. He thinks we will get a grind into year end. Hedge funds need to chase some performance numbers into year end and that might actually push markets up then. We are already anticipating that natural gas prices go up into February in the futures. FCG-N has been beaten with the natural gas prices recently.

Canadians made a deal with China to bypass the US$. This is about China starting to open their markets to the world. They now want the foreign investment. China will be the biggest economy in the world within 5 years. But you probably don’t want to walk around with Yuan in your pocket. You can’t sue anyone there. A lot of companies will start to pop up with direct Chinese equities. But they are extremely volatile. This won`t impact the US$ any time soon.

Educational Segment. The US long bond is giving the best performance. You can’t base your portfolio based on someone’s forecast. ZFL has the returns, but is the long bond ETF. The longer your maturity the more volatility you will have. You have to understand currency risks when you invest in foreign bonds. High yield bonds are ‘junk’. JNK-N is your high yield exposure. They have come down recently. Everyone needs fixed income in their portfolio.

Markets. Disinflation is not a problem in Canada, but it is in the Europe. Japan has been experiencing it for two decades now. When Europe is going nowhere it is definitely a drag on the rest of the world. Europe does not have the fiscal policy to make the changes that the US did in order to recover. Go for shorter term bonds and overweight credit.

We thought fixed income was dead money last year and look what happened. You should have a percentage equal to your age in fixed income. XBB-T and XCB-T are good bond funds for diversity.

Debentures and Bonds. Bonds are usually attached to an income or asset. Debentures are based on the general credit worthiness of the issuer.

Mortgage investment corps. Not a replacement for fixed income. Play more toward the debt side of real estate than the REITs. He prefers them to REITs, however.

Investment savings accounts are at 1%+, GICs are a bit above that and then you can get 2-2.5% without capital risk. He would build a 1-10 year ladder where you don’t want any capital risk.

The TSX Index includes a lot of preferreds. If a bank failed then the government steps in and splits up the bank into good and bad assets into two different banks. Some investors lose everything. This is the risk with preferreds.

Preferred Share ETF. He would not recommend any of them. Talk to an advisor and put together a portfolio. ETFs lack liquidity. XBB-T and XRB-T, however, should be in all portfolios.