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

Sweet Spot in Duration of Corporate Bonds: The cross over is a function of investor’s tolerance for losses. If you can earn 5% over 10 years then that is fine. But if you can’t handle -15% then you need to focus on shorter duration.

Fidelity American High Yield Currency Mutual Fund. Fund has performed well over the last two to three years. He doesn’t recommend Canadians getting into US$ bonds and funds. Find yourself a fund that hedges out interest rate exposure and move up to double ‘B’ credits.

Markets. There are 2 markets he is staying away from. Japanese, which he thinks is just a financial engineering trade and at some point the Japanese government will think about it appropriately and restructure the economy and you will have the mother of all trades. Right now they’re just engineering the currency laws. Latin America is still slowing down. Commodities are hitting lower levels. This is affecting across the economy and causing inflation, etc. However, he is seeing some signs that Latin America is starting to heal, or at least hit the bottom. Likes emerging markets and developed Asia. Last year money ran very aggressively into the large developed regions such as the US. US bank stocks were up 77% last year. They are only grinding out 1% gain year-over-year in growth.

Bond Fund Recommendation. It is possible bonds go lower in the very short term. You make more money if you use a longer duration. Look for an ETF holding longer bonds.

Markets. Q1 was sluggish. The weather was particularly bad in quite a bit of North America. When there is a blizzard outside, you don’t rush out to buy a car or a new house. Feels that a lot of spending has been deferred from Q1 to Q2. Expects a very strong Q2, which will put the year back on track where the optimists thought it would be, as opposed to the pessimists.

Energy. So many of the stocks are seemingly at very lofty levels, but feels this is still a good entry point. There is a couple hundred billion dollars of investments going into energy infrastructure. A lot of these companies have bigger CapX programs ahead of them than they have ever had. If we are in an inning, it is probably more like the 3^rd inning in the story of western infrastructure spend.

Consumer Discretionary. Thinks we are going to see some pent-up demand on the spending side. As job numbers continue to be strong across North America, that is putting money in people’s pockets. Their confidence is coming back. The American consumer is under leveraged and they love to spend. Once they know their job is secure, they are going to be buying the new home, the new car, etc.

Markets. BNS looking to sell off stake in CI Financial after it was thought they would buy them out. CI has been the darling of asset management. BNS probably saw they could get a good dollar for it and evaluated how it fitted in with their strategy. S&P is at an all time high, but there are concerns. VIX's low meaning investors are complacent. Small caps have been underperforming while the broad market has been setting highs. Small caps usually lead. Market usually gets softer at this time of year. This big divergence between small and large concerns him so he is cautious. We are at a major support level for the Russell 2000. This is when the big drops occur in the market. You have to be more defensive right now.

Combinations of technical indicators to decide on selling stocks. Every investor is different. There is no one set indicator. He has target dates to get into and out of a sector. Looks at moving averages and short term momentum indicators. Stochastics, RSI, etc.

Gold bullion is July 12 until beginning of Oct, seasonally. And end of Sept for gold stocks. The trade has worked quite well in recent years. He would start looking at gold a month earlier.

Markets. We always hear that there is a market correction coming, but it would be awfully nice to know “when” this correction was coming. Consensus seems to be that “it is happening”. He is looking at market internals to see on the short term where these internals are pointing to when it comes to market direction. On the S&P 500, the options for the put/call ratio, which usually trades between .6 and .86, closed on Friday at .72. It needs many days below .6 to point to a market top. Also, looked at Total Ticks and on Friday the closing Ticks was about 147. We need 700 to point to a market top. Intraday on the plus side, Ticks were at about 1100 and it needs to be at 1500 to be at a market top. All these things plus others are saying we are nowhere near a top. Indicators are telling you not to be afraid to buy something. Bear in mind that these are very short term indicators. You can use these indicators to trade the S&P 500 as well.

ETFs. Better than mutual funds to invest in? He does not own any mutual funds. There are a lot more advantages with ETFs because you can trade them throughout the day. Also, they are a lot cheaper. You know exactly what is in an ETF. Calls can be written on them. Expect mutual funds will be making some changes some day to make them just as popular as ETFs.

Telcos. Has 2 issues with telcos. Revenue stream is from wireline and wireless. We know that wireline is going to be nonexistent at some point in time. When it comes to wireless, it is probably getting saturation in the marketplace as well. Over the next 12 months, you are probably going to collect the dividend from telcos, but you are not going to get a lot of growth. If he was going to pick one it would probably be Telus (T-T) only because he thinks customer service is a lot better than others. Manitoba (MBT-T) will be a takeout at some point in time.

Uranium stocks? So much depends on what Japan is doing and their reactor situation. Thinks they are going to come on stream again and that Japan does not have any choice, but to pick up the nuclear power situation. If there is some pick up in uranium, you have to look at Cameco (CCO-T) or Uranium Participation (U-T) because they are the big ones and if money starts piling in, especially from the US, this is where they will go. But there will be some short-term pressure on these companies.

Interest Rates. Thinks they are going to stay low for at least a year. We are getting improvements in the economy, probably better than what we were doing in the fall. However, we are still getting muted inflation, there are no wage gains and consumer debt levels are high. The consumer really isn’t in a position to spend their way out of this so it is going to be a muted recovery. Federal reserve still has to finish the ending of the quantitative easing program. We are probably looking out about a year before we can get serious about talking about interest-rate increases. Also, any increases will be slow and incremental. The best place to be is the short end of the curve in short dated maturities. For the last 18 months, he has been overweight in corporates in his broad mandated portfolios and of short duration.