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

Educational Segment. Sleep at night portfolio. This is how you manage money. The idea is to have some assets in fixed income and others in equities and to then move them around to take advantage of opportunities. We had a pretty good move in the Canadian dollar getting weaker. PFF is a basket of US preferreds. We can switch into Canadian preferreds to lock in the gains in the currency. If you pay 1 or two percent for an FX trade, then that is a consideration.

Markets. Oil demand has increased much more than people had expected. There are only 5 countries increasing oil production. Oil inventories have been growing dramatically in the North America. Expects them to be worked down in November. We will have some short term weakness in Oil but a strengthening in WTI pricing. Next year should be a good year for oil investors. He is not bullish on Nat Gas.

Markets. He rejects all forms of prediction-based investing. Markets reflect all available information immediately. It brings us back to a diversified portfolio with many asset classes. These portfolios change over time. You set an asset mix and the next day it is wrong but when it goes up or down significantly you can trim as required. Most people should check quarterly and that is probably enough. If the market goes haywire, then check it that week. Check means you don’t have to change anything. From a year ago, the US has done extremely well and is up a third so. Most people should have a reasonable allocation to US stocks. That 10% in a stock is now 15% and you should sell down to 10%.

Sell in an unregistered account and buy in a registered account within 30 days to be able to deduct losses? The attribution rule does apply and you can’t deduct the capital losses in the unregistered account if you then go out and buy in a registered account, thinking that because it is a trust that you have not bought back within 30 days.

Market Efficiency based on all having all new information. Stocks move on new information. Everyone filters that information differently and all reach their conclusions differently. Statistically some will beat the market over a timeframe. As the timeframe expands, outperformers come and go.

Deferred profit sharing plan being collapsed and can it go into an RRSP when there is not that much contribution allowance. DPSP is an unsheltered plan so you can only put in the amount that you have room for in your RRSP but it will trigger a capital gain. If it is tax sheltered, then you have 3 options. 1. Keep the money there; 2. Move to a new employer’s pension plan; 3. Move it to a new locked in retirement account that is not co-mingled with RRSP funds.

Asset Classes in your portfolio should be growth areas and have low correlation. Caller suggested 5 asset classes at 20% weighting and he applauded that. Guest has 7 asset classes.

Hedged or unhedged? He uses unhedged primarily because hedged cost more. Currency diversification is a valid form of diversification. He thinks the loonie will stay pretty much where it is.

How much do you need to retire? If you have 50-80% of the income from when you were working. For those with only CPP and RIFF, look at a 4% depletion rate. Don’t take out more than 4% per year. If you work till 70 then 4.5% to 5% is fine.

Real return bonds pay a rate above inflation. But you can have an increase in interest rates but not in inflation and then these bonds don't do as well.

Markets. Likes leading cyclical sectors that generally participate later in the cycle of recoveries, particularly in the US and North America. Generally speaking, this would be energy, industrials, as well as financial stocks which perform quite well in that time period. There are lots of challenges globally in terms of economic growth, but, in the US, we have seen signs of recovery and he has been playing this for the last year or so. North America is probably in the 6^th or 7^th inning of the growth pattern in the recovery on the US side. Starting to see Europe recover and perform better and some of the economic signals are improving. In some peripheral countries, debt levels and cost of borrowing is improving as well. Looking for exposure in North American companies that are exposed to a recovery in Europe.

Gold. Does not like gold. Gold companies will continue to struggle as the volatility of the commodity continues to swing around. For years and years, these companies were not forced to operate well. They were paid to grow their companies at the expense of trading economic value for shareholders. It is going to take years and years to fix the problems to get the capital structure in the right places and have their operations in a place where only good mines will produce and bad mines will get shut down. Developing mines that are not economic will not get developed. This is a cycle that will be going on for a couple of years.

US Stocks. There is still upside, which is going to come from multiple expansion as it has from the last couple of hundred points. Still the best market to be in compared to other developed markets. Low hanging fruit is definitely gone from the US market but this is more of a stock pickers market than a sector call at this time. You want to look for stocks that have upside from an earnings perspective. Drivers over the last year have been that economic momentum has gotten better in the US. Going forward, the drivers will be that earnings pull through better than expected and economic momentum that is somewhat positive and continues to reaccelerate.

Markets. Resource stocks, although not showing the best resilience, are probably the best traders and this is the most stable sector that we have. They are preparing themselves for the eventual great rally. You have to be patient. Banks are looking very good, partly because international banks have moved into another down phase. With Spain leading the way out of the depths, he is thinking Europe is looking pretty positive.

Markets. Still finding value in spite of these tremendous runs. Even with the Canadian market up so strongly in October, almost 5%, you have to remember that the first 6 months of the year were very disappointing and the last 2 years before that were pretty disappointing. Banks are still at about 11X earnings in spite of this tremendous run up and still have very high dividend yields and are not overvalued.