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

Markets. He is pretty well fully invested. Short-term driver is basically window dressing. Coming up to March 31 and some people missed the November/December markets. Didn’t jump on in January and they have to report to their trustees on March 31, or shortly thereafter, that they are properly invested. Longer-term factor is an improving economy in the US and the long-term shift from bonds back to equities. 2 critical events that have just taken place, which have stunned him. 1) US president’s statement that his priority was not to balance the budget and 2) the deposit grab by the ECB, ECU and the IMF of depositors assets in Cyprus. We should think long and hard about the implications of this long-term. They are not positive.

Oil. The rate of growth in fracing in the US is slowing down, which is giving some people some pause as to what is the long-term reserve life. It is a blessing to have this incremental oil supply. On a global basis, the huge demand will come from developing nations which will take up increasing exports from the US and Canada. He feels $85-$90 is where the price of oil should be.

Why are we spending so much money to ship oil down through the US when we could just build our own refineries in Canada? That is a great, great question. The initial reason is “not in my backyard” where people view refineries as dirty and smelly. He feels this attitude is changing. A boost will come from the transfer of Western oil to Eastern Canada, where it will be refined mainly by Suncor (SU-T).

Bonds. Government yields are at rock-bottom levels and the spread between them and corporate bonds is slowly shrinking down to where they were prior to the 2008 crisis. High yields have had phenomenal returns in the last 12 months and have come out of the gate this year still very good. Last year there might have been a deal with an 8%-9% coupon but those are now 5%-6%. Have really dropped quite a bit. Getting late in the economic cycle for interest rates and you need to be selective and cautious.

Is there any way of knowing the “face value” of target bond ETF’s Maturity? These are products offered by Bank of Montréal (BMO-T). There is usually a set date that they are going to mature. The short answer to the question is that “No, there is no face value”. You are getting a basket of bonds so it is a total return type of product with a mix of bond interest and the fluctuation of the daily market value.

What are odds on a sell-off in bonds? What’s the trade and where would the money go? We are getting a little bit later in the cycle. When we get to that point of interest rates going higher, bond managers are always watching economic indicators as to when that might happen and they start moving from corporate to more government.

Markets. He is still positive on the market based on his belief that 1) the economies’ of US and Japan in particular are going to do better than most people expect and China is going to do okay. Europe is the problem but later in the year he sees things starting to bottom and hopefully improve. 2) Thinks that bond interest rates are going up and once people realize the types of hits they are going to take on their bond holdings, money will be flowing out of there and into equities.

Lifecos? His preference is Sun Life (SLF-T), which he owns. Great West (GWO-T) is also a fabulous company and he owns this through Power Financial (PWF-T). Sold Manulife (MFC-T).

Markets. Dow on a 10-day winning streak. There is sensitivity so something could trigger a pull back because we have had a strong rally since November. Markets are more focused on Bernanke’s comments that interest rates will remain low. The US is slowly getting better and China is slowly turning around. Europe’s weakness is already built in. There are always names that will pullback in this market and many times she sees it as a short term event and that is the company to buy. If there is a pullback it will not be that deep.

Markets. US markets are somewhat overbought and have had a tremendous run year to date. A little bit of caution is warranted at this point but over the course of 2013, he feels the economy is going from one fuelled by liquidity to one fuelled by growth so stock markets can do quite well going forward. Has been overweighting US stocks for 16-17 months. September-October 2011 is when the divergence between the S&P and the TSX began. Had been a little bit concerned about the commodity space on Canadian side and felt it had come to a bit of a stall. Feels mega-caps and big caps are the place you want to be at this point. To ready himself in the event of a correction, he will rotate out of overbought areas and look for names that he still likes that have sold off a little.

Good ETF that tracks US blue-chip stocks? If you are looking for US dollars, the Diamonds (DIA) would be your “go to” name and the IA is the one that tracks the Dow Jones. In Canada you can buy the ZDJ which is a BMO Dow Jones Cdn$ which is also currency hedged. One of his favourite large caps is the iShares High Dividend Equity (HDV-N). The Canadian equivalent would be XHD.

Markets. Has been bullish for about 3 years but is now getting cautious because the market is getting long in the tooth. We now have a rebound bull. These bulls follow some type of a crash and this is the 2^nd recovery we have had since 2002 and we are now getting near the end of a rebound bull. The rebound from 2002 took about 50 months and we are currently in the rebound from 2009 at about 46 months. He is watching the financials to see when they peak because that is usually the sign.

Gold. The gold chart shows the mid-summer low and the current low which is at the same level, i.e. it has held. Technically the chart shows a descending triangle but that is due to the rally in the US dollar. Gold charts in most other currencies would show more of a symmetrical triangle. Gold is going to find support at its current level and that should get the gold stocks going. (See Top Picks.)

Markets. Valuations are at very reasonable levels. Although markets have hit all-time highs, corporate performance world in terms of earnings, revenues and cash flows, hit all-time highs some time ago. They are probably 20%-25% higher in terms of earnings than when we hit these levels in terms of index pricing. There is an abundance of worry out there which is always a good thing for the market. S&P 500 on a weighted basis will hit somewhere in the high 100’s, $109-$110 a share.

Tax Implications on US Investments. There was a period during the fiscal cliff when it was thought that US holdings would be taxed right from the 1^st $1. There was some relief but it does have implications for Canadians. Anyone who owns more than $60,000 of US property, including common stock, should pay attention to this. For more info check his website at e-articles and sign up for it. (www.goodreid.com)