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

Monthly income funds? A lot of people like regular monthly income but he is not a big fan of them. You can do something similar by having a withdrawal plan (SLIP) through mutual funds. It is usually more tax effective for the 1^st 5 or 6 years than a monthly income fund.

Need some bonds in a portfolio and is looking at CLF-T, CBO-T or CFD-T). Your opinion and suggestions? Of the 3, he would prefer CLF-T and CFD-T. CBO-T is going to be a little bit more riskier because it is going into corporates. CLF-T is a plain-vanilla laddered and very low cost. Doesn’t know that you’re going to make any money on this one in the cycle though. You might be just as well off keeping the money in cash or in a GIC or, just buying a bond to maturity in which you would be guaranteed to make something.

What is a “Flow Through” and how can it reduce income tax? Government allows companies to “flow through” deductions that they would otherwise have. If you want to put money into small, Junior oil companies, you can buy a special kind of share called a flow through, which allows you to deduct 100% of the money that you invest, against all sorts of income. E.G. If you have a taxable income of $150,000, you are in the top marginal bracket. You put $10,000 into a flow through limited partnership or flow-through share, your taxable income goes down to $140,000, just as if you put it into an RRSP. In a year or 2, that limited partnership will roll into an open ended mutual fund, a non-taxable event, so you can sell it if you want.

Focus on paying down student debt or on retirement? You should be paying down student debt. As a student, you have lots and lots of time to start building for retirement. Most student loans are costing 4.5%-5%, which is pretty expensive compared to other debt products.

Portfolio allocation for some one in their 50's? Depends primarily on whether or not you have a pension plan. If you have a pension plan, especially with defined benefits, you can be a lot more aggressive. If you don’t, and you are in your 50s, you should have an equity bias divided between Canadian, US and international stocks. Also, a little bit of some kind of tangible items such as real estate, commodities, gold for diversification.

Converting RRSP into RIF, do I sell all stocks to convert? You don’t have to do anything differently at all. You just sign a RIF application at age 71, or sooner if you wish, and the money just transfers, in kind from your RRSP to your RIF.

An opinion on individual stocks for pension income, compared to ETFs/Mutual Funds. If you have a really, really big account, maybe individual stocks would work. He is talking $2-$3 million. He doesn’t think you can beat diversification that you get with ETFs and mutual funds. Also, feels ETFs usually beat mutual funds hands down on the cost side.

Markets. Getting a little bearish. We’ve had a bull market since March/09 so this puts us into month 50, which is very long in the tooth for a bull market. Also, usually a bull market will end when everything looks fantastic. On the SPDR Financials’ chart, he measured from a financial crisis peak in 2007 and the financial crisis trough in 2009 (the origin of the current bull). Conditions in 2009 were totally reversed from what we have today. This was followed by a long run. You can’t have a bull run without financials. Financials are a key for Fibonacci Retracement which is equal to 38%. It could run up to 50% and then 61% but he thinks it may stop here. Keep an eye on the 50 day and 200 day moving averages.

NASDAQ. NASDAQ Composite Monthly chart shows a “Bearish Rising Wedge” or “Diagonal Triangle”, a very rare pattern which is not seen by a lot of investors. It is extremely bearish. This means that when you get an advance, Buyers come in and then the Sellers come in followed by the Buyers again and so on. This tells him that Sellers are getting more aggressive because the highs are muted.

Markets. We’ve been in a bull market for the last 3 years and Q1 has started the same way. US is definitely rising up. At the end of the RRSP season we might see a bit of a tail off in the normalized way. Europe seems to be all well and good. Japan is in the currency drive to drive the yen down lower. A lot of pockets of uncertainty, but everything right now is good for now.

How do you find out if a company is buying back shares? If you have companies you are interested in, just sign up for their investors/relations sheet. You can also go to www.sec.gov and look up filings. Put in the ticker symbol and it will list the transactions. This is done quarterly in the US.

Do you think shipping will take off. If so would you favour conservative names like Diana Shipping (DSX-N) or also include some high beta names like Dry Ships (DRYS-Q) and Genko (GNK-N)? There is an oversupply and a lot of big ships are coming online in the next 2-3 years. You would need to invest at the right time and if you don’t, you can get a nasty capital loss. His preference would be Orient Overseas Shipping (316-HK) out of Hong Kong, which he has been looking at.

Oil/gas. Even if Keystone got approved tomorrow, the bill time would take it into 2015-2016 before it affects the movement and flow of large volumes. Keystone was built for the amount of new oil that was found in 2010-2012 and there are still a lot of projects on the go. We need a couple of Keystones or Keystone plus the TransCanada route going to the East plus TransCanada expansion plus an oil pipeline going through BC. Right now we are in the best zone for the sector in terms of pricing, which is winter. Historically, prices peak in February/March, and then retreat into the shoulder season. How far they retreat is based on how the inventories are and what excess capacity OPEC has over what is currently demanded. Thinks people should be selling into strength and building up some cash liquidity for a better buying opportunity later this year.

Markets. When fund managers are at their most bullish, it makes her wary because typically that is an indicator that the market is overbought and will probably be very sensitive to any potential negative news. Not chasing anything, but there are times when a stock will pull back allowing her to build a position. Risk in this market is being at little bit too optimistic. We still have the fiscal debt issue in the US, which is the biggest overhang on the market. Economic conditions in Europe are still quite poor.

Markets. The fed has a plan to unwind their balance sheet when the time comes. But what happens to interest rates if they push two trillion back off the balance sheets. That would really hurt the housing recovery. They won’t do this until they are sure the economy can handle it. Earnings are coming back and corporate America is very lean. That is because interest rates are low and margins are at an all time high.