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

US REITs? He has been increasing his exposure to US REITs consistently, over the past 3 years. Good cases are high quality assets, well tenanted, good locations, good balance sheets, low payout ratios and a very low cost of capital.

Royalties. With fund managers increasingly seeking dividends and income, viewer feels royalties are being ignored. Restaurant royalty companies are too small to attract funds. US energy royalty names have had a checkered history and pricing pretty close to perfection on the IPOs, so any hiccup creates problems.

Economy. Thinks the fiscal cliff is overplayed. It’s a no-win situation for the US because the best case they can do is keep the economy with the same amount of fiscal stimulus and the worst case is that they end up having a drag and falling off the cliff and having a drag of 3%-4%. They are either going to deal with the economy in the short term or will deal with the economy in the long-term. Tough situation. Big issue is the debt situation. Debt to GDP is 104% with deficit spending at 4%. That is like a house of cards.

Markets. Relatively positive on the markets right now. Thinks the fiscal cliff will get resolved in a way that sort of kicks it down the road a little bit, not perfect solution but it won’t be a disaster solution. Also, feels that Mr. Bernanke is standing in the background making sure that if anything does go wrong, that he has more ammunition to come to the market’s rescue.

Corporate bonds (mostly BBB) maturing in 4-6 years. Is the only risk to these is if a company goes bankrupt? The simple answer is “Yes”. The problem is, if you are replacing with 6 year bonds, interest-rates are not going to rise too much so he would prefer 2 year bonds.

How much exposure to bonds should a 30-year-old have? Difficult question to answer. He would spend some time getting educated as to what asset classes are available, the kind of risk tolerance you want to take and make those decisions for yourself.

Brascan Corp 5.95% bond maturing June 14/35. Is it safe? Thinks the bond is fine from a credit standpoint. However, it carries a significant interest-rate exposure. History is going to prove that when we look back 10 years from now, long-duration bond exposure is going to be one of the worst investments of our generation.

(A Top Pick July 11/11. Up 9.52%.) Videotron 6.78% 2021 and Short GOC 3.25% 2021. Most of the value has been taken out of Videotron so he has taken this position off.

(A Top Pick July 11/11. Up 5.65%.) Buy Cdn$ and Sell US$.

S&P 500. Sees some technical breakdown coming in later 2013. There is a five-year cycle that is coming up as far as a peak goes. Expects the peak to come in the next 2-3 months. That would tie into some long-term resistance we have seen in the past 12 years at around 1500-1550. He feels we are going to enter into a fairly extensive corrective phase that may begin in the 2^nd half of 2013.

Markets. The fiscal cliff is December 17^th the way politics works on capitol hill. He is concerned, but feels a lot of it is in the market. If we do go over, equities across the board would fall. If we don’t do that then they would fall as much as they could fall. If you are sitting in cash, then establish half a position and wait ‘til next year to invest the rest, but don’t raise cash if you are fully invested. His biggest exposures are energy, tech and financial.

TFSA. How many years can a person go back from 2012? You can go back 4 years.

What should low to mid-net worth people do to find financial advice? Presuming that low net worth is anything under $100,000 in investable assets, you’re not going to find many financial advisors, or if you do they’ll probably limit you to mutual funds or things that might not be in your best interest. Try to find a “fee for service” planner or someone who can actually make recommendations. This might cost a couple of hundred dollars for 2 hours of work. On the other hand, you might have to work with a bank.

RESP. For every $2500/year you contribute, the government gives a corresponding grant. Is it possible to contribute more money earlier to get the power of compounding. Yes and the tax-deferred compounding may very well be worth it but with a pretty big caveat in that when you put in big lump sums at the beginning, you will not get any grant beyond the first $500.

TFSA. How does a person take the maximum tax advantage? It doesn’t matter how you do it, stocks, bonds, dividends, capital appreciation. There is no tax on anything put into a TFSA.