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

Economy. The ECB and the US Fed are just kicking the can down the road. Ultimately, austerity has to come into play and deleveraging has to occur. If all the poor institutions had been allowed to fall apart in 2008, it would have been a lot cleaner fall and would have allowed the economy to resuscitate a lot sooner. By keeping interest rates ultra cheap, all it does is create bubbles where people are borrowing-through car loans or mortgages when they really can’t afford it, especially if interest rates start to rise at some point in time.

Markets. NASDAQ and the S&P 500 have had big returns but that has been dominated by Apple (AAPL-Q), which is 20% of the index. If you take Apple off the equation, then returns on the US are pretty much the same as other places globally except for some of the BRIC countries that are actually negative. For his clients he has been taking a little profit off the table from the consumer names because they are the ones along with utilities that everyone has gone to hide. For people with 100% exposure to equities, he has them in about 20% cash and the rest would be about 10%.

Markets: When you look at how the announcement went from the fed, many bond traders had bought in advance and so now there was a bit of a sell off. He is not buying long government bonds. Long-term yields have definitely started a long-term rise. We should see corporate yields of bonds go up to where they were before the summer.

Provincial Bonds: Great investment. Extra 10 basis points. Risk on Ontario vs BC is negligible. Good for a buy and hold investor.

Real Return Bonds. Real Return Bonds have an inflation component. So if they fall, they only fall by half. When rates rise 1% over the next year, this one will fall 15%.

(Top Pick Nov 04/11, Up 3.94%) Province of Ontario 4.4%

TCA.PR-U, 5.6%. Perpetual, currently yielding 5.46%. Recommending even though he thinks rates are going higher. Thinks this will stay flat as yields go up because of decreasing credit risk. It is callable next October and they could take you out for a 4% return on the year.

Today's Fed announcement. This is not a big splash of new liquidity. They are buying mortgages so the banks can get mortgages off the books to drive the housing market. This just judges the economy.

Flint Energy Services: 7.5%, 06/15/2019 - 7 years, probably called in 2015 at 3.75%. Was taken over and became investment grade. Because it became an orphan, no one really follows it so it trades a little cheap.

Markets. A lot of the stimulus was already baked into the market despite the fact that there was a bit of a rally today. At this point he is not sure how far the market can rally from the current stimulus program. Prefers US stocks as there is broader breadth and you can choose from many different areas and is much more defensive.

Stop Losses? His Sell criteria is based on 3 factors. 1.) If there is a decline in the fundamentals of the Quant tables that he uses. 2.) If a company misses its earnings, once or two quarters in a row. 3.) Stop Losses. He looks at where the 200 day moving average is and depending on the volatility of the company his stop loss is 10% to 15% below the 200 day moving average.

Markets. He is seeing so much value in this market. Obviously dividend payers have done really, really well. Some of the US payers have done okay but if you are going to have gains throughout the rest of the year, probably you’ll have more from names that have underperformed. TSX still has to catch-up to the S&P 500. Commodity names, cyclical names, beaten up performers shouldn’t be sold simply because they have done poorly.

Banks. Thinks Cdn banks are very undervalued and he is trying to find a reason why they are trading at such low valuations. It may be because some of the US banks are even cheaper but he trusts the book values of Cdn banks much more than US banks.

Economy. Not sure that QE 3 makes a difference. The bigger issue is the large sovereign debt globally, which is dampening the ability of countries to grow. That will continue no matter what happens with QE 3. He sees a slow growth period for the next couple of years around the world. What will help unemployment in the US is a government that comes out and says “This is what we are doing about the deficit, this is what we are doing about growth and this is how we are going to achieve those goals over the long-term”. Companies will actually then make longer-term decisions.

Banks. Barclays (BCS-N) versus Lloyd’s (TYG-N) and US banks or would you stay with Canadian banks? Used to own Lloyd’s, a UK bank that is restructuring. Thinks it will do okay but you can do well closer to home owning US banks. US banks are a great opportunity because of what is happening in the US. Even though there is slow growth he feels these banks are healing themselves. The mortgage/housing markets are getting better which can only help banks in the longer-term. Doesn’t think you will get the upside on Canadian banks that you would on a US bank at these levels.