The full title was Where to Stash Your Cash in 2011. This was a paid lunch. The lunch was very good and this session certainly worth the $59 I paid to attend. For this session Howard Gold, the Executive Editor of Money Show was the Moderator. The panel was made up of Hank Cunningham, (Author of “In Your Best Interest: The Ultimate Guide to the Canadian Bond Market”); Jim Jubak (Editor and Founder of Jubakpicks.com; Danielle Park (President and Portfolio Manger of Venable Park Investments Counsel Inc.); and John Stephenson (Senior Vice President and Portfolio Manger of First Asset Management Inc and Editor of Money focus).
This was a very interesting session and all came up with investment suggestions. My one remark on this panel is that Danielle Park is one of the most negative persons I heard at this convention. She and Stephenson agued a lot and especially about commodities.
The first thing this panel did was give their top buys for 2011. First, Cunningham, who is a bond analyst gives his list of bonds, which are all corporate bonds. If I am reading his list correctly, he says his first pick is a bond from H&R Real Estate Investment Trust with an interest coupon at 5.9%, maturing on June 30, 2010. These are convertible bonds and they are selling at $104 with a current yield of 5.08%. His next pick is iShares U. S. High Yield Bond Index ETC (TSX-XHY) which is selling at $20.50 with a current yield of 7.31%. His next pick is Brookfield Asset Management Inc bonds with a coupon at 5.29%, maturing on April 25, 2017, selling at $105.79 with a yield of 4.26%. His next pick is Calloway Real Estate Investment Trust bonds with a coupon at 5.37%, maturing on October 12, 2016, selling at $106 and a yield of 4.22%. His last pick is BCE Inc bond with a coupon at 5%, maturing on February 15, 2017, selling at $108.13 and with a yield of 3.55%.
Jubak has all US picks from the NYSE. His picks are Oneok Partners Limited Partnership (NTSE-OKS) with a dividend yield of 5.7%; Penn Virginia Resources Partners L. P (NYSE-PVR) with a dividend yield of 7.26%; Philippine Long Distance Telephone ADR (NYSE-PHI) with a dividend yield of 5.9%; Verizon Communications Inc (NYSE-VZ) with a dividend yield of 5.9% and Westpac Banking ADR (NYSE-WBK) with a dividend yield of 4.8%.
Danielle Park’s pick are a mixture of things. They are Wisdom Tree Dreyfus Chinese Yuan ETF (NYSE-CYB); the US dollar; iShares S&P TSX Golbal Gold Index Fund (TSX-XGD), Currency Shares Euro Trust (NYSE-FXE) and Clyamore 1-5 year Laddered Corporate Bond ETF (TSX-CBO).
John Stephenson’s picks were mostly all stocks. They were Cliffs Natural Resources (NYSE-CLF); Alcoa Inc (NYSE-AA), First Quantum Minerals Ltd (TSX-FM); SPDR Gold Shares (NYSE-GLD) and Goldcorp (TSX-C).
The panel all had opening remarks. Hank thought that the economy is recovering, but the recovery will be erratic. He thinks the best investments will be corporate bonds maturing in 3 to 7 years. Jubak thinks the best stock is Verizon (NYSE-VZ), but US dividend yields are going down. He mentioned that Mexico just sold 100 year bonds with an interest rate of 5.8%. This is a lower yield than their 10 year bonds. He feels people are hungry for yield and are willing to buy 100 year bond to get it. The reason why companies and countries are selling bonds is that they feel interest rates are cheap. Park thinks that we are still in a secular bear market and that secular bear markets are misunderstood. She said that every time we have a secular bear market, people lost half the value of their investments every 4 years. She feels that stocks are currently overpriced. She also said that if we want safety, we should buy bonds.
Stephenson says the world is changing. First, we had the G7, then the G8, then the G20 and now the G2. Stephenson noted that the S&P is down over the past 10 years even though the companies on the S&P earn 40% of their income from the developing world. What we should invest in is emerging markets, dividend paying stock, bonds and commodities. He says why most people lose when investing in commodities is because they use leverage. He says be conservative when investing in commodities and do not use any leverage.
He goes on to explain his picks. First, Cliffs (NYSE-CLF) is into steel and what is driving steel currently is infrastructure. Also, China is poor in the stuff that goes into steel (starting with the ore). He thinks Alcoa (NYSE-AA) is a great buy as it selling below it book value. This stock is cheap and it will perform well going forward. First Quantum (TSX-FA) will do well because the world inventory in copper is low. He thinks that Gold will go higher because of the currency wars. It will also go higher because people believe that gold is a hedge against inflation. He says Goldcorp (TSX-G) is a good investment because it is a senior gold producer and therefore is less risky than companies that explore for gold.
Park says she does not like commodities. Their prices were all down in 2007 and 2008. The demand for commodities from Asia has not occurred. The price of commodities depend on the US$ as they are priced in US$. She therefore sees wild swings in commodity prices. She feels that people should be into risk control and this means that you should not expose yourself too much to one thesis. Park says that gold is only up in US$, and it is not much up in CDN$. This is because the US$ is going down. To have run up in gold prices we need to see both strength in gold prices and strength in the US$.
Jubak says that we are in a period when every one wants yield. What you want to buy is a strong company with a great yield. A company’s yield can be high because people have a negative view of the company, but they are wrong about the company. This is the sort of stock you want. He likes Oneok (NYSE-OKS) because it is into natural gas and natural gas is out of favor. Penn V (NYSE-PVR) is into coal and coal is also out of favor. He thinks that tight coal regulations in the US are not going to happen. He likes PHI (on the NYSE) because, although land lines are dying, this company has a dominant position and can make money. He says his buy on Westpac (NYSE-WBK) is a currency play that will work for Canadians. Wespac is an Australia bank.
Cunningham says that the iShares ETF on US bonds (TSX-XHY) is the only ETF he has ever recommended. He says that companies like Microsoft are issuing bonds because it is a cheap way to get money. They feel that they can make more on this borrowed money than they will have to pay in interest rates. He thinks that the wrong way to invest is into 100 year Mexican bonds. He thinks we should only be buying corporate bonds and only ones with 3 to 7 years to maturity.
Park thinks that the CDN$ should not be at par with the US$. She thinks the hardest thing for Canada is to have a basket case to the south of us. However, this is the only way we currently look good, we do not look good compared to the rest of the world. She thinks that the first half of 2011 will not be very good, but the 2nd half of 2011 will be better. She said that our currency is up against the US$, not against other currencies. However, she feels that we will do well because we have resources and oil. Park thinks that we will muddle our way out of this recession. Apparently, we have already screwed thinks up so well, we can not do worse going forward.
Cunningham was asked about getting information on bonds in Canada. He says there are three public bond sites. This first is Canadian Fixed Income; Canadian Bond Indices and CanPX Corp. This last site is fee based.
Stephenson said that he is bullish on resources, especially oil. We are going further and further afield to find oil. He thinks we have too much natural gas. He thinks that uranium is plentiful and it is starting to be used again. He expects higher prices in uranium. He says we are at a 15 year low in grain stocks, so these prices will go up. He thinks that corn and soybean prices will rise and wheat prices will go down. However, all grain prices will go higher in the future because we will have more people.
The last to speak is Park and she said we are in a secular bear market and prices will go up and down, but we will not get ahead.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.
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