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

Gold. One of the things that he tracks very closely on a weekly basis is the total gold holdings in ETFs. They were run off very sharply in the April to June period. Physical demand for bullion is very strong. If the selling from investment sources diminishes, he thinks gold will stabilize in this area at $1300. Longer-term he thinks it can go quite a bit higher.

Resources. Feels there is a sense of calm in this space so she is sensing that we have hit the bottom in industrial metals in June/July. US has been performing very well and China and Europe also have been turning around. With this, she thinks demand is going to stay quite healthy, although you are going to have lots of supply coming on within copper and nickel space. We are at a point where we have lower volatility in this space and can start picking away at good stocks. Stocks are now so cheap that the pendulum has swung too far the other way.

Copper. In the short term, this year and next, there are supplies coming on. Copper has been depleting for a long time and it will be difficult for additional supplies to come on strongly. With stronger demand, we might be running into a deficit situation again, 3-5 years out. Currently trading at $3.20 and if we assume that we have a low copper price of $2.70-$3, a lot of companies are not going to be making money. However, when copper prices start to peek at about $3, copper levered companies can start generating cash flow. When we start seeing healthier copper prices, looking back it will seem current copper prices are very cheap.

Oil/Natural gas. Although China is slowing, you are still looking at a very strong power and energy demand. Longer-term, she feels oil has a chance to break out to $105 levels. That might put somewhat of a damper on economic fronts and she thinks we may have a longer way before getting to that point, maybe 2 years or so.

Gold. Expects it to go lower before going higher. Faces a few challenges, including a rising rate environment and Fed tapering. Consumer consumption as well as investment in the 2^nd quarter of this year dropped about 12% as compared to 3% last year. Investment demand actually dropped 50% with consumer demand increasing about 60%. In the next few quarters, if you have less consumers coming into the market, she feels there will be a larger shortfall on the demand side. Because of this, she is very cautious on gold. We still don’t know where central banks interests are in terms of buying gold. She is very cautious on gold.

Markets. We are 5.5 years on from the bottom of the bear market of 2009 and are at all-time highs. Earnings, especially in the US, have not been that spectacular. We are at the top of the valuation range although there are still some sectors that look reasonable. Cyclicals are still a good place to put some money because they have been the big laggards because of worries about China. Commodity prices have all been relatively weak with the exception of oil because of what is happening in the Middle East. If, as it appears, we now have growth accelerating in North America, Japan, UK, and even continental Europe and China (stating that they think they have slowed it down enough), maybe this will start feeding into the cyclicals.

Royal Mail IPO? He has registered his interest for this because it is a government IPO and whenever the Queen of England is selling something, you should be buying because they price it to go. 10% of the issue is given free to the postal workers, to make sure they won’t strike. They are basically profitable.

Be a half to a third in Canada. Favours energy over materials and fundamentals are better in oil over metals. LNG long term is attractive.

Markets. Syria is a small part of resources. Oil prices have more to do with fundamentals. Syria is a Cherry on top. Likes Europe’s pickup in PMIs. China oil demand over the summer is up 5% and they are replenishing their strategic reserves. There is underlying demand. Weakness in fertilizer based in waiting for debate in Russia to conclude. In India the wedding season is getting ready. For gold the seasonal trade has passed. Gold is an emotional commodity. Crude oil is pretty strong right now. You have to look at differentials. There were hopes earlier in the year of Nat Gas rolling over in the US. There was a small increase in production last year. There is a switch from coal to gas. The rigs are being more efficient so the rigs are not rolling over. It could lead to strength in price. They will make a lot of money on the liquids side.

Buy gold now? Economic environment does not favour gold right now. B2 gold, YRI-T, G-T are good names in the space.

Markets. In general, August and September are 2 of the most difficult months of the year. Feels the market is behaving reasonably well now. Have had a tremendous back up in long-term interest rates. Against that, breadth in the market has been reasonably robust, so lots of sectors are participating. There are low correlations in the market right now with certain industries doing well and others doing not so well. Seems to be lots of opportunities in both economically sensitive groups as well as those companies that have the ability to raise dividends.

Markets. Canadian market has been moving up over the last couple of months, better than the US for the 1^st time in 1.5 years. Energy is cheap and all oil needs to do is go sideways or down a little from here and there will be good earnings, which will help our market. In financials, we have seen banks already do well and raise dividends. Materials is the one that drags us down lately. He is quite underweight materials and thinks he will stay there for a while. On interest rates, he expects we will see a mild taper, probably $10 billion as opposed to the $20 billion previously suggested. In certain sectors, we might see a relief rally after next week when we know that it is no worse than we think it is.

Gold. Sees this as weak but would see $1400-1450 in 12 months. A little bit higher from here but not $1600-$1700. As long as the economy is okay, there is not much reason for gold to go way higher.

Markets - US. He made most of his US investments about 2-3 years ago. What surprises him is why money is flying to it for 1% growth. There is some fiscal tapering and the banks are going to recover, but still it is only 1% growth. He finds it quite expensive relative to other opportunities globally. Since he is a value investor, he has to look to areas which the market does not like. Asia is selling off so this is a place where he would probably deploy more capital. Europe is a market that is sort of running up, but when you look at negative growth outlook, fiscal austerity and high unemployment, he is not excited about this. When Latin America bottoms, it might be a good place to look too.

Is the Euro going to gain strength or lose? At 1.20 he thought it was very, very low and needed to move higher. You have a very prosperous $380 million population and he thinks it will move higher. The 1.50 relative to the Cdn$ is a little high. He doesn’t see a drop below the 1.20. Fairly valued right now.