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

Silver. Normally from around the middle of July until around this time of year silver normally goes higher. In the last 10 days or so, it has had a move from the $25 level up to about $35. Seasonality, this is the good time to take some money off the table. Silver has recently started to underperform the market.

Caller once a basket of NASDAQ and a basket of health sciences, primarily biotechnology and pharmaceuticals, buying mid-October. NASDAQ 100 has a positive seasonality coming into the fall. The key is to be in a barbell situation where you are long technology and long healthcare going into late this year. Good strategy. Buy them both around the middle of this month. Healthcare sector is already starting to show a performance but technology is not. Watch for signs of bottoming in technology.

Small/Mid-cap stocks. This area has dramatically underperformed in the last 18 months. Have had a little bounce and typically you would think that with more liquidity coming in to the marketplace that they would start to outperform. He is looking at it differently this time and instead of coming out of a recession, he thinks we are going into a recession. If small/mid-caps are not leading then he tends to think that risk assets are generally probably at risk going forward. He has been long precious metals all summer but now it gets a little trickier. Sentiment in this has started to become very bullish again so he is moving to a more neutral position on the sector.

Canadian versus US banks? He is quite negative on the banks. In Canada in particular, he feels there is a lot of risk in the residential real estate market. When that market rolls over, and it seems to him that it is, Canadian banks are unlikely to outperform. US banks have already taken a hit on mortgages. He probably would step back from both but would be looking for opportunities on the US side. (See Top Picks.)

Commodities. With the race to devalue currencies globally, this is going to raise the value of alternative money, which is gold. Long-term he feels we are destined to see gold continue to rise nice and slow.

Junior miners. There are way too many out there and they can’t get funding. As at the end of last month, over 70% of the juniors are trading at under $.20 and had a mean of $700,000 or less and that is not enough to make it. Venture Exchange lowered their financing requirements so you can now finance for under $.05. These guys are going to have to go away. It is difficult for them to find an economic deposit.

Prospect Generator Model? If you recognize that the odds are so low of making a real discovery on one project, what you want is a company that has the intellectual capital to generate legitimate ideas that have the chance of actually turning into a major discovery that is going to take our $0.10 stock to $10. To do that you’ve got to run through a lot of projects until one hits. As an investor, you own a bigger piece of the intellectual capital, which is really important, of that company. You have more shots at making a discovery.

Markets. There is still a lot of uncertainty. He has been a little bit more proactive on equities in the last few months. With the ECB announcement in July, he thought it was going to be a big positive and things were going to move along and is just waiting now for everything to fall in a row. There are a lot of buying opportunities. Central banks globally are coming in with some coordinated actions and putting a lot of liquidity into the market. US$ is declining giving some opportunity for growth in the US. He is fully invested at the moment.

Markets. The last quarter has been characterized by slowing growth or global contraction and yet the market has been climbing higher and higher and commodity prices have been much firmer than previous so we were due for a bit of a correction here. Right now it is important to have cash in order to take advantage of opportunities to buy some good companies. Over the longer-term he is expecting good returns both in materials and energy.

Asset diversification. His general view is that he wouldn’t want to have much more than 30, maybe 35 equity positions at any one point in time. He likes to have enough that it is going to make an impact shouldn’t work out well but if it doesn’t, it won’t be that detrimental with diversification across industries and companies. When a representation is greater than 10% in any one company that is usually a sign to trim back a little bit.

Oil. Oil rallied and went over $100 in the last couple of weeks, partly because of hurricane Isaac and the shutting in of oil production in the Gulf of Mexico. Also, there was the sabre rattling with Iran over the Straits of Hormuz. Both of these issues are now away so the price of oil has come back down to the $91 level. Inventories are very, very high. Now over 98 days of supply in the US. Also, inventories are at the high end of the five-year band in Europe and Asia. In the shoulder season between the summer driving and the strong winter demand we have too much inventory so expects the price of oil to back off, potentially below $80.

Natural gas. Nearby contract is in the $2.80 level and he expects it will back off a little because the withdrawal season doesn’t start until Nov1. There was a decent injection last week in the 60 BCF level so we are very close to the five-year average of injections. Also, we are much, much higher in storage than normal. Doesn’t believe it will go back to the sub $2 level. Shale production in the US is rising, but there are beginning to be signs that in some areas production is beginning to flatten out, and even decline. Demand is very strong, especially from the electrical industry.

Markets. Has been quite conservative for a while and had his concerns on terms of equity exposure at the lower end of his policy ranges. Bond market portends weaker times. We wouldn’t be getting the QE 3 to the degree we have if there wasn’t a lot of concerns. Has a large cap bias versus small caps. Expects to see more earnings revisions. Cash holdings for clients is in the 25%-40% range.

Natural gas. Has had a bit of a rebound. Certainly influenced by the weather. There is an enormous supply which would point to prices being stable to down. Doesn’t think there is any strong catalyst to suggest that you are going to see a material movement in price going forward.

Markets: Australian dollar is being bought. Money is flowing into those currencies that will most benefit from the stimulus. FXA-N is an ETF that tracks the Australian dollar. Australia is a big exporter to China. He thinks we are looking at a hard landing in China. Shanghai index moved up substantially in a year and a half in 2007/08 and then bottomed early and peaked again in third quarter of 2009 and then has been going down every since. You need to pay attention to this index. Thinks China and India will struggle for the next couple of years. In Europe you have banks reforming for some time and they are not aligning on how to do it. They have to get rid of the debt problems and there are no solutions except to cut, cut, cut and those are austerity measures. Governments have to make tough choices and they are not doing it.