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

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.

Natural Gas. $3.50-$4.50 sounds like a reasonable amount for the remainder of the year and into the 1^st half of 2013. Looking out a little longer, you have to factor in the weather.

Crude oil. At the beginning of the year we had 75-95 WTI US$ per barrel as her forecast and this has not changed although currently it is at the top end of that band. Going to stick with this for the rest of the year.

Economy. Feels the global economy is still deteriorating. Various central banks are easing and will continue to do so. Easing and low interest rates are not enough to offset the global weakness. US Fed will probably ease at some point in time and is a clear indication that the US economy is looking bleaker that it was 3 months ago. The impact of each round of quantitative easing brings with it a declining stimulus to the economy.

Markets. Usually valuations will rise on a combination of expansion of PE ratios and improvement in earnings. We are actually seeing some weakness in earnings so this has all been an expansion of PE ratios and the reason for this rise is strictly quantitative easing and ongoing low interest rates. He has about a 3^rd of his portfolios in cash.

Precious metals. Gold has done well, trading at an all-time high. As bad as the European situation is, it is becoming pretty obvious that the Europeans will do what it takes to fix their situation. Every country in Europe has austerity programs in place. Their debt to GDP is starting to decline. Deficits are down sharply. In 2, 3 years they will be in somewhat better shape. At that point, the premium on gold will probably dissipate somewhat. Expect that gold and silver will suffer a little bit.

Markets: There is some risk that the EU bond buying doesn't happen. On the 13th you get the result of the meeting when they decide. His view is that castles are being built in sand. He thinks they need significant austerity in the US because they can't afford to carry the debt there. Structural reforms needed and will be difficult in the US. Thinks there is some risk to the Euro currency.

GOLD: The easiest choice for Governments is to print more money. He doesn't see that changing. Gold is not going to be a straight ride up; there could be a 20% correction at some point. It depends on your ability to handle the volatility. Long term the trends are up. If you can handle it, look to handle dips and market reversals. As long as you think the trend is up you are going to have less downside volatility. Seasonal trends are positive until the end of October for Gold. QE3 never went away. They may launch it in 2013.

China and India Trip: Tried to talk to local people. China is in for a bit of a harder landing than people think. It has been quite developed quite a bit but he thinks there is over capacity. Condos with 30-40% occupancy. There has been a lot of over capacity. There is room for more roads and so on. But government counts for 50% of GDP. Over next 5 years. Horrified by sewers and there is lots of room for infrastructure spending. India has room for massive growth compared to China. Universal thoughts were that Government is too corrupt. India and China are 40% of world population. Other Asian countries have more room for growth.

Markets: Market continues to climb a wall of worry. With all the Euro worries, it has continued to climb. Thinks most likely QE3 will happen. Wait for the numbers on Friday. Thinks Bernanke has done a very credible job. Finding a lot of value because market is mesmerized by the macro and not looking at the micro. You are starting to see a lot of mergers and acquisitions as a result. Doesn't buy on acquisition opportunity but on fundamentals.

GOOD WILL: Look at balance sheet and look at soft assets – amount over paid for a company. Then he looks at hidden assets like properties.

Markets. Thinks we are going through a rolling crisis that is going to continue for a long, long time. Doesn’t think Europe is going away and it will come back at some point. Also, once you are through the drama of the US election, there is no question we will move towards a discussion towards fiscal restraint. Also, we are still dealing with a dramatically slowing Asian economy. Market is going to be increasingly focused on forward earnings momentum, which sort of sets forward PE multiples. Feels markets are fairly valued now but not extremely overvalued but he would be surprised to see them significantly higher priced than they presently are. He has about 20% cash in his portfolios.

Economy. ISM numbers came in and were, down for the 3^rd time, indicating strong recessionary influences potentially at work. Those people who believe that QE3 is coming in, and he happens to be one of them, are wondering if it is going to be announced as early as the next Fed meeting. If they wait another month, until October, and the numbers look worse, it is going to look a little politically motivated.