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

Markets. He focuses on companies that are going to grow by 20% next year, almost regardless of what the global economy does. Not particularly looking at economically sensitive companies or globally sensitive companies. Sitting on a fair amount of cash right now but he is nibbling away and finding some very compelling ideas. Now is the time to be buying.

Markets. We have had pretty choppy markets over the last 4-5 months and he thinks it will continue to play out like that. European debt crisis seems to be an ongoing saga. Doesn't really see mechanisms in place to provide a solution any time soon. Key for him is to really cleanse the portfolio of what he calls “basis risk”. Effectively he wants to make sure he is long and short the same amount of liquidity and same amount of market cap. He wouldn't go long on a small gold and short a big cap gold.

If you look at gold, which he insists is not an asset, Gold is rise because it is a question about how low the currencies will go. He thinks currencies will HAVE to go a lot lower because they can’t pay the debt. Either we print money or they default. We WILL NOT have a political implode of the system. We tested the low in May, which he said would have to happen. The big loser in the gold game is Germany because their gold is in the vaults in the US under the control of the financial system and they are prancing around with pieces of paper.

The pressure is building in Europe to do something and not in the incremental approach that we have seen over the last several years. When he looks at companies he has, his top positions and the data, there is no sign that anything big is going to happen. He is cherry picking and he wants companies that have just reported.

China. Thinks the slowdown continues. A lot of that was self engineered by the Chinese government in 2008. As part of that, you have a European issue flaring up again. What surprises him his household they have been coming to grips with that. They are now turning around but the pace of it is something we have to worry about.

Markets. He is reasonably defensive. He has a good amount of cash relative to his normal position. However, his outlook is positive. There is too much fear in the market and the worse case scenario won't happen. The US and Chinese economy will still be in a positive pattern. There won't be a breakup in Europe of the EU, at least not in the foreseeable future. Stocks will rally once the risk assessment gets reduced.

(Looking for stock that is safe with some dividends.) AT&T (T-N) would be fine and the dividend is safe. You may not get a lot of growth out of it. Verizon (VZ-N) is the same. Can't find fault with Proctor & Gamble (PG-N) longer-term but there will be a lot of growth. Microsoft (MSFT-Q) could be interesting. They do have Windows 8 coming out later in the year and also getting into the mobile phone market. Generates a lot of cash flow and increases their dividends.

(Caller would like to know of a smaller prominent US Bank that is reasonably leveraged and positioned for growth in the next 12 months.) There are quite a few regional banks that would do well in this environment. To do well they need the US economy to continue to grow, which he expects it will. You could look at Sun Trust (?), US Bancorp (USB-N) or Hudson Bank (?). He uses an ETF for this.

Oil. This is a pipeline issue that can be fixed so he is still positive on the companies he owns and they are cheap. He is investing more now in oil.

Shorting Gold? There is a fairly limited quantity. Becoming more and more expensive to get out of the ground. Currency and monetary situation globally is going to continue to be very dysfunctional for the foreseeable future. You only need a few people to decide that gold is the place to go and you could have a substantial rally. If you do, he would hedge it by being long one of the senior producers as they have already gone down substantially.

On the weekend the Euro zone put 100 billion into the Spanish bank and did not have to ask for International assistance. Things are getting bad enough that we are going to get some more assistance from governments. But she is forecasting positive profit growth this year. Dividend yield on TSX is over 3%. So there is reason to buy the market. She is not buying except specific situations, but is keeping her powder dry otherwise.

Rules of Investing. 1.) Good Balance Sheet. You want companies that are not encumbered by debt i.e. debt to equity of less than .6%. 2.) Look for companies that consistently raise their dividends. This is the best inside insider information that a company can give. 3.) Buy noncyclical companies. Mimicking the TSX in the past year was a very dangerous game. Look for companies that make products we need and use every day such as food, real estate, retail, telecom and those things we can't live without. 4.) Don't look at the stock price, look at the value. Do your research and figure out what a company is worth. (See Top Picks.) 5.) You have to have a balanced type of portfolio. Diversify and include some fixed income.

Gold. Will do well in 3 types of environments. 1) High inflation. 2) Deflation or 3) the world is going to end. None of these scenarios are happening right now so he has no reason to own gold. As a value investor, it is very hard for him to value gold or what the value of gold is over a long-term period.

Drilling companies. With some companies closing down gas installations, would it not be better to hold off from buying drilling companies? He doesn't buy the natural gas story yet. Way too early and he doesn't see any upside in natural gas prices for at least 3 to 5 years.

Commodities. She agrees with Goldman Sachs statement that a basket of commodities will climb about 29% this year, led by oil and base metals like copper. Commodity prices have come down quite drastically over the last couple of months. By and large are priced in a global slow down. Some kind of a bottom has formed and we may see a little bit more downside to go but this is a great level to step in. Likes integrated companies, especially those with both upstream and downstream.