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

Gold ETFs. One investing in bullion (covered call), plain bullion or one investing in gold producers? Any index that is going to be very volatile, the covered call piece in terms of total return is not very different and underperforms its plain vanilla, so he would go with plain bullion. Regarding bullion or producers, everyone scratches their head on this one. He holds S&P/TSX Global Gold (XGD-T) for the producers and either COMEX Gold ETF (IAU-N) for US clients or COMEX Gold ETF (IGT-T) for Canadian clients for the bullion.

Telecom ETF's? There is none for Canada but the US has Global Telecom ETF (IXP-N) with some international telecoms. Has a yield of about 5.5%. There is also the Vanguard Telecom Service ETF (VOX-N), which are strictly US companies with a yield of 2.9%. This has 45% weighting of AT&T and Verizon.

Markets. We are in a very broad trading range and are at the upper end. We'll probably get some kind of rally in the fall but investors shouldn't get too carried away or optimistic that the good times are here. There will be an economic slowdown and probably a recession next year. The most important thing that individual investors should be doing is to make sure they have the appropriate amount of money invested in equities and make sure that as stocks rise to their price target, they should be prepared to part with some of them. They should stick to good dividend paying stocks and be aware that some of those dividend paying stocks are not as cheap as people think they are.

Natural gas. Should he sell into the strength and buy back later? When it gets under $3, the industry stops as they cannot make money. There is a record low number of rigs drilling for this. Decline rates are very high. Expect you will see $4.50 gas next year and perhaps even $5.

Oil. Gone up recently because of geopolitical concerns. A lot of actions surrounding Iran. Some terrorist attacks where Israel implicated Iran. Also demand in the US has picked up slightly. Fundamentals of supply/demand show that the market is very well supplied. If it weren't for geopolitical concerns, oil would be trading much lower.

Natural gas. Went from a low of $2 in April to current price of about $3. In April there was a tremendous overhang with gas in excess of the 5 year average. For consecutive 13 weeks there have been injections that have been well below historical averages. The storage excess of 60% is now around 17%-18%. He feels this rally is going to be sustainable. Rig count has gone down to about 520 rigs, which is a 13 year low. Also there has been switching from coal-fired generation to natural gas.

Economy. Have been 2 efforts by US Federal Reserve as well as a lot of efforts in Europe to pump money into the system. The problem is, if you are pumping money into the system and it doesn't get into the hands of the people who spend it and stays in the banking system to protect the bank or to bail them out, then it is not really doing what it is intended to do. GDP growth is money supply times velocity. Velocity of money only occurs if you put money into the hands of the consumer and it is spent and it is how quickly that money turns. Liquidity trap could go on for a very long time.

What is the best and easiest way to learn about options? There are options seminars for the Montréal exchange being set up in Toronto and Montréal in September. It's $45 and you get 2 meals. (http://www.m-x.ca/educ_oed_en.php) Also there is a very good book written by Lawrence McMillan “McMillan on Options”.

Economy. We still have stimulus from both monetary boards. The old adage is “Don't fight the Fed”. Valuations are very strong. This is a stock selective market.

Canadian banks. Generally speaking he thinks the Canadian banks very, very fairly valued. Currently they are yielding almost twice as much as the 10 year Canada yield. Their earnings outlook will probably be much more muted over the next few years. When you can buy them at 10X earnings with the yield of almost twice the 10 year Canada.

Markets. This is a time when you want to look for defence first. You want to find companies that can deliver on cash flows, boost their dividends and can still grow in this environment. A little more disappointed that Europe hasn't done more. The key still lies with Germany.

Investing in silver. ETF's, mines, bullion or certificates? The best way he found to trade it is through the futures market. The ETF iShares (SLV-N) is a pretty good way also. Silver is a very whippy metal. It gets moved around very quickly and you want as much liquidity as possible.

Markets. Have been under some pressure from anticipation of very weak 2nd-quarter results. Market peaked on April 4 and has come down since then. People anticipated bad 2nd-quarter results. Numbers are now coming out. They’re bad, but not as bad as people had expected. Less Bad is good for the equity markets.

NASDAQ Comp. Chart shows the 3-year trend completely on the upside. Will probably test the high of 3,122 by the end of the year. Technology sector seasonally normally does very well from October until January. You might see this come up a little bit sooner than average this year because there are a whole bunch of interesting products coming to market in the technology sector late this year.

Printing of money. This has to do with what is happening with the US$. Right now the US$ has been going stronger because it is less bad than the other currencies! This can't continue indefinitely because the Americans are printing money very quickly, which will have an impact on their dollar. During the last couple of days, the dollar has reached a very import and resistance level and is about to roll over. If the US$ moves lower, watch for commodity prices to move significantly higher. Watch PowerShares DB U.S.$ Bull ETF (UUP-N) for the next 2 weeks for a very important indication of trend in the market.