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

Gold. Dropped to its 50 day moving average, the bottom of the Bollinger band. His long-term outlook is very positive. Can see it testing this year's highs of around $1923 and possibly going up to $2000. If US and European debt issues are not resolved, there will have to be a new world financial system and gold will be a major part. Also, at some point, there will be inflation. His preference would be holding your 1st 5% position in bullion and the 5% or 10% should be Goldcorp (G-T) or one of his Top Picks today.

Last year a big rally in government bond yields, this year it will be corporate bonds, preferred shares. Partly because the economies are getting better, people are feeling safer going into the corporate bonds now.

In a rising interest rate environment, perpetuals are more risky. That's not the case now, as the interest rate is steady.

Markets: We are past the 7th inning stretch in this market. We are getting extended now. He doubled his cash reserves to 20-30% cash in the last month. There is a possibility of a sideways correction but greater probability it will roll over and then continue up. As investors he would let the SNC thing ride out. You are paid to be cautious in these kinds of markets. Wait a while and let it find a bottom and then it will look pretty good.

Strip bonds. With a rise in interest rates will the capital value decrease? Should I sell to capture capital gain or keep them? This was not an individual strip bond but were called packages. They operate like annuities where they have a series of maturities. Very similar to a ladder. Very safe provincials.

Bonds. What is the easiest way for a neophyte to get into bonds? The 1st thing you need to do is to get educated. (He has a new book that has just been published that would be good. You can also check his website www.inyourbestinterest.ca for help. ETF's can be good but he prefers dealing directly.

How do convertible bonds rank in security and safety compared to regular bonds? Which ones do you prefer? Convertible bonds in Canada are focused on 2 sectors of the economy, REITs and energy. You have to be confident with the underlying company. (See Top Picks.)

Preferred shares? There are many changes coming to the preferred market. They're less volatile than equities and more stable than bonds. New Basil (?) rules are going to change the game. Banks are likely going to be calling all their bank resets so in the next 3 years, a lot of preferreds will disappear. Some of them are trading above their call price right now so you might consider changing them for some of the perpetuals that are coming out now.

Bond ladder. Have a $20,000 bond coming due on an 8 year ladder. Should I renew at around 4% or go shorter? Stick to your ladder and renew.

Do convertible ones purchased via an ETF represent decent value at the present? He believes they are. He likes Claymore Adv. Convertible Bond ETF (CVD-T), which has 81 different issues in it which gives you a basket of convertibles.

3 investment books that he would recommend for anybody's home library. 1) Wealthy Barber Returns by David Chilton. 2) Winning The Loser's Game by Charlie Ellis. 3) Common Sense Investing by John Vogle. 4) Thinking Fast and Slow by Daniel Kahneman.

Oil. Expect there will be demand/destruction when gasoline in the US gets above $4. Currently at around $3.60 so there is a little ways to go. Thinks there is probably about a $15-$20 premium baked into the price of oil so a lot of hike in oil prices relates to geopolitical events and what is going on in Iran.

Markets. Feels this market has room to run. Because we have had a really strong run means we are likely to continue to do so. Central banks are continuing to pump out liquidity. Chinese have started to reduce reserve requirements. Because of strong earnings, valuations of companies are reasonable.

Markets: Markets should take a breath after 4 months of rally. He is driven by a chart showing earnings yield vs. bond yield. There is now a real gap. The public systems are bankrupt (sovereign debt, bonds) but the private systems (equities) are not. Conservatively balanced companies are raising their dividend. On a balance sheet they are less levered and payout ratios are lower. This is favorable for equities.

Markets. TSX has a little bit more room according to some of the indicators but NASDAQ and S&P are at extreme readings. Looking at the actual price actions, there are very small daily movements and volatility is very low. Indicates records are complacent but grinding higher.