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

Markets: When he was into the US, people asked him why, given the economy and the US dollar. But now people are worried about Europe and the Euro. He is not buying in Europe.

Semi conductors: are the most attractive area of high tech. AMAT-O is the biggest maker of equipment that is sold to semi conductor manufactures. The other is TSM-N, which is the biggest, and best.

Markets. We are due for a bit of a pause but we are safely above the November low. The ranges that you get in the fundamentals as well as the technicals makes you think “Are we going to get something that no one thinks about?”. This could be the fly in the ointment.

REITs. The key metric as to whether these are expensive or cheap is the future direction of interest rates. He believes interest rates are going to remain low for a substantial period of time. REITs are not cheap, but look for a coupon at around 6% plus CPI giving a total return of around 8%.

Markets. Home builder stocks have gone parabolic, but when you look at the numbers in the US, he believes that there is starting to be some stabilization. They are clearing up a lot of inventory. Probably in the next year to 18 months, US homebuilders will start to build again. US Banks will be the benefit of this.

How risky are BBB bonds such as Calloway (CWT.UN-T) or First Capital (FCR-T)? Credit rating agencies rate rates as BBB’s but the stability and their balance sheets are equivalent to an A, but you get an extra 2% basis points above Canada bonds. He really likes real estate bonds.

Markets: Graphite is the next big boom in terms of metals. Requirement for graphite is for lithium ion batteries, which will power cars of the future. 75% of graphite is from china but are restricting exports. Prices are climbing and use of graphite is growing. Graphine is the strongest material known to mankind – 200 times tougher than titanium. It will raise the profile of Graphite going forward.

Uranium: There are two sides to every coin and in the uranium sector that is the case. Give the state of the global economy, soft landing in China, US and Europe, when it comes to nuclear power plants which are multi-billion dollar projects, they have to be guaranteed by sovereign debt. Given what happened in Japan, we can see a worst case scenario. On the positive side, nuclear power is evolving and becoming safer and less capital intensive and are using less uranium, so his outlook for uranium is not that positive.

Markets. In 18 of 21 presidential years, there has been about an 86% batting average. He expects the markets to go up this year. At the same time, a lot of people are going to get tired of the negative interest rates in some of the foreign countries and people are going to look at alternatives in North America and start forgetting about some of the risks and will start looking for a higher return. 20% of the portfolios that he manages are in financials and this is an area where a lot of people can still do well. He also sees opportunities in US real estate.

Gold. There are no gold companies on his screen at this time. He only owns one company, Richmont Mines (RIC-T) of which he has sold 90% of it.

Financials. Off to a good start this year. Look at these in the context of the big picture as to how the stock market performed over a 5-6 year period. We often get a very good move in the first 3 innings, followed by a pause in innings 4 and 5, followed by a run in the 6th and 7th, which then often leads us into the downturn. We are currently in the 6th -7th inning so you have to be a little careful. Treat as trades rather than as “Buy and Holds” as we are well into this economic cycle. Expect we will get back to where we were in bank stocks early last year but you have to watch out coming out the other side.

Markets. There is a danger in chasing last year's winners such as utilities, pipelines, REITs, dividend payers and US multinationals. He is worried about the earnings growth of them going forward, their valuations and the potential for dividend increases. He would rather look for companies with lower valuations, perhaps less dividends, but the potential for good earnings growth.

Commodities. He is looking at copper, coking coal, fertilizer and oil. He wants to be in commodities that China needs over the long term. This is a play on China and India. The next 3-6 months are going to be iffy in terms of commodity prices. He set for a lot of volatility but he is in for the long term. Demographics are very positive for these.

Copper? This is a funny one because long-term he is so bullish and a changing demographics in India, Asia and Brazil means a lot of copper and he doesn't even know where they will get it from. In the short term, copper has no business being at its current price. Way too high. His favourite pick in this regards would be Inmet Mining (IMN-T).

Markets. 2011 was extremely difficult for value investors because there was a real tug-of-war between the forces of fear versus fundamental value. As a consequence, fear overtook the value. Fundamentals on the micro side were actually quite good. 70% of companies came out with greater earnings in Q3 than most people predicted. For 2012, he expects the micro earnings to come through. Rates are still low and will be low for possibly another 2 years so cost of capital is fairly low and he expects acquisitions and takeovers making it a better year.