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

Markets. Stock market is looking more optimistically on what is happening in Europe and China than what the bond market is. Historically, the bond market gets it right more than the stock market. There is probably more Hope than Reality in the market.

Market: There was such an extreme level of pessimism it was hard to find anyone who had anything good to say back in September. Thinks we are off the bottom a little bit. It feels like a recession, but we priced in a very negative outlook. Sees this rally having legs. Best thing about CAT results was the positive view for 23012. It is a proxy for the global situation. He is doing some buying. He doesn’t need dividends, but he looks at ROE.

REITs. Structurally people are shifting away from investing for growth to investing for income to fund their retirements. This is accelerated with interest rates being low. Aconomic growth is pretty anaemic for most of the developed nations.

Markets. People got carried away with the slow economy earlier this year and when it came, everyone extrapolated from there a downward curve. But things have picked up. The Philly Fed report was extremely positive. Employment numbers have improved. A whole bunch of earnings from major US corporations is having more beats than misses. US corporate sector is quite healthy but they're sitting on all their money so there's not much expansion or hiring. Aggressive and small-cap stocks are going to languish until there is real momentum in growth.

REITs? He is concerned about this sector. They have been a favourite. Yields have come down. Feels the real estate sector as a whole is somewhat suspect these days. Residential is okay but he wonders about the commercial side.

Short selling? This has been around for a long time. Back in the 30s they put in a rule “Up Tick” where you couldn't sell short unless there was an up tick. And has now disappeared and has added to the problems. Has some impact, but high-speed computer trading has a lot more. Feels they should not allow “naked shorts”, in other words you have to borrow the stocks.

DRIP programs in RRIFs? Makes a lot of sense. An attractive way and some DRIP programs give a little extra advantage in terms of pricing.

China. Growth is slowing from 9.5% to 9.1% but it still means they are going to need about 9% more of everything next year. Expects they’re waiting for copper and oil prices to drop and then will be buying again. G

US financials. Hasn't touched these since 2006. Even though they look extremely cheap, you know something is wrong when they are not increasing their dividends. Cheap on a PE basis and a Price to Book basis, but their balance sheets are too opaque to know what is going on. There is still more trouble to come in the housing market. Could have recession next year.

Canadian banks for the next 3 years? Has always liked the banks. His favourite right now is National Bank (), which has no exposure to Greece and next to nothing in the US. Cheap at 10-11 times earnings. Flush with cash.

Markets. Market has stopped going down on bad news and we are in an oversold balance on risk assets. Global economy is slowing and likely heading to recession. Would use rallies to sell into them. Deleveraging process is going to take a very long time.

Market: Cameco is only one mine. If something goes wrong, the stock drops dramatically. CCO is a really super power in uranium. He thinks Rio will stick to their price. These won’t get political.

Market: Overnight risk out of China and Europe. Is China taking a hard landing? There are seasonal patters and descent stock valuations. Corporate earnings are quite good, especially in the US. Don’t know when Europe will fix itself so you want to be defensive. US will continue to do well this year.

US$ has become the safe haven trade. Moves up every time there is a scare. Questions if this is sustainable given the underlying fundamentals of the US economy and the weak fiscal situation. As the economy improves and corporate earnings come through and the stock market improves, this safe haven trade may be abandoned to some degree.

REITs. Obviously, we don't know where the world is going from here but right now, they are a perfect investment. Relatively high yield and very safe returns in most cases. The earnings you are getting are safer than they were getting 4-5 years ago, because they have been able to bring their payout ratios down and have been able to extend the term of their debt.