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

Markets are in a crisis of confidence. He continues to put strong emphasis on asset class diversification in equity and bonds so there is as much cash flow coming in as possible and when markets drop-off like this, there is more cash to reinvest in high-quality assets.

Markets. It's going to take us a long time getting out of this so you have to be defensive. Don't take action and sell during this period, but wait until the market stabilizes. There will be more market plummets so make sure your portfolio is set up for the long-term so that you can take advantage when the market recovers.

Canadian banks. Low interest rates will spur people to make other investments which is good for them. The negative is the net interest charges as they will make less money on their spreads lending out to investors. Earnings will continue to grow. His favourite is National Bank (NA-T) followed closely by Bank of Nova Scotia (BNS-T) and would be a buyer today.

Market. Investors have to remember this is the summer and there is probably buyer exhaustion. A real case could be made that this is just an overreaction and a very large correction. Currently buying companies with pristine balance sheets. Continues to like earnings yield, which is earnings over price, as opposed to PE. Big divergence between Earnings Yield and Bond Yield.

Sectors. Betting against consumer cyclicals, retailers (particularly in Canada) and some US retailers. Recently have been shorting some restaurants because of rising commodity prices and weaker consumer buying.

Market: It’s touch to figure out what is going on. Investor psychology. Lot of day traders. It’s China, Asian, Europe and the US downgrade. They all moved up in a short period of time. He did some buying Friday, Monday and today. He is cautious that the market is complacent about these issues. He is buying US equities – tech, consumer discretionary and staples. Doesn’t think banks are great long term. Sees good value in the energy sector. The energy crisis is not going away anytime soon. Odds of recession are 1 in 3. Markets thing it is a greater chance. Growth will be slow. Oil prices being down is a big stimulus.

Preferred shares: Play an important role, particularly in income. Pay attention to credit quality. Perpetual maturity makes them volatile. Some can be called on you. Yield to call date can be quite poor in some cases.

Program was interupted by the US President's speech, so only 2 Top Picks were made. Also no Past Picks were commented on.

Market. The market here is going to give you some opportunity to make some money. Wouldn't add to precious metals here because they are so extended on a short-term trading basis but he does have a full position in this sector. Still seeing values in the Canadian and emerging markets.

Banks. These are so cheap that they will move up quickly with the market.

Oil. The next place he sees support is around $80. Would like to see it hold here. Once it gets below this, the question will be, is it a bigger correction. Still a good, long-term place to be but you have to be conscious of your price.

Market Call Tonight. This is a special edition with 2 Experts, James Hodgins and Bill Carrigan.

We have come through this massive debt bubble, focused in the US but really global. Debt to GDP ratio was about 350% in the US in 08. That was the tipping point and Debt could no longer be financed. The rally off the 09 lows has been artificially driven by monetary and fiscal stimulus. He started getting bearish this spring when he saw the end of QE2 coming. He also saw a shift in the political landscape from more stimuli to more austerity.

Market. The key to protecting capital and ultimately making some money is to stay diversified, especially in small and mid-caps. He is a little concerned about Monday where he could see a crash scenario.

Gold stocks generally have under performed bullion for quite a period of time. There will be a time to come back into precious metals but we need to wait until there is more clarity by the Fed as to what they are going to do regarding further qualitative easing. Doesn't expect this to come anytime soon, certainly not before we see some decline in inflation and more economic pain.