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

Forestry? A lot of these companies have had big moves and a lot will probably move a lot further. Thinks there is a lot of room for upside but he is very wary after getting burnt by Abitibi as well as the way the US plays hardball. Definitely a contrarian area.

He has raised his cash reserves and taken quite a bit of profit in the 1st quarter and will see where the market wants to go from here. Portfolios are about 25%-30% cash. Mainly trimming positions. Important for investors to review their positions during the market cycle. There is a fair bit of risk in the market.

Gold. Staying market weight gold because it’s a bull market. Gold keeps going up and looks pretty good and there doesn’t seem to be any subsiding of the demand side of the equation. Supply/Demand relationship is quite positive.

Market Neutral Investing. Capturing the Alpha in Longs and Shorts while getting rid of the Beta. Doesn’t want any exposure to the markets movement either up or down. Wants all returns to be generated by Long positions outperforming short positions. Looks for companies with positive change in their fundamentals.

Market. Bearish. In the 1930’s, post the debt bubble in global markets, there was a period of time where you were essentially deleveraging in the system. We’ve had this for 18 months, but the quantitative easing that has gone on globally, essentially incentivised investors to re-lever. You can see it in margin rates and levels of debt and they haven’t come down at all. Wouldn’t be surprised to see more talk of austerity measures, especially in the US.

China. Feels their economy will start to cool off. There have been 6 reserve hikes over the 6 or 7 months. Thinks they are much more concerned about food inflation than we are in the developed world.

Market: Debt rating for US is just another data point in this story. IMF is saying they should get their act together or they could get downgraded in the next couple of years. They are printing so much money that people are moving to gold. The theme is that you want to put your money in oil and other assets. The other theme is income. The fundamentals for most commodities are strong. There is some demand destruction likely to go on, but remember that China is driving the demand on oil. Their oil is subsidized so they don’t feel the price. The way to play oil is through the service companies. REITs are good way to get income, and banks, and pipelines.

Markets. If you look at what the TSX and the S&P500 have done since their peak, they are off about 2.5% and about 4% above the 200 day moving averages, which is the worse case he can see for the markets at this point. A lot of stocks he is talking about today are about 15% off their highs, so he is starting to see bargains.

Uranium. Demand for uranium as a clean source of power is going to continue. There are safer reactors being built today than was the Japanese plant. Expect there will be acquisitions with the drop in uranium companies’ prices. His choice is Uranium Participation (U-T).

Market. Investors are beginning to worry a little bit about all the headwinds. European problems are getting worse. Also there are the budget fights in the US, the deficit, chronic unemployment, housing problem, which hasn’t entirely turned around as yet. All of this along with the Mideast and North Africa political unrest has left the world in a precarious state. Market was ahead of fundamentals so wouldn’t be surprised to see more correction or a market stall. This will be a painful recovery.

Market. Trading pretty viciously day by day. S&P’s talk of potential downgrades out of New York is the excuse for the downside but you could finish up even for the end of the day because that is not a market breaker. Doesn’t think it will be the end of the world. Commodities Bull Run is long but thinks it has legs. What worries him is that stocks are all priced at $7o to $100.

Canadian Banks. Continue to be pretty solid and reliable.

Standard and Poor cut their outlook on the US debt rating from stable to negative. Doesn’t really impact in any particular way. Too much debt in the US. Is the government going to do anything about it? Not until bond market prices bond at a price where they have to do something. We worry about US or Europe being slow, but what would bother Canada is that China is on fire and they are trying to slow it down a bit. About 50% of the stocks on the TSX are resource and that is what affects our market. What is important is that the world is growing, companies are able to participate in global growth and Canada has a stable system.

S&P 500. US economy, for all its vaunted recovery, is kind of hanging on by its fingernails and heavily reliant on quantitative easing stimulus. We are now coming to the end of the 2nd one and the market is hoping against hope that it will be renewed and there will be a QE3 but gold market is telling you no as it is terrified of inflation, even hyper inflation. Having done 2 of them, the Fed has to sit back a little bit and let the economy prove or not that this is the case. We are 85%-86% dependent on the US.

Rising interest rates and inflation. If we get QE3 (quantitative easing), you had better look out. Inflation in the US is already vicious and rampant and sooner or later it will affect interest rates badly. If they don’t pursue QE3, it’s a different story. If they back off, we’ll probably not get rising interest rates and it may create a slowing US economy. There is a key meeting at the end of April, which will reveal a lot about their intentions.