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

Every announcement since August regarding QE2 has pushed the markets higher. A lot of participants are looking for a correction, but you can correct in price or in time. Something stays at the same price, time passes, and it has gone through a correction by waiting out the overbought condition. Market is continuing on until a correction develops. With bonds, currencies and markets, there is a lot in motion right now.

SHORT GOLD? He is long gold. Is looking at buying a little bit more. If you are short gold, you have to take profit. He would cover now. It is in the zone for him to add.

(New investor.) Probably an ETF that is fairly diversified that represents the broad market indices. An S&P 500 or and Index fund would be wise. Possibly a mix between the US and Canada.

(Brent versus West Texas crude?) Serving different markets with differing transportation costs. You find this in commodity markets all the time.

Rising interest rates affecting bonds bought over par? Generally if interest rates rise from 1 year to 30 years, all bonds fall. It’s like a teeter-totter in that the closer you are to the center, the less that bonds are affected by the move. 3 to 4 years his sweet spot.

Top Short Short the 10-Year 2.625% US Treasury bonds due Nov 15/20. Bearish on bonds as the economy is coming back very nicely.

(A Top Pick Feb 25/10. Up 1.34%.) Short 2 year Canadian government bond 1.33%.

Convertible debentures for safety and versus preferred shares? Those issued in Canada are typically small issues and are un-rated. Normally subordinated to any other debt on the company’s balance sheets but rank ahead of preferreds.

Gold. Being assisted because of all the riots, etc in the mid-east and economic problems globally. Should continue on up. Worries about the spike in gold.

He is overweight oil and energy. Likes oil services companies. The VIX is very dormant right now. VIX peaks and reverses at a bottom. We have some month end seasonality. You buy a couple of days before the month end. Dow tried to get above 12000 and pulled back. Round numbers are significance. There isn’t much resistance in the TSX until 14,000.

GOLD: Head and shoulder trend. Since October there were bottoms and highs, each successive one getting higher until year-end. We should see another $50-$70 drop. He is NOT bullish on gold. There aren’t a lot of supply and demand factors to influence price.

Quantitative easing is driving the market. If that stops then that is sort of the end. GDP ratio to Debt is at .289. Currently we are at $3.50 of debt for every $1 of GDP, which is where productivity of debt falls to zero. Unless US continues to borrow a tremendous amount of money, their economy will tend to retreat.

Bank Stocks? The 6 bank stocks are giving mixed messages. 2 of them have given him clear Sells. 2 of them have hit ceilings and look as if they are going back down again. Remaining two, TD (TD-T) and Scotia (BNS-T), would be rated as good solid holds.

Strike price for writing a covered call? (Covered Call is where you buy a stock and sell someone else the right to buy that stock from you at a fixed price, usually in 6 months.) Strike price on most larger capped companies are in $2 increments. Likes to be very close to “at the money” option. Give or take above or below the strike price of about $0.25 either side.

US$ Hedge? This is basically buying into the US market but without exposure to the US$. Rather than buying a US ETF with us$, he buys a Cdn ETF that is based upon the S&P500. The ETF provider will put on a futures contract such that they are hedging exposure to the US$.