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

“Risk on” and “Risk off”: It’s a new term from 2010. Risk on means you are willing to take more risk – it is a good time to take more risk. Risk off means it is time to be scared and people flee to American treasuries. Diversification covers this anyway.

Market - Still have a broad based rally with broad participation. There is reallocation from fixed income into equities that really only began in earnest from December. This could go on for some time. Many missed a lot of this rally and private investors are now engaging. Over the last 50 years we got to the low point in equity allocation in pension funds about 10 months ago. Averaging about 45% allocation to equities, versus 30% about a year ago.

Markets: Nothing has been solved in Europe. Things are not improving in those countries that have supposedly been fixed. Believes the biggest risk in 2011/12 is a default by Greece, Ireland or Portugal. Every quarter that we move forward and the economy recovers improves the issue. Thinks things are still ok – banks have not warned. Rising oil prices will have a dampening effect on the recovery in Europe. The stock market looks relatively cheap. With Libyan problems etc. it will push the US currency higher as safe haven. It’s a good time to put higher Canadian dollars to work.

Market: Step away from the madness: These things will pass. We expect 3 to 5 dips of 3 to 5 % per year.

3 layers of protection: He is worried about US inflation and the printing of money to get out of their deficit, which could see higher interest rates. Buy commodity-related stocks. You want companies that can pass on higher inflation. SC-T, Grocery stores, Kraft. If you must own bonds, keep maturities short or real return bonds.

Markets – Markets are running because there’s so much liquidity. Quantitative Easing 2 is pumping all kinds of money into the stock market. What the staying power is remains to be seen. Is enjoying it, but nervously. Sectors that he has had the most fun with, and the most unexpected, have been Canadian pipelines, telecoms and utilities. (His clients are more conservative so tends to have a lot of this.) It is really a search for dividends. Some are starting to get a little high and he is starting to pare back a little.

Natural gas is a tomorrow commodity, not today. Large companies are buying into natural gas when they could just as easily be buying into oil. Not buying for today but for the future. They have a longer investment horizon than the average investor.

Markets – Little overbought right now but that doesn’t mean they are going to come down. This is a favourable time for markets to rally until May. Possibility for a correction to take place. Even if there is one, he expects the market to go up from here. Can still see the oil sector going very well. In material sector, metals and mining tend to do well. Also financial as well as discretionary.

Oil. She uses OPEC Spare Capacity numbers, which indicated a potential for some problems in 2 or 3 years and prices might spike. Present middle east scenario could move the time-line a little bit shorter and could see some price hikes that could be quite dramatic if oil was cut off. Was not expecting $150 oil for 3 years but it could now be sooner. Has been adding names that were down or hadn’t moved in the last few days.

Banks. A big part of the market and also represent an extremely well run section of the Canadian economy. His favourites currently would be the Bank of Nova Scotia (BNS-T) and Toronto Dominion (TD-T). TD just made a good acquisition of Chrysler Finance at a very good price. Their US banks are doing very well.

(A Top Pick Feb 26/10. Up 45.49%.) BMG Bullion Fund. Rather than put your faith and stock in a company where minds can get messed up, you are basically buying bullion. 1/3 gold, 1/3 platinum and 1/3 silver.

Market - Recent mid-east problems might be a decent catalyst for a correction in the market. Market has gone straight up since August and has been looking for a catalyst and this is a pretty big one. Market rally was significant enough and the catalyst is big enough that it could be a fairly good correction. 10% would not surprise him. Could be a few weeks or a couple of months.

Market. A civil war in Libya could have big implications for oil supplies, oil prices and global economic recovery. Assuming the situation calms down and there is a peaceful resolution, he presumes it is a temporary situation.

Natural Gas ETFs? You need to have an outlook on gas in order to play these. He is bearish over the near term. Beyond the next 12 months he expects gas to go from the current $4 to perhaps $6-$6.50 and will stay in that range for quite a wile.

Market. -Expects we are in a more subdued economic climate. Easy money has been made in the recovery from the bottom of 2009. For the first time in a couple of years, equities that have supposedly been clearly cheap are at a more fair value. Expect only average rates of returns over the next few years, perhaps high single digits.