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

(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$.

Converting a diversified portfolio into ETFs instead? Before doing this you should look at the tax implications. Every portfolio he manages has iUnits S&P/TSX 60 (XIU-T) in it as well as the iShares S&P 500 (CAD-Hedged) ETF (XSP-T).

Copper? Bullish on copper and a lot of the base metals. There isn’t a specific copper ETF right now but there’s going to be one coming from BMO in the next week or two. He would be more inclined to look at the S&P/TSX Base Metals ETF (ZMT-T), which has a bunch of metals in there.

Markets. TSX hit a high for the year on Jan 3/11. Dropped 150 points so we’ve been in a flat correction, which he expects to continue until mid-February. After that look for a continuation in the upward movement. Looking for a target of 15,500 this year. In the midst of the presidential cycle which is the sweet spot until June. S&P 50. He has a target of 1,450.

Gold. Broke a short term support level today of around 1315. Usually from around the end of January until the end of February it climbs higher because 1) Chinese new year (Feb 3) and 2) the PEDAC convention around the beginning of March.

Oil. Very strong seasonality from around the 3rd week in February through until May. A little too early to go in on a trade but has a hunch it’s going to be a really good one coming in the spring. Looking for oil to hit $100 per barrel by some time this summer.

Copper. Historically its sweet spot is from around the end of January though until May. Expects this will happen again this year. Demand for copper will increase as economies improve. Inventory levels are at historic lows.