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

10 year Ontario provincial bonds at 4% yield. Ontario is a big issuer and will continue to be a big issuer because of its massive deficit but he can't see any default risks.

Effect of a double dip recession in the US on high yield bonds? Typically high yield will be as volatile as equities so if there is a double dip scenario (he doesn't think so), generally high yields would suffer.

Cdn Gov’t bond maturing 2029. Volatile but with rates where they are and the forecast for stable and perhaps declining long rates, they may appreciate further.

Secular trends. 1968-1982 started with nifty 50s and ended with the “new economy”. In between was a sort of clutter. These usually persist for about 12 to 14 years, which include 3 bull & bear markets. The 2nd cycle is usually the big “granddaddy bear”. If 2000-2010 will consist of 3 cycles, the 2nd cycle was completed in 2008 so there is one more cycle to go. Historically the “granddaddy bear” would be 2008-2009. We now have one mini-bear to go and then will move on to our next big upswing which he thinks will be an echo tech boom.

Markets are Schizophrenic right now. With levels of government debt, they can’t stimulate much more. If stock market goes up a fair amount they become richer and are more willing to spend. There are lots of interesting valuations after the correction. Financial, for example. He has invested in 23 of max 25 positions. Has sat back and done nothing with his contra portfolio. NBG-N is something he has bought for his personal portfolio. Could be a 4d or 5 bagger but very risky.

Stocks with sudden events or bad quarters. When do you buy in? Likes to see a stock stabilize before he buys in. But if it is an event that is a one-off then he night by in instantly. BP he started to follow but it is difficult for him to buy in quickly.

Picking 3 to 5 ETFs with $100,000, which would you choose? Depends on individual circumstances, but generally would build strong base around a diversified portfolio. Perhaps 20% in Claymore’s laddered corporate bond (CBO-T), position in TSX, hedge position in an MSC Type Global (?) (MGB-N) and give real thought as to whether growth will be coming from emerging markets, so something like Claymore BRIC ETF (CBQ-T). Last 20% would be in cash.

Gold. There is a bit of a lag time between gold producers and gold bullion. Normally producers lead the bullion by about 6 months. Now getting into the seasonality of gold.

He is in the “no double dip” camp. There will be very modest growth in the second half of 2010. New home construction at an all time low is a good sign. He never thought there would be a very robust recovery. He feels most of the gains in 2010 will come from dividends. Expects a saw tooth. Some stocks have been sold off much too much and these are opportunities.

Cdn$ versus US$? Longer-term, he likes the prospects for the Cdn$. Big revaluation has been done. Will continue to see relative strength as long as commodities stay strong and Canadian economy shows relative out performance to the US economy.

I had expected 3 Top Picks but as far as I can tell, there were only 2 discussed. Anybody get anything better than this?Bill

4-month treasury bills. Prepare yourself by having money in the kitty for now with the idea of being fully invested by October.

(A Top Pick June 2/09.) 3-month Treasury Bills as a cash holding. Seasonal period of strength for equity markets ended around May 5 and a series of technical indicators started to move lower.

Oil has been coming under pressure and the bottom of the trading range is being tested. No reason to think the trend will improve in the next little while but there could be a little bounce. Crude oil tends to go sideways in the summer.

Natural gas has very strong seasonality. Tends to peak around the middle of June and move significantly lower until the end of August.