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

We are at the middle of the range of oil price, creeping toward the higher end of the range ($30-$130). Stocks are relatively under priced compared to the price of oil. China’s only reason for investing in Canadian oil companies is for the oil. We Canadians invest in oil stocks only for return on investment.

Gold. Looking for $1200-$1400 in gold over the next 12-18 months but stocks have lagged.

US stocks. Because of currency exchange he has been zero-weighted in US stocks. Now that the Cdn $ is at parity, the risk is much more reduced but the economic risks might be high. Expects Cdn$ to go through $1.05, maybe as high as $1.10.

Agriculture. Has been under investment by farmers globally because commodity prices have fallen so much. World grain supplies are low and you have to look forward, not back. (See Top Picks.)

Never suspected we would have this kind of rally. So much money that has to find a home; markets have come back so people are feeling richer; but governments are in far worse shape than before and interest rates can only go one way from here – up. Looks for good clean balance sheets. It’s a stock picker’s market. Looks at sectors out of favour. A lot of large caps he used to look at have become mid-caps.

Natural Gas: Difficulty is finding good companies to invest in because so many have poor balance sheets. Prefers cherry picking in the sector than ETFs.

(Top Pick Mar 12/09) Canadian Bank Preferred Shares. Wished he bought the common shares.

CHINA: is going to continue to grow. At some point Yuan will be allowed to move up. A good place to invest. Strategy is to go in and grab market share, killing enterprises. Thinks a lot of countries should slap tariffs on them to make China move on increasing the Yuan. If you look at their labour laws and what they are doing environmentally, it’s horrific. As a place to invest – yes, but as a good corporate citizen – no.

(A Top Pick May 4/09.) Long term real estate bonds: E.g. Reocan, First Capital. These where a screaming buy from a risk/reward perspective.

Real return bonds. Hedge against inflation. Return is 1.5% plus the rate of inflation. If you believe inflation will come roaring back, then these are the bonds for you, as they will go up in value. He doesn't think inflation is a large problem.

Banks. Had a very nice move and are up 70%-80% on a one-year basis. Currently up about 10% year-to-date. Values are about at the midpoint of historical ranges. Expects earnings growth this year will be mid-single digits but double digit next year. Her preferences are Toronto Dominion (TD-T), Bank of Montreal (BMO-T) and Royal (RY-T).

Natural gas. Looking for recovery to $7 in the 2nd half of this year. Market has underestimated 1) the pullback in activity in the 4th quarter eventually catches up and 2) a lot of shale gas plays are declining 75% to 95% in the 1st year. Shale gas in the US only represents about 15% of their production and is looking for it to flatten out towards the end of the year.

Corporate bonds. This was the place to be last year in the bond market. There is still room as the yield spread still hasn't come down where they where prior to the 2008-2009 mess. Pretty safe place to be but would stay in the 5 to 10 year area.

Real return bond funds? Geared to the CPI to hedge against inflation. You would want to move into these when you think inflation is really starting to pick up. He can't see any big danger of inflation picking up much at this time. Probably in 2 to 3 years you may have to start thinking about it.

Silver. Behaves like other precious metals. The drawback is that there is quite a lot often mined in conjunction with other ores. Also not as much demand as there once was. Would prefer platinum and palladium, which have more industrial applications.