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

Looking for an overall 1% increase in oil demand. OPEC spare capacity is 5.5 Million Barrels per day. Until we chew through excess capacity we will stay in the $75-$80 range for 2 to 3 years. Natural gas rally last week is nothing more than a ‘suckers’ rally. The fundamentals are awful. We are looking at 10% growth in Nat Gas supply this year in the US. He buys good, liquid companies with good balance sheets, existing production, with meaningful upsides, good management teams.

The Euro-debt crisis: We are the most important market for the US. Europe is only about 5%-10%, so Euro-debt crisis will only have a modest impact. Bernanke may be right but he didn’t predict the last recession very well. Continues not to see a ‘V’ shaped recovery. Gold has become a currency. Almost all currencies are racing for the bottom.

REITs – after in 2011 will they have more capital appreciation? Investors are attracted to the yield – stable, although not likely to grow. Not affected by income trusts going out. Some income trust investors will cycle money into REITs.

S&P 500 – we have been below the 200-day moving average for about 3 weeks. The action today was very negative. 1120 was a 50% retracement level from 2008 and we are below that. There is support at the 1066 level and we are below that. He can see another 30 point drop and then we run into some resistance. 1020-1030 – if we break through this support we are in trouble. He is 40% exposed to equity and will continue hedging and selling.

Average of the stocks in his portfolio have been held for 3.5 years of more. His VP has started a portfolio that allows cheaper stocks and more dividends.

Sell stocks to buy a condo – is Toronto Condo market overheated? Thinks condo prices will come down – HST a factor. Housing prices are relatively high. This is not the season to buy. He would wait. They will slip or maybe they will fall. He loves paying down debt.

Asset allocation is so important in this market. You also have a strong bond component. He is more likely to use an ‘insurance’ put. You should avoid the 2x leverage in ETFs. Doesn’t hold European stocks. He owns 60% ETFs and 40% bonds. Covered calls provide an income stream.

Oil ETFs: Has been buying them in small amounts.

Oil ETFs: Has been buying them in small amounts.

This is a good time for bonds. It’s a volatile time, but a good time. A good time to put new money to work. US Financial space is good. Tread carefully for the below investment grade. If we saw a sustained dip in he housing market and we saw GDP dip he would be more concerned about a double dip. European restraint is going to cause a restraint in growth in N.A. Should be 2/3rds in corporate bonds vs. government bonds.

Not such a good place for bonds with maturity less than 5 years. Mortgage rates wont fall much more. You wont see a significant drop in mortgage rates from here.

Strip Bonds: Don’t mind the provincial space but this is a long-term investment. There is a lot of risk in that increased investment term. You will get some descent yields.`

There will be more interest rate hikes, not at the rate the market expects. The market is already priced at the short tend. Growth will be low and inflation will go down. Royal and TD are good bonds. 10 years and out.

Is it inflation or deflation? He is in the disinflation camp. Fixed income will perform well. Expects lower growth.

Merrill Lynch 5.29%. Low end of where he is putting money. Majority of problems are behind them. A strong franchise. 6.5% on this bond.