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

Platinum. Precious metal with industrial applications such as catalytic converters, especially with the current ramping up of auto production.

(A Top Pick Nov 10/09. Up 2.3 % not counting yield.) Canada Real Return Bond Dec 2021 4.25%. Good protection against inflation while getting paid.

Preferred shares? There are a lot of different types including 1) Perpetual with unlimited interest rate risks 2) Retractable that are similar to bonds with a maturity date and 3) Fixed Reset that pay a 5 year rate and floats against government bonds after that. Likes them and recommends them for taxable accounts. Would avoid the Perpetual Preferreds.

There is a fair amount of skepticism regarding this rally. He sees this as a good thing. It feels like we are in a bit of a trading range. It is very easy to find inexpensive growth companies, so he thinks if there is a breakout, it will be to the upside. Not sitting in any cash.

Value Investing in Financials? Presuming Canadian securities. 3 parts 1) money managers 2) banks 3) insurance companies. A little early to be in insurers unless a long-term holder. Banks should outperform in a weak market and under perform in a strong one but expect they will go sideways for now. Money managers are a little expensive.

Canadian banks? Some look reasonably priced and are back at levels they where except for Bank of Montreal (BMO-T) and Commerce (CM-T). If a long-term investor, you could step into them, especially BMO and Commerce, which have some pretty good yields.

Large Chromite discovery in the “Ring of fire” in northern Ontario. Will take a long time as it needs a 100 km road to be built. Being blockaded by First Nations at the local airports.

Natural gas prices. New fraqing methods in the shale plays have dramatically expanded amount of natural gas available. Price is substantially lower than what it can hold for the long term. Inventories are still high and the possibility of liquid natural gas could create more problems. Thinks prices are pretty near the bottom. Energy usage is going to increase and this is a good feedstock for manufacturing and power production.

Gold. This has been a very interesting trade in the last 6 months. Feels that it is losing its lustre as crisis insurance. Has done better recently on weakness of the US$! Not a gold bug.

Taxing of options? Options are taxed as capital gains unless you are a professional trader when they are taxed as income.

Canadian economy is doing better than US. Manufacturing stats were better. Traditionally we have lagged behind the US with lower productivity. Strength of Canadian dollar has allowed companies to buy abroad cheaper. There are signs of stability in the labour force. US housing starts are down.

Canadian banks. He owns 4 of the 5 banks excluding Bank of Montreal (BMO-T). His favourite is Toronto Dominion (TD-T). However, they all have run based on good 1st quarter earnings so expects they will pause and go sideways for a while. 2011 estimates are starting to look pretty good.

Canadian banks. About 3 or 4 months ago, the general consensus on the street was that the 2010 earnings per share for all the banks would be fairly lacklustre with 2011 being the blockbuster with earnings increases of 20%-30%. Because of the much better than expected, 1st quarter estimates are being increased for this year as well as target prices.

Alberta royalty rules were just changed from 50% going down to 36% for natural gas and 50% down to 40% for oil. There was a 5% royalty on new gas wells is to be continued for another year. Very positive for all the oil/gas trusts.

Merrill Lynch Financial Assets CAN22A3 series, 4.88% coupon maturing 4/12/17. A collateralized mortgage-backed security rated AAA. Assets are all Canadian.