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

Real Return Bond ETF or Fund? The yields on these are currently at 1.6%, which is too low for him. He would prefer seeing them at 2%. Also doesn't think the inflation rate is going to be 2.4% over the next two years, but will be under 2%.

All along investors have been desperately seeking good news and are latching onto any news that is positive. People are trying to end on a positive note. Housing numbers were good, but we know there are still structural problem south of the border and there is a lot that could happen to upset that balance. Canada weathered the storm much better than a lot of other countries. People expect us to come out of the recession stronger. Politicians are worried about how fragile the recovery is at this stage still. He is relatively cautious. Markets were ahead of the fundamentals. Trying to buy more strategically.

Using ETFs you can build a diversified portfolio. Within the bond allocation, he would consider a broad bond one such as iUnits Cnd Bond Market (XBB-T) and to complement this 1-5year Ladder Corporate Bd (CBO-T). On equities he would use S&P/TSX Comp (XIC-T), S&P 500 $ Cdn (XSP-T) and MSCI EAFE $Cdn (XIN-T).

Investors need to see earnings right now. Technology was his favorite sector and now he has rotated out and into consumer staples and healthcare. He needs sustainable earnings. He is a fundamental value investor with a bottom up approach. Looking at sideways type of market. Uses options to increase portfolio income.

M & A activity: Low cost of financing and with the market being positive to new issues, there should be increased M & A activity. Energy sector, CF and Agrium, Kraft/Cadbury. Canadian banks are looking for US acquisitions.

There is now some major questioning about reserves for XTO in shale in Texas area, making natural gas area look much better than it used to be. A great number of companies will go back to natural gas from coal, which used to be very cheap. In 2 to 3 years we will see the oversupply reduce. If you are going to buy a Nat Gas company, now is the time to do it. TSX will go up 10% from here as a result of recent US economic data released (inventory, retail sales numbers).

Uranium. There had been a huge rise in the commodity and then the bubble burst and it has been lingering. Now is a good time to be adding. He owns Uranium Participation (U-T) but has not added to this. Uranium needs patience as it takes many years to build a nuclear plant.

Gold is setting up very nicely. Central banks are becoming net buyers of gold. Small-cap area is where the smart money is going. Gold production is at a standstill and there is nothing in the pipeline.

Cdn$. Thinks it will grow because of commodities. As the world continues to grow, the dollar will get stronger and stronger. There may be US$ strength next year that will put some pressure on it but longer-term he thinks it will go through par.

Uranium. Surprised that uranium hasn't done better over the last year. Pricing sort of stuck in the $45-$50 range. There is a supply/demand imbalance looking out a few years. If you take a position, go for the larger companies first as they will lead the sector.

Gold. Had a tremendous run but is currently pulling back but he sees upward pressure on it. As long as deficits are very large among developing nations, people will be looking for a currency play. Gold companies are selling at very cheap multiples at current gold prices. His 3 principles are Barrick (ABX-T), Goldcorp (G-T) and Silver Wheaton (SLW-T) (precious metals).

Natural gas. Not very optimistic in the short term. A lot depends on the winter in the short term. Would prefer oily names right now.

Tortoise and the Hare. Stocks that faired the worst on the way down have faired the best on the way up. This is coming to an end. Slow and steady wins the race. Tortoise is the dividend paying stocks like utilities, drugs, consumer, and non-durables. The ones that are left behind are resource, cyclicals and have lead the market on iffy fundamentals. Higher quality stocks are starting to outperform. Over the next year or so will be a muted recovery.

GOLD: Bubble bubble, toil and trouble. Gold was starting to go parabolic. It is a big beneficiary of the US$ but has been gaining against all the currencies. Gold does not deserve to be as high as it is now. You only want to own gold when it is moving and it usually results in tears afterwards. It is a commodity and sometimes they go up but usually they don’t. Gold stocks have not kept up with the price of gold. They will be less volatile.

When to invest in US stocks again: No one knows when dollar will stabilize. You should look at your portfolio and if it is not properly diversified, you will have to buy the US. In the long run, currencies go up and down and tend to be neutral. Now is as good a time as ever, with the dollar in the mid-90s.