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

Most of the REITs will qualify to remain trusts, exceptions are Chartwell, extendicare, hotel properties. Anyone who has more than 5% management fees would not qualify. He thinks there will be a large movement from income trusts into REITs. Those not qualified have already been discounted.

(Top Pick January 13, 2009, Up 21%) GE Capital Funding 5.73% 10/22/2037. There is $10 more in these so he is not cycling out of them.

(Top Pick January 13, 2009, Up131%) Pacific Rubiales CV 8% 08/29/2013. The bonds got distressed and he got an equity-like return on them. Thinks it is at full value.

(Top Pick January 13, 2009, Up 47%) Sherritt 7.7.% 10/15/2015). Fantastic balance sheet, not ever leveraged.

Fairfax Financial 7.5% 09-Apr-2019. They are fine from a bond perspective. You don’t have to worry about the bond side.

Sherritt 7.75% 10/15/2015. Not worried about Cuban component. It’s not the largest part of their operation. Even if you wiped out the Cuban and Madagascar assets, then he knows the Saskatchewan assets will cover him. 7% return. Owns the stock in equity portfolio also. Cuba is discounted to nothing but is a great asset base.

Canadian banks. PE Ratios are very high because of coming off worst 2 years in the last 20 years. Earnings tend to be difficult because they always load expenses as things are improving, because bad debts are peaking with low interest rates at a steep positive yield curve. Wouldn't worry too much as they'll come down sharply over the next year.

Gold. Seasonality is typically from July 12 to October 9. 67% of gold is consumed in jewellery and most of it is in India. October gold has tended to correct when central banks dumped gold but not so much this year. Gold can now run through to the end of the year and even into February but then drops off until the summer.

Banks. Canadian banks year-end is the end of October. Traditionally they have cleaned up all their stuff with good positive surprises. Seasonality is from the end of October into mid April.

Oil. Seasonality is February 26th to May 9th. Oil has gone up 24 out of the last 26 times and produced a return of 8.9%. Refineries start switching over from crude to start preparing for the driving season

Volatility Index (VIX). Simply looks at what premiums cost on options on the S&P 500 index. One of the things in the Options Pricing formula is that you have to have some estimate about future volatility. Volatility Index does the reverse. Has been dropping because of the narrowing of the trading range to the market.

Dividends. The core sectors where he thinks you will get dividend increases year-over-year are pipelines and utilities. They are regulated and they know how much they're going to make and typically increase dividends from 5% to 10% a year.

Trading 10- year notes. Bullish on these right now. His duration is long but on a trading perspective, he backed up to 3.50 and it is currently south of 3.40. If it got to 3.25-3.20 that might be a place to let some go. Very difficult to short these instruments for the average investor.

Bank Tier 1 Capital Issues. He did a lot of these earlier in the year and continues to hold a lot of these. Still likes this space.

Short Term Bonds. He would reduce exposure to the short and of the year curve, 1-5 year period. This is very rich. T-bills are 2.5 basis points and government bonds on the short end at 5 years 2.75 so there is not a lot of upside. He favours the 10-year part of the yield curve.