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

US is in a recession that will last through Q1 with a better than expected recovery in the 2nd half of the year. This has been an extreme economic shock but governments around the world are battling the problem. Have had the fastest interest rate cuts in the US, unprecedented amount of intervention to the banking system and thinks there will be another huge stimulus package in the US.

Oil: In the near term, oil is not going anywhere in a hurry. It would be hard for it to go a lot lower. This is the normal cyclical movement of oil that is in every recession where there is a retreat in demand and a retreat in prices. In an economic recovery, oil prices should move higher.

Canadian$: Our economy had a huge trade surplus despite having a high currency. The question is, longer-term, are commodities still going to be enough of a support for our trade balance to counterbalance to losing a lot of our previous surplus and going into deficit on auto trade. When the economy recovers again will have a trade surplus in commodities that will push the Cdn$ back to $.90-$.95. That will be a perilous range for some of our manufacturers.

Provinces: We went through a period where provinces were having difficulty raising money. Expect that that is starting to ease off now.

GE Bonds 5.37% of Oct 22/37. AAA credit but basically trading like a junk bond. Thinks that over the next 5 years the spread will tighten, so not only to you get a yield while holding, you probably get an uptick on the price. This also reduces the risk in your portfolio.

Ontario provincial bonds: Ontario has become a “have not” province and this will have a negative affect on their bonds but it won't be massively detrimental. Corporate or Canadian bank 5 year bonds would be better as the spread has widened considerably.

Bear Market Rally: Pure technicians will probably expect a rally here. There will be bad economic numbers coming out over the next 2 to 3 months. Expect a decent rally for the next 35 to 40 days and then should pull back and test the lows.

Gold: Keeps it at 5% weighting in his portfolio. When he needs it, it is never enough. But right now it is dead money. What is intriguing is that this should be the leading indicator of inflation. Not sure what signal it is sending. His instinct is to buy more but he is holding back.

Gold: The stocks have massively under performed gold over the last year. One of the reasons is because extracting costs went up. US printing a lot more $’s will reduce the value of the US currency. Can see it very probably going back to $1000 an ounce.

Gold: Should be trading at lot higher. A lot of hedge funds were looking to raise cash on whatever vehicle they could and gold was an easy thing to sell.

Gold: Gold and gold stocks have taken a divergent trend. Gold stocks have given the leverage to bullion price as gold has gone from $1000-$750. Gold stocks are up 50% vs. the commodity being down 25%. He owns gold stocks but not bullion.

Gold: 9 out of 10 times gold is a store of value during deflation and great geopolitical risk. Always at the extremes of economic scenarios. We now run the risk of having deflation. Likes gold for this reason and thinks it will take a run at $1000 again and go beyond in the next decade. As US problem became a global problem, US$ started to strengthen and act as a safe haven. Doesn't think this is a trend that will continue through next year.

US$: Can all the global governments rescue the financial system, stabilize things and get back on a path to growth? He believes there is a 70% chance they can. Probably in the next couple to 6 months you will see confidence coming back a little, emerging economies accelerating and the Cdn$ stronger again. Expects parity in 18 months.

Canadian Banks: They are not immune to US risks but have a different set of problems. Doesn't like Bank of Montreal (BMO-T) and Canadian Imperial Bank of Commerce (CM-T) as profitability is extremely weak but he is very interested in picking up a couple of bank names when the time is right.

Gold Juniors: It would take a real collapse in the US for gold to reach $1500. If you feel this is going to happen, you're probably better off to owning the actual metal. When things start getting better in the broader economy, juniors tend to be the last things to go up.