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

Index Trading: First principle is that the market itself is going to be pretty good at reading that data and it will be hard for you to out guess that. If you are going to time the market it would be when there is maximum pessimism. Also, when the market stops going down on really bad news that is an indication that you can step up.

US Interest Rates: At this point the Fed is more likely to increase interest rates then cut further. Probably a consensus view, which is why the US$ has started to become stronger. More important are borrowing rates and these have gone up significantly.

Integrated Oils: Have had no profitability on the refining and marketing side. The upside for them has been their upstream operations. His concern is that they are not growing their production profile. If you have to be in the integrateds, His #1 would be Husky Energy (HSE-T), #2 Petro-Can (PCA-T) and #3 Imperial (IMO-T)..

US$: It is having a rally in a bear market. Been in a downtrend for 2.5 years against the euro, Cdn$ and other currencies. Still have twin deficits and the credit crisis. Doubts the US Federal Reserve is going to raise interest rates given the fragility of the financial system. Also has inflationary pressure.

Bullion: See Comments on US$. These are the same reasons you want to be long on gold. Also a seasonality factor that suggests you buy gold at the end of August for a strong end of year. Wouldn't be surprised if it tested $1000.

Q: Would you buy Telus (T-T) Bell Aliant (BA.UN-T) and Manitoba Telecom (MBT-T) for a combination of growth and income? A: Interesting question because there is no growth. Telcos don't give you both growth and income. There is yield but don't expect growth.

Canadian Banks: If you decide that you want to own financials, he personally likes US banks right now, as yields are almost 30% higher. Canadian Banks continue to issue a lot of preferential shares, which is dilutive.

Preferred Shares: Perpetual preference shares have been a mainstay of Canadian investors for a long time, until the beginning of this year. Bank stocks underneath them fell so many are trading down 8% to 10%. Starting to look interesting. When he starts to see series north of 6% with a re-pricing 5 years from now he will be interested. Inflation kills preference shares.

Inflation: Not a problem yet. There is only one index he cares about, the long bond. This is the smartest index for where inflation is going.

Canadian Financials: Doesn't see any good news coming from the banks in the short-term. Loan loss provisions are going up. Problems in the credit market are going to impact Canada ultimately. World growth has slowed down. There will be decent tradable rallies but we haven't hit the bottom.

Preferred Shares: When income trusts came out, they took a back seat because of the yields. The problem is, you are taking stock market risks for bond returns. They get preferred tax treatment, but tax rates have come down so the relative attractiveness has diminished.

Gold: Has been negative on gold for most of this year but has come back to it recently. Technically, a lot of commodities have broken their short-term support but they haven't broken long-term support. US$ could rally at little bit further and then start fading away and that could give another lift to the gold sector. Would shy away from seniors and be more into intermediates, which could be acquired.

US Banking: The good news is that the US banking sector is not going to zero however, the credit crisis is still ongoing. Credit spreads are still widening. Even the banks don't know what is going to come out. The problems will take a long time to work out.

US$: There has been a 5-year decline in the US$. This is the first time in 2 years that it is broken back through the 200-day moving average. Other parts of the world are now getting into more difficult economic waters.

US Financials: Not a time to be buying. If you own, use any strength in the next few months to reduce your position.