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

Gold: Tough to forecast. Not something you can model a supply/demand on. Very much driven by sentiment and technicals. Inflation is a little bit of a concern and gold has always been viewed as a safe haven from inflation. Think it will trade anywhere between $825 and $1000. He buys at the low end and sells at the high end.

Canadian Bonds: Not enamoured with provincial bonds. With higher inflation and a 5% yield, inflation is going to chew into this. Not looking for interest rates to come down. He does like corporate bonds where spreads have blown out dramatically.

Canadian Banks: These are well run banks. If you have a diversified portfolio and are comfortable waiting, these companies will start growing.

REIT Market: Is now the time to Buy? A: Pick your spots and don’t buy everything. Have been through one of the major breaks in the system and one can never know. His feeling is that we are very much at the high end of the quality range and you should be OK with the better names.

What happened to this “Sell in May/Go away” idea? Probably a continued rally for a little while anyway. It’s a stock picker’s market – one has to be careful about stock selection. Don’t choose just a sector.

Solar Industry – 10-20% upside on a lot of the securities, but one has to be careful buying into it. Would be better to go into a conglomerate that has solar and perhaps wind power.

Gold may well have seen it’s peak in the near term, but as a hedge, a little gold makes some sense. He doesn’t like gold stocks and finds them outrageously overvalued, so use gold futures or something of that nature.

Suggests holding 80% of what oil and gas represents in the TSX (24-25% position). Gas could perform better than oil. Oil could weaken before it moves up again.

Energy: In the short term wouldn't be surprised to see oil pullback to $100-$110 and this would be a buying opportunity.

Inflation: Not a big believer in the inflationary arguments. The housing bubble deflating in the US is a deflationary event. Inflation is a trailing indicator. Also, unless inflation is seen in wages, it won't be a concern on a broader level.

GMAC (Canada) 5.1% bond maturing Apr 30/09. These yield 10% to 11%. Part of GMAC (US) book is US residential mortgages, which hurt them and reflected on GMAC (Canada), which has no mortgages but is auto financing. Fundamentals for financing in Canada are far better.

Inflation: Cdn$ protected us from inflation. Globally, we have been in the best position. This is slowly stopping because of higher food and energy costs. Also there is a big slowdown in wage increases, which is where velocity of money increases and where wage and inflation pressures really start coming into the picture. About 60% of our consumption (furniture, technology, cars etc.) is still in deflation and will not be passed on to wage increases, so inflation should be contained.

Manufacturing: Chinese and Asian labour pool is slowly drying up because people have moved to the cities, so the free labour is much less. Wouldn't be surprised to see resurgence in manufacturing in North America in the next year or two.

Bond Investors: Will have a tough time because 1) bond market rally was so great in the last year or two that we are at the ultimate low level and you will have to fight against that and 2) corporate spreads have blown out. Probably the only opportune area in the bond market is corporate spreads. If you believe the economy will stay whole and global growth will continue (corporate balance sheets have never been better and spreads are irrational at this time) spreads should compress and would mean prices go higher and yields go lower. That would be favourable on the bond side.

Real Return Bonds: This is a good time to buy. Believe it's up 5% - 6% year to date versus the general bond market. Returns are based on total CPI, which includes food and energy. You have to be careful, because if oil tracks down or the global economy slows you might see commodities turn over and that would affect returns.