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

Bank Stocks: There are periods of times when even the bank stocks get hurt. Sooner or later they are going to recover. Wouldn't go bargain hunting. These stocks will have to settle down, get the problem out of the way and then will probably make a base giving a buying opportunity again.

Q: S&P 500 lost 10% of its value recently. Is it good for a short rally? A: Yes. The chance will be that not only will the Fed lower rates in December, but also could see a 2% or 3% rally.

Banks: - Would like to be able to say that Cdn banks would be good choices but that would be guessing as to where the bottom is in this overall correction and possible bear market.

National Bank 4.7% bond maturing Nov 2/20. Will probably be called in 2015. For the first time, you are having bank bonds giving you value.

Base Metals - Commodities are correcting. Expects to see some upside, but feels you have to ride out some volatility. Focus on US economic growth is affecting commodity prices, but with continued demand coming out of China and India and the need for commodities over the long term, investors should do very well in commodity plays. Long-term outlook for copper and zinc will be positive. Zinc seems to be in a pretty firm downtrend but thinks it will bottom out here. Copper is moving more sideways and doesn't expect a big uptick in the near term.

Ibiden - Ceramic packaging company. Has about 70% market share a diesel particulate filter of which the demand should double over the next 5 years. This has to go into the exhaust systems of any diesel automobile/transport vehicle made. (Ed. -Listed on the Japanese exchange.)

Market Outlook - Earlier in the year financials rallied, made a peak, corrected and then failed to make a new high. They then broke their low mid summer. That was a signal of the top. Are we going to have 1) long down bear like we had in the 70s 2) short, dirty bear or a 3) flat rotational bear. He thinks the latter because the commodities continued making new highs and are now correcting. In other words, half the market is doing one thing and half is doing the other.

Gold - The recent spike is just short of an all time high so you might consider this as the overhead resistance. If gold stays in its trading range where it is now, if the Cdn$ calms down a bit maybe gold stocks play catch-up. There may be opportunities in the stocks.

Index Investing - The time to own an index is in a strong bull market. The time not to own them is when the market is going down.

Bank of Nova Scotia 5.65% bond maturing July 22/08. A good pick up over treasury bills that are artificially low right now (3%+) because of the flight to quality bid. This is a fixed floater, i.e., it has a fixed coupon up to July, but if the bank decides not to mature the bond, it will float plus 1%.

MetLife 4.35% bond maturing Feb 10/09. Very good US insurance company, AA rated.

GE Capital Canada 4.4% bond maturing June 1/14. AAA rated, This is a great global, well-diversified company.

What to Invest in if you have $10K in both Cdn and US? – He would look at large Cdn and US blue chip companies that will export to China and India, etc. Exporters are going to be very competitive with the weak US$. These countries are going to need the technology and know how of the US.

Cdn$ versus the Euro – The Euro is not a bad bet at all. It has moved a long way. It is another good positive long-term story. The Euro should continue to strengthen over the US$.

Impact of High $ on the Bond Market – Very close “Direct and Cause” link between the $ and the bond market. The Cdn$ is acting as a de facto tighten for the Bank of Canada, which is a very positive support for the bond market. Canada is a fairly low yielder now and by looking elsewhere, you would be able to get some added yield. Australia, New Zealand have 6.25% - 6.50% versus our 4.25%. Instead of taking a currency risk, you could Buy some high-grade financials (major banks, etc.) that would yield 1.5% - 1.75% over Govt of Canada Bonds, which would put you up close to 6%.