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

Security Value versus ETF; - The way an ETF is priced is one of the biggest misconceptions out there. An ETF represents the exact weighted average of the price of all the underlying stocks. The big benefit is the contractual agreement he has with a designated broker/partner who actually trades the ETF all day long, trying to keep the market price and the net asset value as tight as possible within a bid/ask spread.

Markets: - Most important level for markets is the one that we saw in January; the panic low. A selling climax and it is significant. Normally, you get a bounce up and then a test of that low. We are still waiting for the test. If it breaks there with any degree of confidence, it will be bad. Still waiting for the bounce up.

About 33% short and about 60% long so net exposure to the market is about 27%. Now have more large cap companies that are less risky than smaller cap. Making more money on the short positions. Shorts are diversified. Likes the areas that will be affected by the consumer because of a lack of spending, particularly in the US. Canadian banks have not come down very much, except for National and CIBC and he can see more downside if credit problems continue, so he is short Canadian banks.

Uranium:- Prices are running about $75 in the short term and $95 in the long-term. Expect the long-term will come down into the $70's. Outlook for uranium in the long-term is attractive. A lot of countries are looking to use this as an energy source.

Cash: Most of his accounts have 15% to 20% cash and most of them are balanced with bonds. On bonds, you can do better with quality dividend paying stocks, which will give you a comparable or better yield. You also get a tax credit on dividends and they grow over time.

In this particular market, there is no rush to buy anything right now. If you have a lot of cash, that's great, but chip away at things rather than going whole hog into the market.

Markets: Should be waiting. Cash is your #1 asset class to hold. The housing crisis in the US has led to a banking crisis and is now leading to a credit crisis. Banks are nervous about one another and don't want to lend to each other or take on any risks. Thinks it will be 6 months to a year before you see it turning around. Wait for analysts’ revisions on the financials to turn. Financials have always led the markets down and always led it up.

Oil Shell Extraction: Oil shells are prevalent throughout North America. These are about as tight a formation as you can get. Have now developed a new technique, part of which is horizontal drilling and major fraqing.

Canadian Banks: If he had to pick one right now, Royal (RY-T), Toronto Dominion (TD-T) and Bank of Nova Scotia (BNS-T) are ones he would look at. An interesting way to see what the market thinks of them is to look at the dividend yield. It is very attractive in that you get the dividend tax credit and the equivalent yield of 20-30 year Canada bonds.

Gold: If you adjust the $850 peak price from the last peak, you probably come out with an adjusted price of $2200-$2400. $300 of the rally from $550 to $850 was speculation; so eliminating that gives a current price adjusted for inflation of about $1200, which is his target. He has Gold ETF’s (GLD-N), which is his prime play plus 3 gold plays Agnico Eagle (AEM-T), Kinross (K-T) and Yamana (YRI-T). These are great intermediate stories with great growth potential in front of them.

Canadian$: He is presuming that this will stay $0.02 either side of par, that is, $0.98 or $1.02.

(A Top Pick Feb 5/07. Up 4.1% total return.) First Capital Realty five-year 5.08% bonds. Real estate bonds have generally outperformed the credit market.

(A Top Pick Feb 5/07. Up 8.65%.) Government of Canada 2029 5.75% bond. Feels that real rates are coming down. Bigger believer in deflation than inflation. Was rewarded when inflation numbers were lower than both the street estimates and Bank of Canada estimates. Feels inflation rate could drop through 1% in Canada.

Bankers Acceptances: - They use the inner bank markets to set their interest rates. These are safe as long as the banking system in Canada is safe.

The credit market problems are very serious and profound. US Banks only have a small fraction of clients’ money in their accounts. Bank rules say they each have to have a certain percent in their vaults but because of daily transactions they may not have it so borrow from each other at the end of the day. December credit scare happened because banks had to borrow 36% of the money they were supposed to have. The highest borrowings since March 1933 when it was 46%. Last month, they borrowed over 100%, which means they have nothing. He is buying physical gold. Although your money is insured, it is only for a very small amount. Doesn't know Canadian bank requirements.