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

How do you tell the difference between a value stock and value trap? Sometimes it is impossible to tell the difference. This is why often value investors are thrown into contrarian investors. There’s always the element of surprise where you buy something and it goes up to your target price. It’s a dilemma.

What gold companies to consider: There are a number of gold companies you could look at. ABX, G, ELD, and so on. There has been a lag between the commodity and the stocks and between those and the small caps. There IS a reason to old a gold position of 5-10% at most at this time.

Canadian Banks: Likes the valuation on the banks. They pulled back significantly in the last month in sympathy to global banks. BMO lead off with good earnings today. He would not worry about quarter-to-quarter earnings. Good profitability going forward. A good place to be looking for income.

Derivatives: Is a financial instrument that takes its value off another financial instrument. E.g. puts and calls, futures, swaps, credit default swaps. Derivative is priced on a formula that is the perceived volatility and the time until the derivative matures.

Widening on of the Panama Canal. Might take some business away from rails. CNR would be affected more so than CP. When you look at Rail, you are looking more at the economy. More and more you will see use of rails for long haul within North America. Has not see any models comparing Sea to Rail. He owns CP.

Oil. Could see it over $100 this summer but could also see it $10 lower. Will probably not break 100 because of the weaker economy. A lot of Canadian companies are in Colombia and doing extremely well.

Market. Have been preparing for a downturn for a couple of months after seeing a double top earlier in the year. His stock portfolios are about 30% cash and hedged. Chart shows strong support at the beginning of last year at around 11,700. There is a downward channel from about March with lower lows and lower highs but he is looking for a little bit of support at this time. He is starting to buy but is very cautious.

Gold. Chart shows a steep rise which is panic buying and the rally is going to end soon. The price of gold is not sustainable. Would be very cautious right now on exposing your portfolio to gold.

Moving averages? More volatile a stock, the longer moving average you want. If you use incorrect values you are going to be in and out of the stock too often. He uses 50, 100 and 200 as he likes to see the interactions. When they spread apart, you should be selling or putting tight stops in. When they are all bunched up, that is a sign for buying.

Markets. Looks at the current situation as an opportunity. In spite of all the noise and fear, he is not seeing a breakdown economically, such as a failure of a European bank. Has been a painful couple of months in the market. Cyclical stocks have been absolutely hammered.

Markets. Looking at European and US situations there are causes for concern. The big question is, are they real causes of concern or something on the other side of the mountain that you won't figure out until you get to the top? He tends to be optimistic. Won't be as severe as 2008-2009 as a lot of people have taken cover and corporations are sitting with trillions of cash.

(A Top Pick Aug 6/10. Up 53.72%.) BMG Bullion Fund. Gold, silver and platinum in Bank of Nova Scotia (BNS-T) vaults.

Market. Just saw statistics that indicated despite the volatility last week, Bulls went from 47.3% to 46.2% and Bears didn't tick higher. This indicates complacency in this market where people are assuming things will ultimately go higher but there are some risks in the market right now. The interest is in yield rather than in capital appreciation.

Gold. Looks like it is going higher and is benefiting from the current environment. Prefers physical gold to producers. Costs of bringing in new mines have gone up and increasing gold prices have not offset this. His preferences are Yamana (YRI), Eldorado (ELD-T), Allied Nevada (ANV-T) and Kirkland Lake (KGI-T).

Market. 3 things are happening. 1) A collapse in confidence by investing public and Main Street and government's inability to deal with the deficit and the issue of more debt. 2) Forecasts that we are already into the 2nd recession in a couple of years. 3) Has all been exasperated by high frequency trading and hedge fund short-term manipulation. Until there is some direction from the government, the economy or steps taken to reduce the impact of short-term traders, markets are going to be in limbo.