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

Market: What we saw in the debt ceiling is just the tip of the iceberg. We haven’t gotten rid of debt. It’s a 3-ring circus. We haven’t figured out how to get jobs back and get the economy going. With economy so weak and certainty about the future so weak, corporations are sitting on the cash that they have. US bonds are just a temporary parking space for the global investor.

Market: It nuts or plain stupid. We wondered if the US could have stimulus now. The whole concept of the country in bankruptcy. The US is not going to disappear so we can buy stocks. Gold looks likes it has legs. It has become an obsession. This is closing on toward the end. Institutional investors are not more than a normal weighting in gold. End gale is 6 months to a year or more. If gold price stays reasonably high (14-17 hundred), mining can handle it quite nicely. Will continue to see an expansion on the gold stocks. Canadian investors hang in with good companies and suffer the tumbles on minor aggravations. It doesn’t mean you have to hold everything forever to stay invested. If there is a major bear market, you probably come out at the other end as if you hadn’t sold anything in banks. You have to buy them when they are still down or not sell at all.

Markets. S&P 500 and TSX both closed close to June lows. Surprised by the pullback. Market is starting to realize, with price of gold, they are losing confidence in currencies and governments to get the economy going. This leaves the private sector to get us into a recovery, which means profit growth. Recovery may be more muted and protracted. Still feels we are grinding higher. Earnings on the S&P 500 are about 13 percent higher year-over-year.

Economies. Most recent numbers for both US and Canada were quite weak and we are on thin ice. This whole debt ceiling business is creating an atmosphere of crisis at exactly the wrong time.

1 month Call options Versus 6 month? Likes 6 month Calls because it gives him downside protection. Example. Buys a bank share at $50 and he can sell a 6 month option for $2.50, plus pick up the dividends. He has basically covered himself for 5% off the Call plus he is getting 2% of the 4% on the dividend. This is 7% over 6 months.

Gold ETFs? The ones that he likes are those that are hedged against the decline in the US$. He likes Claymore Gold Bullion ETF (CGL-T).

Why are Cash Covered Naked Puts considered riskier than buying a straight forward stock in an RRSP? There is no way of segregating the funds. If you put in a naked put, you have to have the cash available if the stock is put to you.

30-year-old wants to set up an ETF portfolio. Depends on the size of your portfolio. For example, if you have $25-$50 thousand and every time you buy an ETF there is a commission involved. (Sometimes better for smaller ($10,000?) investor to just go into a bank and buy a Cdn index fund.) You only need 4 or 5 of them.

Gold. Does not believe we are at a secular high and his forecast for the next year is over $2000. Ultimately would not be surprised to see it go well north of $5000. It is not the price of gold that is going up, but the devaluation of global currencies because of large debts. He

US banks? Something for a long-term hold. Wouldn't get into it for three months or a year. At some point, when the economy starts to normalize, some of these banks will have very nice moves. Many of them are trading at historically low valuations.

Market. Even if the US comes to an agreement on the debt ceiling, it is still going to be a mess for a while. It won't be like they have solved all of their problems. Difficult global environment. Has been as high as 25% in cash as of May but is currently whittling this down.

Problems in Europe are ultimately worse than the problems in the US. The US has an artificial crisis created by politicians trying to get reelected. US deserves to have its credit rating downgraded from AAA. He would view any major sell off as an opportunity to buy more stocks. He prefers multinational growth stocks with a dividend.

Natural gas. Warming up to this commodity. Looking at the major energy companies, they are buying natural gas properties. Their timeframe is 10-20 years so he feels they are seeing something that the market isn't. As a long-term investor, he feels maybe he should be looking at it too.

Safe havens. One of the best areas for safe havens is dividend paying stocks. They provide you with some downside protection in the event the markets go down.

Market: There has been a lot of noise in the market. But there are real concerns if the US does not come to some agreement on the debt. The longer-term impact – they have to come to terms with the debt at some point. Europe is a very real concern in the markets today. If there is some kind of a sell off he would be looking at all kinds of things. He has been adding a bit to some of his positions. Generally the quality of earnings has not been too bad.