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

Markets. Very confusing out there right now. We are definitely in uncharted areas. Policy makers are in areas they have never been before and will be taking very cautious steps and very predictive. Quality names, really good stock picking is going to be paramount. A big believer in stop/losses. Volatility is absolutely here to stay.

Earnings VS Cash Flow: Earnings are the bottom line. People pay dividends off that. Cash flow is not on the financial statements. People look at cash flow in juniors when there is no positive earnings.

Market: The market has not reacted at all to what he sees as an impending disaster. Feels the US will be downgraded from triple-A. He also sees a potential breakup of the Euro zone. Gold’s winning streak is justified. There is a psychological component. Gold really is a currency. The gov’t has no way other than to inflate its way out of the debt situation. US probably will raise debt ceiling by Aug 2, but it will be so large that it has to lead to a debt rating reduction. Interest rates will go up and government debt servicing costs will go up. Where you put your money is (a) in golds and (b) in cash so you are ready when the market bottoms. Or you could be in large cap dividend-paying stocks that pay you to wait.

Market: We are still in the Summer Doldrums. He doesn’t do anything except make tax loss selling. He just does research on the sidelines. Debt ceilings are creating an overhang on the markets. They will have to come to a settlement on the US debt level and will do it by Aug 2. Europe could go on for quite a while still. If they solve some problems, often the solution is only a temporary measure. He has sold off 21% of portfolio this year, locking in profit in most cases.

Preferred Shares: He owns 3 banks. Would have preferred the common stock in hindsight. He is holding them now. Doesn’t like bonds.

Markets. His macro view is that there are very serious risks out there, Europe obviously being one of them. Europe doesn't know what to do with Greece, Portugal and the like. Can't allow default as it will kill the banking system. US economy is in terrible shape. Also, inflation has been rising and interest rates will be rising over time. Investors should have a very large cash position. He has about 65% in cash.

How should a portfolio of Corporate Strip Bonds deconstructed? (Should only own these in non-taxable accounts.) Yields are relatively low so you want to make sure you are taking virtually no risk, so stick to the highest quality. Ladder then from 1 to 7 years giving you an average of 3.5 years. If rates go up, you have a maturity.

Gold/Silver. Gold at a record in Euros, British pounds and now in US$. It was just a matter of time. Normally this is a seasonally weak time for gold but there hasn't been much of a pullback. Expects to see some upside in gold and silver in the short term. US is letting its dollar slide on purpose. Currently likes the silver play better than the gold.

Markets. Expect there will be some consolidation and then it goes sideways over the summer time and then have a second wind in the 4th quarter. Correction in April, May and June was more severe than what he expected. In Europe, they will have to put Greece to bed in terms of having a solution for the next couple of years.

Gold. He is a bull on gold. It’s an alternative to paper currency. If you're not in the US$, where are you going to be? Could get to $2300 per ounce at some point.

Market: There will be continued volatility because of what is happening in Europe. There is a little more worry now. The volatility is the new normal right now. He is in a little more cash right now. The problems will be knocked off the list one at a time and that will give the market more room to move up. Italy and Spain are the worry as they are larger. Probably the US will recover of this really soft patch. He is ready to buy in some dips but he is not ready to do that right now. Raised cash in economically sensitive areas. Stay with blue chip and dividend payers.

REITs: .TTRE-T. Canadian REITs have a lot of breadth. Turmoil in Europe does not affect a strip mall in Woodbridge. As long as Europe does not affect world banks, REITs should be ok. XRE is a reasonable way to go but Riocan is a way to go.

Government Bonds. Yields of government bonds are at all-time low. Looks like a slowdown in the US economy through the summer and everyone is piling into the bonds. Yields of 2.9% for 10-year bonds are not much of an investment. Very challenging market and is not a “buy and hold” time.

Tax-free savings accounts. The most secure bonds are government but they are not yielded very much. Likes the cable and telcos sectors. (See Top Picks.)

Bond ETF's. You will lose money if interest rates rise. To protect this from inflation, you would have to have a long, short component to your fixed income strategy. The only way to do this is to hedge out interest rates on your own or put your money with a long-short manager in the fixed income space.