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

Economy. Bad things have happened in the 1st quarter including weather, events in Egypt, Libya and Japan. This has all conspired to slow recovery down but there is still a Global economic recovery going on. Growth could be 4% this year and next, but very uneven with less than 1% in Europe and Japan, 3% in North America and high single digits in emerging markets.

Fixed Income. Returns are very feeble right now. Not expecting a double dip coming so expects rates will rise from here, so you have to be very defensive in a fixed income portfolio but he’s been wrong for the last 3 months so has never abandoned the laddered concept.

24 Yr Gov Ontario bonds @4.6%? He would recommend a laddered approach rather than just one single bond. This is case of inflation and rising interest rates.

30 year Gov’t of Canada Bond 4% 6/1/2041. (A Top Pick Apr 27/10. Up 12.34%.) Turned bearish on the bond market in Sept so he sold.

Preferred shares? Rank senior to equity shares. Dividends must be paid before common share dividends. However, they rank junior to bonds and debentures. The advantage is the tax credit.

Real Return Bonds? Principal and interest payments are indexed to the CPI, every 6 months as the CPI comes out. Trade on the “after inflation” number. These are long duration securities and if yields rise, the price of these will fall dramatically. Not a good time to buy.

Top Short Short the US 10 Yr bonds @ 3.12%. There is a world recovery under way. Excessive stimulus that has been kept in place by the Federal Reserve Board has meant bond yields have stayed artificially low and inflation expectations are rising and with inflation at 2%-2.5%, these bonds should be 4.5%, not 3.5%.

Has been an interesting month because the things that made people money over the last 8-9 months really ran into a wall at the end of April, in Canada first and then other markets at the beginning of May. Has been a significant rotation away from mid-cap and small-cap to large cap that had a more stable earnings picture with a continuation of the theme around yield. Slowdown or something else?

Silver: There was a huge drop because of changing in margin requirements. Took a lot of speculation out of the market. It is a speculation and does not fit in with his portfolios.

Market: This year we had curve balls – floods, earthquake in Japan, Greece problem. Margin rules caused the commodity correction. Could have 4 or 5 % to go in the correction. We had another good quarter of results. Valuations are reasonable. There are a lot of good things going on behind the scenes. Unless we see a dramatic increase in rates when QE2 ends, he doesn’t see and end to the bull market yet. He is a GARP investor.

Markets. Coming into a seasonally weak period for commodities, but also people’s confidence has been shaken for the time being. Emerging markets fighting inflation may slow things down too. There has been a very rapid rise in commodity prices in the last year and that as yet has to beat its way through the system in terms of what it might do to inflationary tendencies. Some bargains may show up for prepared investors.

Risks to the market- there are geopolitical risks, so much risk in the middle east and the earth quake, evaluation not cheap but proper, S&P is trading 13 times earning,there is a fear of unknown, liquidity is back, financial system is flushed.

Markets-feels that the rally we have had over the last 2 years is appropriate and that we should see sideways trading, it will be difficult and we won't be seeing any screaming buys, feels we will see a bigger recovery in the fall and next 6-12 months,private sector operating earnings are very good and will eventually feed into the stock market.

Markets-Over the last week there has been a rotation out of commodities and into utilities and stable dividend companies. There could be a another down.

Golds. People are taking a bit of risk off the table. Hardest hit are small cap golds as they have the biggest leverage to the gold price and biggest long term returns, but when the market starts to turn, this sector weakens. Long term, the US looks like it will continue to print money and as long as that continues, it looks like gold is a good place to be.