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

Oil. Expects oil to be $110-$120 a year from now. Looks like the war in Libya will continue for another 6 months . Also, there has been a lot of noise about demand/destruction in the US and China. Sees demand growing in China and India.

Natural gas. Could see a short term rally as quite often there is a spring rally as the short positions are at record amounts. Doesn't see the price much above $5 this year. Every month the US is still showing a record amount and they are still drilling.

Big sell off last Thursday shows the speculation in the commodities market. A lot of it was driven by the amount of liquid money we have because of low interest rates. People are flocking to anything where they can make money. Not only did you have oil move through $100 because of unrest in North Africa, but speculators want to re-test its old highs. Feels the fundamental price for oil is in the $85 range. He puts the $85 oil price through his models so if oil is at $85, his oil picks will be fairly valued. Also, owns companies that pay dividends so in times of volatility, which helps insulate your total return.

Natural Gas. Feels it will be higher in 12 to 18 months. Starting to see demand increase. Expects to see massive decline rates soon.

Covered Call Writing. You are basically buying the stock and Selling an option 6 months out. On a $60 stock you are picking up roughly $2.50-$3 as well as collecting any dividends. During that period, you are picking up roughly 5%-6%.

Fixed Income ETF's. Realistically you have to decide on where rates are going to be. An important component is not just should you be in ETFs but which ones. Currently you want to be in those of short duration, such as 2.5 to 3 years..

Leaps. These are basically long term options. The problem with options is the Buyer is paying for time and on Leaps, you are paying for an awful lot of time.

What would you suggest for a TFSA? There are lots of choices but he would look at S&P/TSX 60 ETF (XIU-T), S&P 500 (CAD-Hedged) ETF (XSP-T), Cdn Div & Income ETF (CDZ-T). There are a lot out there. Just buy yourself a large Cap ETF.

Market. Canada has had 10 months without any significant correction. Market doesn’t go up forever. He is telling his clients that there will be a period when the TSX goes down 700-800 points (5%) in a couple of weeks. Not unexpected. This could be that period. There is certainly a big liquidation in the commodity space. Long term secular trend is that China is going to continue suck up everything it can. Feels the current market turn, with liquidation of precious metals and oil, is a short term correction of speculative excess.

Silver. Finished its seasonality at the end of April. Has been in a bubble lately and had a parabolic move, which he doesn’t like as you don’t know when it’s going to collapse. Will be coming back down to the $30 range. If it keeps going down, it could reach $20. There will be a lot of volatility.

Markets. Coming off the earnings season in the US. Now starting to focus on economic numbers but they’re not so good and people are challenging valuations. Speculation has been fairly high and people have been questioning that. Weaker employment numbers. There’s a big number coming out tomorrow and people are scared of that and don’t want to be in the market so they’re pulling all their speculative bets off the table. This is the time of the year to be more conservative.

Oil. This is the end of the season for oil. Oil tends to run from Feb 25th to May 9th. He started taking his oil positions off in April when he saw some weakness.

Linear vs. Log Charts. Linear is an arithmetic chart while a log chart measures in percentage gains. If you have a 100 point move. Preference is for a Log charts in technical analysis.

Agriculture and fertilizers tend to go up from the end of July to Dec 31st. Since 1990, the average return in this period has been 15%.

Oil Stocks. Oil is holding firm above $110 but stocks really haven’t followed oil up as much since the crisis began early this year. Any time you get a really rapid run up in a commodity, it’s generally bad for the economy and you start seeing demand destruction and an impact on retail sales. He would like to see oil modestly lower.