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

US$ is central and affects everything else. It has been weakening since 2001. Now at a support level where it was in 2008. If it breaks through that then the risk trade is on again. They have the Japanese model of a weakening equity market and strengthening dollar, which they will want to avoid. June will tell us a lot. Will there be a QE3 starting?

Silver. Recently had a big correction. The 50-day moving average of $38.94 was kind of critical. You’ll have some really good support at $33.50 and $36.50. Gold probably has a better opportunity. Expects we’ll see $50 again.

Markets. Had felt from late February to early March that we were in a corrective phase and would probably go into May. Seasonality. A key level is $13,555 on the TSX. There will be a bit more time before the key questions can be answered.

Market: Portugal has reached a bailout deal. This will stop the bleeding. Sees more of this spilling over into other countries such as Spain. European debt restructuring is the biggest story of 2011. This is driving Gold and Silver. Thinks these are crowded, bubbly trade. Once interest rates start to go higher, this will be a really lousy trade. He has ABX instead of gold. He is starting to buy more US names and things that everybody hates.

TFSA: The promised to double the size of these in the future. Media has not done a good job of telling us what we can buy in a TFSA. You can buy stocks, bonds, and preferred shares.

Dividends. If you are going for dividend yield, he would probably look to the banks. Their dividend yield compared to the bond yield is so high now and they are growing their earnings and they have good valuations. Also some of the old Income Trusts on the energy side are still paying out some pretty substantial yield.

Market. Has been quite strong year to date with the S&P500 up over 9%, (only 3% in Cdn$ terms) and the Cdn market is up about 4.5%. Market has been very strong since the US Fed announced the Q2 but could be vulnerable with some near term concerns with Q2 ending, rising inflation, profit taking and seasonality. She remains constructive on the market over the balance of year, but could be volatile.

Precious Metals. Gold and silver are not in a bubble, but are just reflecting the reality of the US$. The index he watches shows the dollar right at the bottom. Even though Bernanke is not going to continue QE2, they have to keep buying the debt. $ is too low to raise rates yet.

Silver still has a lot of room to grow. Comparing it to gold back to the 1980’s it should be much higher than where it is. This week the COMEX raised margin rates twice against silver. They are forcing the silver market down in any way shape or form. Expects the futures will well overtake the paper.

Gold. Pricing is in a new paradigm. No longer the simple buying of gold when there is going to be inflation or the US$ is dropping. Universe of buyers has broadened enough that it has muddied the waters. Expect it will continue to be in decent shape for the foreseeable future, possibly another 18 months, but ultimately when interest rates start to rise, gold will peak and then start to pull back.

Dividends. Will continue to be important. Large cap dividend paying stocks is definitely the place to be 1) because they have the dividends and 2) those tend to be the companies with offshore revenue growth.

Market. Expects it to continue to move up in the first half of the year but believes it will have some challenges in the second half and will pull back. Cash is important to have so over the next few months increase your cash position.

Market. Macro view is that he believes there is a long term secular trend in favour of commodities and expects it to continue for the next 8, 10, 12 years.

Would rising interest rates have a significant effect on ETFs that hold preferred shares and high yield bonds? As rates go up, bonds of all kinds generally go down. Preferred shares really depend on corporate viability and profitability, not interest rates.

Mutual Funds versus ETFs ignoring MER’s? Depends on turnover. A typical mutual fund might have a turnover of 33% to 50% so within 2 to 3 years all the stocks in the fund are bought and sold once. Typical ETF will have a turnover rate of maybe 5% so it is 20 years before the turnover goes the full cycle. On a taxable account you will have more liabilities in a mutual fund.