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

There is no sign of the gold spike coming to an end. One tends to worry. It is a strange world at the moment with all that has been going on for some time – interest rates, depression in US housing, then financial problems, and then massive wave of revolution and discontent bubbling up to the surface in certain Mediterranean countries. It’s all very unsettling. What ever happens in Libya, the oil price comes down afterwords about $10. He is telling investors to expect massive and sudden moves in the market both up AND down.

Silver – This could be the decade for silver. Gold/silver ratio is currently 50 to 1 and feels it could go to 30 to 1 or even lower.

Market: We have high food and fuel prices like the 70s. Commodity stocks were doing well but everything lese was doing fairly poorly. When you have 10% unemployment in the US you can’t pass increasing commodity prices onto the consumer. We are still in the early innings of this game. It will carry on for the next decade.

China: He was on a trip there recently. What is overwhelming is how dynamic it is. He found it unbelievable. Saw mines, steel mills. There is a 450Km/h high speed train that is where a farmer’s field was last year. A huge number of people are entering middle class here and are starting to consume.

Market – The big wild card is the price of oil. If prices stayed at this level for the rest of 2011, it would take 1.2% off the US GDP, which is not good and they are very vulnerable. Globally, in the developed world, recovery is on but it is still fragile.

Market – Some fairly serious issues in the middle east right now and oil has been spiking quite a bit lately. Oil functions very well at $50, $60 or $70 but at $110 or $120 that could put a real crimp on recovery. Between the oil and high grain and high commodity prices, there has to be some inflationary events that show through. Eventually rates will creep up as people demand to be paid for the volumes of debt that is circulating. Feels the market is due for a set back. You have to very pick about what you pay and where you place your investments.

Because of high oil prices and the fact that it cold stay high and affect the economy, she is switching economically sensitive sectors such as copper and industrial products into oil.

Markets: Is like a value investor. Looks for companies or sectors that are beaten down. Must have gone down at least 33% in last year. Looks for a sector out of favour. People are moving back into the market. There is a tendency when the market is out of favour, people run from it. It is harder for him to find opportunities in this environment. People tend to make the same mistakes again and again. There are good reasons to be skittish. They have not dealt with the problems in the market – liquidity, debt load, hedge funds.

Natural gas: is a great play, although it has gone down recently. He owns Pengrowth and is happy to collect the dividend, although he would not buy it right now. It’s a contrarian play. It has to rise eventually. It is a supply/demand thing.

Gold and Silver: Both had tremendous moves. People are looking in other areas. If you are looking for a better kick, gold stocks are better than gold itself. Gold and silver are not particularly exciting to him right now.

“Risk on” and “Risk off”: It’s a new term from 2010. Risk on means you are willing to take more risk – it is a good time to take more risk. Risk off means it is time to be scared and people flee to American treasuries. Diversification covers this anyway.

Market - Still have a broad based rally with broad participation. There is reallocation from fixed income into equities that really only began in earnest from December. This could go on for some time. Many missed a lot of this rally and private investors are now engaging. Over the last 50 years we got to the low point in equity allocation in pension funds about 10 months ago. Averaging about 45% allocation to equities, versus 30% about a year ago.

Markets: Nothing has been solved in Europe. Things are not improving in those countries that have supposedly been fixed. Believes the biggest risk in 2011/12 is a default by Greece, Ireland or Portugal. Every quarter that we move forward and the economy recovers improves the issue. Thinks things are still ok – banks have not warned. Rising oil prices will have a dampening effect on the recovery in Europe. The stock market looks relatively cheap. With Libyan problems etc. it will push the US currency higher as safe haven. It’s a good time to put higher Canadian dollars to work.

Market: Step away from the madness: These things will pass. We expect 3 to 5 dips of 3 to 5 % per year.

3 layers of protection: He is worried about US inflation and the printing of money to get out of their deficit, which could see higher interest rates. Buy commodity-related stocks. You want companies that can pass on higher inflation. SC-T, Grocery stores, Kraft. If you must own bonds, keep maturities short or real return bonds.