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

Markets – Markets are running because there’s so much liquidity. Quantitative Easing 2 is pumping all kinds of money into the stock market. What the staying power is remains to be seen. Is enjoying it, but nervously. Sectors that he has had the most fun with, and the most unexpected, have been Canadian pipelines, telecoms and utilities. (His clients are more conservative so tends to have a lot of this.) It is really a search for dividends. Some are starting to get a little high and he is starting to pare back a little.

Natural gas is a tomorrow commodity, not today. Large companies are buying into natural gas when they could just as easily be buying into oil. Not buying for today but for the future. They have a longer investment horizon than the average investor.

Markets – Little overbought right now but that doesn’t mean they are going to come down. This is a favourable time for markets to rally until May. Possibility for a correction to take place. Even if there is one, he expects the market to go up from here. Can still see the oil sector going very well. In material sector, metals and mining tend to do well. Also financial as well as discretionary.

Oil. She uses OPEC Spare Capacity numbers, which indicated a potential for some problems in 2 or 3 years and prices might spike. Present middle east scenario could move the time-line a little bit shorter and could see some price hikes that could be quite dramatic if oil was cut off. Was not expecting $150 oil for 3 years but it could now be sooner. Has been adding names that were down or hadn’t moved in the last few days.

Banks. A big part of the market and also represent an extremely well run section of the Canadian economy. His favourites currently would be the Bank of Nova Scotia (BNS-T) and Toronto Dominion (TD-T). TD just made a good acquisition of Chrysler Finance at a very good price. Their US banks are doing very well.

(A Top Pick Feb 26/10. Up 45.49%.) BMG Bullion Fund. Rather than put your faith and stock in a company where minds can get messed up, you are basically buying bullion. 1/3 gold, 1/3 platinum and 1/3 silver.

Market - Recent mid-east problems might be a decent catalyst for a correction in the market. Market has gone straight up since August and has been looking for a catalyst and this is a pretty big one. Market rally was significant enough and the catalyst is big enough that it could be a fairly good correction. 10% would not surprise him. Could be a few weeks or a couple of months.

Market. A civil war in Libya could have big implications for oil supplies, oil prices and global economic recovery. Assuming the situation calms down and there is a peaceful resolution, he presumes it is a temporary situation.

Natural Gas ETFs? You need to have an outlook on gas in order to play these. He is bearish over the near term. Beyond the next 12 months he expects gas to go from the current $4 to perhaps $6-$6.50 and will stay in that range for quite a wile.

Market. -Expects we are in a more subdued economic climate. Easy money has been made in the recovery from the bottom of 2009. For the first time in a couple of years, equities that have supposedly been clearly cheap are at a more fair value. Expect only average rates of returns over the next few years, perhaps high single digits.

US Currency. Outlook for the US$ over a very long term (50 years?) isn’t great. 10 years ago the US accounted for almost 2/5 of global GDP but is now down to 1/3. More countries, such as China, India and Brazil are gaining. However over the next year or two the outlook is not too bad. When the Fed raises interest rates, it will support the $.

Airlines. One of the worst businesses. Every time things go well, oil prices go through the roof and they have to deal with jet fuel costs. A lot of fixed costs such as unionized costs. You have to Buy when they are either close to bankruptcy or close to coming out of a recession. He avoids this sector.

Middle East. These countries need the revenues, such as tourism. Getting a decision on how governments will go on, on a going forward basis, needs to be done fairly quickly. The problem is that 50% of the population in these countries is under 25 years of age and most are unemployed. This is what caused them to go to the streets. Governments were subsidizing the staples such as food and energy. Once they removed the subsidies or raised prices, you had cost pressures at the same time as a very bleak job picture. Thinks there will be a positive resolution and there will be a job market again. There has been no problem in the area where oil is being produced.

Today, problems in Libya were an excuse to sell off. Investors took some money off the table – it was the fear trade. Oil price is starting to get to the point where it restricts growth. The middle east and north African problems do not impact his investing strategy. A possible outcome is simply the spread of democracy in the middle east. It could be as big as the Berlin wall coming down. Economy continues to improve. Sees money moving away from the developed markets. We are seeing a little of a slowdown in the economy but it is just bumping along its bottom. Sees growth in technology. Looks at companies that export to developing economies.

Has to dig a little deeper in the current market to find value stocks. Gold, Real Estate and Commodities have all moved and he thinks it’s finally time for common stocks. Expecting this rally will continue in a saw tooth like fashion. Depending on what news comes out, Corporate, Political or Economic; there will be sell offs, which will look like a big decline. Finds that a lot of stocks are not terribly expensive but you have to look at individual companies piece by piece.