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

Natural gas. Feels prices will go substantially higher. Headlines would indicate that we have a natural abundance from shale as far as the eye can see. However looking at the supply of gas today, particularly US, only 13% comes from shale and over half is from the Barnett shale, which saw peak production about a year ago. Only 6% of the 13% is actually growing, nowhere near enough to offset the declines from the other 87%. Questions if the EIA is supplying accurate data on supply. Looking for $8 gas over the next 6-12 months.

Oil. World is operating in 80 million barrels a day of production. Gulf spill of 60,000 barrels a day doesn't move the needle too much as far as what the price should be. Expect it will become much more costly to drill offshore and that will position Canada very well because we have the 2nd highest reserves globally, in the tar sands.

Alberta oil sands. Medium to long-term, a very attractive area to invest in. 180 billion barrels of proven reserves, 2nd only to Saudi Arabia. Most production currently is from Suncor (SU-T) and Syncrude but there are some emerging players like Cenovus (CVE-T) that are bringing some SAGD technology and this is where real production growth is going to come from.

Markets are telling us, because they were oversold, were due for a bounce. People look at the 50-day and 200 day moving averages. It was a good rally. How far is it going to go – neither you nor I know - through the month end and into the earnings season, but if there are any mishaps (Europe situation, for example) then it ends. We are in for an era of broken promises. People in unions will have to accept cuts to benefits. 10-15% cash.

Natural Gas: Not sure it is bouncing off bottom and going higher. With new legislation, power companies in the US are going to look hard at what fuel they will use. He thinks Gas will be much higher in 3 years.

Market. We may have reached fair value at 12,000-12,500 so he doesn't expect too much upside. A “show me” market that he'll look at in the 3rd-4th quarters. Doesn't think economy will fall in a double dip recession. Not comfortable with being in the US as he expects Cdn$ to go over par.

(A Top Pick Nov 10/09. Up 3.14%.) Canada Real Return Bond Dec 2021.

Income trusts: We are not in the rising interest rate environment that we thought we would be in thanks to the Greeks. Yields that are sustainable in income trusts still look pretty good. There are a lot of trusts that don’t need to convert because of tax credits. If the trust is a good business and earning its distribution it is going to do fine after its conversion. You need to be very focused on which trusts you hold. Positive outlook for 2010; no major correction, TSX should end up in the high 12,000s. The world isn’t coming to an end and there are people who have made their careers in the last couple of years by coming on TV and saying the world is ending on bad news.

Hedge fund are relevant to a retail environment in terms of diversification. Alternative strategies and hedge funds add diversification, which is harder with the globalization in the markets. Hedge funds are very much misunderstood. 99% of guys running these funds are doing a fantastic job. You get returns that are not as relevant to the rest of the world. You need an advisor that has access to these guys. You shouldn’t do hedge funds yourself. Minimum investment is $25K and there are salary and asset requirements that must be met.

Are they an asset class on their own? Yes, Hedge funds are a separate asset. Percent depends on who you are and what you require.

Authentic hedge fund strategy encompasses about 20 different kinds of funds.

How does a hedge principle work: Buy long and buy a put option, for example. You can buy a commodity company and short the commodity. Hedge funds use a long/short strategy. There are some that simply aim to make significant returns at a risk. This later type get all the press.

AIMA: Alternative Investment Management Association. Their reports will say who the guys are and what they are doing. It protects against fiascoes like Portis.

Definition: Managed strategy with more flexibility than traditional funds. Protect capital.

Picton Mahoney Cdn. Mkt. Neutral (Top Pick Nov 13/09, Up 1%) Authentic long/short strategy with a bond-like volatility. Wouldn’t expect big growth. Fantastic during the 2008 downturn.