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

It’s a difficult market to find things you want to buy, but some things are getting down to prices where you want to buy. There are going to be more and more opportunities for people with a 3-5 year horizon. If prices go up substantially in the short term it is time to take money off the table.

The word is volatility. Now we are in a range called 11,000 to 12,500. He is defensive in portfolios. If earnings don’t come through then watch out because the market will be over valued. This could be into next year, depending on the economy. Defensive stocks are the backbone of the economy. Principals are capital preservation and dividend growing stocks.

Bank preferreds: Likes resets (Reset rate based on a spread between Gov’t of Canada and initial rate) and floaters (tied to yield of short term money).

6.1% GDP growth in the quarter and they hiked the rate a quarter point. Doesn’t know if they will accelerate the raising of the rate much this year. He got cautious in the funds because the market seemed over bought in April. Now he is back into the market buying some of what he sold. We continue to expand due to the stimulus plans but not at the same rate. This market was looking for a triggering event to go lower. The Europe situation is contained. He is looking at this as a buying opportunity. Maybe we will double bottom, but he didn’t want to sit on a whack of cash.

Volatility is pretty much here to stay. We will be range bound for 4 or 5 months. It will depend on how things are played out with Greece. In the fall, things will start to move up slowly. We will bounce around between 11,000 and 12,000 for the TSX.

Bank of Canada will raise rates (70-80% likely) according to the market. It is the right thing to do for Canada. There is some adversity because of Europe. Inflation is running at the high end of several bankers’ estimates. Real Estate values are increasing due to low rates and raising rates may be to head off a bubble. He is cautious for the last few weeks. Thinking about when to toe into the water. He will be slow to deploy.

(Top pick Jun 02/09) 3-month treasury Bills.

Treasury Bills 4-Month. Take you through until the end of September, bottom of 4-year cycle. That bottom might be delayed until the beginning of October.

Money Market. Have money on the side for sectors that are lined up to do well this fall. As technicals start to bottom out, you are there.

The middle of last week we went into the memorial day trade. One of the best one-week periods during the whole year. Traditionally markets go down (specifically DJIA) from here until the end of September.

(A Top Pick May 4/09. N/A.) Long term real estate bonds: E.g. Riocan, First Capital. Really cheap last year but not so cheap now.

Provincial Bonds. If dealing in government bonds, he would deal only with government of Canada bonds and not provincials and would stay with shorter terms of 5 years or less.

Canadian banks in general have outperformed the market. Have pulled back so are attractive for the longer term. Good area to be in. 3.5%-4.5% dividends.