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

North Pole Multi-Strategy. In a broader macro sense of things, they find opportunities and find arbitrage situations within the Canadian market. (Canada's oldest operating hedge fund.)

Yield curve says interest rates are going up. His fear is that interest rates may rise quicker than expected. His worry is on the supply side, rather than on the inflation side. For dividend paying stocks, the real rate of return will be better than a growth stock. Earnings expectations are looking punchy, 20-25% growth by next year.

Natural gas. Greatly undervalued in terms of fundamentals. Peaked in the US 40 years ago and will inexorably decline long-term. Increasing use and current prices would create 8 billion foot a day and gas prices would have to almost double. Recent shale gas diversion is only about 13% of total gas supply and of that, 60% is Barnett shale that peaked a year ago and is in significant decline.

Oil sands. There is not a wide enough realization yet that we have absolute peaking of world oil production. We are entering a totally new era where there will be a continuing decline of global supplies creating higher prices. Oil sands is the only resource in the world that he forecasts a continuing rise of supply in the future.

Short selling. You don't want to do it on trusts as you will be responsible for the distributions. You could consider gas weighted names such as Compton Petroleum (CMT-T) or Iteration (ITX-T).

Would buying the US$ be a good investment? Thinks the US$ is going a lot lower as it is the only way they can deal with the mounting liabilities.

Canadian Banks. Small increase in rates and not a huge drop in loan demands is probably a positive. Expect later this year or early next year there will be a round of dividend increases. His favourite is Toronto Dominion (TD-T).

Short Selling from a Value respective. As long as fundamentals of a stock continue to improve, an expensive stock can become even more expensive. You have to try to find a company that you believe its fundamentals and fortunes are going to change. Find balance sheets that are weakening, cash flows are dwindling, declining margins and increasing CapX.

(A Top Pick Jan 10/08.) Canadian banks.

We are at the middle of the range of oil price, creeping toward the higher end of the range ($30-$130). Stocks are relatively under priced compared to the price of oil. China’s only reason for investing in Canadian oil companies is for the oil. We Canadians invest in oil stocks only for return on investment.

Gold. Looking for $1200-$1400 in gold over the next 12-18 months but stocks have lagged.

US stocks. Because of currency exchange he has been zero-weighted in US stocks. Now that the Cdn $ is at parity, the risk is much more reduced but the economic risks might be high. Expects Cdn$ to go through $1.05, maybe as high as $1.10.

Agriculture. Has been under investment by farmers globally because commodity prices have fallen so much. World grain supplies are low and you have to look forward, not back. (See Top Picks.)

Never suspected we would have this kind of rally. So much money that has to find a home; markets have come back so people are feeling richer; but governments are in far worse shape than before and interest rates can only go one way from here – up. Looks for good clean balance sheets. It’s a stock picker’s market. Looks at sectors out of favour. A lot of large caps he used to look at have become mid-caps.

Natural Gas: Difficulty is finding good companies to invest in because so many have poor balance sheets. Prefers cherry picking in the sector than ETFs.