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

Large Chromite discovery in the “Ring of fire” in northern Ontario. Will take a long time as it needs a 100 km road to be built. Being blockaded by First Nations at the local airports.

Natural gas prices. New fraqing methods in the shale plays have dramatically expanded amount of natural gas available. Price is substantially lower than what it can hold for the long term. Inventories are still high and the possibility of liquid natural gas could create more problems. Thinks prices are pretty near the bottom. Energy usage is going to increase and this is a good feedstock for manufacturing and power production.

Gold. This has been a very interesting trade in the last 6 months. Feels that it is losing its lustre as crisis insurance. Has done better recently on weakness of the US$! Not a gold bug.

Taxing of options? Options are taxed as capital gains unless you are a professional trader when they are taxed as income.

Canadian economy is doing better than US. Manufacturing stats were better. Traditionally we have lagged behind the US with lower productivity. Strength of Canadian dollar has allowed companies to buy abroad cheaper. There are signs of stability in the labour force. US housing starts are down.

Canadian banks. He owns 4 of the 5 banks excluding Bank of Montreal (BMO-T). His favourite is Toronto Dominion (TD-T). However, they all have run based on good 1st quarter earnings so expects they will pause and go sideways for a while. 2011 estimates are starting to look pretty good.

Canadian banks. About 3 or 4 months ago, the general consensus on the street was that the 2010 earnings per share for all the banks would be fairly lacklustre with 2011 being the blockbuster with earnings increases of 20%-30%. Because of the much better than expected, 1st quarter estimates are being increased for this year as well as target prices.

Alberta royalty rules were just changed from 50% going down to 36% for natural gas and 50% down to 40% for oil. There was a 5% royalty on new gas wells is to be continued for another year. Very positive for all the oil/gas trusts.

Merrill Lynch Financial Assets CAN22A3 series, 4.88% coupon maturing 4/12/17. A collateralized mortgage-backed security rated AAA. Assets are all Canadian.

Aeroplan 6.95% maturing 1/26/17. As the economy recovers and people spend and travel, there will be more revenues coming in. Fairly good yield for a not very long duration.

Bank perpetual preferreds. Paying over 5% but if interest rates go up will the banks call these? As interest rates rise, bonds and preferreds will get hurt, especially perpetuals. Generally, the banks do not call these.

US or Canadian corporate bonds? He would prefer to the Canadian over the US. Doesn't like the currency risk. Also, Canadian corporate balance sheets are generally in better shape. Growth prospects for Canada is probably better.

City of Winnipeg bonds Feb 11/13 yielding 9.375%. Credit risk is pretty close to zero. Between now and 2013, it will go from $118-$100. So every year you lose approximately $6 in capital. To offset that you are getting a huge coupon.

Bank preferred shares as an alternative to GICs? The preferreds would be a better alternative. Credit risk is slightly higher but not much. They won't always be at $.25 on the $1 so will be more volatile. You may have figured out at quite a discount depending on market conditions,

Oil and Natural gas. Thinks these will be very, very good businesses. Still the possibility for sharply lower natural gas prices because of burgeoning US production and reduced industrial demand. A lot of it will depend on how oil/gas companies will be allowed to report reserves on a going forward basis and whether or not the current liquidity driven rally declines.