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

Markets are pretty interesting. The data is interesting because we are getting some divergence in the numbers between the US and Canada, meaning that we are de-linking to some extend. It means that you need to be in the market. It requires some caution, however. It is becoming more of a stock picker’s market. Doesn’t like shorting because you can so easily get the timing wrong.

BEAR FUND: It is essentially a hedge. That is not something he is that interested in. You are essentially betting against yourself. However there are particular times that he hedges. He buys PUTs on S&P 500 when he feels the market is in an immanent situation, such as day after Freddy Mac and Fanny Mae went down. It did protect the portfolio and he later sold the PUTs. He prefers to hedge by having CASH or precious metals in the portfolio.

She is an asset allocator. It is important to have a diversity of assets in the portfolio. She looks more at the value side of stocks, especially dividend stocks. So many people are chasing yield that it can be a bit over priced. There aren’t a lot of yield producing securities. The banks aren’t going to be in apposition to increase dividends. MFC might increase somewhere down the road.

Today was a very special day because two banks broke out of a range they were in, suggesting the market is about to start a new up-leg. The banks could put on 25 or 30% from here. Supply and demand are the main drivers of stock price. Charts are nothing but a picture of supply and demand.

It’s interesting that they are talking about making the banks issue more shares if they want to make an acquisition, even if they have lots of cash on the books. He wouldn’t count on bumping dividends if they are going to be this constrained on capital. We are in a slow global economic recovery. We are going to moderate and continue on at a slower rate.

TOPIC: Fixed Income, Dividend and Agricultural stocks. BONDS: We were over bought in December. It is fairly priced right now. In the 7-10 term, you are looking at good picks in the corporate space. The flow of credit has been good and so spreads are coming in. GREECE: He doesn’t see a massive contagion ion sovereign risk spilling over into other asset classes. But maybe the spread between corporate bonds and sovereign bonds could narrow a little bit, but fundamentally this fear of sovereign risk getting priced out of hand is substantially over blown.

(Top Pick Sep 29/09, Up 0.6%) Fairfax 2018 7.35% bonds.. Insurance business has been doing very well. Bonds are a good buy.

Forth quarter was quite strong. Expecting positive growth year, but not as strong as last year. A lot of growth expectations where build into the market. Unemployment is starting to improve. Sovereign debt issues are distracting the market.

BMG BULLION FUND. Has the 3 precious metals, silver, gold and platinum in equal portions, and actually own the physical metal for 95 percent of the portfolio. The are believers that paper currencies have some problems.

Banks are holding up Canadian Stock Market single handedly. Their history is somewhat uncertain. He owns 3 banks and that is enough for now. Probably earnings will be better than analysts forecasted. The American economy is not our of the woods yet.

Short 2 year Canadian government bond 1.33%. This is very difficult for a retail investor. Minimum million-dollar transaction.

6 months ago we were in the position where there was inflation fears. There are still huge deflation fears in the world. This recovery is very fragile and lead by government stimulus only. Sweet spot on yield curve is 3-7 year term in corporates where they find value. The out performance trade on corporate bonds is over. Next opportunity is the high yield market. Huge fan of laddering.

STEP-UP BONDS: They are a structured product from the banks where annually or semi-annually, the bank can call them from you or the rate steps up to a higher yield. They are in the bank’s favour and not for the investor. Can be an alternative to the money market funds.

CORPORATE BOND FUNDS: There is no drawback in buying a corporate bond fund. Prospects of yield widening is low. The only reason to not buy one is if you think we are going back into deep recession.

(Top Pick May 08/09, Up 1.5%) Gov’t of Canada 1.25% 06/01/2011.