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

Earnings season has been great despite a fear it would not be. There have been cases of all-time record earnings. Prices are falling but fundamentals are rising, which creates value. Sovereign debt concerns are keeping the market’s feet on the ground.

From the highs until a week or so ago we were down about 8%. He thought it would go further. The reasons were 3 – (1) it was very over bought; (2) people were concerned about Chinese tightening; (3) debt crisis in Greece. The later gives him some concern. Wonderful company results were partly based on conservative guidance from the companies. He is glad to see it but takes it with a grain of salt. He looks for income in stocks, not just capital gains.

Looking at individual companies for value. Using put options to create protection. They are partially edging their portfolio against decline. Telco sector is at 18% of portfolio. He is looking at technology pullbacks for opportunities.

We came back from the long weekend and people realized the European situation was going to be dealt with. Doesn’t have a strong price run-up case for oil. Outside of some kind of shock, $70-$80 range. Bearish on Natural Gas for over a year. She looks for management experience and profit indicating a higher stock price or room for growth.

Thinks the Precision Drilling conversion to a corporation makes a lot of sense. The drillers had a little experiment in converting to the income trust structure and done simply for a multiple premium, but in the longer run it makes a lot more sense for them to be a common share format. Change to an income trust was the right thing to do at the time. Bond spreads have really widened out in the last little bit, but he has migrated half of the bonds over to bank loans.

H & R REIT Bond – 7 Years. They do a good job of matching the assets to the bonds. The tenants in their buildings are long-term tenants. He wouldn’t recommend a bond from a hotel REIT because the tenancy is for over night.

CIBC Tier one bond 10%. Good certainty that the bond will get called so then you loose the extra value the bond has gained. It is less attractive than a year ago.

Bonds of Opti-Canada. 8.25% Dec 15/2014 (Top Pick Apr 27/09, Up 69%)

Markets haven’t really done anything for 5 months. They are trying to find the direction. It’s a pretty flat market. You want to sift through the good from the bad. Growth will continue. The fix to the financial crisis is in. Rising interest rates will set the course for the markets. He looks for companies that can consistently grow their dividends. Look for companies that take the capital in the business and then keep re-investing it.

Gold. Definitely an area that you want as part of your portfolio. Doesn't expect as good a year as last year. $1100-$1200 is probably a good top of the band for gold. Has about 10% weighting in gold. Prefers companies to ETF’s. Biggest position is GoldCorp (G-T), which is in the process of starting up a big mine in Mexico, so be cautious.

US$ over the next few months? Cdn$ should outperform again. He would prefer it not to go through par as that damages our manufacturing sector.

We’re seeing all kinds of opposite forces at work. There are far more dangerous elements out there than normal. Government have tremendous debt. Consumers and corporations have huge debts. There are huge dangers out there. It’s handy to have cash out there. You have to be very careful in what you choose. You have to be careful of interest rates. There is only one way they can go. Hedge funds may have problems. Governments may have trouble re-financing themselves. Canada is no exception.

Bearish on the US$ versus the Cdn$. Feels the Cdn$ will rise above par.

Dividend paying stocks. He feels 2010 is going to be the year of dividends. You want to have equal weighting in banks, pipelines, utilities (energy producers and distributors) and telcos.

US$ over the longer run is likely to weaken again against the currency of resource producing countries such as Canada and the emerging world currencies.