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

Canadian Tier 1 bank bonds had a substantial rally. If you bought because they were cheap and you are an income investor, he would probably continue to hold. Yields are still fairly attractive. Prices are probably not going to fall too substantially but if you have profits, consider taking some of them.

Corporate Bonds versus Preferred Shares? Corporate bonds are ranked higher as they are more secure. If a company is in trouble the last thing you want to hold are shares. However, preferreds pay more plus you get the dividend tax credit. Buy direct versus ETFs.

Bank Reset Preferred Shares? Had a very good run and continue to throw off a pretty good income. New bank regulations may result in a lot of them getting called and disappearing.

(A Top Pick Oct 19/09. Up 0.33%.) Government of Canada 1.25% Due Dec/11. Recently sold this. Had a very good run up until about December and then the market started to turn.

Shale is the source rock for oil and gas. It’s locked in tighter rock that would not be accessible through vertical wells. Horizontal wells can reach it.

We are at the top of the range that we are going to see for the next couple of months. Oil will be between $70 and $85. Fundamentally, oil is not supported at this level. The run in gas has been pretty good recently due to pretty cold weather recently, colder than last year.

(A Top Pick Nov 10/09. Up 1.9%.) Canada Real Return Bond Dec 2021. Investors should have some type of inflation protection in their portfolio. Sometime in 2011-2012 prices are going to go higher.

Banks have moved up 100% but that was from the bottom and they are still off from 2008 highs. Buying banks has always proven to be a great strategy for long-term investors. Earnings should go higher. His preference is National (NA-T).

Market. Markets have come so far and so fast that, historically, we should have some kind of pullback. Timing a correction is difficult but it is very unlikely we will get through this without a 10% correction.

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Gold. The pullback of $1220-$1090 has surprised him. Thinks you should still be in gold but he is not looking for $2000. 1200 to 1250 would be reasonable and as it gets back there in the next 6 months, he will lighten up his holdings.

Strip Bonds. Coupons are stripped so you only have the cash at a future date. Good in a portfolio where you want some longer-term duration as they normally have a longer term than an average bond.

Canada 2% 2014 Bond. Only yields about 2.8%-2.9%. If you have a low risk tolerance, it is probably an okay security. He would prefer corporate bonds.

When to sell a bond? Before he buys a bond, he sets a target price to exit out of the position. E.g. if he buys a government bond with a 4% yield and he thinks rates are going to drop 25 basis points, when it gets to those levels he will start exiting. For corporate bonds, if this spreads narrow significantly on a short-term basis, he would probably sell it a bit ahead of time.

Gold. Decent play as he thinks the US$ is going to be weak, which will cause the price of gold to go up. Any hiccups or downdrafts in the equity market could cause gold to appreciate.