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

Yield curve is a great predictor of what is going to happen. Bank of Canada interest rates are low while long-term interest rates are high giving a very steep yield curve. Usually indicates a green light for the economy. Expect the government yields will continue to be subdued.

Long US treasury bonds. Doesn't think there is any danger in long treasuries right now if you want that exposure to the US. You have to be concerned about the amount of supply coming down the line as well as inflation 2-3 years out.

5-year convertibles. They are very illiquid so there may be difficulty in trading them. They’re also usually lower quality.

(Caller) Bank Tier 1 capital issues when yields where around 8% but are now about 5.5%. Hold or sell? (Answer) Still thinks there is good value and if you can hang on a little longer you will see more gains but easy money has been made.

Telecoms. He is quite bullish on them right now. Credit rating is in the investment grade. Feels Bell (BCE-T) would be #1, Telus (T-T) would be #2 followed by Rogers (RCI.B-T).

Gold. Trading on weak US$. Other commodities are through their inflation adjusted 1982 peaks but gold is still at about half. Because of this, there could be further upward moves but these are speculative markets.

Market Volatility Index (VIX). If this were stock he would not be a buyer. A very clear trend in place of falling volatility. At some point it will turn around but to pick the bottom your timing has to be perfect.

Likes base metals, especially copper but zinc looks okay too. As long as you think countries globally are going to continue to debase their currency by printing money, base metals are seen as a bucket to hide assets in for protection.

The liquidity crisis is over, but is this a deep recession or are we coming out of it. The US consumer and house markets are the big questions. Consumer is cutting down debt and becoming a saver. Black Friday is coming up this week. If you are a retailer, you have been expecting this for 9 months so expect inventory control has been much higher. Inventory levels are close to lows. There will be inventory buildup in early 2010. He is more in the deflation camp than the inflation camp. There is too big a spread between gov't of Canada bonds and dividend paying stocks. These will have to compress.

Most of the REITs will qualify to remain trusts, exceptions are Chartwell, extendicare, hotel properties. Anyone who has more than 5% management fees would not qualify. He thinks there will be a large movement from income trusts into REITs. Those not qualified have already been discounted.

(Top Pick January 13, 2009, Up 21%) GE Capital Funding 5.73% 10/22/2037. There is $10 more in these so he is not cycling out of them.

(Top Pick January 13, 2009, Up131%) Pacific Rubiales CV 8% 08/29/2013. The bonds got distressed and he got an equity-like return on them. Thinks it is at full value.

(Top Pick January 13, 2009, Up 47%) Sherritt 7.7.% 10/15/2015). Fantastic balance sheet, not ever leveraged.

Fairfax Financial 7.5% 09-Apr-2019. They are fine from a bond perspective. You don’t have to worry about the bond side.

Sherritt 7.75% 10/15/2015. Not worried about Cuban component. It’s not the largest part of their operation. Even if you wiped out the Cuban and Madagascar assets, then he knows the Saskatchewan assets will cover him. 7% return. Owns the stock in equity portfolio also. Cuba is discounted to nothing but is a great asset base.