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

The Canadian dollar will go to $1.10US. It will continue to appreciate.

Market. Last 6 months is just a result of stimulus money coming in and it is time to start getting cautious. Starting to raise cash. S&P 500 is overvalued but could go higher if the US$ crashes. There is a lot of weakness in the US economy. Subprime mess is what got us into this situation and only 47% of the debt has been rolled over and the next wave is just starting. More stimuli will be required.

Precious metals will be the sector to be in over the next couple of months. Had sold his gold and was riding the silver but is now back into gold. A lot of institutional money is coming in. Chinese are going to buy $50 billion of the IMF gold sale. Central banks are not selling as much gold anymore.

Oil. Isn’t looking for it to go higher this year. If there is a good correction this fall, and the economy recovers, you could be looking at $95 oil next year.

Energy. A lot of Canadian companies have a fair bit of leverage on their balance sheets and these reset in the spring after the companies get their 3rd party engineering results and report them in their annual reports. Resets often cause downward revisions from the Net Present Value of assets. Expects a cataclysmic bottom in natural gas stocks in April/May with a once in a decade buying opportunity.

Looking for a pullback. September is usually the worst month. We had a strong rally in the stock markets. There was a 10% pullback in May but it was slight, so we need another. We had a lot of good news but people are starting to discount it. Valuations are neutral at best. We can’t get a handle on the economy. Stimulus numbers mixed in with others.

Natural gas. There is some serious short-term pressure on natural gas. 1) Amount in storage is off the top of the chart. 2) New technology for producing it from shale has doubled the reserves in North America. 3) Arab countries used to burn their excess as a waste product but are now converting it to liquefied natural gas. However, there are companies and homes that can convert from oil. Historic ratio to oil has been broken. Believes gas will come back but not in the short term.

Japanese Yen vs. Cdn$. Japan has just elected a new government for the first time in the postwar period, which may clean up a lot of corruption in the financial and corporate industries. This will probably be good for the yen in the long-term. If you think the world is out of recession and the US$ is going to crumble under the weight of its debt, you can buy yen. Feels the Loony will be stronger on the back of increased commodity prices.

Thinks natural gas will bottom sometime in the fall because it is so ridiculously over extended. The ratio between natural gas and crude is a historical deviation so it eventually has to come back to the mean. Natural gas stocks, by and large, bottomed in April, rallied and they are sitting at a higher low in July. None of the big Canadian natural gas players have taken a new low, which tells him the low is not sustainable. Stocks to consider are Breaker (WAV-T), Crew (CR-T), Fairborne (FEL-T), Galleon (GO-T), Progress (PRQ-T), Talisman (TLM-T). Buy 2 or 3.

Real return bonds. Acts as a hedge to inflation. Limited to governments, mainly Canada. Coupon is fixed but the face amount is adjusted to the inflation rate. Can be complicated from an administration and tax standpoint so there is the cost of the ministrations for the individual investor. Most of them are issued for very long terms, 30 years+. Are getting shorter now in the last 5-7 years.

Bonds versus ETFs & Funds. With the bond, you know you'll get the interest as well as the principle of maturity. ETFs and funds have no principle so should you focus more on the direction of bond prices? An ETF or fund will take a lot of the risk and worry out of selling or maturing issues.

Corporate bonds. There has been a great run in the corporate bond market. There is still value for select issues and it is probably worthwhile to be in corporates’ as that is where the return is. They will give you that extra yield over Government of Canada's.

Canada June/37 bond yielding about 5%. This is the benchmark long Canada bond. One of the most sensitive bonds to yield movement. Currently at about 3.91% yield equivalent of $118.40 for a $100 bond. If you're a long-term investor is a good one to hold onto.