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

Gold. Thinks there will be a significant rise in the price level over the next 10 years. In the near-term he thinks it will go through $1000 and when it does we could see $1200 by the end of the year, if not higher. Expects there will be inflation in commodities and gold will participate.

Energy: S&P/TSX Capped Energy Index will probably be coming down over the next little while because of continuing low gas prices.

High-quality corporate bonds. Single A, AA or potentially BBB is the right place to be right now. Spreads have come in a lot but if you're looking for fixed income this is the right place to be. Moving into the 4th quarter, moving into some of the lower investment grades for a little bit more risk but better yield is going to be coming in. Default rates have been increasing as expected but think they will peak out in the 2nd half, which should give a very strong opportunity.

Value Biased Equity. Thinks that the equity market still has some potential strong room for growth. Looking at the last 18 months growth has really outperformed value stocks. Consider any of the dividend ETF's.

Hard Asset Commodities. In the event of inflation and devaluation of the US dollar, hard assets will be a big rotation area for portfolios. Likes gold a lot but likes silver even more.

Inflation: If inflation is coming, the one sure sign will be higher interest rates and these are dominated right now like government policy. Some installation is going to be the perfect way for the US to grow their way out of this debt problem. They would like 3% inflation.

Oil and Base Metals: Looking for a pullback in the order of 10%, maybe 15%. Currently he favours defensive stocks or senior producers.

GMAC Canada bond due June 30/09. Although GM has gone bankrupt, this is a separate company. Outlook for the short-term is pretty good. They are selling at $.85 on the $1 indicating there is still some risk. They are deeply non-investment-grade which could mean a default.

Provincial strip bonds in a TFSA? This is one of the best choices you can make. You get the compound interest tax-free. You are looking at 12 to 14 years and basically doubling your money.

City of Toronto 4.95% due June 27/18. Canadian municipalities are AA or better in general. Yields are generally more than some of the bank deposit notes.

Canadian Banks: Dodged the credit bullets but will not be able to dodge the real economy bullet, which will have to be dealt with over the next 6 to 9 months. Thinks they are vulnerable but not to a major extent.

Gold: Has seasonality. Moves down in the summer and picks up in the fall. This is a pretty wide view and there are a lot of diverging influences that affect it. ETF levels are extremely high right now. Thinks $850 is its bottom.

Canadian Banks: The banks have done very well. He looks on them as a leading indicator of the economy. Earnings are still a bit challenged because there are a lot of loan losses built into analysts’ estimates for this year and next. Dividend yields are very attractive right now. 15% ROE is forecast for this year. (See Top Picks.)

Copper: this is his favourite commodity because it is the one commodity that China needs. Currently trading at about $2.50 a pound, which is significantly ahead of where the market is expecting. If the Chinese stop building their inventory there will be a material reversal on pricing. Given his outlook on the economy he would be surprised to see Copper fall below $2.

Silver: Has never been a big fan of precious metals but does prefer gold to silver. Silver had a lot of good industrial applications, particularly photography, x-rays and electronics. Digital photography has eliminated a huge amount of the need and a lot of x-rays are now digital.