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

US Long-Term Government Bonds: US is going to have to do a massive amount of issuance to finance the various bailouts. In the short time there are very powerful deflationary forces at work. There is also a public policy to have low financing rates. Given how important it is to get cost of debt down to both consumer and US corporate, the Fed will come in through open purchases and put a cap on yields in the short-term. In the longer term, there are clearly some inflationary forces but that is a 3 to 5 year view.

Thinks the downturn will be a multi-year process so with policy rates so low, now is the time to take some risk with very high quality spread products. The yield curve is very steep so longer-term 20-30 year provincial bonds (Ontario or Quebec) yielding in the range of 5.3% and 6.2% is better.

US$: - Because all countries globally will be into deficit financing, he can see the US$ remaining in its current relative position. There might be some weakness, but he doesn't see any sustainable weakness. Sees inflation ticking up but not dramatically.

Verizon (VZ-N) vs. Vodafone (VOD-N). In a joint venture together with Verizon Wireless so revenue is split between the 2. Verizon has a fair number of catalysts in the US. The challenge with telcos is the competitive environment. Bread-and-butter has always been landlines and they are losing subscribers rapidly. With Verizon's broadband exposure, this would be his choice.

CONTANGO: Refers to what is happening to the future strip. Each month in the futures market has its own contract and CONTANGO is when future months have a higher price than nearer months and there are expectations that the longer-term price trend is going to be higher. E.G. when there is a December futures contract price oil at $60, the probability is that prices are going to be higher.

Oil: Oil price collapse was because of Saudis in 2006 and 2007. Believed a forecast there was going to be the largest increase in OPEC production in history, so cut production significantly. No increase or change in consumption so created a shortage and drove prices up in 07. Followed by a cold winter creating higher demand. Chinese went on a buying spree. Saudis increased production in mid-07 that caused a price collapse. Now cut twice as much production as they had before, which should create a shortage later this year. Looking for a doubling in oil prices this year.

Natural Gas: Production has peaked but new technology in the gas shales is creating some surplus. Thinks there will be a gas shortage in 8 to 15 months.

Hubbert Peak Oil Theory: World oil production would be peaking at about this time. He sees nothing to change this view.

US Environmental Policy and the Oil Sands: There is an inverse correlation between oil price and environmental concerns. Dominant environmental concern in the US is coal, which is a quarter of all their energy supply. He forecasts that Canada's oil production is the only growing production in any country for the foreseeable future. US’s #1 oil supplier and will become even more important.

Platinum: Very concerned about inflation 2 or 3 or 4 years out. With this kind of printing and this kind of debt, there is no way they are going to be able to pay for it with increased taxes. Precious metals would be a reasonable diversification.

Canadian banks with covered calls? Options market is of the view that dividends will be cut on the major banks this year. Writing covered calls against them makes a lot of sense right now.

Bank Preferreds: Rank higher than common shares in the hierarchy of paying out in case of an issue. New ones being issued now are called perpetual and the price does not change because of the high interest rates. Over the longer term, he would prefer common shares, which gives you potential for a rising dividend.

Gold: Thinks gold will be $1000, $1100 or even $1200 within the next few years.

Canadian Banks: The one thing that has been illustrated in this crisis is the strength of the Canadian financial system. On a global basis, our banks were nowhere near as levered as European and US.