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

Blue-Chip Dividend Growth Equities: Focus on quality, long-term companies that pay dividends and have sustainable growth.

Global Agriculture: Long-term theme continues to be in place. There is a need for food globally. Expects that commodity prices will increase if the US$ falls off. Agricultural commodities will benefit.

Real Return Bonds: Have been eviscerated over the last several months because “real return” is your return after inflation. Inflation expectations were high 6 to 9 months ago but have fallen off a cliff since deflation became a possibility. High-quality corporate bonds will give you a better return.

Correction by BNN. Dec 8/08 program. Ben Cheng on Dec 8/08 recommended Yellow Pages Preferreds (YPG.PR.A-T) showing a 20% yield. The yield is closer to 6%. His figure includes the company paying $25 a share at the retraction date in 2012. To get that yield, you must hold the security to that maturity.

US$: Oil price is going to be a factor in moving the dollar and he expects oil will be moving up. When this happens, the US$ will start to decouple from oil and will start trading with the US economy. If so, he expects more money will flow in to buy the dollar.

Options: Agreements that give holders the right to Buy or Sell a specified number of shares at a predetermined price. They are bought and sold like shares. The perfect form of a stock portfolio hedge.

US Market: US$ has rallied mostly because everyone globally is having problems. It is not a flight to quality but a flight to confidence. If he were a Canadian, he would be a little nervous investing in the US knowing that when the bottom drops out, the US dollar is probably going to get hurt significantly against the Cdn$. You can hedge the dollar by using currency options. (Philadelphia Stock Exchange.)

Caller Buys DUG-N and DIG-N and sells covered calls at the money on both positions. Good strategy? Options are great on the ETF’s.

Greek Variables: (A group of statistical references that are spit out by the pricing option model.) Very important as they tell you the option sensitivities to time, stock movement and volatility movement that your option has. They identify all the potential risks of your option as well as quantifying them.

Banks: Expects to see banks rebound by 20% to 30% going into the first half of next year when it becomes clear that the financial system has stabilized. Around the middle part of next year, you will probably do better with most of the reflation stocks such as golds and oils. Prefers Bank of Montréal (BMO-T) and Royal (RY-T). CIBC (CM-T) is of the least interest to him.

Economy: US will stabilize its economic environment but will only grow at 1.5X real GDP growth. Inflation will be very low, probably close to 0 or 0.5. Emerging economies will be pushing very hard to accelerate their growth.

Gold Stocks Vs. Bullion: These are not always correlated. The problem with buying bullion is the risk of storage, insurance, etc. Believes that by the middle of next year, the US$ will be weaker again and gold will be rebounding. He prefers stocks to bullion.

Feels that the market is totally in the hands of the US Congress. Feels that the money will be provided to the big three automakers, but there will be conditions, restrictions and performance goals. They need conditions that will let them compete. Feels government caused the problems that they have today and they have to fix it. In favour of the new administration because it will boost confidence in the economy. But there may be problems down the road for Canadians as some of the accords may not be followed. Protectionism is a real risk. Problem is that the banks are not lending, we need to get the economy going.

Pharmaceuticals: The (US) government is not healthcare friendly. There are cost problems keeping it affordable. A lot of pressure in pharmaceuticals.

Canadian Banks Held for 5 Years? If you want reasonable yields, you could pick away at these banks. His choices would be Royal (RY-T), Scotia (BNS-T) and TD (TD-T).