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

US$: there are some good technical reasons why it has been strong such as repatriation of funds. From a global perspective, other countries are terrified that the US will slip into a recession and kill them all. Until the rest of the world thinks in terms of expanding their economies, it is not going to happen. Not confident the dollar will be strong for much longer.

Economy: There is $600 trillion in derivatives, which is $10 in revenues for every $1 of global GDP. There has to be a lot of coming down because that mountain of derivatives is what really is supporting the mountain of debt. This is one of the reasons he is not very bullish on the banking sector.

Canadian Banks: Had a rolling correction with Bank of Montreal (BMO-T) and CIBC (CM-T) leading the way down and the others have been following. You could probably look at these 2, which have good yields. Much closer to the bottom than the others.

(Market Called Minute.) Bullion. Because of technical reasons, the US$ will fall back.

Short-Term Market: Absolutely stunning volatility. Driven by herd instinct. Although the market is discounting a recession, it is not discounting The recession. Thinks there will be a rally but then we will get part #2.

Mid-Term Market: Defined as the next year or perhaps 2. The problem we are facing is too much debt. De-leveraging will get the US and the world back to financial health. This process will be painful.

Oil: What is needed cannot be replaced at $55-$56 a barrel. It should be at about $80 just before winter. Once you get into winter, physical demand rises by about 2 million barrels a day more than in the fall. We do not have that oil and OPEC is cutting back. Thinks oil has bottomed and will be in the $80 range by Jan/Feb and north of $100 by the 4th quarter.

Natural Gas: Storage is OK now if we have an average winter. If it is colder than normal, natural gas should recover in Jan/Feb. Could be at $8.00.

Market: His view is that between now and the 2nd week of December most of the tax loss selling should be done. Once into the new year, the key ingredients of the new US administration are in place, stability should return.

US Rails: Move a lot of grain and coal. As the price of grain and coal skyrocket the rails were doing very well. Both of these have reversed and that is the main headwind for them rather than the general economy. Likes them long term. Have some cost issues. Will have a bumpy 2009.

Dividends: In an economy like this they are becoming more relevant. The issue is, especially around the energy trusts, where are the dividends going. Feels energy trusts have displayed a prudent amount of discipline by increasing or decreasing dividends at the appropriate times.

Oil: A lot of volatility at this time but expects to see crude oil back up to $85 or so by the end of March and perhaps $95 in early summer.

Coal: China, about 8 years ago, planned to launch a major increase in coal mining capacity by adding 1.6 billion tons of new capacity to existing 1.1. Built 400,000-megawatt coal fired power plants, bringing 1 on every 5 days. Consumption outstripped production so had to import. If they can complete their mining extension, this will impact their imports.

(His Top Pick is a package of 4 precious metals including SPDR Gold E.T.F. (GLD-N), Agnico Eagle (AEM-T), iShares Silver E.T.F. (SLV-A) and Scorpio Mining (SPM-T).) Right now, hedge funds are paying back their debts in US$’s. Currently, the US$ will is king of the castle but that won't last forever.

Market Outlook: The market will tell you itself when it is finally bottoming. Watch for a basing and stability of the indexes. Also, when you see some traction building with the steps the global governments have taken to get liquidity back into the system. Also look for a deceleration in housing prices and there could be some basing next year.