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

China: After a 55% decline in China markets, valuations are much better. Chinese economy over the last 15 years has grown between 7% and 15% per year. Doesn't see a major decline and thinks this growth is sustainable. You have to be very selective in the companies you own.

Inflation Hedge: Gold bullion, gold fund or gold stocks? The core of anybody's exposure in gold should be gold bullion. If you are going to get into smaller gold companies, you should be in a fund. Larger gold stocks are somewhat efficient so you should have a balanced portfolio.

Gold/Oil Correlation: Historically an ounce of gold was worth about 15-17 barrels of oil. That has changed with the high price of oil and the holding back of gold. Not terribly concerned about demand destruction of oil and the oil price drops. If oil goes back up there will be more printing of money and people will be going to gold as a refuge. Eventually we will head back to the relationship of 15 to 1.

Gold or Silver: Gold has always been acknowledged as real money while silver is called poor man's gold. In the long run, gold is the safer one to be in because of the huge industrial component to silver. However, he feels silver is more under priced than gold and in 2 to 3 years the percentage gain in silver will be better.

Junior Golds and Base Metal Markets: This sector has been a dreadful experience. There have been a lot of factors contributing to it, not the least of which has been naked shorting issues. Needs a significant breakout to new highs in gold and silver prices over what was there earlier this year. This will start to refocus the interest in the sector. Also need a less attractive environment for other financial assets.

Derivatives: How have these affected the prices of precious metals? One of the ploys being used by the anti-gold cartels is the use of a lot of derivatives. There is $1 trillion in gold derivatives, which is preposterous.

US$ and Gold: Thinks the recent strength in the US$ is more weakness in the euro because of all the news coming out of Europe that is sort of devastating economically while the Americans are really fudging their numbers. All currencies are under pressure. When the real gold bull market gets going it will be against all currencies.

Will gold companies grow through mergers and acquisitions rather than exploration? 75 million ounces of gold is dug annually but they are not finding anywhere close to 25 million on a reserve basis. Life index of the gold is shrinking. This shortage will also support much higher prices.

Small Caps: In a market of risk aversion so anything perceived to be risky is avoided and shunned so they are just throwing stocks out these days. You don't want to buy a company that needs financing. You want one that has cash flow and earnings and has been through a recession before. You can find 40 or 50 names that can triple in a 3-year environment. He can't find any names that are going to do well this year but with a 3-year time horizon, it's free money.

Natural Gas: Thinks $8 to $10 is where we want to be. Likes the sector right now. Not too worried about oversupply.

Silver: Thinks sober has more upside potential than gold. There is not very much physical silver out there. Marginal cost of production is about $10.

Index Trading: First principle is that the market itself is going to be pretty good at reading that data and it will be hard for you to out guess that. If you are going to time the market it would be when there is maximum pessimism. Also, when the market stops going down on really bad news that is an indication that you can step up.

US Interest Rates: At this point the Fed is more likely to increase interest rates then cut further. Probably a consensus view, which is why the US$ has started to become stronger. More important are borrowing rates and these have gone up significantly.

Integrated Oils: Have had no profitability on the refining and marketing side. The upside for them has been their upstream operations. His concern is that they are not growing their production profile. If you have to be in the integrateds, His #1 would be Husky Energy (HSE-T), #2 Petro-Can (PCA-T) and #3 Imperial (IMO-T)..

US$: It is having a rally in a bear market. Been in a downtrend for 2.5 years against the euro, Cdn$ and other currencies. Still have twin deficits and the credit crisis. Doubts the US Federal Reserve is going to raise interest rates given the fragility of the financial system. Also has inflationary pressure.