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

No stocks discussed. Only bonds, so nothing to report.

Banks: -Money from income trusts has been flowing into bank stocks so they are all high. If you own, hold. It you don't own, wait for weakness.

Optimistic about gold and base metals over the next 3-4 months. Will do very well into the 1st quarter of 2007 and a good chance it may last into the 1st half. In the 2nd half of 07 there are going to be some bumps in the road in the form of mortgage pressure on lenders in the US, which will have a big impact on the behaviour of markets. There will be some economic pressures into 08 because of global slowing. Still thinks gold will hit $800 by 08.

Banks: - Feels that earnings are going to disappoint due to disappointing trading revenues out of the US in the last quarter. Money coming out of the Income Trust sector is moving in making them look better now. Sector is a little bit overbought.

Gut reaction is that copper is being held back by the weakness in the US housing sector. There is still a global demand for base metals that isn’t going to end any time soon, but they are taking on the forms of trading ranges and copper is going in this direction.

Taxes: - Eventually, distributions will be taxed at the dividend rate, which is currently 31%. The more profound issue for some income trusts, like Yellow Pages (YLO.UN-T), which not only pays out income but some of their capital, the haircut maybe even worse than that.

Taxes: - Distributions will take a hit up 31% which is the taxable dividend rate.

REIT’s: - Have the lowest of the income streams in income trust sector. He expects a recession and, if this happens, real estate holdings will generally drop 75%. Very expensive and low yields.

REIT’s: - His main criterion for getting into non-energy trusts was a yield on a 5-year Canada plus 300 basis points. REITs didn't qualify. On some high-quality preferreds, you can get 5.05% to 5.15%, which is better than REITs at 5%.

Foreign Investors: - They are not going to like this one bit. If they can’t get in to rape our corporations, they'll be reluctant to invest in Canada.

Move to Financials? – Not a good idea because financials are extremely highly valued by all historic measures. They pay the highest yield of stocks on the TSX, but that doesn’t mean they are defensive.

Move to Financials? – Likes banks. One metric he uses is the TSX’s price/earnings ratio for next year which runs about 15.2. Banks yields are at about 3% and 12.4 X next year’s earnings represents pretty good value.

Time to buy? - For the short-term investor, it will be extremely difficult to pick a bottom. A 15% reduction in valuation is what can be expected with reduced cash flows over the long term. For the long-term investor, a lot of trusts will be able to gain back that 15% over time.

Affect on Yields: - before the tax change announcement, the average yield was about 9% for income trusts. If you were to buy trusts today, you would be looking at 10.5%-11% because of the drop in valuations.

Doesn't really believe we are in a bull market. With US elections coming up, some people are trying to make it appear as positive as possible. Last year, because of Katrina and Rita, a lot of people didn't travel as much and shopped less, so this year, the numbers, year-over-year, appear to be positive, but this is a onetime event. Expect that consumer spending will come down substantially in the next few months.