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

Markets. He is very positive on the global equity markets. For his clients’ portfolios, he is at maximum equity and has been for a little while. For the remainder of the year, probably Canada and Europe will do better than the US. The US will probably take a bit of a breather here. Thinks that ultimately the S&P 500 by the end of next year will be in the 1900-2000 range.

Best ETF for gold miners? There are 2 or 3 ways to go. If you are interested in just bullion, you can buy gold bullion ETFs. If you want gold miners, you can have one of 2 things, depending on your preference. iShares S&P/TSX Global Gold (XGD-T) is the gold index and Market Vector Gold Miners (GDX-N) is almost exact index but is listed in New York.

Risks of a corporate bond (laddered) ETF? Is it volatile? Primary thing on corporate bonds is going to be credit worthiness. Laddered tends to get rid of the interest-rate risk. The problem at the moment in Canada is that the bond market in Canada is dominated by the banks. He has started to move from Canadian corporate bond indexes into just the straight preferred indexes. You get another point and it is the same credits that are in there.

Markets. Up until the last week or so, he felt that there might be a correction on the US market and we would get one too and, since we are not up that much, we didn’t deserve to get one. With the gold rebound yesterday, energy looking a lot better and differentials narrowing substantially, those stocks are cheap. So for the 1^st time, they could pull back and we might hang in better. If the US falls, we will fall but not as far.

Energy. We are entering a period of seasonal strength for energy. Implications for earnings is that the 3^rd quarter will be quite strong and some 2^nd quarter earnings will be strong as well. We have WTI narrowing to Brent. Brent is -2% for the year and WTI has basically just come up to it. Also,Western Canadian Select, which is what most of the Canadian guys get, was $47 at Christmas time but is now at $94. It has doubled. Stocks have not doubled, they are basically flat. Lastly, the light spread has narrowed. A lot of the guys have a lot going for them and it is not reflected in the stocks, until just recently we are starting to see them move. They could run a fair long way.

Oil. Price is north of $100 a barrel again but stocks have not moved commensurate with the oil prices and differentials so there is still room to move. Canadian players are sitting pretty but with a couple of caveats. Weather did not cooperate with a lot of Canadian producers and earnings for companies with down stream exposure will be muted by that. For the upstream players, Western Canadian Select is up in Cdn$ terms by about 50% from the beginning of the year and natural gas is down about 10%. We should see stronger cash flow profiles and reported earnings other the oilier companies.

Natural gas. Normally we would expect some disruptions on production because of hurricanes but, what we are seeing in the Canadian market right now is worrisome with respect to the difference between US benchmark prices and Canadian AECO prices, which has widened out to very wide levels. He is cautious on gas prices.

If the US government rejects the Keystone project, how do you see the oil stocks, especially the Canadian oil sands stocks, performing? If they take a hit, would that be a good buying opportunity for a short-term hold? If Keystone is denied, it would be a huge blow for the Canadian energy space. People would think it was game over for ongoing oil sands growth. The reality is that Keystone is not the be all and end all for Canadian energy getting to market. There are a number of other alternatives. Differentials have recently narrowed because of such a tremendous amount of growth of moving crude by rail.

Markets. If you look at the 52 year history. The S&P has gone down from July 17 to Sept 30 2% each year during that time. Markets are overbought now. Seasonality favours oil, gold, biotech, which are all clicked in and look very interesting. Gold broke out of a very important resistance this morning. It is a clear breakout that confirms the seasonality. Forget moving averages except for 20 day moving average, which is the buy signal for gold right now. Earnings are not doing that well right now. Banks had strong earnings. Energy is coming up and that should do well, but all other sectors, watch out! The US dollar is in an upward trend and will be an important component going forward.

Airline Stocks. This time of year airline stocks have a peak. After this period of time they tend to move lower. They lower their rates around the beginning of September. Earnings wind down during that time of the year. Now is a good time to take profits.

US Treasuries. Inverse tracking ETFs. Regular ETFs rebound in recent weeks. You don’t want to fight the trend, which is to the upside. TMV-N has gone up over the last while. It could be topping.

Educational Segment. How to make money on ETFs on Seasonal Strength. Gold equities – July 27-Sep 25. Returns 8.1% per period 12 of last 16 years. This is the time for seasonality for gold and gold stocks. Extra is bought by India for wedding season. This year is special. Second quarter results are not going to be nice. Once you get past the bad news the stocks will go up from there. There are higher costs in recovering gold so they are all struggling but as soon as the bad news is all out we see gold going higher from there. Gold bullion broke out two weeks ago, which is unusual. Gold stocks were better last year but not the year before. Gold outperforms Silver from now until October.

Markets. Volatility has accompanied the Fed reserve announcements over the summer. Rates in Canada will remain low until the economy improves. We are seeing evidence of a recovery in the US, employment, housing, and optimism in consumer spending. Expectations for growth have been somewhat dampened but we look for growth in EU. People can take advantage of this volatility and pick their spots. You want financial strength and wherewithal to go through periods of weak demand.

In REITs we have generally done well over the last couple of years as people searched for yield. Interest rates put pressure on REITs and it could continue for a while.

Markets. There is likely to be a correction. We have had a near-term top with 7% on the TSX and 7.7% on the S&P since Mr. Bernanke started confusing as all. There could be a 5%-10% pressure on a couple of stocks that have had great moves, but nothing serious. To make his selections, he uses P/E ratios as well as looking to see if there are any dividend increases coming. Doesn’t feel that the US fed will be tapering on their bond buying for a while.