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

US Hedging in ETFs: You can't hedge your own portfolio unless you have millions and millions. ETFs can lock in a currency contract for each month.

Education Segment: QE infinity: 2.8 Trillion in Fed now and if they buy these bonds it will hit 4 Trillion. He is wildly bullish about gold, not as much gold stocks but gold for sure. Different types of inflation: (1) Demand Pull: not enough supply; (2) Cost Push:Wages dramatically stronger than the cost of hiring extra workers; (3) Pricing Power: eg. Apple can charge $899 for phones; (4) Sectoral: When Fed does QE and money gets into system and rise in oil prices leaks into other industries. US dollar will remain the reserve currency for years and years to come because there is no alternative.

Markets: Was in UK this summer and the double dip recession was not as bad as expected with the Olympics and the sentiment uplift. The rest of the Euro is bringing it and us down. Reports from people in Spain and Italy where it was really bad. Euro stocks are on sale. Exports in US were weak but domestics had a pick-up. In US there are signs of a turn-around. S&P is up 25% in the US already vs 6% on the TSX. You should buy US stocks that benefit from a Canadian Economy since it is lagging.

Markets. Feels that markets still want to consolidate a little bit further. There is still concern about weak 3^rd quarter numbers, probably down about 2% on the S&P. Weak global data again today out of Europe and China. Also feels that people are concerned about policy missteps. Feels that any pullback from here will be very shallow and should be bought up. Expects very strong 4^th quarter numbers on a year-over-year comparison. Expect we will get some Chinese easing coming pretty soon. You don’t want to argue with the Fed which is adding to its balance sheet. It will drive interest rates lower and free cash flow higher. On a hot stock with a good balance sheet and strong cash flows, try to buy at a 20 day moving average. On a cold stock, but a very good thesis, try to buy it at the 200 day moving average.

Hedging strategies. For most investors, you might want to get acquainted with Selling Calls, perhaps Writing Puts and maybe even Buying Puts. Best protection is basically through asset allocation. For large corporations or very large portfolios, sometimes you can just freeze out any sort of move in the portfolio by doing the opposite in the Futures Market. Extremely liquid. Put it on whenever you want, take it off, almost 24 hours a day.

Convertible Debentures versus Stocks? Convertible debentures tend to be issued by higher risk companies in Canada. On the one hand they are safer because the only way you are not going to get paid is if the company goes bankrupt. But, if the company does go bankrupt, you will lose everything. Compare that to a stock in a company that is not going to go bankrupt. On a little bit of a pullback and a little bit of recession, convertible debentures are probably going to do pretty well but if there is a really big pull back like 2008, convertible debentures spreads are going to dry up. You have to be careful

Small Caps. Really getting trounced but now you are starting to see them come back a little bit. Thinks some of the larger caps are moving down market cap and making acquisitions.

Market. With interest rates so low, people need other places to put their money and felt that some of the stocks had been oversold. There are some companies that have been reporting very good earnings. You have to be wary of some of the names that have been down most of the year because in the last few months they are going to continue to stay down because of possible tax loss selling.

Gold. Has had a nice run over the last 6 weeks. They are still printing money and he expects this trend to continue. His firm is looking for gold to get over $2000 over the next year or so.

Markets. Weakest period of the year for equity markets is from September 16 to October 9. TSX and S&P 500 have dropped about 3% from September 14 when they peaked. Effectively he is 100% in cash but owns things that go up like gold and is shorting things that go down such as semiconductors and transportation. Estimates are for significantly lower earnings in the 3^rd quarter, relative to the same period last year. S&P 500 companies are expected be down about 3%. 60 companies in the TSX are expected to show decline of 7.8% on a year-over-year basis. Watch out short-term but when these earnings reports come out, that is when you buy.

US elections. This is really important. Historically, when the market figures out who the next president is going to be, that is when the market starts heading higher. That is usually around the middle of October, prior to the actual election. There is a honeymoon period from the middle of October right through until at least early January, until the new president is actually inaugurated.

Natural gas. Has formed a nice little bottoming pattern and has just broken above its trading range. On a technical basis, natural gas is starting to show some pretty good gains. Seasonably, it does very well from early September, right through until about the 2^nd week in December. A lot of hedgers take advantage of where natural gas price is around mid-December to avoid tax so they are often sellers of futures. Make sure you are not there after the 2^nd week of December.

Silver. Normally from around the middle of July until around this time of year silver normally goes higher. In the last 10 days or so, it has had a move from the $25 level up to about $35. Seasonality, this is the good time to take some money off the table. Silver has recently started to underperform the market.

Caller once a basket of NASDAQ and a basket of health sciences, primarily biotechnology and pharmaceuticals, buying mid-October. NASDAQ 100 has a positive seasonality coming into the fall. The key is to be in a barbell situation where you are long technology and long healthcare going into late this year. Good strategy. Buy them both around the middle of this month. Healthcare sector is already starting to show a performance but technology is not. Watch for signs of bottoming in technology.

Small/Mid-cap stocks. This area has dramatically underperformed in the last 18 months. Have had a little bounce and typically you would think that with more liquidity coming in to the marketplace that they would start to outperform. He is looking at it differently this time and instead of coming out of a recession, he thinks we are going into a recession. If small/mid-caps are not leading then he tends to think that risk assets are generally probably at risk going forward. He has been long precious metals all summer but now it gets a little trickier. Sentiment in this has started to become very bullish again so he is moving to a more neutral position on the sector.