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

It has been a rough ride for the venture. The companies that have outperformed will do fine. Those hit hard are in politically unsafe countries. You have to be cognizant of where the assets are. People selling small caps often get hit harder because of liquidity problems. You have to cherry pick when buying small caps. Cash Flow and Earnings plus balance sheet are the key factors in choosing stocks. Some small caps have a yield and can even raise them.

Russell 2000: He doesn’t follow that but over the 20 yeas it has followed the TSX because of similarity to the TSX in capitalization of securities. There are lot of indicates that are breaking down right now.

He is not that active over the summer on the buying side until August or September. He hopes to sell if things hit sell targets. He does dell in May and go away. If you can have better returns by not doing anything it is better.

We are going to see this volatility over the next little while. Things are cheap here compared to where they will be over the next couple of years. Investors should be patient and look for periods like to day because opportunities will be created. Thinks Greece will withdraw. He has a lot of fixed income investments so that he can move into equities when the time comes. He likes companies that do business in all parts of the world. He has tilted to the Asia pacific realm. Growth in the US will be constrained.

(Top Pick Nov 22/11, Up 9.80%) Videotron 6.875% bonds maturing July 15/21.

Expects good returns for the rest of the year. Most of his holdings are in Canada. Companies are increasing earnings, expanding their business and taking part in the economy. His biggest risk is that he is long energy, i.e. oil. Expects a bottom in oil prices in the next days or weeks. He has been holding. He took them a while ago. Thinks China will sustain a growth rate north of 8%.

In markets like this volatility is on everyone’s minds and it is nice to be able to hedge exposure to sector, etc. He uses index shorts and currency hedges. He can protect against risks he does not want to take. In his portfolios he is long most of the time. He has been moving from Canadian to US equities. Recently he has had higher than normal cash positions and has been shorting the Euro, which is a crowded trade. It has to adjust for the European economy to get strong. A weaker currency will bolster exports and for the next couple of quarters it will be under pressure.

Vics in and of itself is a good way to hedge. If there is a crisis in the markets or Europe so buying volatility can be a good way to hedge against it. HVU-T is leveraged, so there are imperfections to it. It can be difficult to get the kind of exposure you want. Often investors think it is a great way to predict but it is not. Don’t hold it as a long term investment because of rolling over futures contracts within it.

GOLD/SILVER: He would err on the side of it being a buying opportunity. Gold is sometimes seen as a safe haven but in the last 12 months it has been the US $.

We are in for some rough waters ahead. There is more to come out of Europe and it is serious. Generally in North America we are seeing some strength in our economies starting to take hold. If things go off the rails in Europe that can really take the rest of the world with it. The Canadian Market is being punished a little overboard but that doesn’t mean there couldn’t be more setbacks. He is seeing some attractive valuations among some material and energy players. You have to have a long-term perspective. Over the next few months we are going to see some excellent opportunities to establish positions.

When you look at the future of Canadian oil production, the future is in the sands. In terms of long term, it is tied to the oil sands. Companies in conventional oil often sell at a better valuation. You need a significant oil price to be able to justify the production of oil.

There are pockets of strength within the markets. REITs have done very well and he argues that the balance sheets have never looked better. Excess cash is being used to improve balance sheets and to make acquisitions. Good companies go out and acquire their competitors.

Let’s hope it will be different from last year and likely it will. It is dependent on Greece and now Spain. If the worries are at least somewhat taken care of then we have a chance of what happened after it was temporarily solved before Christmas. He decided most clients would like him to chase a situation rather than get in early. He knows the names he would like to buy if the time comes. Took a little off the table in energy and precious metals and would be prepared to put that back on.

Gold: You would think we would know that European governments are printing money. It has to be inflationary and good for gold. In the first sign of panic, investors don’t go to gold. We have not solved everything yet. Doesn’t see $2000 any time soon for gold.

Markets. It is obvious that Europe is heading for a pretty deep recession. Unemployment in Spain is 25%. This has implications for us with probably lower oil and commodity prices. North American economy is okay, not strong, but is slowly picking up. Consumer data is indicating that people in the US are more confident than before the crash.