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

Markets: Last year there was a big debt downgrade and Europe is a mess, but people don’t care and the US is considered a safe haven, still, for money. It’s hard to see how deflation would creep into the system in a significant way. China has a good and swift ability to correct the economy when they want to. If it does slow down, the government will quickly come in and see that it continues on a strong foot. Income is going to continue to be a big focus in the markets this year. Stocks that can show growth in cash and dividends will be the focus.

99 Cents Only Stores 11% Bond 2019: A lot of investors will think Dollarama or Dollar General, but this is different. Only in Southern California and Texas. 50% of store sells groceries and other consumables. He saw the stores and was quite surprised to see produce. Bonds have good asset coverage and could see growth profiling in the credit going forward.

Markets: Lot of the 2011 problems are continuing. Still suffering from the hangover of the crisis of 2007/8. For 3’rd year in a row we saw earnings growing at a stronger rate than the market. The dogs of last year sold in December and rising in January and this is normal for this time of year. We are seeing decoupling from the European problems.

Natural Gas: Going down because of new technology of shale fracking. Dislocated its normal relationship with oil. This could cause oil prices to drop. Fracking is allowing for an abundance of supply. Could lead to North America being independent of Middle east for energy.

Markets: Chinese import is low and people are hoping for monetary easing. He calls this in the US QE 2 and a half. QE 1 and 2 did not work that well but that is what people are hoping for. This year we are going into have to get through he first quarter to know if this will be a good year in the markets. The rebound from 2008 has played out. We are seeing there are an awful lot of earnings downgrades.

Tech Stocks: BA – stock had a brilliant two years. Has been holding all the way through. Is getting a little on the expensive side. Earnings do not cover the dividend at the present time. Finding an income stock to replace it is hard.

Markets: Market is rebounding and is a predictable behavior due to tax issues. It could continue for a while but we are in for a year like last year. Expecting volatility. Strategy is to try to get back to some very good performances as in earlier years. Wants high quality, strong dividend stocks in utilities, phones and so on. Thinks there will be strong commodity market also.

How do you mix the various styles into one portfolio: He says you could have stocks, bond and fixed income. You can have one or two fliers. Go balanced and spread your risk. Don’t buy too many stocks and go with one or two exciting ones.

Will the US lose its global money standard? If you don't have the US$, what do you have? He doesn't think there is an alternative right now. Doesn't think gold is a viable alternative so in the interim he can't see it happening. Also, the US is still a huge proportion of global GDP.

Videotron 7.125% bond maturing January 15/20. Leading cable operator in Québec. Yields over 6.5%. This company is not investment-grade but are not that far off.

REITs. Virtually all of these in Canada have good earnings, have a good base of business, payout ratios are down to very acceptable levels and they're still earning a lot more than you can earn elsewhere. US REITs are vulnerable. They've moved up a lot and they don't have the interest rate protection that we have in Canada.

Markets. We have finished a 6 month mini bear market after a fairly long-term rebound bull market. A rebound bull is a sharp advance from a granddaddy bear, the 08-09 crises. This rebound bull traces out a perfect Elliott Wave, which are 5 waves. We have had an A, B C correction. We are now in the early stages of a bull market. We do need some leadership, which will be US financials, industrialists and absolutely technology.

Fear factor. He is measuring Dow Industrials vs. TLT 20-year Treasury Bond. As fear increased in the early part of last year, prices were falling. With the TLT we have the same fear level but the prices are much higher, the divergence between price and fear. Market is saying the fear is likely to abate. He wants the TLT to roll over.

Gold. A-B-C Correction in Gold chart shows a long-term primary trend line, which goes back to 2004. It shows the A wave down followed by the B rally followed by the C wave. What is interesting about this C wave is that it subdivided and he expects that this is probably it. Expect gold will rally but keep in mind that it is still over loved and a crowded trade so don't go overboard.

Oil. Origin of the current uptrend in crude is around 2001-2002. Chart show that we are in a 4th wave correction and are almost done and is now trying to break out. We may run up to the old peak of $147 in the next 1-1.5 years. That could end crude’s large secular uptrend. Energy stocks may outperform. Usually in a 5th wave advance, there is a lot of bullishness, which is great but sometimes fundamentals can deteriorate. Test will be “will crude make a new high”. He thinks unlikely. Thinks oil stocks will lead this advance. He would prefer oil service stocks and the integrateds.