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

Markets. Going into this year, his perception was that the markets were a little bit ahead of fundamentals. We have now seen the correction but have also seen the problems begin to build, whether they wear the European problems or the political intransigence that we have seen in the US. Those problems are going to continue to follow us through into 2012. This is created a lot of volatility in the market and it has been hard to make money. For a longer term focus, it has been a relatively good time to upgrade the quality of the holdings in your portfolio.

Gold. He tends to invest through producers rather than bullion. Even as a value investor, he feels there is a good place for gold as a bit of a hedge in your portfolio. He would keep 5% to 10% at most. Longer term, there is room for the gold price to move up again.

Resources. Saw a low in resource stocks in October and was able to pick up quite a few names. Thinks the market is basing here and can see better days ahead. Looks like China is going to have a soft landing and need to largest economies globally, China and the US, look like they are stabilizing. Expecting a flat growth environment in Europe for 2012. Less speculative in this environment.

Investing. He wants companies that produce net free cash flow after taking care of CapX and dividends. This leaves the door open for further increase in dividends, which is very important.

Shale gas. For sustained long-term growth, nations have to have secure, cheap energy. For North America and the rest of the world, that ended in 1974 because of 1) oil embargo and 2) tremendous price increases. With the potential burgeoning of supplies in shale gas, this could be a game changer in terms of cost of energy for all aspects of the economy. In 5-7 years, the 1st to benefit would be manufacturing companies and secondly if the shale gas boom continues, will create a huge demand for pipe and other types of equipment. Lastly, the consumer will benefit.

Gold. Until governments come to their financial senses, the currency and paper money are going to depreciate and gold is the one fixed quantity going forward.

Natural gas. Has been bullish on this for a year and is amazed at how much it has been hurt. There is a long-term trend for environmentally friendly source of fuel. Sees a decline in shale gas in the US where rigs are coming off. Decline rate is 80%-90% in the 1st year and then gradually slows down from there on and can then last for 10-20 years. Quite bullish in 2012 for natural gas.

S&P 500. Chart shows that for the last 3 months, this has been forming a wedge. You are supposed to only get about 75% into the wedge before there is a resolution. It will either break up or down out of the wedge. That is what the market is waiting for.

Trend lines with candlestick charts? If you have a lot of little short wicks at the top, it is fine to use those for drawing trend lines. If you have larger bodies with smaller wicks it makes more sense to use the bodies.

Copper. He would like to see copper hold at the current price, otherwise it will probably revisit the $3 range.

Oil. Doesn't see it holding at $120. Could stick around in a band between $80 and $105. Rather than playing oil, he would rather have something in the oil sands that pays a dividend. You want to play commodities, you have to shorten your time frame dramatically.

Euro versus the US$. Should he Short and take some long positions in some US equities? Shorting the euro is becoming a popular trade. This makes him a little nervous. US is full of companies doing business globally so are faced with the European market, which could be a bit of a problem. However, the US is looking like a bit of a safe haven.

Markets. This is all short term stuff and he is a long-term value investor. He buys stocks when no one wants them and sells them when everyone wants them. He chooses companies he likes as well as prices that he likes.

Could we slip into a recession and if so, what would be the effect on the stock market? Canada is dependent on 2 things, commodities and the US. Commodity prices will come down and that will hurt. Best stock market globally has been the US because the economy there is nowhere like it was in 2008. Europe will probably go into recession and China will slow down. The US might go into recession and pull Canada down but there is a better chance it will just have some slow growth.

Market: A festival of tax loss selling. You will be right in the zone now. This is what starts feeling more like a bottom like a couple of years ago. People don’t want to deal with each other – this is the contagion. The European situation can only be solved by politicians so it is a speculative situation. The banks in the EU need to get better balance sheets and then things will start to roll.