Carl’s Comments

Economic news from the U.S. will most likely get worse. It’s no longer all about the U.S. It appears that they are not in the driver’s seat. China, India and other emerging markets are taking over. These countries are building cities, expressways, railways, subways, airports, ports, pipelines and power stations and are the new consumers of resources at unprecedented levels. What does this mean? It means continual pressure on commodities and inflation moving forward. There is much talk about a decoupling scenario. For years everything revolved around the U.S. Everything will now revolve around India and China. Looking at these countries, especially India, the demand is almost completely domestic. Even if exports fall, they will continue to enjoy strong growth.

Most investors now believe that the U.S. and most of the world is in a recession. The bigger question will be the outcome. My feeling is that there will be a lot more pain for the U.S. economy. I don’t believe that the housing collapse has bottomed and therefore financial problems still persist. The U.S. consumer is tapped out. Their ability to use their homes as ATM machines is over. America is now trading food for oil and planting more corn and less of everything else. This will continue to drive up food prices.

There are many scenarios unfolding. One is stagflation (low economic growth and high inflation) which is potentially the worst. You can’t lower interest rates to stimulate the economy in order to fix the recession. You will exacerbate inflation. And, if you try to slow down the economy, you will exacerbate recession. My bias is toward higher than normal inflation and continued worldwide uncertainty. I have huge concerns with the American economy, inflation and how and when we deal with Iran. All this being said, what to do? I’m not sure we run to GICs. They will not keep up with inflation. So, a few tips: deal with the best money managers we can find; put a percentage of our portfolio in precious metals as a hedge against increasing inflation and worldwide uncertainties; perhaps lower our overall exposure to equities; and, understanding and appreciating that treading water in these difficult times is not a bad thing.

Five Tips for Staying Confident During Volatile Markets

1. Listen to your financial advisor.
Your advisor is the voice of experience. If your investments are right for you, your advisor will probably recommend that you weather the storm.

2. Remember that risk is part of investing.
Accepting some risk is crucial to growing your investments enough to reach your financial goals. Investors have to take the bad with the good.

3. Don’t panic.
Your investments may be ‘down’ on paper, but you don’t actually lose money until you sell. So be very careful about any decision to sell.

4. Time, not timing, is the key to success.
Sticking with a good long-term plan is usually the best decision. Trying to ‘time the market’ based on media reports is usually the worst decision.

5. Be realistic.
If your investments are well suited to you, you should know what returns to expect in the long-term. If you’re in that zone, you needn’t worry what happens in the short term. Taking the long-term view is a prudent investment strategy.

Time vs. Timing is Key to Long-Term Investing Success

If the S&P 500 averaged 11.8% over the past twenty years, why did the majority of investors only earn 3.7%?

Easy. The old buy high, sell low trap

Between December 1987 and October 2007, there were three significant bear markets – the worst being the 44.5% dip on the S&P 500 from 2000 to 2002 – and the innumerable minor corrections. But over that 20-year period, the S&P 500 rose an astonishing 527%.

• Average bear market during the 20th century – Length: 14 months; Decline: 32.7%
• Average bull market – Length: three years, seven months; Gain 189%

During one five-year stretch in the 1980s, stock prices gained 26.3% per year. But out of a total of 1,276 days that the markets were operating, most of those gains occurred on only 40 days. If you’d missed those 40 key days because you were trying to avoid the next correction, you would have made only 4.3%.

The Challenge: Beating Inflation in Retirement

Thanks to healthier lifestyles and new advances in medical science, many baby boomers will enjoy significantly longer retirements than their parents did. This is great news, but it also raises a new investment challenge: beating inflation over a retirement period of 20 or even 30 years. For many retirees, this will only be accomplished by adding a healthy mix of equities to their retirement portfolio.

Government Pension Plans: Benefits and Contributions for 2008

Contributions and benefits under government pension plans are adjusted periodically to reflect increases in the consumer price index or the average Canadian wage. The new amounts, as of January 1, 2008, are shown in the table below. Each benefit is subject to income tax when received, with the exception of the Guaranteed Income Supplement and the Allowance. All benefits shown are paid monthly unless otherwise indicated and are the maximum amounts.