A solid end to a dreadful decade

Stock markets around the world have continued to rally overnight. The traditional Santa Claus rally is well underway. Even with this rally, which has lasted for nine months, few investors will miss this decade. The new decade may be the perfect opportunity to explore a new approach with your nmoney. As Christmas of 2009 approaches, may you and you family have a safe and healthy holiday season, and a prosperous New Year.

New Approach in the New Year

Markets around the world look set to move higher, as the traditional Santa Claus rally may be ready to begin. Markets are likey to be pretty quiet over the next few weeks, but the holidays are a great time to prepare for next year. Be sure you have done any tax loss selling you might need completed by year end, then relax and enjoy the holidays. As the new year begins, resolve to take a new approach with your money, and see if therer are better alternatives for you than traditional mutual funds. A new year and a new decade are the perfect opportunity to review your investment strategy.

pay attention to today's Fed announcement

After a pretty weak day yesterday on North American markets, European markets have started this morning broadly higher. North American markets look poised to rise when they open. Investors should be watching carefully as the US Federal Reserve releases its decision on interest rates. Everyone recognizes that interest rates must eventually turn higher, but today's meeting may give us a sense if the rate increases will occur quickly, or off in the distant future. This could have a meaningful impact on your portfolio, so pay attention to today's Fed announcement.

Diversification and our Loonie

After months of watching a surging loonie, many investors have asked me if the Canadian dollar is finished its rally. In the short term, we may see dollar volatility, but I believe the long term trend still favors the loonie. Canada features a good balance sheet, abundant energy and resources, and stable financial markets. This is likely to attract global investment for years to come, and should keep wind in the loonies' sails. As a Canadian investor, this has a dramatic impact on diversification. For years, our currency's devaluation has significantly boosted foreign market returns in Canadian dollar terms. Global investment returns are likely to be dragged lower by the strengthening dollar, so you may wish to discuss investment alternatives that hedge out this currency risk with your advisor. Diversification is still very important, but you need to adjust for the new, robust Canadian currency.

Diversification

Over the past few days, we have seen many global markets reaching new 12 month highs. With markets clearly in recovery mode, it is interesting to note that bond funds continue to attract a significant percentage of the new assets being invested in mutual funds. Many experts argue that this indicates that investors are missing the recovery in the stock market. I disagree, and believe it is a healthy sign, as investors actually appear to be getting the message of diversification. Buying bonds, real estate, and even gold, can significantly reduce the overall risk for investors. The massive flow to bonds may not be an intentional move toward diversification, but regardless of the reasons, I believe it is a sign of a healthy recovery in the overall investment world. Tune in tomorrow at 9:30 for Beyond Funds Market Weekly, and I will discuss how you can benefit from diversification.

Wareham Weekly Insights

The big picture
U.S. manufacturing grows amid rising unemployment

Showing unexpected strength, the U.S. manufacturing sector grew in October at its fastest pace since April 2006, suggesting U.S. gross domestic product is growing at an annualized rate of 4.5% in the fourth quarter. The manufacturing index rose for the third consecutive month in October after 18 consecutive months of contractions. The services sector grew for a second straight month in October, but at a slower pace than in September. Despite this growth, the unemployment rate rose to 10.2% in October, the highest since April 1983, with the largest job losses in construction, manufacturing and retail.

The Bank of Canada (BoC) is still predicting growth in the second half of 2009, even though recent GDP data indicated that the economy contracted in the third quarter. The BoC predicts the economy will grow 3.0% in 2010 and 3.3% in 2011. Finance Minister Jim Flaherty said on Monday that Canadians should not expect the employment market to recover as quickly as the general economy. “The recovery in jobs will lag recovery of the economy. That is to be expected. That is the lesson of past recessions. It takes time for businesses to regain confidence, to reinvest in their businesses and thereby create jobs.” Canada's unemployment rate rose to 8.6% in October from 8.4% a month earlier as the economy shed 60,000 part-time jobs. Full-time employment increased slightly.

Markets
Stocks rally; GM does a U-turn

The TSX surged this week as gold prices reached a record US$1,101 after a pledge from the Federal Reserve to keep interest rates low weakened the U.S. dollar, and billionaire Warren Buffett bet big on the U.S economic recovery. North American markets also rallied on strong U.S. manufacturing data and better-than-expected earnings by technology bellwether Cisco, although the TSX was hit by surprise losses from Sun Life and Manulife.

General Motors did a U-turn, scrapping plans to sell Opel to Canadian auto parts supplier Magna. Unions are seething as GM Europe will now revert to a reorganization plan that chops fixed costs at Opel by 30%. Enbridge reported third-quarter profit more than doubled to $300 million versus one year ago. Warren Buffett will make his biggest ever investment, buying Burlington Northern Santa Fe Railway for US$44 billion in what the billionaire described as “an all-in wager on the economic future of the United States.” BlackBerry maker Research In Motion fell more than 6% on Monday after an analyst told investors to sell the stock because of mounting competition and an influx of new phones and applications.

Our recommendation
Favour equities over bonds
· Equities. Stephen Uzielli, Portfolio Manager, Portfolio Advisory Group, says the current pullback in equity markets is one of what will likely be a series of retracements in the coming months, but which will likely be shallow and short-lived, thus creating a buying opportunity for investors who have not yet made their full equity allocation. Buy the dips.
· Fixed income. Anthony Mentor, Associate, Portfolio Advisory Group, highlights the following recommendations: Term Call – below benchmark duration. Sector Call – underweight Canadas, overweight Municipals and Provincials, neutral on Corporates. Currency Call – recent weakness in the Canadian dollar means little upside to foreign currency trades. Alternative Strategies – overweight high yield, overweight Emerging Markets Debt, underweight inflation protected bonds.
· Portfolio strategy. Vincent Delisle, Scotia Capital’s Portfolio Strategist, writes, “Based on our 2010 forecasts, equities (10%-12%) should outperform government bonds (0%) and high yield (4%-6%) over the next 12 months. We are sticking to our equity overweight bias, but our current asset mix recommendation is as cyclical as it will get.”




The month in review
October: Surges and setbacks on climb to recovery
Facing mixed economic data, investors were sometimes unsure which way the economy was headed in October. While the U.S. economy showed surprising GDP growth, unemployment continued to climb. In Canada, where jobs were growing, GDP contracted. In the U.S., high unemployment continues to hamper consumer spending, which accounts for 70% of U.S. economic activity, and Americans will need to cut back after years of accumulating too much debt, according to U.S. Treasury Secretary Timothy Geithner, who warned that the whole world will need to reduce their dependence on U.S. consumption.

U.S. GDP grows while Canada contracts
The Commerce Department reported that U.S. GDP expanded at an annual rate of 3.5%, an unexpected surge after the economy had contracted 0.7% and 6.4% in the second and first quarters, respectively. Robust government spending, exports, and consumer spending – lifted by auto purchases under the cash-for-clunkers program – pushed the measure into positive territory. In contrast, Canada’s GDP shrank 0.1% in August despite signs that the country is climbing out of recession.

Jobless rate falls in Canada, climbs in U.S.
Canada’s unemployment rate fell to 8.4% from 8.7% in September, the first monthly decline since the fall of 2008. Employment increased for the second consecutive month, up 31,000. In the U.S., unemployment is at a 26-year high of 9.8% and still climbing.

Australia and Norway increase rates; Canada and U.S. on hold
Australia became the first among the Group of 20 countries to increase borrowing costs since the start of the global financial crisis, and Norway the first country to raise rates in Europe. The Bank of Canada announced it would keep its key rate unchanged at a record low of 0.25% and U.S. policymakers agreed that “economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.”

Rollercoaster month for Canadian dollar
The Canadian dollar was volatile, fluctuating over a five-cent range during October. The loonie approached parity, topping 97 cents U.S. mid-month before falling back. Prime Minister Stephen Harper warned that too rapid a rise could damage the country’s economic recovery, but said some of the Canadian dollar’s sharp climb is justified by fundamentals. The central bank has said it will not counteract rises in the dollar due to fundamental factors.

Oil and gold reach highs
In mid-October, gold hit a record US$1,070 and its popularity has risen to the point where shoppers can now buy gold bars at Harrods department store. In the third week of October, oil reached a fresh 2009 high of US$81.36 a barrel.

Dow breaks 10,000 and falls back
The blue-chip Dow index broke through the psychologically important 10,000 mark, up 52% up from its March low but still 29% below its peak in October 2007. Despite a strong start, North American markets ended the month down as commodity prices weakened and bleak U.S. home sales data caused stocks to slide.

Smart phone wars rage on
Nokia filed a lawsuit claiming the iPhone infringes 10 of its patents and Research In Motion rolled out an updated BlackBerry Bold in an effort to fend off Apple’s gains in the cellphone market. Bell and Telus will break Rogers’ monopoly and begin selling iPhones in November as their new iPhone-compatible network comes online. Verizon will offer phones with Google’s Android operating system, while Microsoft unveiled its own new mobile operating system, available on 30 phones.


Privacy Policy and Legal DisclaimerTM Trademarks used under authorization and control of The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPFThis publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author is an employee of ScotiaMcLeod, a division of Scotia Capital Inc. ("SCI"), but the data selection, analysis and views expressed herein are solely those of the author and not those of SCI. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor SCI can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your investment advisor, who can assess all relevant particulars of any proposed investment or transaction. SCI and the author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this publication in contravention of this notice. All performance data represents past performance and is not indicative of future performance. Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding equity securities of Royal Bank. Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to equity or debt securities of, or have provided advice for a fee with respect to Royal Bank. TM Trademark used under authorization and control of The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.

Income Alternatives

Global interest rates remain near record lows. Investors seeking income are being forced to consider investments alternatives beyond the safe harbour of GICs and bonds. This is particularly true for many of last year's GICs and maturing government savings bonds. With global central banks signalling that interest rates will stay low for an extended period of time, many investors seeking income will either have to tap into their principal, move into stocks with dividends, or buy riskier bonds, to generate the cashflow they need to live. I believe one of the best alternatives out there is using preferred shares, which offer significantly higher yields than most bonds, better tax treatment in non registered accounts, and generally lower risk than common stocks. Unfortunately, it is almost impossible to get these through a mutual fund, so you need to work with an advisor that has access to these investment alternatives. If you are looking for options, give me a call.

Lost Decade

The enthusiastic rally of the last couple of days has pushed the Dow in New York back above the 10000 level. This is positive news, of course, but it is important to remember that this level was first reached in the spring of 1999. In other words, all of the positive results since spring have really only brought the world's dominant market back near break even on the last ten years. Tune in tomorrow at 930 for ideas on rebuilding after the lost decade.

Funds Fail to Beat Index

The latest numbers are in, and Eric Lam of the National Post reports that two thirds of Canadian mutual funds failed to beat the index over the last quarter. This isn't very good, but the longer term numbers are even worse. Over the last 5 years, only around 5 percent of Canadian funds, and eight percent with foreign content were able to beat the index. Factor in that this has been a lost decade, with virtually no return from these equity indices, and it is no wonder investors are disheartened! The data tells us that the index has made you almost no money, and that almost all funds have been worse. You really should consider your alternatives.

"Enthusiasm definitely seems to have replaced fear with many investors. However after a significant rally over the last few months, we have seen a pretty negative move in the market over the past few days. The next few weeks could easily see a return to some of the volatility of last year. What does this mean to you? It makes sense to rebalance your portfolio after the significant drop of 2008, and rally of 2009. As year end approaches, it would make sense to meet with your advisor, and make sure that your asset allocation makes sense. This means that you may want to be a buyer on weakness if you have too much cash, or a seller of stocks if you have too much equity. The nearer you are to retirement, the more important this is. Last year really damaged many retirement plans, and it makes sense to protect against further damage. If you are looking for a second opinion, why not give me a call."

The HST and Your Investments, part 2

If you caught my show on saturday, you heard me speak on the issue of
mutual fund companies protesting about the impact of the new
Harmonized Sales Tax on fund investors. This issue is valid, but I
think it is a red herring. The fund companies kick up a huge fuss
about the impact of the tax on investors' savings, but do nothing
about the fact that an investor could conceivably pay hundreds of
thousands of dollars in management fees over a lifetime. The HST only
increases the already dramatic impact of the Canadian mutual fund
company management expenses, which are the highest in the world. I
doubt we will see any great movement to see fees come down due to the
tax. It really does support my stance that investors with larger
portfolios should explore their options. Less expensive and more
customized alternatives exist if you have outgrown your mutual funds.

Wareham Weekly Insights

Market Watch



The big picture

U.S. recovery slow and fragile



Housing and manufacturing are driving the early stages of an economic recovery in the U.S., however the most recent Federal Reserve survey pointed to a slow and fragile turnaround. Some economists fear the fledgling housing revival could be derailed when the first-time home buyers credit expires on November 30. The survey reported that the weakest links in the recovery were consumer spending, which accounts for 70% of economic activity, and commercial real estate.



Prime Minister Stephen Harper said his biggest concern is how the recovery plays out in the U.S., and he cautioned that, despite Canada’s strength, spillover effects could cause a double-dip recession. The Bank of Canada (BoC) announced it would keep its key rate unchanged at a record low of 0.25% and BoC Governor Mark Carney gave his clearest warning yet that he will take steps to stop the dollar’s rise if it continues at the current pace, warning that the strong dollar was hampering Canada’s recovery. Mr. Carney is also monitoring the surge in Canada’s housing market, with average house prices up 13.6% in one year. A top adviser to French President Nicolas Sarkozy complained that the euro’s strength, at US$1.50, was a disaster for European industry, and could lead to printing euros and inflation.



Markets

Ups and downs



Markets were volatile this week as investors reacted to the Fed survey results, Canada’s interest rate announcement and earnings news. The Canadian dollar slid almost two cents when the Bank of Canada announced its key rate would remain at 0.25%. However, on Wednesday, U.S. dollar weakness sent the loonie back up. Oil reached a fresh 2009 high of US$81.36 a barrel as U.S. gasoline inventories fell by 2.3 million barrels last week.



Apple posted record quarterly sales, pushing its stock to all-time highs. Meanwhile, Nokia filed a lawsuit claiming the iPhone infringes 10 of its patents. Research In Motion rolled out an updated BlackBerry Bold and Microsoft launched its new Windows 7 operating system in efforts to fend off Apple’s gains in the cellphone and PC markets. Microsoft announced Bing will search Twitter and Facebook for up-to-the-minute content. Within hours, Google announced a similar deal with Twitter. Caterpillar posted stronger-than-expected earnings and raised its full-year forecast. Hit by the sharpest drop in potash demand on record, Potash Corp. reported its quarterly profit fell 80% from a year ago. Cadbury posted strong sales, fueling speculation that Kraft will have to raise its bid. McDonald's profit climbed almost 6% on the success of its expensive new Angus burger.



Our recommendation
Add cyclical holdings on market pullbacks



· Equities. Stephen Uzielli, Portfolio Manager, Portfolio Advisory Group, says the market trend remains upward heading into the end of the year despite economic risks on the horizon. The market is not overpriced, just overbought in the short term; we would be adding weight in cyclical holdings on any market pullback.

Fixed income. Chris Kennedy, Associate Director, Portfolio Advisory Group, highlights the following recommendations: Term Call – below benchmark duration. Sector Call – underweight Canadas, overweight Municipals and Provincials, neutral on Corporates. Currency Call – generally favour the C$ against most majors; however, with the recent weakness in the British pound, it is now expected to outperform the C$ over the next year. Alternative Strategies – overweight high yield, overweight Emerging Markets Debt, underweight inflation protected bonds.
Portfolio strategy. Vincent Delisle, Scotia Capital’s Portfolio Strategist, writes, “On the equity side, our global bias remains unchanged: Overweight Americas and Emerging markets, underweight Europe and Japan. From a sector standpoint, U.S. Energy, Materials, Discretionary, Financials, and Technology are posting superior relative earnings momentum. Our Sector Strategy continues to be geared towards Cyclical sectors.”


TM Trademarks used under authorization and control of The Bank of Nova Scotia.
ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF

This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author is an employee of ScotiaMcLeod, a division of Scotia Capital Inc. ("SCI"), but the data selection, analysis and views expressed herein are solely those of the author and not those of SCI. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor SCI can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your investment advisor, who can assess all relevant particulars of any proposed investment or transaction. SCI and the author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this publication in contravention of this notice. All performance data represents past performance and is not indicative of future performance. Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding equity securities of Royal Bank. Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to equity or debt securities of, or have provided advice for a fee with respect to Royal Bank. TM Trademark used under authorization and control of The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.

Carney Warns Low Rates Can't Last

After years of falling interest rates, Bank of Canada governor Mark
Carney warned home owners not to count on continuing record low rates
forever. This seems obvious, especially when you consider that there
really is nowhere to go but up, but we may be a while before we see
significantly higher rates. Our loonie contines to surge, in spite of
both low rates and burgeoning government deficits. As we saw with
Ontario's budget shortfall, corporate taxes have been plummeting this
year. Raising interest rates would put upward pressure on our
currency, and that would have a pretty negative impact on our
manufacturing sector. Throw in increased business lending rates, and
governments have compelling reasons to remain committed to low
interest rates. As an investor, you need to ensure you are taking
advantage of low borrowing rates, and finding alternatives to the
nearly non existent yield from GICs, money markets, and government
bonds. Tune in to Beyond Funds Market Weekly, tomorrow at 9:30 and I
will discuss this issue in more depth.

Our superstar currency

After years of seeming pathetic, our dollar really is becoming a
global superstar. Yesterday, the Bank of Canada indicated that we
will see a significant drag on our ecocnomic recovery as the loonie
continues to strengthen. This will effect all investment classes;
keeping your bond yields low, reducing the return on your foreign
investments, and affecting our domestic industries. This may sound
negative, but I believe it is a great environment for long term
investors. The biggest challenge , in my opinion, will be finding
yield in an environment with very low interest rates for an extended
period of time. If you are looking for ideas in this market, why not
give me a call.

A Sobering Statement from the Bank of Canada

Tuesday morning's statement by the Bank of Canada indicated that the Canadian economy was clearly recovering, but painted the troubling spectre of the surging Loonie raining on the parade. Most major bank economists agree that the record low rates will continue, but the powerful dollar appears a looming economic risk. The traditional solution to a surging currency is cutting interest rates...tough to do at a quarter of one percent! It will be interesting to see how the BOC responds to this unique challenge.

A new tax on your savings

As 2010 approaches, another issue is emerging that should cause you to
consider your investment product choices. Canadians already pay the
highest mutual fund management fees in the world. Now, the proposed
Harmonized Sales Tax will be applied to these already lofty fees.
This is essentially a tax on savings. This issue is likely to become
highly political. Ultimately, it is one more reason for you to
consider if you are well served by paying these fees, or if you should
much more cost efficient solutions? If you are wondering if you have
outgrown your mutual funds, give me a call.

Wareham Weekly Insights

Market Watch

The big picture
Canadian economy shows strength

The Canadian dollar neared parity with the U.S. dollar after six straight days of gains, topping 97 cents on Wednesday before pausing ahead of the Bank of Canada's interest rate announcement next week. Prime Minister Stephen Harper warned that too rapid a rise could damage the country's economic recovery, but said some of the Canadian dollar's sharp climb is justified by fundamentals. "We know that Canada's economy is relatively stronger than certainly virtually any other developed country." The central bank has said it would not counteract rises in the dollar due to fundamental factors.

Unemployment in Britain is still rising, but the monthly increase has slowed, signalling the worst may be over. The Bank of Japan held rates while raising its economic assessment for the second month, and refrained from ending its liquidity-boosting measures. U.S. retail sales were better than expected in September - up 0.5% excluding autos. Overall retail sales dropped 1.5%, as auto sales plummeted 10% after the Cash for Clunkers program ended. Federal Reserve policymakers agreed that "economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period." Fed Vice Chairman Donald Kohn said that a subdued U.S. economic recovery with sluggish growth would keep inflation at bay.

Markets
Dow breaks 10,000 barrier; oil hits one-year high

The blue-chip Dow index passed the 10,000 mark fuelled by results from Intel and JPMorgan Chase and September retail data that beat expectations. Up 52% from its March low, the Dow remains 29% below its peak in October 2007. The TSX was also fuelled by the energy sector as oil hit a one-year high of US$78 on an unexpected drop in U.S. gasoline inventories. Gold hit a record $1,070 and its popularity has risen to the point where shoppers can now buy gold bars at Harrods department store in London.

In third-quarter earnings announcements, Google shone with net income up 27% over last year; Intel posted results and a fourth-quarter outlook that exceeded Wall Street expectations; Johnson & Johnson saw revenue fall 5% as generic competition caused prescription sales to plunge 14% from a year ago; and railroad operator CSX reported an earnings decline that was not as bad as feared. In the financials sector, JPMorgan reported a ninefold increase in profits over a year ago. Goldman Sachs profits more than tripled and the firm faces criticism for $20 billion in planned year-end bonuses. Citigroup posted a loss, suffering $8 billion of credit losses. In the smartphone wars, Research In Motion released Storm 2 to challenge the iPhone.

Our recommendation
Add cyclical holdings on market pullbacks
* Equities. Stephen Uzielli, Portfolio Manager, Portfolio Advisory Group, says the market trend remains upward heading into the end of the year despite economic risks on the horizon. The market is not overpriced, just overbought in the short term; we would be adding weight in cyclical holdings on any market pullback.
* Fixed income. Chris Kennedy, Associate Director, Portfolio Advisory Group, highlights the following recommendations: Term Call - below benchmark duration. Sector Call - underweight Canadas, overweight Municipals and Provincials, neutral on Corporates. Currency Call - generally favour the C$ against most majors; however, with the recent weakness in the British pound, it is now expected to outperform the C$ over the next year. Alternative Strategies - overweight high yield, overweight Emerging Markets Debt, underweight inflation protected bonds.
* Portfolio strategy. Vincent Delisle, Scotia Capital's Portfolio Strategist, writes, "On the equity side, our global bias remains unchanged: Overweight Americas and Emerging markets, underweight Europe and Japan. From a sector standpoint, U.S. Energy, Materials, Discretionary, Financials, and Technology are posting superior relative earnings momentum. Our Sector Strategy continues to be geared towards Cyclical sectors."


Privacy Policy and Legal Disclaimer
TM Trademarks used under authorization and control of The Bank of Nova Scotia.
ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF
This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author is an employee of ScotiaMcLeod, a division of Scotia Capital Inc. ("SCI"), but the data selection, analysis and views expressed herein are solely those of the author and not those of SCI. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor SCI can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your investment advisor, who can assess all relevant particulars of any proposed investment or transaction. SCI and the author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this publication in contravention of this notice. All performance data represents past performance and is not indicative of future performance. Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding equity securities of Royal Bank. Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to equity or debt securities of, or have provided advice for a fee with respect to Royal Bank. TM Trademark used under authorization and control of The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.

Investing for the powerful Loonie

This is Jeff Wareham, ScotiaMcLeod Wealth Advisor, with some thoughts
for investors outgrowing their mutual funds.

It has been a fascinating week, with the Dow breaking through 10,000,
the Loonie back near par with the US dollar, gold at record highs, and
oil surging. As time goes by, Canadian investors have to consider the
strength of our dollar. First, it has a significant impact on our
domestic industries. Second, global investment returns may be dragged
lower by currency appreciation. This is most obvious with investments
in the US, where most of this year's gains have been lost to Canadian
currency appreciation. If our dollar remains strong, you need to have
a strategy to manage this risk. Tune in to AM 980 tomorrow morning, for
Beyond Funds Market Weekly, as I offer some ideas to protect your
portfolio from the risks posed by the powerful loonie.

Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit,
www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This
program is for information purposes only. Fees, management fees and
commissions may be associated with mutual fund investing. Investors
should consult their prospectus before investing. Views expressed are
those of the author, not Scotia Capital. ScotiaMcLeod is a division of
Scotia Capital, member CIPF

Surging Loonie

In my continuing theme of the surging Loonie, I read some excellent commentary from commodity guru Dennis Gartman. Gartman sees the Loonie surging well past parity with the greenback, as investors express a preference for our commodities, our financial system, and even our adherence to global trade agreements. With global currency traders bullish on our dollar, and interest rates at all time lows, it may be very difficult for the Bank of Canada to slow down the flight of the Loonie.

This is for information purposes only. Views expressed are those of the author, not Scotia Capital

The Dow is only back to its levels of 1999...in essence, investors have lost a decade

A few days ago, i mentioned the beginning of US earnings season, and
how important the numbers reported over the next few weeks would be.
So far, both US and global companies have been posting pretty
impressive numbers, and that trend continued overnight, with
spectacular numbers from Intel, from China, and JP Morgan. We may see
the Dow jump over 10,000 today. All of this is great news, but some
perspective is required. The Dow is only back to its levels of
1999...in essence, investors have lost a decade. Tune in this
Saturday for ideas on rebuilding your portfolio after this lost
decade.

For a review your portfolio, or a complimentary copy of my CD, visit,
www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This
program is for information purposes only. Fees, management fees and
commissions may be associated with mutual fund investing. Investors
should consult their prospectus before investing. Views expressed are
those of the author, not Scotia Capital. ScotiaMcLeod is a division of
Scotia Capital, member CIPF

Lost Decade

This is Jeff Wareham, ScotiaMcLeod Wealth Advisor, with some thoughts
for investors outgrowing their mutual funds.

A few days ago, i mentioned the beginning of US earnings season, and
how important the numbers reported over the next few weeks would be.
So far, both US and global companies have been posting pretty
impressive numbers, and that trend continued overnight, with
spectacular numbers from Intel, from China, and JP Morgan. We may see
the Dow jump over 10,000 today. All of this is great news, but some
perspective is required. The Dow is only back to its levels of
1999...in essence, investors have lost a decade. Tune in this
Saturday for ideas on rebuilding your portfolio after this lost
decade.

For a review your portfolio, or a complimentary copy of my CD, visit,
www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This
program is for information purposes only. Fees, management fees and
commissions may be associated with mutual fund investing. Investors
should consult their prospectus before investing. Views expressed are
those of the author, not Scotia Capital. ScotiaMcLeod is a division of
Scotia Capital, member CIPF

Canadian fund MERs

On Saturday, I enjoyed Jon Chevreau's article regarding the relative costs of Canadian mutual funds, versus the Vanguard funds in the US. Chevreau points out the massive gulf between typical Canadian and American management expense ratios. Regular listeners will recognize this is a pet peeve of mine. The significant drag on an investor's portfolio caused by management expense ratios should not be forgotten, especially as time passes.

The web site that illustrates this best is www.investored.ca, which has a great calculator, indicating the long term costs of buying traditional retail mutual funds. Alternatively, you canfind the calculator and read my commentary on my blog. Over the long term, an investor could pay more in fees than their inital investment. Spound preposterous? Take your current portfolio, and calculate the fees at 2.5%, over 25 years, using an eight percent return. The results may shock you.

If you are interested in finding out your alternatives, speak with your advisor, or give me a call.

The Weakening US Dollar

For anyone who listened to my radio show this morning, this blog post reinforces my concern about the massive, debt driven stimulus spending in the US. This thought provoking article from the Financial Post paints a bleak picture, but it is pretty hard to argue with any of the concerns raised by author Edward Hadas.

As I have frequently noted, this may make it tough to invest in US equities over the long term. The Dow is essentially flat over the last decade, so an American invested in her native market has essentially broken even, but the massive revaluation of the US currency leaves a Canadian with a loss of over thirty percent on a currency adjusted basis.

This may not preclude investing in the US market, but it sure makes sense to consider hedging your US denominated positions.

This is for information purposes only. Views expressed are those of the author, not Scotia Capital.

Wareham Weekly Insights

Market Watch



The big picture

Australian rate hike sparks optimism



Australia surprised markets Tuesday by increasing interest rates, setting off a wave of optimism about the global economic recovery. The Reserve Bank of Australia raised its benchmark interest rate to 3.25% from 3.00%, becoming the first among the Group of 20 countries to increase borrowing costs since the start of the global financial crisis. In Canada, Prime Minister Stephen Harper reiterated that the global recovery will remain fragile until jobless rates start to fall. Canada’s unemployment rate fell to 8.4% from 8.7% in September, the first monthly decline since the fall of 2008. Employment increased for the second consecutive month, up 31,000. In the U.S., the unemployment rate is at a 26-year high of 9.8% and still climbing.

Americans will have to save more in the future after years of accumulating too much debt, according to U.S. Treasury Secretary Timothy Geithner. He predicts that this change will transform the whole world’s economic reality. “Everyone is going to have to come to terms with the fact that we are going to save more in the United States.” He called on Europeans and Japanese to work at boosting domestic demand, and credited China for being at the forefront of thinking about new ways to reduce the dependence of its economy on U.S. exports and investments.



Markets

Stocks ride wave; wealthy tighten their Gucci belts



Optimism sparked by Australia’s rate hike sent stocks rising around the world on Tuesday. The TSX also was buoyed by strong commodity prices as gold topped $1,050 and oil hit $71. The Canadian dollar surged above 95 cents while U.S. Aluminum producer Alcoa posted a surprise profit and Costco beat analysts’ estimates despite a drop in quarterly profits. In Canada, Jean Coutu reported quarterly revenues up 7.3% versus a year ago, while Canwest sought court protection from its creditors, with $4 billion of debt. As the rich tighten their belts, luxury retailer Neiman Marcus has priced 40% of its new catalogue at just US$250 or less.



In the smartphone wars, Bell and Telus will break Rogers’ monopoly and begin selling iPhones next month as their new iPhone-compatible network comes online. Verizon will offer phones with Google’s Android operating system, while Microsoft unveiled its own new mobile operating system, available on 30 phones. The battery-powered LEAF car will hit British Columbia in 2011, as a result of a partnership between the Renault-Nissan Alliance, the province, the city of Vancouver and BC Hydro. The U.S. government is lending $1 billion to two new green automakers – Tesla Motors and Fisker Automotive.



Our recommendation
Buy the dips, don’t sell the rallies

· Equities. Stephen Uzielli, Portfolio Manager, Portfolio Advisory Group, says the market trend remains upward in the short term despite economic risks on the horizon. The market is not overpriced, just overbought in the short term; we would be adding weight in cyclical holdings on any market pullback.

Fixed income. Chris Kennedy, Associate Director, Portfolio Advisory Group, highlights the following recommendations: Term Call – below benchmark duration. Sector Call – underweight Canadas, overweight Municipals and Provincials, neutral on Corporates. Currency Call –generally favour the C$ against most majors, however with the recent weakness in the British Pound, it is now expected to outperform the C$ over the next year. Alternative Strategies – overweight high yield, overweight Emerging Markets Debt, underweight inflation protected bonds.
Portfolio strategy. Vincent Delisle, Scotia Capital’s Portfolio Strategist, writes, “On the equity side, our global bias remains unchanged: Overweight Americas and Emerging markets, underweight Europe and Japan. From a sector standpoint, U.S. Energy, Materials, Discretionary, Financials, and Technology are posting superior relative earnings momentum. Our Sector Strategy continues to be geared towards Cyclical sectors.”


TM Trademarks used under authorization and control of The Bank of Nova Scotia.
ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF

This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author is an employee of ScotiaMcLeod, a division of Scotia Capital Inc. ("SCI"), but the data selection, analysis and views expressed herein are solely those of the author and not those of SCI. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor SCI can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your investment advisor, who can assess all relevant particulars of any proposed investment or transaction. SCI and the author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this publication in contravention of this notice. All performance data represents past performance and is not indicative of future performance. Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding equity securities of Royal Bank. Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to equity or debt securities of, or have provided advice for a fee with respect to Royal Bank. TM Trademark used under authorization and control of The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.

review your asset mix, and see if you should rebalance your investments to protect your gains

The recent rally in the equity market has been pretty spectacular. As
the markets rebound, one key problem is reemerging. As stock prices
rise, the relative value in in your portfolio is also surging.
Ultimately, the growth in value in your equity portfolio increases
your risk, and it may be appropriate to review your asset mix, and see
if you should rebalance your investments to protect your gains. If
you are looking to review your situation, give me a call.

Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit,
www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This
program is for information purposes only. Fees, management fees and
commissions may be associated with mutual fund investing. Investors
should consult their prospectus before investing. Views expressed are
those of the author, not Scotia Capital. ScotiaMcLeod is a division of
Scotia Capital, member CIPF

this may be one of the most important earnings seasons in years

US earnings season begins today, and we will start to get an idea of
the financial state of many multinational companies. Ultimately,
equity investing is about business ownership, and the next few weeks
should give us a sense if the recent rally in the global market is
actually supported by results. If earnings are strong, then the rally
makes sense, but if we see weakness, the recent rally may be at risk.
Stay tuned through the next few weeks, as this may be one of the most
important earnings seasons in years. If you want to discuss your
portfolio, give me a call.

Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit,
www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This
program is for information purposes only. Fees, management fees and
commissions may be associated with mutual fund investing. Investors
should consult their prospectus before investing. Views expressed are
those of the author, not Scotia Capital. ScotiaMcLeod is a division of
Scotia Capital, member CIPF

there may be enormous volatility as the

There is certainly more optimism in the market today, but perspective
is important. In spite of the recent rally in global markets, it is
important to realize that we have essentially experienced a lost
decade. The ten year return for the Dow has been negative. History
tells us that such long term bear markets are rare, and frequently
preceed massive rallies...but there may be enormous volatility as the
market recovers. The good news is, there are options today that allow
you to preserve capital, while remaining in the market. If you are
looking for ideas, why not give me a call?

Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit,
www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This
program is for information purposes only. Fees, management fees and
commissions may be associated with mutual fund investing. Investors
should consult their prospectus before investing. Views expressed are
those of the author, not Scotia Capital. ScotiaMcLeod is a division of
Scotia Capital, member CIPF

Wareham Weekly Insights

The big picture

Canada’s GDP growth stalls

The latest reports on the Canadian economy unexpectedly showed no GDP growth in July, throwing into question the strength of the country’s recovery. Wednesday’s report from Statistics Canada dashed economists’ expectations of a 0.5% increase, blaming shutdowns at mines, lower oil-and-gas extraction, civic strikes and poor weather. On the bright side, employers added 27,000 jobs in August, and new applications for employment insurance fell. Prime Minister Stephen Harper reported that 90% of the economic stimulus funding has been allocated and that the money will create or support 200,000 jobs over two years by funding 7,500 infrastructure projects, training for 44,000 Canadians, $5.8 billion in added EI benefits and $131 billion in business financing.



Bank of Canada Governor Mark Carney said, “A powerful and sustained restructuring of the global economy has begun, but the efforts required of us will be historic,” as he called on consumers and businesses to spend and hire. Consumer confidence in Canada rose for the seventh month in September, but fell unexpectedly in the U.S. on job security worries. U.S. home prices rose for the third month in July, but still are down 32.6% from their 2006 peak. In Germany, stocks surged as Chancellor Angela Merkel was re-elected and pledged to form a centre-right coalition.



Markets

A bumpy road to recovery

Early gains in the week were erased on Thursday as weak U.S. manufacturing and jobless data sent stocks lower. It was one year ago that the Dow Jones Industrial Average suffered its biggest point drop ever – but also its largest gain soon after. In the fourth quarter of 2008, the S&P 500 moved 3% in one day a stunning 29 times. The extreme market volatility seen last year has abated, but stocks are expected to remain in a volatile environment as the recovery picks up.



On Monday, Bombardier shares surged when its joint venture in China won a US$4-billion contract to build 80 high-speed trains. Apple’s iPhone will go on sale in China in October for about US$700. The iPhone App Store hit 2 billion downloads, with users buying 6 million apps per day. Mergers and acquisitions continued with Xerox buying Affiliated Computer Services, while Abbott Laboratories will acquire a division of Solvay. Meanwhile, British regulators gave Kraft a November 9th deadline to make a formal bid for Cadbury. In the lead-up to the holiday season, Wal-Mart unveiled a list of 100 toys for $10 each, and Toys “R” Us is hiring 35,000 seasonal employees.



Our recommendation
Buy the dips, don’t sell the rallies



· Equities. Stephen Uzielli, Portfolio Manager, Portfolio Advisory Group, says the market trend remains upward in the short term despite economic risks on the horizon. Although market valuations are not excessive at current levels, they are already pricing in a significant rebound in earnings in 2010. The market is not overpriced, just overbought in the short term; we would be adding weight in cyclical holdings on any market pullback.

· Fixed income. Chris Kennedy, Associate Director, Portfolio Advisory Group, highlights the following recommendations: Term Call – below benchmark duration. Sector Call – underweight Canadas, overweight Municipals and Provincials, neutral on Corporates. Currency Call – favour the C$, as well as the A$, which is expected to outperform. Alternative Strategies – overweight high yield, overweight Emerging Markets Debt, underweight inflation protected bonds.

· Portfolio strategy. Vincent Delisle, Scotia Capital’s Portfolio Strategist, writes, “we are in a higher-highs/higher-lows environment and recommend buying the dips, not selling the rallies. Our longer term stance remains positive and we expect equities and corporate bonds to outperform Treasuries over the next 12-18 months.”











The month in review
September: One year later, recovery intact but fragile

September 15th marked one year since Lehman Brothers declared bankruptcy, setting off the worst financial crisis since the Great Depression. Canada’s economy is recovering faster than previously thought. Nonetheless, the Bank of Canada kept its lending rate at an all-time low of 0.25%, and renewed its pledge to hold rates until mid-2010. Canada’s banks were ranked the soundest in the world for the second year in a row by the World Economic Forum, while U.S. banks were ranked 108th. Prime Minister Stephen Harper cautioned that while the recession technically may be over, the recovery is extremely fragile. Finance Minister Jim Flaherty insists that it would be a major mistake for developed economies not to continue stimulus.



Federal Reserve Chairman Ben Bernanke said the U.S. recession is technically over, with growth expected to show in the third quarter. The Federal Reserve kept interest rates unchanged at 0.25%, while giving its most upbeat assessment of the U.S. economy in 18 months and voting to end its US$1.45-trillion program for buying mortgage debt three months early.



G20 leads economic cooperation

At London’s G20 meeting, finance ministers agreed the world economy is stabilizing, but recovery is not established enough to start unwinding stimulus programs. Bankers’ pay is at the centre of discussions; Britain’s finance minister says “the party is over” for bankers who were at the heart of “this almighty car crash.” Bank of England Governor Mervyn King revealed that the Royal Bank of Scotland and HBOS had been just hours away from collapsing last October.



Loonie shows strength; gold tops US$1,000

As the Canadian dollar approached 94 cents U.S., the Bank of Canada repeated warnings that economic recovery may be hampered by the strength of the currency, but said it would ignore short-term volatility in its exchange rate. Gold climbed above US$1,000 an ounce as investors sought a hedge against a falling U.S. currency.



Canadian stocks regain October 2008 levels

Markets advanced in September, reaching levels last seen in October 2008. The TSX has gained 50% since its March 2009 low.



Mergers and acquisitions marry superheroes with princesses

Disney will buy Marvel Entertainment for $4 billion in its biggest deal since buying Pixar in 2006, T-Mobile and Orange will merge to create the U.K.’s biggest wireless operator, and Swedish sports car maker Koenigsegg has teamed up with a Chinese company to buy Saab from General Motors. Magna plans to buy a stake in Opel, GM’s European car division, but risks alienating customers VW and BMW. Canada’s biggest IT services player, CGI, surged on takeover speculation after Dell bid US$3.9 billion for Perot Systems, a 68% premium.



Smart phone wars

In technology news, new hardware and an alliance with Facebook could see Nokia catching up with rivals such as Apple and Research In Motion. Apple unveiled an updated line of iPods this month, while RIM’s quarterly profit and outlook fell short of analyst expectations, sending its shares down sharply. Google’s new Internet phone service, Google Voice, is expected to draw scrutiny from regulators.



Alternative energy: changing the tide

Nova Scotia was given the green light to test turbines in the Bay of Fundy. If viable, sea power could meet 10% of the province’s energy needs. First Solar struck a 10-year deal with the Chinese government to build the world’s largest solar field. Solar panels will blanket a desert area larger than Manhattan and generate enough energy to light 3 million homes. A123 Systems, a U.S.-based battery maker for electric cars, jumped 43% in one day after raising US$380 million through an initial public offering.



TM Trademarks used under authorization and control of The Bank of Nova Scotia.
ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF

This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author is an employee of ScotiaMcLeod, a division of Scotia Capital Inc. ("SCI"), but the data selection, analysis and views expressed herein are solely those of the author and not those of SCI. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor SCI can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your investment advisor, who can assess all relevant particulars of any proposed investment or transaction. SCI and the author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this publication in contravention of this notice. All performance data represents past performance and is not indicative of future performance. Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding equity securities of Royal Bank. Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to equity or debt securities of, or have provided advice for a fee with respect to Royal Bank. TM Trademark used under authorization and control of The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.

October got off to a rough start

October got off to a rough start yesterday, with a significant sell
off. This should not be surprising after the dramatic rally we have
seen over the past few months. The possibility of a significant
downward move in the market has been widely expected, but it has not
happened yet. Many investors have been sitting on the sidelines,
waiting for a chance to get back in the market. In fact, this cash on
the sidelines may be the reason any downward move may not be too
dramatic. Rather than rush back in all at once, I believe investors
should plan their strategy. If you are looking at getting back into
the market, why not get a second opinion before you make your move.
Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit,
www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This
program is for information purposes only. Fees, management fees and
commissions may be associated with mutual fund investing. Investors
should consult their prospectus before investing. Views expressed are
those of the author, not Scotia Capital. ScotiaMcLeod is a division of
Scotia Capital, member CIPF

North American Markets - 7th consecutive positive month

September 2009 is coming to an end, and it appears North American
markets will experience their seventh consecutive positive month.
This is a spectacular winning streak, after the grisly bear market of
2008. This change in market sentiment may make you more comfortable
with your portfolio, but it also should inspire you to look at your
long term strategy. Through the downturn, most mutual funds fell more
than the index, and most are struggling to beat the index as the
market recovers. If you are comfortable investing for the long term,
but are looking for a fresh approach, give me a call.

Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit,
www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This
program is for information purposes only. Fees, management fees and
commissions may be associated with mutual fund investing. Investors
should consult their prospectus before investing. Views expressed are
those of the author, not Scotia Capital. ScotiaMcLeod is a division of
Scotia Capital, member CIPF

Wareham Weekly Insights

Market Watch



The big picture

U.S. economy picking up steam

The Federal Reserve kept interest rates unchanged at 0.25%, while giving its most upbeat assessment of the U.S. economy in 18 months and voting to end its US$1.45-trillion program for buying mortgage debt three months early. G20 world leaders are holding talks on the global financial crisis today, where bankers’ pay will be at the centre of discussions. Britain’s finance minister says “the party is over” for bankers who were at the heart of “this almighty car crash.” Bank of England Governor Mervyn King revealed that the Royal Bank of Scotland and HBOS had been just hours away from collapsing last October.

In Canada, Prime Minister Stephen Harper cautioned that while the recession technically may be over, the recovery is extremely fragile, particularly in the automotive and forestry industries. Retail sales fell 0.6% to $34.2 billion in July, mainly because of lower gas prices. The Bank of Canada said it would ignore short-term volatility in its exchange rate but warned again that a strong Canadian dollar could curb growth. A rate increase could come after the middle of 2010.

The Markets

Stocks slide on falling oil prices and home sales

North American stock indices retreated broadly on Thursday as a slide in oil prices knocked energy shares lower and weak U.S. home sales data hit other shares. With supplies on the rise, oil prices dropped more than 4% to less than $66 a barrel. Research In Motion’s quarterly profit and outlook fell short of analyst expectations on Thursday, sending its shares down sharply. Canada’s biggest IT services player, CGI, surged nearly 6% Monday on takeover speculation, following Dell’s proposed acquisition of Perot Systems for US$3.9 billion, which represents a 68% premium.

Canadian auto supplier Magna said it will appease Volkswagen, which has threatened to pull business from Magna if it buys a stake in Opel, a competing car company. After rejecting an initial offer of US$16 billion, Cadbury has asked Kraft to submit another bid. A123 Systems, a U.S.-based battery maker for electric cars, jumped 43% in one day after raising US$380 million through an initial public offering. Google re-touched the US$500 level, after hitting a low of US$250 in the past year. Google’s new Internet phone service, Google Voice, is expected to draw scrutiny from regulators.

Our recommendation
Favour equities to outperform



· Equities. Stephen Uzielli, Portfolio Manager, Portfolio Advisory Group, says the market trend remains upward in the short term despite economic risks on the horizon. Although market valuations are not excessive at current levels, they are already pricing in a significant rebound in earnings in 2010. The market is not overpriced, just overbought in the short term; we would be adding weight in cyclical holdings on any market pullback.

· Fixed income. Chris Kennedy, Associate Director, Portfolio Advisory Group, highlights the following recommendations: Term Call – below benchmark duration. Sector Call – underweight Canadas, overweight Municipals and Provincials, neutral on Corporates. Currency Call – favour the C$, as well as the A$, which is expected to outperform. Alternative Strategies – overweight high yield, overweight Emerging Markets Debt, underweight inflation protected bonds.

· Portfolio strategy. Vincent Delisle, Scotia Capital’s Portfolio Strategist, writes, “we are in a higher-highs/higher-lows environment and recommend buying the dips, not selling the rallies. Our longer term stance remains positive and we expect equities and corporate bonds to outperform Treasuries over the next 12-18 months.”

TM Trademarks used under authorization and control of The Bank of Nova Scotia.
ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF

This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author is an employee of ScotiaMcLeod, a division of Scotia Capital Inc. ("SCI"), but the data selection, analysis and views expressed herein are solely those of the author and not those of SCI. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor SCI can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your investment advisor, who can assess all relevant particulars of any proposed investment or transaction. SCI and the author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this publication in contravention of this notice. All performance data represents past performance and is not indicative of future performance. Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding equity securities of Royal Bank. Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to equity or debt securities of, or have provided advice for a fee with respect to Royal Bank. TM Trademark used under authorization and control of The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.

Wareham Weekly Insights

Market Watch



The big picture

One year later: Growth emerges



Tuesday marked one year since Lehman Brothers declared bankruptcy, setting off the worst financial crisis since the Great Depression. U.S. President Barack Obama spoke to a Wall Street audience, lauding his administration’s moves to prevent future financial calamities and warning that further bailouts are unlikely. Legendary investor Warren Buffett also praised the U.S. government for its efforts to heal the economy. Federal Reserve Chairman Ben Bernanke said the U.S. recession is technically over, with growth expected to show in the third quarter, but warned the economy may remain weak for some time.



In Canada, Finance Minister Jim Flaherty insisted that it would be a major mistake for developed economies not to continue stimulus, and the Bank of Canada repeated warnings that economic recovery may be hampered by the strong loonie. Inflation was negative for the third straight month, but economists said it’s not deflation – taking energy out of the calculation, inflation would have been a healthy 1.4%. The Bank of England may reduce the Bank’s deposit rate to discourage banks from hoarding reserves and encourage them to buy more assets. Beijing filed a complaint with the World Trade Organization as the U.S. raised tariffs on Chinese-made tires, which have cost 5,000 U.S. jobs since 2004.



Markets

Stocks rally and book sellers rejoice



The TSX index had a three-day run-up, hitting its highest level in almost a year on Wednesday as commodities and financial shares rallied. But on Thursday, stocks in Canada and the U.S. slipped on concerns whether recent market gains were justified, despite the latest round of solid economic data. The benchmark S&P 500 is now up 58% since its early March lows.



Magna’s second-largest customer, BMW, warned that their relationship could be in jeopardy if the parts supplier turns into a competitor. Magna plans to buy a stake in Opel, GM’s European car division. Nova Scotia was given the green light to test turbines in the Bay of Fundy. If viable, sea power could meet 10% of the province’s energy needs. Suncor is making deep cuts after its $22.7-billion takeover of Petro-Canada, eliminating 1,000 jobs, selling properties and reducing natural gas production. Booksellers are rejoicing as bestselling author Dan Brown’s new book, The Lost Symbol, sold over a million copies in the first 24 hours of its release; however, Amazon reported the e-book edition for its Kindle reader had actually outsold the hardcover version.


Our recommendation
Expect equities and corporate bonds to outperform



· Equities. Stephen Uzielli, Portfolio Manager, Portfolio Advisory Group, says the market trend remains upward in the short term despite economic risks on the horizon. Although market valuations are not excessive at current levels, they are already pricing in a significant rebound in earnings in 2010. The market is not overpriced, just overbought in the short term; we would be adding weight in cyclical holdings on any market pullback.

Fixed income. Chris Kennedy, Associate Director, Portfolio Advisory Group, highlights the following recommendations: Term Call – below benchmark duration. Sector Call – underweight Canadas, overweight Municipals and Provincials, neutral on Corporates. Currency Call – favour the C$, as well as the A$, which is expected to outperform. Alternative Strategies – overweight high yield, overweight Emerging Markets Debt, underweight inflation protected bonds.
Portfolio strategy. Vincent Delisle, Scotia Capital’s Portfolio Strategist, writes, “we are in a higher-highs/higher-lows environment and recommend buying the dips, not selling the rallies. Our longer term stance remains positive and we expect equities and corporate bonds to outperform Treasuries over the next 12-18 months.”

TM Trademarks used under authorization and control of The Bank of Nova Scotia.
ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF

This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author is an employee of ScotiaMcLeod, a division of Scotia Capital Inc. ("SCI"), but the data selection, analysis and views expressed herein are solely those of the author and not those of SCI. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor SCI can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your investment advisor, who can assess all relevant particulars of any proposed investment or transaction. SCI and the author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this publication in contravention of this notice. All performance data represents past performance and is not indicative of future performance. Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding equity securities of Royal Bank. Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to equity or debt securities of, or have provided advice for a fee with respect to Royal Bank. TM Trademark used under authorization and control of The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.

seek other alternatives to traditional fund investments

Many mutual fund investors have seen the recovery of global markets, but have yet to see their investments following suit. I have frequently discussed the impact of high management fees on mutual fund investors, and this is part of the story. Another major drag on many fund companies is the redemptions they have suffered through the downturn. In other words, when investors want out of their fund holdings, the manager is forced to sell, regardless of whether it is the right time to do so. and I believe many fund families will continue to suffer from this as investors seek other alternatives to traditional fund investments.

reason for optimism this week

There is reason for optimism this week, as we have seen most global
markets reaching new highs for the year. It is important to keep
things in perspective. The Dow in New York is currently approaching
the level it reached a decade ago. The Nasdaq is still sixty percent
below its all time high. The long term returns of many international
markets are even worse. As the market recovers, it may be tempting to
simply let things stay the same, believing this is following the
conventional wisdom of buying and holding. In fact, this approach has
not worked for at least a decade, and I believe you should discuss
your long term strategy with your advisor. If you are looking for a
second opinion, why not give me a call.

Do you want to discuss your alternatives?
Have you outgrown your mutual funds?


For a review your portfolio, or a complimentary copy of my CD, visit,
www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This
program is for information purposes only. Fees, management fees and
commissions may be associated with mutual fund investing. Investors
should consult their prospectus before investing. Views expressed are
those of the author, not Scotia Capital. ScotiaMcLeod is a division of
Scotia Capital, member CIPF

consider a short term bond fund

On Saturday, I discussed te fact that money market funds and cashable
GICs have reached a point where they are paying essentially no yield.
This is definitely motivating investors to seek alternatives for their
short term, secure money. In essence, the returns are the equivalent
of putting your cash under your mattress. One interesting alternative
that you may consider is a short term bond fund. There are several
funds that are focused on high quality investment grade bonds, which
offer significantly better returns than a money market fund, with very
little extra risk. If you are looking for a home for your "safe"
money, you may want to consider a short term bond fund i n your
portfolio. Are you looking for a second opinion?

Wareham Weekly Insights

The big picture

Canada bouncing back, but rates stay on hold



Canada’s economy is recovering faster than previously thought, the Bank of Canada (BoC) said Thursday. Nonetheless, the BoC kept its lending rate at an all-time low of 0.25%, and renewed its pledge to hold rates until mid-2010. Canada’s banks were ranked the soundest in the world for the second year in a row by the World Economic Forum, while U.S. banks were ranked 108th.



At London’s G20 meeting, finance ministers agreed the world economy is stabilizing, but recovery is not established enough to start unwinding stimulus programs. Finance Minister Jim Flaherty said, “We agreed that we are not out of the woods . . . We must all remain focused on fully implementing our stimulus packages.” The International Monetary Fund called Canada’s economic strategy “large, timely, well-diversified and structured for maximum effectiveness.” The IMF raised its estimate for global economic growth in 2010 to 2.5%, from 1.9%. Rating agency Moody’s said on Tuesday that the U.S. government’s triple-A credit rating was safe and that the U.K. and Spain are unlikely to lose their top credit ratings.



Markets

Stocks rise as oil and metals rally; gold breaks $1,000



Rising prices for oil and metals helped push the TSX index to an 11-month high this week and the S&P index extended its gain to five straight days, its longest winning streak since November. Oil prices rose 6% since last Thursday and gold rallied above $1,000 an ounce for only the third time in history. The Canadian dollar surged as high as 93.56 cents, but fell back as investors weighed the risk of central bank intervention.



First Solar struck a 10-year deal with the Chinese government to build the world’s largest solar field. Solar panels will blanket a desert area larger than Manhattan and generate enough energy to light three million homes. Apple chief executive Steve Jobs unveiled a new iPod Nano equipped with a video camera and announced price cuts. In merger and acquisition activity, Telus bought Black’s Photo, adding 113 stores to its retail base; Cadbury rejected Kraft’s merger offer of US$16.7 billion; T-Mobile and Orange will merge to create the U.K.’s biggest wireless operator; and Swedish sports car maker Koenigsegg has teamed up with Beijing Automotive Industry Holding Co. (BAIC) to buy Saab from General Motors.



Our recommendation
Buying the dips, not selling the rallies



· Equities. Stephen Uzielli, Portfolio Manager, Portfolio Advisory Group, says the market trend remains upward in the short term despite economic risks on the horizon. Although market valuations are not excessive at current levels, they are already pricing in a significant rebound in earnings in 2010. The market is not overpriced, just overbought in the short term; we would be adding weight in cyclical holdings on any market pullback.

Fixed income. Chris Kennedy, Associate Director, Portfolio Advisory Group, highlights the desk’s current recommendations as follows: Term Call – below benchmark duration. Sector Call – underweight Canadas, overweight Municipals and Provincials, neutral on Corporates. Currency Call – favour the C$, as well as the A$, which is expected to outperform. Alternative Strategies – underweight high yield, overweight Emerging Markets Debt, neutral on inflation protected bonds.
Portfolio strategy. Vincent Delisle, Scotia Capital’s Portfolio Strategist, writes, “we are in a higher-highs/higher-lows environment and recommend buying the dips, not selling the rallies. Our longer term stance remains positive and we expect equities and corporate bonds to outperform Treasuries over the next 12-18 months.”

TM Trademarks used under authorization and control of The Bank of Nova Scotia.
ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF

This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author is an employee of ScotiaMcLeod, a division of Scotia Capital Inc. ("SCI"), but the data selection, analysis and views expressed herein are solely those of the author and not those of SCI. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor SCI can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your investment advisor, who can assess all relevant particulars of any proposed investment or transaction. SCI and the author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this publication in contravention of this notice. All performance data represents past performance and is not indicative of future performance. Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding equity securities of Royal Bank. Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to equity or debt securities of, or have provided advice for a fee with respect to Royal Bank. TM Trademark used under authorization and control of The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.

investors requiring secure income should look further

Yesterday, the Bank Of Canada reaffirmed its commitment to maintaining
record low interest rates well into next year. This is great news for
consumers and homeowners, but leaves investors facing the potential of
near zero interest on their secure investments. In this environment,
investors counting on stable income may find it difficult to generate
cashflow. I believe investors requiring secure income should look
further, and consider three options. First, they should look at good
quality corporate bonds. Second, the preferred shares issued by major
financial firms offer attractive yield. Finally, guaranteed
withdrawal benefit products like Income Plus give stable income, with
exposure to the equity markets. Ultimately, security concious
investors have options, but low interest rates really do complicate
things.

Do you want to discuss your alternatives?
Have you outgrown your mutual funds?

Planning For Retirement

US President Obama will be addressing his nation this evening,
concentrating on their healthcare crisis. Although the Canadian
system is much different, we have our own problems. Retirees are
facing spiraling costs for services not covered by the Canadian
system. This is one of the more difficult elements of planning for
retirement, as it is tough to estimate the impact these expenses will
have over a lengthy retirement. The greatest financial impact is
likely to come from the growing cost of nursing home care. A
relatively new solution is the emergence of insurance solutions that
may help offset the cost of in home or nursing home care. Although
these insurance plans will not work for everyone, I believe they will
form an important part of financial plans moving forward.

Do you want to discuss your alternatives?
Have you outgrown your mutual funds?


For a review your portfolio, or a complimentary copy of my CD, visit,
www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This
program is for information purposes only. Fees, management fees and
commissions may be associated with mutual fund investing. Investors
should consult their prospectus before investing. Views expressed are
those of the author, not Scotia Capital. ScotiaMcLeod is a division of
Scotia Capital, member CIPF

Wareham Weekly Insights

The big picture

Global recovery slowly takes root



“It is a sign that we are on the path to economic recovery,” said U.S. President Obama, after a survey showed the U.S. manufacturing sector grew in August following 18 consecutive monthly declines. Nevertheless, the U.S. jobless rate in

August climbed to 9.7%, the highest since 1983, and employers cut another 216,000 jobs, although fewer than in July.



Australia’s economy grew strongly, expanding 0.6% in the second quarter – the best result among developed countries. However, this did not prompt the Reserve Bank of Australia to change its key interest rate. The European Central Bank also left interest rates at a record low and signalled it’s in no rush to withdraw emergency stimulus measures. Finance ministers from the Group of 20 meet in London on the weekend to draft a strategy to keep the economic momentum going. The IMF increased its estimate for global economic growth to slightly less than 3% in 2010, up from 2.5% in July. Two million buyers took advantage of Germany’s car scrapping rebate, which expired on Wednesday, driving the country’s auto sales up 28% in August. Some worry that 2010 sales could slump as many drivers rushed to take advantage of 2009 sales incentives. In the U.S., lacklustre back-to-school sales hinted that retailers may be facing another tough holiday season.



Markets

Markets tumble, then climb – gold closes in on $1,000



China’s key stock index fell 6.7% early in the week knocking European and North American stock markets lower along with the price of oil. Stocks rose again on Thursday, as U.S. chain stores reported surprising sales that topped projections, spurring the S&P past the 1,000 mark. Meanwhile, the price of gold jumped to a six-month high of $999.50/ounce.



Bombardier saw its second-quarter profit decline by $100 million – less than analysts had expected – as its aerospace division delivered fewer planes than a year ago. In technology news, new hardware and an alliance with Facebook could see Nokia catching up with rivals such as Apple and RIM. Apple is expected to unveil an updated line of iPods next week. Sony says it will introduce a 3-D television by the end of 2010; its TV division has lost money for five straight years. Disney will buy Marvel Entertainment for $4 billion, marrying princesses with superheroes in its biggest deal since buying Pixar in 2006 for $7.4 billion in stock.



Our recommendation
Rebalance portfolios to buy low, sell high



· Equities. Stephen Uzielli, Portfolio Manager, Portfolio Advisory Group, says the market trend remains upward in the short term despite economic risks on the horizon. Although market valuations are not excessive at current levels, they are already pricing in a significant rebound in earnings in 2010. The market is not overpriced, just overbought in the short term; we would be adding weight in cyclical holdings on any market pullback.



Fixed income. Chris Kennedy, Associate Director, Portfolio Advisory Group, highlights the desk’s current recommendations as follows: Term Call – below benchmark duration. Sector Call – underweight Canadas, overweight Municipals and Provincials, neutral on Corporates. Currency Call – favour the C$, as well as the A$, which is expected to outperform. Alternative Strategies – underweight high yield, overweight Emerging Markets Debt, neutral on inflation protected bonds.


Portfolio strategy. Vincent Delisle, Scotia Capital's Portfolio Strategist, writes "we are in higher high/higher lows environment and recommend buying the dips, not selling the rallies. Our longer term stance remains positive and we expect equities and corporate bonds to outperform Treasuries over the next 12-18 months."

The month in review
August: Major economies continue to stabilize as rates stay on hold



The U.S. Federal Reserve declared that U.S. economic activity is “levelling out.” The central bank held its key lending rate at a record low, and signalled it would end one of its stimulus programs (buying U.S. Treasury securities) at the end of October. Federal Reserve Chairman Ben Bernanke declared that the U.S. economy is on the verge of a long-awaited recovery after enduring a brutal recession and the worst financial crisis since the Great Depression. Bernanke was re-appointed for a second term.



In Europe, Germany and France unexpectedly returned to growth in the second quarter. Good news also came out of the U.K. – data showed house prices stabilized, and the Royal Institution of Chartered Surveyors now predicts the average house price will rise by the end of the year, reversing its forecast of a 10% to 15% decline. In Canada, retail sales jumped 1% from May to June, but remain 4.4% lower than a year ago. With inflation at a 56-year low, consumer spending remains weak, and some economists say it could be years before companies begin to raise prices.



Canadian banks shine

In August, the Royal Bank reported record profits while earnings from the Bank of Montreal, TD Bank and the Bank of Nova Scotia also beat expectations. Financials were the largest contributor to the TSX Index last month and account for 51% of the gains year-to-date.



Loonie strength prompts Bank of Canada warning

As the Canadian dollar hit a 10-month high versus the U.S., the Bank of Canada (BoC) warned again that it is prepared to intervene to stop the sharp rise of the loonie from derailing the economic recovery. The BoC has not intervened in foreign exchange markets in more than 10 years.



TSX up for the sixth straight month

In August, the TSX broke through 11,000 to a 10-month high, and the S&P 500 rose above 1,000 for the first time in nine months. Both indices fell back, but still finished the month slightly up. The Canadian index is up 20.9% year-to-date with the top 10 contributors accounting for 64% of the gains (Royal Bank, TD Bank, Research In Motion, Bank of Nova Scotia, Bank of Montreal, Teck Resources, Suncor, Petro-Canada, Canadian Natural Resources and Talisman).



Auto industry soldiers on

The U.S. government’s $3-billion “cash for clunkers” program drove 700,000 auto sales, prompting Ford to hike factory output. Toyota will slash production by 580,000 vehicles – 6% of global capacity – despite capturing 19% of the sales from the program. General Motors claims its new electric car, the Chevy Volt, will get an unprecedented 230 miles per gallon (100 km/l), four times the mileage of Toyota’s Prius. It will go on sale in late 2010 for US$40,000. Meanwhile, Volkswagen announced that it will pay US$4.7 billion for a 42% stake in Porsche as it executes a gradual merger.



Apple heats up

As the iPhone prepares for its debut in China – the world’s largest cell phone market – Apple is investigating reports from France of iPhone screens exploding, apparently because of overheated lithium ion batteries. Meanwhile, analysts speculate that Apple is working on a new multimedia tablet that will let people access movies and TV, games, the Internet and books.



TM Trademarks used under authorization and control of The Bank of Nova Scotia.
ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF

This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author is an employee of ScotiaMcLeod, a division of Scotia Capital Inc. ("SCI"), but the data selection, analysis and views expressed herein are solely those of the author and not those of SCI. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor SCI can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your investment advisor, who can assess all relevant particulars of any proposed investment or transaction. SCI and the author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this publication in contravention of this notice. All performance data represents past performance and is not indicative of future performance. Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding equity securities of Royal Bank. Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to equity or debt securities of, or have provided advice for a fee with respect to Royal Bank. TM Trademark used under authorization and control of The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.

Review your portfolio

The last long weekend of the summer is upon us. With children back to school, and vacations done, this is a good time to be reviewing your portfolio. If you are ready to review your situation, here are are few key considerations. First, are you really comfortable with your level of risk. Second, have you accumulated enough wealth to be on track for your long term goals. Finally, are you sure that you are in the right type of investment to best suit your needs. If you have sev Do you want to discuss your alternatives?
Have you outgrown your mutual funds?


For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This program is for information purposes only. Fees, management fees and commissions may be associated with mutual fund investing. Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital, member CIPF

September is off to its typical start

September is off to its typical start, with significant losses in most global markets. Improving economic news has been offset by profit taking, and it may be tempting to worry about your portfolio if we get the sell off I expect. In fact, the positive economic signs support buying investments for the long term. I believe September and October will be an excellent opportunity to rebalance your portfolio,especially if you have cash on the sidelines. Ideally, you should sit down with your advisor, and prepare for the opportunity that may arise if we get continued weakness over the next couple of months. If you feel you need help preparing for the future, why not give me a call. Do you want to discuss your alternatives? Have you outgrown your mutual funds? For a review your portfolio, or a complimentary copy of my CD, visit,www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260.


This program is for information purposes only. Fees, management fees and commissions may be associated with mutual fund investing. Investors should consult their prospectus before investing. Views expressed arethose of the author, not Scotia Capital. ScotiaMcLeod is a division ofScotia Capital, member CIPF

Wareham Weekly Insights

The big picture

U.S. deficit looms as recovery takes hold



U.S. President Barack Obama nominated Ben Bernanke for a second term as Federal Reserve (the Fed) Chairman, praising him for leading the Fed through “one of the worst financial crises that this nation and this world has ever faced." The same day, a grim U.S. budget forecast US$9 trillion in additional debt over the next decade, up $2 trillion since the last forecast, because of plunging tax receipts, soaring spending and a sluggish recovery. U.S. consumer confidence rose unexpectedly in August after two consecutive months of declines. Consumer expectations of where the economy will be in six months rose to its highest level since the recession began in December 2007.



In Canada, retail sales jumped 1% from May to June, but remain 4.4% lower than a year ago. The Bank of Canada (the BoC) warned again that it is prepared to intervene to stop the sharp rise of the loonie from derailing the economic recovery. The BoC has not intervened in foreign exchange markets in more than 10 years.



All eyes will be on Japan this Sunday as voters take to the polls. Expectations are for the opposition Democratic Party to oust the ruling conservative Liberal Democratic Party for only the second time in its 54-year history.



Markets

Investors weigh issues



Markets were choppy as U.S. bank concerns undermined improving consumer confidence, jobless and housing data. In Canada, the Royal Bank reported record profits while earnings from the Bank of Montreal, TD Bank and the Bank of Nova Scotia also beat expectations.



As the iPhone prepares for its debut in China – the world’s largest cell phone market – Apple is investigating reports from France of iPhone screens exploding, apparently because of overheated lithium ion batteries. Meanwhile, analysts speculate that Apple is working on a new multimedia tablet that will let people access movies and TV, games, the Internet and books. Toyota will slash production by 580,000 vehicles – 6% of global capacity – despite capturing 19% of the 700,000 U.S. auto sales generated by the “cash for clunkers” program.



Our recommendation
Rebalance portfolios to buy low, sell high



· Equities. Stephen Uzielli, Portfolio Manager, Portfolio Advisory Group, says the market trend remains upward in the short term despite economic risks on the horizon. Although the market may be overbought in the short term and subject to profit taking, we do not believe markets are overpriced. A period of consolidation or a range bound market allowing time for fundamentals to catch up with share prices is likely to occur over the coming months. Recall that September, on average, is historically the worst month for equity investors.

· Fixed income. Chris Kennedy, Associate Director, Portfolio Advisory Group, highlights the desk’s current recommendations as follows: Term Call – below benchmark duration. Sector Call – underweight Canadas, overweight Municipals, neutral on Provincials and Corporates. Currency Call – favour the C$, as well as the A$, which is expected to outperform. Alternative Strategies – underweight high yield, overweight Emerging Markets Debt, neutral on inflation protected bonds.

· Portfolio strategy. When market volatility leads to large shifts in the weights of individual holdings, we recommend clients rebalance portfolios to maintain a discipline that encourages profit taking on strength, while adding on weakness in other positions that may have underperformed.

TM Trademarks used under authorization and control of The Bank of Nova Scotia.
ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF

This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author is an employee of ScotiaMcLeod, a division of Scotia Capital Inc. ("SCI"), but the data selection, analysis and views expressed herein are solely those of the author and not those of SCI. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor SCI can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your investment advisor, who can assess all relevant particulars of any proposed investment or transaction. SCI and the author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this publication in contravention of this notice. All performance data represents past performance and is not indicative of future performance. Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding equity securities of Royal Bank. Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to equity or debt securities of, or have provided advice for a fee with respect to Royal Bank. TM Trademark used under authorization and control of The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.