QUARTERLY An exclusive newsletter from Mark J. Krygier, LL.B., CFP Vice President & Portfolio Manager Commodity Bulls Be Forewarned! One of the very first lessons I learned about investing after articling in law and starting in this business in 1996, was about the different types of stocks in which one could invest. A seasoned guru, Al P., gave us rookies a chalk on blackboard “powerful and pointed” presentation which I remember to this day. He drew two charts, one with a line that started in the bottom left-hand corner and moved at a 45 degree angle to the upper-right hand corner – “window” A. The second chart was a line that simply went from left to right in a series of alternating up and down half circles – i.e. a cyclical formation, in “window” B. Al said that there are two types of March 2012 stocks to buy, companies that have secular growth rates (window A) and companies Volume 15, Issue 1 that have cyclical earnings (window B). He stated that the bulk of one’s long-term investments should be invested in the first set, as long as the secular growth in earnings remained intact, whereas the cyclical companies were to be bought when“If a country should so choose, it earnings were low (high price/earnings “PE” ratio) and sold when earnings were can pay [for oil] in gold and we high (low PE ratio). The slowing of global growth, as exhibited in China as its would accept that without any reservation.” American and European customers have to regroup after gorging on debt induced consumption, is highly indicative of a slowing in the commodity cycle, soIran’s Central Bank Governor commodity bulls be forewarned! Mahmoud Bahmani For Canadian investors, a slowing commodity cycle has significant implications. No question, the Canadian stock market was “the place to be” globally in the ‘00s Did you know? decade, as it was in the ‘70s decade of oil embargo fame, as the Canadian market, Worth repeating: In “Stocks for like the Australian and Brazilian markets, are highly (approximately 50%) weighted the long run”, Jeremy Siegel lists towards commodity stocks. However, in the ‘80s and ‘90s as global growththe after-tax returns for investments overcame high inflation, real estate collapses, Black Monday in ’87, the end of the from 1871-2006, and for most 20- Cold War, etc., it was the U.S. markets (which today represent 24% of world GDP) year periods, as being: which reigned supreme. Global growth settled down and, despite calls for the Stocks 6.7% contrary, U.S. markets ran for the greatest secular bull market in history. Therefore, Bonds 2.8% at the very least consider how much commodity exposure your portfolio contains, T-Bills 1.7% Gold 0.4% whether in stocks, mutual funds or ETFs, and decide how much secular versus CPI (inflation) 2.1% cyclical growth you want as you consider an ever-increasing lifespan in retirement.Consider how this information fits Bottom line – the Canadian market has been stable versus many others, but be sure with your investment strategies! you are not “driving” your investment strategies by looking in the rear-view mirror.CAPITAL MARKET HIGHLIGHTS Dr. Pianalto, President of the Federal Reserve Bank in Cleveland, noted the U.S. economy’s recovery has been “frustratingly slow” and it make take four to five years of slow growth to push unemployment back down to 6%. European banks took advantage of 530 billion Euros in funding, to temporarily quiet fears over Greek defaults. Chinese manufacturing shows it is slowing, but it does not appear headed for a collapse as some had feared.WHAT TO DO NOW? The stock markets appear to be climbing a “wall of worry”, and those that cannot overcome their fears will not participate as markets improve. Consider your longer-term goals and align your investments accordingly.Mark J. Krygier: T : 416-512-6441 E : email@example.com Avital Pearlston: T : 416-512-6674 E: firstname.lastname@example.org 4950 Yonge St., 16th Floor, Toronto, ON M2N 6K1 Toll-Free 1-800-382-4964
FINANCIAL SUCCESS SOLUTION$ - U.S. Federal Estate Tax Implications! Many Canadians are unaware that they may be subject to U.S. estate tax. Even if they don’t have any connection to the U.S. (i.e. not a U.S. citizen, resident or green-card holder), but own U.S. property (for example U.S. stocks or real estate) at the time of death, they may be liable for U.S. Estate tax. While Canada does not have any estate taxes (probate is different and not significant in comparison), U.S. federal estate tax is a tax levied by the U.S. government on large transfers of wealth between individuals at the time of death. Note the following important points regarding U.S. estate tax: For U.S. citizens and residents, this tax applies to their worldwide assets in excess of a certain threshold at the time of death. For Canadians, U.S. estate tax will only apply to that portion of their assets deemed to be situated in the United States (U.S. “situs” assets) if the cumulative amount of these assets, OR their worldwide assets, exceed a threshold. Generally, there is no U.S. estate tax liability, if, at the time of death, the deceased had less than $60,000 of U.S. situs assets; or $5,000,000 ($5,120,000 in 2012) of worldwide assets. If you would like more information regarding U.S. estate tax, call us for more detailed information. GLOBAL BENCHMARKS STOCK WATCH ETFs TO WATCH (In Canadian Dollars to February 29, 2012) CANADA CDN Advantaged High Yield Bond ETF – CHB (TSX): $20.73 Bank of Nova Scotia. - BNS Asset Class YTD 3-Year (TSX) - $53.35 In Brief: This ETF offers a low cost S&P 500 (USA) 5.6% 15.5% Year High: $60.43 Low: $47.54 way of accessing high yield corporate bonds which offer NASDAQ 10.3% 18.8% rd BNS is the 3 largest bank compelling returns in this low-yield TSX 60 (Canada) 5.9% 16.8% in Canada and the country’s environment. MSCI Europe 7.4% 7.4% most international bank. Some of the benefits of this ETF: MSCI EAFE 7.5% 7.0% Established franchises Good way to hold a diversified across Latin America. basked of bonds that are not China Shanghai 7.0% -0.5% Heavy investing in growth investment grade to reduce Brazil Bovespa 22.1% 23.2% opportunities should result in individual security risk. MSCI World 6.4% 10.4% solid results going forward. ETFs are bought like a stock 3-mo. CDN T-Bill 0.1% 0.6% so pricing is transparent. Risks: any changes in market 5-yr GOC Bonds -0.2% 4.4% Yield of 7.45% is attractive. conditions and regulations. U.S.$/CDN$@ -3.1% -8.0% In summary: This ETF is suitable U.S./ INTERNATIONAL for those seeking higher yields 0.9895 change) from their bond portfolio. Intel Corporation INTC (Nasdaq) U.S. $26.88 Year High: $27.50 Low: $19.16 WHAT AM I UP TO? INTC is a leading global MY THANKS: The month of February started off with To Reanne P., Bill M., and Daniel the birth of a healthy baby boy to our manufacturer of integrated family, for which we are so thankful. M. for referring my services. If circuits. you know someone - family, Has increased its exposure to friends or colleagues - who may The month ended with the passing of high-growth segments of the my 95 year-old grandmother, a be able to use some assistance chip-market, i.e. mobile and survivor of the Holocaust, and with their investment planning and cloud computing. matriarch of my father’s family. She you think that I can be of some leaves behind four grandchildren, Risks: A prolonged economic help, contact me and I would be twelve great grandchildren, and a lot of pleased to call and meet with slow-down could affect capital wonderful memories. them personally. spending and product demand.The information contained herein has been provided by TD Waterhouse Private Investment Advice and is for information purposes only. The information hasbeen drawn from sources believed to be reliable. Where such statements are based in whole or in part on information provided by third parties, they are notguaranteed to be accurate or complete. Graphs and charts are used for illustrative purposes only and do not reflect future values or future performance of anyinvestment. The information does not provide financial, legal, tax or investment advice. Particular investment, trading or tax strategies should be evaluatedrelative to each individual’s objectives and risk tolerance. TD Waterhouse Private Investment Advice, The Toronto-Dominion Bank and its affiliates and relatedentities are not liable for any errors or omissions in the information or for any loss or damage suffered. TD Waterhouse Private Investment Advice is a divisionof TD Waterhouse Canada Inc., a subsidiary of The Toronto-Dominion Bank. TD Waterhouse Canada Inc.– Member of the Canadian Investor Protection Fund.® / The TD logo and other trade-marks are the property of The Toronto-Dominion Bank or a wholly-owned subsidiary, in Canada and/or in other countries.