December 14, 2009 Market Update

Good day,
Attached is Empire's performance to the end of November. As you can easily see, the small cap fund has performed remarkably well to the end of November. The other funds have not moved as much, however, they are still all very strong. When we get to the end of the year, I am sure each of us will be looking back and trying to determine if in fact all my recommendations are as good as they could have been? And the short answer, based on results, is no, we could have hoped for better.  When we look forward, the question becomes, should we change our strategy and make a recommendation to move money back into the market.  The short answer again is No.

We read that some countries like Greece and Ireland, as well as the UK and Spain and Portugal are having some internal issues with their bond rate, ( their bond rate is up about 1% in he past few weeks)
We also read that the consumer has not come back to buy, sales are still down.
Unemployment is still up.
Banks are not doing much to improve access to credit. The credit markets are generally still very tight.
Sovereign Wealth Funds are having some trouble. i.e. Dubai, Abu Dubai
Mortgage foreclosure in the US is still on the increase.
In Canada  this past year, 100% of new mortgages were insured and in the past two years 90% were insured. So banks have securitized virtually all of their mortgages. That should theroritically make more cash available, but it would appear that banks are only interested in their capital ratios, which were decimated last year.


I also have attached a copy of a report prepared by David Rosenberg, Chief Economist for Gluskin Sheff. You will be able to read that he is concerned about the Canadian housing market.  If you do some additional research you will find out that he believes that oil and gold will continue to drive the Canadian market forward.

Unfortunately, I believe, and Mr Rosenberg also is of that same opinion, that we are experiencing a bear market rally.  So, if we are in a bear market, then the broad trend is still down.  I believe that we will experience something similar to what the Japanese have experience the past 14 years or so. Cycles of rapid decline and fairly aggressive growth followed by further rapid decline. If we go back to what was experience in the 30's we can see something similar. Substantial rallys in a bear market that last some 15 years.

So, I would urge you to remain on the sideline. Continue to pay down debt as quickly as you can. Do not incur any new consumer debt. And we will watch for the next decline to take place. Oh yes, do take the time to read the piece on the Canadian Housing Market by Mr. Rosenberg, especially if you are considering a new home in the next short time period.

(To get this report, please email info@cvbenefits.com)