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u u nUKlfl Luvs LMIll-Jul MARCH 1992 STOW THE LIFE JACKETS COPYRIGHT l992 by Garry W. Beckman, B.A. In late January, those brave enough to face the elements were treated to an Ottawa investment preâ€" sentation by analysts from Midland Walwyn. Speakers were Dr. Mark Mullins, Chief Economist, and Dr. Michael Graham, Director Private Client Investing. (Excuse the divergence from timely topics such as RRSP's. The wellâ€"publicized RRSP message has not changed: make those RRSP contributions; make them as early in the year as possible; and, contribute as much as you can. NOW!) ..... getting back to the topic at hand. Last spring outlined Mark Mullins' address to a He said that the recession concluding that this space Gloucester service club. in Canada was coming to an end; a spectacular recovery was not in the cards. He did emphasize that the Canadian entrepreneurial spirit was healthy; a cause for optimism. Late in this winter of 1992 Dr. Mullins took a less orthodox approach by offering some insights into the linkages between economies and financial markets. They are worth sharing as guidelines for forecasting the economic future. Point 1: The economy is cyclical â€" we are North Americans. Peaks and troughs can be charted as respective highs and lows of economic activity. The key is to spot the turning points to growth or to recession. Point 2: Consumers, Services and Manufacturing dominate the Economy â€" we are open to World Trade. Trade for Canada is roughly one-third of its economic Only about seven per cent of the activity is resource based! when the US sneezes the breeze is felt Up North. Each country is the other's largest trading partner. strikingly, about twoâ€"thirds of each country's eco- nomic activity is driven by the spending that you and I do. Ponder this. The Canadian economy is based on cities, manufacturing and, particularly, These elements will be keys for economic activity in the 90‘s according to Dr. Mullins. Point 3: The Bank of Canada (and Financial Markets) hate inflation. Keep an eye on the US Broad market influences affect interest rates. Most of all, inflation governs interest rates. It is no surprise that the Bank of Canada is maintaining its battle to permanently deaden inflation. Point 4: The Stock Market is Cyclical. High inflaâ€" tion means high interest rates. In turn, bond and Lowering inflation means lower interest rates; a boost for bond and stock markets. A second major ingredient is the expecta~ tions for corporate earnings. POlnL 5: Expectations Drive the Dollar. The differ- ence between US and Canadian interest rates (the Financial markets look Canada cannot afford to have a booming eco~ activity. services. stock markets decline. spread) is a key element. ahead. nomy. Rather, a stable economy is a must for the That means relatively high interest long term trend of interest rate next five years. rates within a decline. Point 6: Financial Markets Discount the Future. Related to Point 4. Point 7: International Events Act as Swing Factors. Countries are not islands unto themselves. Economies are interrelated. Inflation and interest rates know no borders. The prices of off-shore'raw materiâ€" als and worldwide growth affect economies. Canada could outperform in resources. Dr. Mullins indicated that his studies forecast average annual changes of key indicators as follows: 1991 1992 1993 Gross Domestic Produce: Canada â€"l.0% 3.5% 1.6% USA â€"O.6% 3.0% 1.9% Unemployment: Canada 10.3% 9.6% 9.0% . USA 6.8% 6.0% 5.4% Inflation: Canada 5.7% 2.5% 3.4% . USA 4.2% 3.9% 4.5% Tâ€"Bills: Canada 7.4% 8.0% 6. 8% USA 5.1% 5. 8% 6. 4% Canadian Dollar: 86.4 88â€" 91 85â€" 89 In general, Dr. Mullens' forecast for Canada is positive. How does an investor adjust his portfolio to maximize returns with an acceptable level of risk? This is where Dr. Graham took the podium. Essentially, he reiterated continuation of a strategy that has worked well for the past five quarters. The strategy is a combination of: maximizinggyield for RRSP and other nonâ€"taxable holdings: maximizing afterâ€"tax returns for taxable holding; and, maxiâ€" furnaces are compact, efficient, clean and safe, and, the "Pay Back“ for conversion is fast. 6 Today‘s "State-of-the-art" oil Home heating oil is at 1984 -pric'es, and more than 57% cheaper than electricity. (All us TODAY FOR A FREE ESTIMATE {Elksâ€"o M CHIMNEY The savings are even larger now when you build your home or convert to oil heat. CSA approved side wall venting eliminates the conventional chimney, lowering installation costs as well as future maintenance. mizing yield while allowing for captial returns on a total return basis. . Michael Graham emphasized key investment actions to be executed NOW. Extend term NOW. Lock in yields NOW. Utilize the tax advantages of dividend income NOW. For the private investor, Dr. Graham outlined some specific equity investments such as straight preâ€" ferred shares, US dollar pay preferreds and converti- ble securities. He recommended specific Canadian common stocks for income and total return; Cyclicals that are showing promise in the recovery were noted. Appealing growth companies, both Canadian and US were highlighted. Commenting on the daily doom and gloom that we have settled for, Dr. Graham aptly remarked that Canadians are about to "snatch defeat from the jaws of vicâ€" tory"! It was refreshing to hear about the restrucâ€" turing taking place in Canadian consumer, service and manufacturing sectors. A Canada ready and able to do business. By the way, the presentation wes entitled: at the Crossroads â€" Economic Opportunities. ******************** Canada with Midland at toll free Garry Beckman is Financial Advisor Walwyn Capital Inc., Ottawa branch, 1â€"800â€"267â€"9345. Today as many as 65% of children with acute leukemia are alive and well 10 years after diagnosis Cancer can be beaten. Please support our April campaign gfisfi? D‘ I (AM ER ”01d (Um! tr Our (Umbrcuull 7mm SEMMERS FUELS A Owns- inn M [JIIIVPISJI lrnnmals Lm Heating- Air Conditioningâ€" 24 Hour Service Elgin,()ntario 359-5080 - After HOllfS 1-800-267-8187 - Over 25 Years Local Seche -