Terry's Weekly Update – March 31, 2008

Opening Thought

"A Little Madness in the Spring is Wholesome Even
for the King!” – Emily Dickinson

Stay Calm, Stay in Canada

Canadian investors should sit tight and keep an eye out for bargains on their home market, according to one of the country's biggest investment fund companies. Fidelity Investments is sticking to its "Go Canada" thesis, citing the long-term effects of the creation of a new middle class in the developing world. "So much has already transpired that it's good to note that among the major markets, Canada has been a reasonably safe haven because of the strong fundamentals," says Bob Haber, CIO of Fidelity. Haber says that the U.S. Federal Reserve was definitely behind the curve during the early days of the credit crisis but that the latest interest rate cuts have helped to shore up the Fed's credibility While it is too early to call for a recovery in the U.S. financial markets, Haber says the sub-prime element of the credit crunch has already been discounted, with $200 billion written off of the books of financial institutions worldwide. "My view is that the sub-prime part of this crisis came to an end on Monday March 17. Not that there aren't sub-prime mortgages in the States that won't have problems financing themselves, but from the bond and stock market standpoint, we've now taken out and shot [Bear Stearns] and discounted paper associated with sub-prime, basically down to nil. It's an important marker on the road to ending this bear market, especially in the U.S." The Canadian economy and markets do face short-term challenges, however. Miron points out that the Canadian economy rarely decouples from the U.S. economy and that the effects of the American downturn will be felt north of the border. But he points out that the Canadian economy is starting its slowdown from a much healthier position, so the downturn should be muted.

"The global financial markets are still facing some degree of stress, and I don't think it's over yet, but we have been here before," says Miron. "I'd recommend investors exhibit patience and conservatism when it comes to short-term investing but also be prepared to be opportunistic."


Markets and Rates