Managed Money Reporter Newsletter — Issue 193, March 2003

Editors: Carl Spiess & Allan McGlade

Featured Articles

Market Commentary: War Unfolds 

No matter what your opinions are regarding the war in Iraq, as war unfolds, it will be natural to think beyond the risks and tremendous potential for loss of life, and more directly about your situation and your investments.  After all, how we live our lives day-to-day is really the only aspect we have control over as individuals in these troubling times.

In last few weeks, the European markets hit 12 year lows, and Japan is at 20 year lows.  In the week heading to March 20th, the markets jumped nearly 10%, as some of the uncertainty about the war was replaced by hard facts.

As tensions rise and the war in Iraq develops, it is helpful to keep in mind how markets have behaved long term.  Fidelity has a good graphic (.pdf 500k) on this.

There can be no denying that political events have a profound effect on stock market performance, but in many cases that effect is only for the short term. Take the last major conflict in the Middle East as an example: When Iraq invaded Kuwait in the late summer of 1990, European markets fell by 20%. Newspaper headlines warned of impending recession and economic hardship. By the time the Gulf War ended in late February 1991, however, the European markets had actually rallied by 25%.

Even more specifically, the last time we saw market declines as significant as the last 3 years, was in 1973-1974. That period also had the prospects for war, and other significant geopolitical events, like the cold war.  The war in Vietnam would eventually be lost by America, and yet markets and the economy grew over the following years.  In fact, despite all the wars and conflicts that took place between 1957 and 1997, there were no 10-year periods with negative returns on the Toronto Stock Exchange. 

The temptation is always there to move out of the markets until things become clearer and more settled. AIM/Trimark has a terrific example of what happened to investors who stayed invested in the 70's and those who moved out of the markets.  We recommend that you review the analysis before making any significant asset allocation changes.  And while we don't recommend getting out of the markets due to the war, we similarly don't recommend simply over-weighting equities and assuming that a quick solution is at hand.

No one knows how things will turn out this time.  Even the experts are divided, with half thinking the markets are heading lower short term, and half looking for markets to rise.  That is what sets the market at its current levels.  Mr. Greenspan and his pals at the Federal Reserve, said it best earlier in the week, stating that the the Fed "does not believe it can usefully characterize the current balance of risks".  The Fed is pretty well where the rest of us are; unsure of what the next few weeks will bring.

There is no disputing the long term upward trend however, or the fact that a balanced portfolio will have better returns with lower volatility as we look to the long term. 

In these troubling times, it is natural to be concerned, and to have questions.  Should you have any questions, or simply just want to touch base on current events or any other matters, please don't hesitate to contact us at 1-800-387-9273 or by email at

Tax Time

As April 30th approaches, many of us will be doing our taxes, or at least preparing the papers to take to the accountant.  While gains have been modest in recent years, relative to 1999 and 2000, some funds did still have taxable distributions.  We have some good links on funds and taxes.

Budget Update

The recent federal budget proposed several tax changes.  The most significant for investors is that RRSP limits are proposed to rise to $14,500 for 2003.  See more budget information here.  The government is again clearly signaling that we as individuals will be responsible for our own retirement funding.

Strange Taxes

Canadians often feel that we are the most highly taxed people in the world.  Recently however, CNN reviewed some of the strangest taxes that Americans have to pay.  Would you believe there is a tax on selling illegal drugs? Click here for more strange taxes

Staff Profile - Brenda Cordeiro

Brenda Cordeiro will soon be celebrating her 10th anniversary with our team.  Born in Calcutta, India, Brenda is responsible for keeping client accounts operating smoothly.  Her experience with account opening, documentation, and administrative procedures ensures that we are always able to provide outstanding customer service.  Sometimes these administrative matters are transparent because they generally go so smoothly.  You may not notice all she does, but we certainly appreciate the contribution Brenda's skill and accuracy make to our client's overall satisfaction.

Of the 5 staff that were working for your advisor, Carl Spiess, 9 years ago, all 5 are current members of your investment team.  Please note that while we rotate the 3 names of our team members listed on client statements each month, our group has remained remarkably consistent over the years.  As a team, we look forward further developing our relationships with you and serving you personally for many years to come.

Looking Back - 3 Years Since the NASDAQ Tech High

This month marks the 3 year anniversary of the March 2000 peak in the NASDAQ Index. The Wall Street Journal discussed Cisco in a report written in 2000 entitled "Potentially the First Trillion Dollar Market Capitalization Company".  Those who had warned of a bubble in technology stocks had been so wrong for so long that few listened to them any longer.  But tech companies didn't quite live up to the hype, and the rest is history.  Irrational exuberance has been replaced with complete despondence.

While no one specifically "called" the market peak, and we don't try to "time" the markets, we did feature an article in the March 2000 edition of this newsletter on the markets, from value investors Trimark.  Professional money managers, who use a balanced approach, and fundamental analysis, have helped to minimize losses of capital in the last 3 years.

A similar concern today would be the risk to client portfolios that are significantly overweight on foreign content.  A 5% rise in the Canadian dollar recently decreased the value of foreign investments by the same amount.  We generally recommend an equal weighting of foreign and Canadian content for investors with a 10 year time frame for investing.  Striking a balance generally works out better than trying to strike it rich.

Fund News - Lower Fees

In a move that we strongly applaud, Mackenzie has lowered it's management fees in its fixed income funds.  For us, this is great news.  Mackenzie Bond Fund has long been a recommended fund for clients looking to invest small amounts in bonds on a payroll deduction basis.  Of course, in the long term, bond investors are still better off buying bonds directly.

Fidelity recently prepared information on mutual fund fees, competition and value for service provided.  The data on 2001 performance of fund investors vs. direct stock investors is interesting.  The data is for the US, but would be similar in Canada.

Please contact us if you have any questions about these funds or changes.

Mutual Fund Reporter Recommended Website of the Month 

Generally, we feature sites that let clients learn more about the stock and bond markets.  This month, we feature a site that lets you see the current price for electricity in the Ontario energy market.  The site is and allows you to see real time pricing of Ontario Hydro rates.  While capped at 4.3 cents for residential users, the difference between the market rate and 4.3 cents, will still come out of our taxes down the road, so we should still all try to conserve.


Contact Us

T.  416.863.RRSP (7777)
F.  416.863.7479

ScotiaMcLeod is a division of Scotia Capital Inc., member of CIPF.

Security | Privacy Policy | Legal Information | Important Information | Site Map




® Registered trademark of The Bank of Nova Scotia, used under licence. ™ Trademark of The Bank of Nova Scotia, used under licence. Scotia Wealth Management™ consists of a range of financial services provided by The Bank of Nova Scotia (Scotiabank®); The Bank of Nova Scotia Trust Company (Scotiatrust®); Private Investment Counsel, a service of 1832 Asset Management L.P.; 1832 Asset Management U.S. Inc.; Scotia Wealth Insurance Services Inc.; and ScotiaMcLeod®, a division of Scotia Capital Inc. ("SCI"). Wealth advisory and brokerage services are provided by ScotiaMcLeod, a division of SCI. Insurance services are provided by Scotia Wealth Insurance Services Inc., the insurance subsidiary of SCI. When discussing life insurance products, ScotiaMcLeod advisors are acting as Life Underwriters (Financial Security Advisors in Québec) representing Scotia Wealth Insurance Services Inc. SCI is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.

The Spiess McGlade Team is a personal trade name of Carl Spiess and Allan McGlade.