More Pain for Investors

With the dreadful fourth-quarter earnings season all but behind us, there's one thing we can say with certainty: U.S. profits will record their first back-to-back decline in nearly five years.

What's less certain is whether the first quarter, which has a little more than a month to go, will bring some relief after profits fell in both the third and fourth quarters.

Don't count on it.

As yesterday's ugly fourth-quarter results from Lowe's demonstrated, the housing slump is only beginning to leave its steel-toed boot marks on the bottom lines of Corporate America. Lowe's, the second-biggest home improvement retailer behind Home Depot, cited the “unprecedented” housing downturn in posting a 33-per-cent drop in profit.

And it warned there's more pain on the way.

“As we look to fiscal 2008, we know the next several quarters will be challenging on many fronts as industry sales are likely to remain soft,” said Lowe's chairman and chief executive officer Robert Niblock.

True, Lowe's stock rallied on the results, but that was only because the per share numbers, although awful, were a few pennies less awful than some analysts expected. It's hard to see how anyone can put a positive spin on a quarter in which same-store sales plunged 7.6 per cent. For fiscal 2008, Lowe's expects same-store sales to tumble by 5 to 6 per cent.

The ugly results from Lowes and other companies underline a key hurdle facing the stock market: How can stock prices rise when profits, a key driver of the stock market, have gone into reverse?

Lowe's has plenty of company. With 88 per cent of S&P 500 members having reported results as of last Friday, fourth-quarter profits are projected to plunge 21 per cent from a year earlier, according to Thomson Financial.

That is far worse than anyone predicted just a few months ago.

As of Oct. 1, profits were expected to rise 11.5 per cent, according to Thomson Financial. Why the massive reversal? A good deal of the blame goes to the financial sector, which has swung to an expected loss of $5.3-billion (U.S.) from a profit of $56.4-billion in the fourth quarter of 2006.

If the rapid deterioration in the earnings outlook has taught us anything, it's that estimates weren't nearly pessimistic enough to reflect the extent of credit-related losses piling up on Wall Street and spilling into the broader economy. Which is why the current first-quarter forecast – earnings are expected to slip just 0.3 per cent from a year earlier – should be viewed with suspicion.

Indeed, first-quarter estimates have already come down sharply, just as they did in the fourth quarter.

On Oct. 1, the expectation was that first-quarter profits would rise 10.6 per cent. By Jan. 1, the number had fallen to 5.7 per cent. Now, the projection has dipped into negative territory.

The trajectory here isn't encouraging. With tens of billions of subprime-related paper still sitting on the books of financial institutions, more writedowns are a certainty.

And that all but guarantees that the first quarter will be the third in a row in which profits tumble from year-earlier levels.

To be sure, there will be some pockets of strength. The technology sector, for example, is expected to post fourth-quarter earnings growth of 26 per cent, followed by energy, up 21 per cent.

As yesterday's triple-digit gains on the Dow Jones industrial average and S&P/TSX composite index prove, there's no shortage of hope out there. But until the profit recession shows signs of bottoming out for real, it's hard to see how such rallies can be sustained.

Your Money

What's your best response to market volatility?



With the wild swings in the market, you're sure to be inundated with advice. Buy. Sell. Hold. What should you do?


Here's how our professionals see it:

1. Don't make any move out of panic
In the last decade alone, we've seen the Mexican peso crisis, the collapse of Barings Bank, the Asian flu, 9/11…and more.

There is always a risk of some volatility in the market. But there have also been rebounds from the extremes. Over-reacting too soon is, in itself, the biggest risk. Stay calm.

2. Have a sound written financial plan
Your ability to stay calm will be enhanced if you have a sound written financial plan in place. A solid financial plan and roadmap must be the foundation of financing your dreams. Make sure you have a process in place that keeps you on track and in line with your investment objectives.

Put it in writing. This will ensure that you and your advisor are covering all the bases.

3. Ensure that the plan is being monitored constantly
Economic and market conditions change – frequently. As well, there is a plethora of new financial products and instruments. “Set it and forget it” no longer works.Your plan must be monitored constantly – if possible, through an automatic process that doesn't depend on your advisor being busy or not busy. In an ideal world, your portfolio should be revisited at least on a monthly basis.

4. Ensure that the plan is being rebalanced whenever necessary
Rebalancing is critical, and your portfolio should be adjusted according to current economic conditions.Your investment mix should be realigned, and replacements made, when and as frequently as possible. It's imperative that this occur on a proactive and ongoing basis – as opposed to reactive and according to the market. Make absolutely sure this is happening. Are you hearing from your advisor regularly?

5. Don't fall into the strategic inertia trap
Diversification strategies that may have worked well in the past are not guaranteed to work well now. Some diversification strategies may no longer be effective – your strategies must keep up with the times.A well balanced and diversified portfolio is the critical element in surviving volatility in the market.

6. Stay true to the plan
If your portfolio is being monitored constantly – and if your portfolio is being rebalanced proactively – then it becomes easier to stick to the plan. Don't get side-tracked by dramatic events or the swings of market volatility, but trust the plan to respond to new challenges (as well as new opportunities).

Of course, if your plan is stale and your advisor isn't monitoring it constantly and rebalancing it as needed, then you are at much greater risk and it becomes much easier to fall prey to the crisis mentality of market swings.

So the key first step right now is to take a good hard look at that plan, in the light of the points made above.

Thanks to the Investment Planning Counsel

Heart Attack

Cardiac rehabilitation: Building a better life after heart disease

Cardiac rehabilitation is an exercise and education program designed to improve your quality of life after you've had a heart attack or another heart problem.

Cardiac rehabilitation is a medically supervised program to help you recover after a heart attack, from other forms of heart disease or after surgery to treat heart disease. Cardiac rehabilitation is often divided into phases that involve various levels of monitored exercise, nutritional counseling, emotional support, and support and education about lifestyle changes to reduce your risks of heart problems.

Cardiac rehabilitation often begins while you're still in the hospital and continues through monitored programs in an outpatient setting until home-based maintenance programs can be safely followed.

What is cardiac rehabilitation?

Cardiac rehabilitation — also called cardiac rehab — is a customized program of exercise and education. Cardiac rehabilitation programs significantly increase your chances of survival. Both the American Heart Association and American College of Cardiology recommend cardiac rehab programs.

The goals of cardiac rehabilitation are to help you regain strength, to prevent your condition from worsening and to reduce your risk of future heart problems. These goals can add up to a better quality of life.

Cardiac rehabilitation has four main parts:

• Medical evaluation. Initial and ongoing evaluation helps your health care team assess your physical abilities, medical limitations and other conditions you may have, and keep track of your progress over time. Your health care team explores your risk factors for cardiovascular diseases, stroke or high blood pressure. All of these findings help your team tailor a cardiac rehabilitation program to your individual situation, making sure it's safe and effective.
• Physical activity. No longer is bed rest recommended if you have serious heart problems. Cardiac rehabilitation improves your cardiovascular fitness through walking, cycling, rowing, or even jogging and other endurance activities. You may also do strength training to increase your muscular fitness. Don't worry if you've never exercised before. Your cardiac rehabilitation team will make sure the program moves at a comfortable pace and one that's safe for you, but in general you should look at exercising three to five times a week. You'll be taught proper exercise techniques, such as warming up and stretching before beginning your exercise.

· Lifestyle education. Guidance about diet and nutrition helps you shed excess weight and learn to make healthier food choices aimed at reducing fat, sodium and cholesterol intake. You receive support and education on making lifestyle changes and breaking unhealthy habits, such as smoking. You also learn how to manage pain or fatigue that may accompany your heart condition. Cardiac rehabilitation also gives you ample opportunity to ask questions about such issues as sexual activity. Finally, it's critical you closely follow your doctor's advice on medications.

New guidelines by the American Heart Association note that it's important to get your cholesterol levels down to healthy levels as part of your long-term cardiac rehabilitation plan. For example, getting your low-density lipoprotein (LDL, or "bad") cholesterol under 100 milligrams per deciliter (mg/dL), and ideally under 70 mg/dL, is a key goal, and this might require you to increase or change your medications to achieve this. Your doctor can help you evaluate whether this is a good option for you.

• Support. Adjusting to a serious health problem often takes time. You may feel depressed or anxious, lose touch with your social support system, or have to stop working for several weeks. If you get depressed, don't ignore it, because depression can make your cardiac rehab program more difficult, as well as impact your relationships and other areas of your life and health. Counseling will help you learn healthy ways to cope with depression and other feelings, and your doctor may also suggest medications such as antidepressants. Vocational or occupational therapy will teach you new skills to help you return to work.

Cardiac rehabilitation helps you rebuild your life, both physically and emotionally. As you get stronger and learn how to manage your condition, you'll likely return to a normal routine and enjoy life more. It's important to know that your chances of having a successful cardiac rehab program rest largely with you; the more dedicated you are to following your program's recommendations, the better you'll do.

thanks to Mayo Clinic

retirement wiew from our front window

I know it is still summer here, but this is what it will look like in a few short months

High Gas Prices

High gas prices are just another reason to re-think your wheels.



The thing about environmental issues is this: no amount of nagging, bullying or guilt will move the dial in the end.
People have to get there on their own – and a big kick in the wallet is usually the turning point.

That said, the recent spikes in gasoline prices, the seasonal consumer tendency to buy new vehicles in spring and tweaks in the 2007 federal budget means that when it comes to demand for fuel-efficient cars and trucks, the rubber may finally be about to hit the road.

Awareness of new technology and new gas-saving models has been on the rise - as have the range of choices on offer. With critical mass building, there's finally some buzz about the difference between hybrids (which use both electric power cells and internal combustion engines). And that includes their cost which typically runs at least $5,000 more than the same model with a combustion engine.

Still, there are some financial offsets in addition to reduced gasoline use.
Stung by their early failure to grasp the resonance of environmental issues and the demise of their first effort to design a national environmental policy, the Conservative government introduced a vehicle efficiency inventive of up to $2,000 on the purchase of a greener car or truck and a new Green Levy on imported gas guzzlers in the latest budget.
(Five provinces including Ontario, Quebec, B.C., Manitoba and Prince Edward Island also offer a rebate on the cost of a hybrid or other more efficient cars.)

Although insurance companies are still collecting data, their psychological profiling has led them to conclude that drivers of fuel efficient cars are conservative and responsible. And premiums have been designed to reflect that.

Furthermore, to dispel consumer concerns that hybrids can be more costly to maintain – and to be fair, there isn't a long record on this score since they've only been around since 2000 – hybrid manufacturers often offer more comprehensive and longer-term warranties. (Toyota, for example, offers an eight-year or 160,000 km coverage on the hybrid components of the Prius and Highlander models.)

But the desire – and even the incentive – to save money and ozone with a more ecologically-friendly car isn't all that's required. It helps to have a good grasp of the issues and options as well.

After all, for most people their ride is their second-largest purchase.

Start by asking yourself a few fundamental questions: how much driving do you do in a week? How many people of what size do you need to transport regularly?
It's also important to acknowledge that you need to feel even a little emotional pull towards your prospective purchase.

If you don't like the car, you'll only end up trading it sooner than later – and that's never a sound financial strategy. Green or otherwise. (In fact, the fuel-efficiency of some models has been diminished in recent years because those that achieved optimal savings were so unappealing to drive.
)
Doing your online consumer research is critical and be prepared to wait. The popularity of some of the new hybrid vehicles often means getting on a waiting list. The days of driving it off the lot aren't over, but it doesn't hurt to adjust your expectations.

Because of that supply/demand equation, try not to get into bidding wars or to capitulate to high-pressure sales tactics. Your savings on gas will take a whole lot longer to achieve if you end up paying a premium price to get rolling.

Of course, even if you decide against a hybrid, electric or natural-gas powered car or SUV there's the issue – as with any vehicle purchase – of the various options.
When it comes to engine size, smaller isn't always better.

The weight and size of the car should be matched to engine output to avoid overworking or excess capacity. When you research the mileage and the road tests, also be on the look out for any report comments about the sufficiency or lack of power.

Consider that some axle ratios are more economical than others and if you have a choice, go with the lower numbers. An economical axle has a ration below 3:1 while the high-performance axles that offer fast acceleration or the power to tow trailers are more likely to be in the 4:1 ballpark
.
Depending on the kind of driving you do (city versus highway) the choice of manual or automatic transmission may affect fuel efficiency as well. Not only can manual shifts be more fuel friendly, they cost about $1,000 less.

It's important to be weight conscious in the extreme.

All-wheel drive systems tend to consume more fuel than two-wheel drive.
Weight is the big issue here, adding as much as 200 pounds to the total tally for a car or truck – a trade-off if you drive in severe winter conditions.

Likewise, the weight of air conditioning units also makes a car less fuel-efficient and heavy use of it can take up about 10 per cent of gas consumption. Sunroofs with their extra motor, tracks, glass and reinforcements also contribute to vehicle weight and energy drain, as do power windows, power seats and power locks. Roof racks diminish aerodynamics.

A black car may look cool, but in reality it's anything but.
Light-colored cars and trucks reflect rather than absorb sunlight, the reverse of darker tones.

When it comes to driving, most cars (depending on load factor) are most efficient when traveling at 40 to 60 MPH.

It's also critical to ensure that your tires are adequately inflated because failure to keep them pumped up can take as much as 15 per cent off a car's fuel mileage.

Regular maintenance is also key to saving on gas costs: a misfiring spark plug can reduce fuel efficiency by as much as 30 per cent and replacing clogged air filters can improve gas mileage by 10 per cent.

As always, you have to spend some money to save – and that now includes the environment.


By Deirdre McMurdy

Market Jitters

Controlling your investment risk


Article By: Gordon Pape


The stock market dive that ushered in March should be treated as a wake-up call. It's time to take a fresh look at your portfolio and see how you can reduce risk.


March came in like a lion as far as the stock markets were concerned. In five trading sessions from Feb. 27 to March 5, the S&P/TSX Composite Index lost almost 700 points or more than 5 per cent of its value. The sharp drop frightened many people and raised concerns about the possibility of a new bear market. If you were among them, it may be time to revisit your portfolio. It probably contains too much risk for your temperament.

Actually, a 5 per cent drop is rather modest by historical standards. But it should serve as a wake-up call to all investors. Stock prices don't go to the moon. Sooner or later, the markets will retreat and consolidate before starting to move higher again.

The current bull market began in late October 2002 so we've enjoyed over four years of steady profits. People tend to become complacent in that kind of situation. While that's understandable, it is also dangerous. Bull markets don't last forever. No one can predict exactly when the next downturn will come but the smart investor is prepared for any eventuality.

How do you do that? By paying close attention to your asset allocation. Most investors are more concerned with trying to pick individual securities than they are with ensuring that their asset mix is right for their goals and temperament. That's putting the cart before the horse. Asset allocation should be the first step. Once you know how you want to structure your portfolio, you can concentrate on selecting the best securities. But put first things first.

I know that to many people this sounds very basic. I make no apologies for that – it is. But asset allocation is the cornerstone of smart investing. Repeated studies have shown that having the right mix is more important to your total return than the individual securities you choose. Yet even seasoned investors lose track of their portfolio balance from time to time, especially when markets are volatile.

When markets are performing well there is a natural tendency to direct more of your money towards equities. Steady profits produce a sort of investor euphoria, a state which leads to impaired judgement. That lasts until the moment the market turns around. Then people rush to make changes – perhaps too late, depending on the speed and severity of the slide.

Remember 2000? At the start of the year, investors were giddy. The high-tech boom was making instant millionaires out of thousands of people, the Dow was setting new records, and many pundits were telling us that we were experiencing a new paradigm which would see stocks continue to rise for the next decade. By Easter, the markets were in full retreat and we all know what came next.

So don't procrastinate any longer. If you've been telling yourself for some time that you really need to sit down and review your portfolio, then do it now. Perhaps the next bear market is many months away. But maybe it is only days away. Be prepared!

The best way to do that is through proper diversification. For most people, that will mean reducing stock market exposure and increasing bond exposure. Using a computer program developed by Ativa Interactive of Hamilton, Ontario, I looked at the impact of different asset mixes on a portfolio during the period from August 2000 to September 2002, when the bear market was in full control. A portfolio that was 80 per cent in equities and 20 per cent in bonds would have lost 30.7 per cent during that period. A portfolio with a 50-50 weighting would have been down 11.7 per cent. With a 60-40 weighting in favour of bonds, the loss was trimmed to 5.6 per cent. At a 30-70 stocks to bonds ratio, the portfolio actually turned a small profit over that period. That's the power of asset allocation at work!

I do not mean to sound like a Cassandra. I am not suggesting that you convert all your assets to gold and cash and head for the hills. What I am advising is a healthy dose of prudence, reality, and common sense so that when the next big dip comes (which it will) you can rest more comfortably.


© March 2007 Gordon Pape Enterprises Ltd.

PENSION

Only in Canada.

OLD AGE PENSION

Do not apply for your old age pension. Apply to be a refugee.

A single Refugee can get a monthly allowance of $1,890.00 and each
can Get an additional $580.00 in social assistance for a
total of $2,470.00.

This compares very well to a single pensioner who, after
Contributing to the growth and development of Canada for
40 or 50 years, can only receive a monthly maximum of $1,012.00
In old age pension and Guaranteed Income Supplement.

Maybe our pensioners should apply as refugees!

Let's send this thought to as many Canadians as we can and
Maybe we can get the refugees cut back to $1,012.00 and the
Pensioners up to $2,470.00 , so they can enjoy the money they
Were forced to submit to the Canadian government for those 40
To 50 years.

Please forward this to every Canadian you know