MARKET REVIEW

Shawley Financial and Insurance Solutions

June 10, 01!
Anti"s#a$ le%islation&
Recently the federal government enacted anti-spam legislation which requires me to get your
approval in writing before I can send you an email with my market review. I have been requesting
your approval in some emails lately but as of June 30 !0"# your approval response is required or
you will be removed from the email list. If you haven$t already replied please respond to this email
with %email approval& in the sub'ect line.
FEE disclosure le%islation&
(he )utual *und +ealers ,ssociation has enacted a few new rules for information disclosure to
clients around fees that are paid and information on the actual investments held in your accounts.
-oon there will be a simple fund information sheet which will be available on every fund that is in
your various accounts. It will describe what the fund invests into and highlights the risks involved
and details the fees charged. I really like this new information sheet because it is in plain language
and concise. If you want a copy of your funds information sheet it will be available from the fund
company$s web site. I would be happy to send you a copy either in a .+* electronic form
, ma'or change coming is the full disclosure of the fees charged for managing and investing your
money. (he primary fee charged by the mutual fund company is the )anagement /0pense Ratio or
)/R. (his fee is hidden and is deducted from the performance of the investment. It ranges from
less than "1 per year to 3.21 per year depending on the actual fund selected. (he rates of return
which are available on public web sites like the 3lobe and )ail or )orningstar and the rates which
I show during my reviews with you are always calculated after the fee has been paid. It is net of the
fee. -o when the personal rate of return is quoted as say 41 that means you actually received a 41
return. (he fund may have made 5.21 gross deducted the )/R of say !.21 and delivered to you
the 41 return.
)y personal compensation is derived partly by receiving a portion of this )/R. (he )/R fee
structure allows me to meet with you in your home discuss your investments and financial
situation and hire a full time service representative dedicated to your phone calls and emails.
6ithout the )/R fee I would need to invoice and bill you for the service I provide.
I welcome any questions about the fees and hope to have more discussion with you about the ever
changing effects of government regulations on your investments and my service.
Mar'et re(iew and u#date&
(his market review is strictly my personal opinion and is not endorsed by -unlife *inancial.
(he stock markets around the world have been increasing dramatically in value for the last year.
(he markets are a future pricing mechanism which forecast what the future prices and corporate
profits might be. , primary view is that with huge amounts of government stimulus through
money printing 7or deficit financing8 there will be a run up in inflation. (his inflation will carry the
price of stocks even higher. In my mind there are two inflation rates9 one for food and consumable
items and one for assets such as homes stocks and commodities.
)y contention is that these asset prices are
already high and are posed for a decrease
in their value. I know I have been talking
about this for a while but it still does not
change the technical data because it hasn$t
happened yet.
(he chart at the left shows that it takes
nearly 201 of the household$s income in
:ntario to own a two story home. ;)<;
states that the ma0imum it will approve for
new purchases is 3!1.
<ere is a chart showing the current whole sale
interest rates for =-, "0 year bonds. (his rate
normally translates into the interest paid on the
five year fi0ed interest on mortgages. If interest
rates go up what do you think will happen to the
price of homes>
;ommodities are an asset class which has already
dropped in price from the !005 high. (his chart is
the ;ommodity Research ?ureau inde0 of
commodities.
;ommodities represented in the inde0 are copper
coffee oil gold gas corn live cattle sugar
hogs silver and wheat to name a few.
(he most widely watched asset class is the
price of stocks. (he (-@ inde0 is fast
approaching the level of "2000 points which
is what it was in !005. -o after 2 years the
value of the (oronto inde0 will break even.
,re we at a point where the values will go
higher or is this a point where we see a
correction>
(he =-, +ow Jones Industrial ,ve. is right at
a long term trend line. =sually when we hit
the top of a trend line we get a correction.
(his trend line connects the two ma'or highs
in the last decade the !000 technology bubble
and the credit bubble of !005.
In my last market up date I showed the -hillier
price earnings ratio for the -A. 200 at !#.43.
(his inflation ad'usted number is now at !4. In
short it will take !4 years for the annual profit
from the average stock to pay back your
purchase price. (hat seems like a long time.
-o ask yourself do you feel the economic
environment is getting better or worse> <ave
you noticed how many stores are closing>
-ears Rona Braft plants Cick$s hamburgers
and Jacobs are the ones that come to my mind.
I still promote safety and capital preservation
as an investment strategy for the ne0t business
cycle. /stablishing a defensive posture using
short duration income funds some money
market or cash and large blue chip funds I
believe will help insulate your investments
from a market correction.
(here is a macro economic indicator which I
look at to determine the underlying health of
the economy. It$s called the velocity of money.
In simple terms it measures the rate that
money flows through the economy. ,n
increase usually indicates a brisk business
climate with lots of transactions and a
decreasing velocity usually means a
contraction.
To schedule an a##oint$ent )or a re(iew call me at e0t !!35 or /dina at e0t !!D3.
Ron -hawley ;*.
-hawley *inancial and Insurance -olutions
-unlife *inancial
ron.shawleyEsunlife.com
F02-33D-003F e0t !!35
G#0"- !DD Cakeshore Rd. /
:akville :n C4J "<F