Asset Allocation May 15, 2008:

The global economy continues to grow at a rapid pace, we in North America tend to be too focused on the US economy and forget that the rest of the world is much more important now than in the past. The US economy is definitely slowing and there will be a follow through effect in the rest of North America but for investors with a wider view there are still lots of opportunities out there.

The current credit crisis is having a major impact on the opportunities in North America but is not being felt to any great extent in Asia or South America both of these regions offer excellent potential for growth going forward. The Asian economies of China and India are changing the global economic landscape in a dramatic and permanent way. This region will be the driver of global economic growth for the foreseeable future as the industrialization and urbanization continues to create wealth at a pace unseen in history. The creation of wealth attached to the growth of the middle class is dwarfing that seen after the Second World War in the US and Europe and that period saw the most robust growth in the past century.

Investors have to realize that the US is still an important economy but it is not as important at it has been historically and it will become less important as economic potential continues to move to Asia.  Investors who ignore Asia and Latin America are missing out on the next great growth opportunity of the world and the opportunity is likely to outperform the rest of the world for years.

The current Asset Allocation is quite conservative with only a 20% exposure to equities, 50% in bonds and 30% in cash. The allocation should remain that way until there is more clarity regarding the depth and breadth of the current credit and food crisis impacting markets.

The equity portion should remain allocated 30% Canada, 30% Asia, 20% Latin America, 10% Japan, 5% US and 5% Europe. Equity sectors to avoid include financials, home builders, consumer durables, autos, travel and tourism.  Sectors that have positive potential are gold, agricultural products and equipment, base metals, alternative energy and energy. The increase in food prices has had a positive impact on the agricultural sector but does have the potential to cause an increase in global turmoil over the short term causing an increase in volatility. Investors need to stay focused on the long term fundamentals in order to weather the short term volatility.

The bond portfolio should hold only government issued bonds with 60% 1-3 years, 30% 4-7 years and 10% 20 years plus, in anticipation of rates stabilizing going forward then moving higher as inflation pressure increases.