Asset Allocation March 15, 2006 :

For March the Asset allocation will remain at 70% equity, 25% bonds and 5% cash. This fully invested position anticipates the markets in Canada and Asia will continue to move higher as the global economy remains strong.

The only change is a minor reallocation of the equity portion to reduce the US exposure to zero expecting that the US market will see a substantial decline later in the year due to a substantial slow down in the economy. The small US portion will be reallocated to Latin America .

The South American economy has been generally strengthening as the demand for basic materials adds export growth in the region. The Brazilian, Argentinean and the Chilean economies dominate this region and are heavily weighted to commodity production. The lower cost of production in this region allows many international companies an excellent opportunity for increased profitability and they have been spending large sums on exploration and development as a result. This spending is a positive development helping to increase economic growth.

The most efficient way to establish a position in the region is to utilize the Latin America 40 Index Fund ishares which trade on the New York Stock exchange under the symbol ILF. The fund holds the 40 largest companies trading in Latin America with representation from the four main economies, Mexico , Brazil , Argentina and Chile . This is a low cost method of investing in Latin America the fund has a very low 0.50% management expense ratio.

Canadian Equity:

Over the past month the TSE has been trading in a range between 11,300 and 12,000, this consolidation phase may last until summer. The run up in the first two months of the year was very swift and it would be normal for investors to digest this move. Over time investors will become comfortable with this new higher level and start looking ahead again to increased earnings which will allow prices to increase and move to a new higher level before fall.

The Canadian market has been reacting to commodity prices in general and oil prices specifically. The price of crude oil has been trading in a range between $55.00 and $65.00 US a barrel over the past month or so. Changes in the price of crude oil have a huge influence on how attractive the Canadian market looks to foreign investors. When oil is on the rise foreign investors are more likely to move into the Canadian market.

Oil is not the only sector that has been active other commodity sectors such as a base and precious metals have also seen a lot of activity due to higher prices for those commodities as well. The financial services sector has generated a lot of interest due to the continuation of excellent earnings growth and increases in dividends as a result. This combination is proving to be very attractive for investors looking for long term capital appreciation.

The Canadian equity market appears to have the ability to remain one of the best performing markets globally due to the high percentage of commodity and financial stocks in the index.

US Equity:

The US equity has recently moved back near its recent highs and appears to have topped out in the short term. The main markets in the US have not been able to move above the level reached in 2000 this in spite of the economy growing at a reasonable rate.

The excess capacity that was created during the technology boom is still over hanging the economy. The only winners have been the consumer as price increases have generally been held down due to the increased competition as a result of excess production capacity available in many industries.

The US consumer has been doing their part but US industry has been hampered in their efforts to increase profitability. The technology boom has increased the productivity of the US worker but in the process also increased the number of companies that can remain profitable in a tight market. This excess capacity will take years to be worked off and in the mean time profit growth will be hard to come by.

If the US Federal Reserve remains on a trend of increasing interest rates they will force the consumer to the sidelines and the economy will slow dramatically as a result. The US economy appears to be headed for a slow down likely by late summer or early fall.

It is time to exit the US market as upside potential is severely limited due to the potential of a recession later this year. Investors should be moving out of this market over the next month or two as opportunities arise.

European Equity:

The economic growth in Europe has not been able to increase to a pace that would reduce unemployment and create consumer confidence. The European Central Bank has been so focused on possible inflation they have held interest rates higher than need be as a result the economy has never built up any momentum.

Any slow down in global economic growth will push the European economies into recession very quickly. There is very limited potential in the European markets and investors should avoid this region.

Asian Equity:

Asia continues to be the engine for global growth and this is likely to remain the case for quite some time. The changes taking place through Asia are only just beginning over the next few years the increase in the number of new consumers will put dramatic pressure on established economies as many materials and products will potentially be in short supply.

The increase in economic power in this region due too the increase in the number of middle class consumers, will offer patient investors with a long term view the potential for much better than average investment returns, when compared to the potential in western markets. But the operative words are likely to be patient and long term. To see the full extent of the changes taking place may take a decade or longer.

Asia represents the opportunity of this decade and likely the next as well and investors have to become familiar with this region if they hope to capitalize on this huge potential.

Latin American Equity:

In many ways the economies in Latin America are similar to that of Canada , the main industries are commodity driven and the geology of the area have proven to hold a wealth of minerals and metals.

The political situation has historically been the main uncertainty when considering investing in this region. Over the past few years politics has become less volatile and more predicable this has led to increased foreign investment in exploration and development. This increase in foreign investment has created a more stable economic environment which is creating opportunities for economic growth not seen in years.

The increase in global demand for commodities has created an opportunity for investors in these emerging markets, but these are not for the fait of heart and any investment should be kept to a relatively small percentage of a portfolio.