Portfolio Managers Bullish, Consumer Confidence extreme low. What gives?

Barron’s just did a survey. It revealed that the bullish sentiment on stocks is quite high and almost everyone hates US treasuries

"Whenever sentiment gets too strong in one way or the other, it is usually setting up the markets for a rally in the despised asset. "Mr. Market" (Ben Graham's Book) likes to do whatever he can to cause the most pain to the largest number of people."

"I am not predicting a near-term crash or imminent precipitous bear, although in this environment anything can happen. I am merely noting that there is an imbalance in the system. The longer this imbalance goes on, the more likely it is that it will end in tears. And the irony is that a recovering world economy could be the catalyst."



Saverio Manzo
www.wealthconcepts.ca

Proposed Changes to Tax-Free Savings Accounts (TFSA)

Our Finance Minister is at it again.

The proposed changes aim to address deliberate over-contributions and penalize clients who intentionally abuse the Tax-Free Savings Accounts program. Changes are effective October 16th, 2009 and impact all transactions and withdrawals taking place after this date.

The proposals announced on October 15, 2009 by the Ministry of Finance contemplate a number of amendments to the tax framework applicable to TFSAs. These amendments seek to address deliberate over-contributions and penalize clients who intentionally abuse the use of TFSAs in tax-planning schemes.

For complete details, please see attached or visit website link.



Saverio Manzo

Another Foreign Bank buying Gold

If the sources are accurate, according to the Financial Times, then Russia’s central bank, which without much fanfare (compared to India) purchased 15.5 tons of gold in October, recently indicated that it wants to add another 30 tons to its cache by year-end.

This is yet another example of a central bank with too much $USD looking to diversify its monetary base.

India says it will continue on its trend of last week. What happens when China has a drink out of this punch bowl?

Thanks in part to mounting US deficits and a weak US economy, the US dollar continues to trend lower. After all, a virtual collapse of the banking sector does have its consequences. For some perspective, today's chart illustrates the current trend in the US dollar (blue line) as well as that other world currency, gold (gray line). As today's chart illustrates, the performance of the US dollar has varied inversely to that of gold since the latter stages of the credit bubble. It is worth noting that the US dollar is currently testing resistance of its downtrend (red line) while gold makes record highs.



Saverio Manzo

Sliding U.S. dollar pushes Canadian Stocks higher

The U.S. dollar continues its slide and gold moved further into record territory.

The dollar started falling after Federal Reserve official James Bullard said the central bank should continue to buy mortgage-backed securities after the program is supposed to expire in March. That would continue to keep interest rates low.

The U.S. dollar traded lower against six other major currencies. The Canadian dollar closed up 1.24 cents to 94.71 cents US in morning trading.

Commodities - which are priced in U.S. dollars also moved higher.

Gold soared to a record.

Crude oil - Canada's largest export - rose with the December contract adding 84 cents to settle at $77.56 US a barrel

Scotia Capital currency strategist Camilla Sutton told CBC News that central banks are moving away from the U.S. dollar as a reserve currency and into gold.

"We're in the midst of a long-term U.S. dollar weakening trend," she said. "We'll close next year at lower levels than we're at this year and the same is true for 2011," she predicted.

Sutton advised investors not to view the rise on the TSX too positively. Commodities will do well, but the higher dollar "plays havoc," particularly in Ontario where the manufacturers are "suffering dramatically."

She said a higher Canadian dollar would put more pressure on exporting companies here to invest in financial contracts that protect them from sudden changes in exchange rates or become more efficient by moving jobs offshore to countries where wages are lower.

The falling U.S. dollar has led in the last few months to a resurgence in what's called the carry trade. Traders sell U.S. dollars because American interest rates are low and buy the currencies of countries with high rates in an attempt to make money on the difference in yields.

That inflow of money into the strong currency economies, she said, in turn risks creating a buying frenzy in financial and housing markets similar to that which led to the downturn in the U.S. economy.

Sutton said the risks are "extremely high" that could lay "the groundwork for the next crisis a few years out."

Source: CBC News



Saverio Manzo

Will CRA follow the IRS to Foreign bank accounts?

Behind closed doors, we are told, this has been a point of discussion. However, if attacking a simple offshore “bank account” is difficult, imagine the difficulty of cracking open a properly composed trust for Canadian beneficiaries.

14,700 Taxpayers Voluntarily Disclosed Foreign Accounts to IRS
By WebCPA
November 17, 2009

Over 14,700 holders of foreign bank accounts told the Internal Revenue Service about the existence of the accounts under a voluntary disclosure program.

IRS Commissioner Doug Shulman said the agency received voluntary disclosures about the presence of billions of dollars in assets in bank accounts located in 70 countries.

“To put it simply, this is a historic milestone for the nation’s hard-working taxpayers,” he said, according to the Associated Press.

The IRS had extended the program and offered to allow most of those who came forward voluntarily to avoid criminal prosecution for tax evasion. The agency has successfully prosecuted several UBS account holders who did not come forward voluntarily.



Saverio Manzo

A Bull Market in A Weak Economy Doesn't Last

With the consumer making up about two-thirds of the US economy, we need job growth to sustain this little increase in the economy and maintain current levels of stock market valuations.

The contrasts are too stark to ignore. Stocks are supercharging ahead, while unemployment continues to increase (as of this post at a 26 year high), home prices are stalled and likely to dip further. Emerging markets are eating the developed world's lunch. Asset prices in general are rising far above the economic reality that would rationally support them.

Main Street Americans are struggling to pay their bills, while Wall Street executives are getting record bonuses. Two Americas; trust me it's more than just a campaign slogan. It's the cold hard reality.

The dichotomy continues. Stocks, gold and oil all continue their amazing climb as the dollar descends to new lows.

Russian stocks are up 136% this year, and Brazil is up 117%, far outpacing the meager gains here and in that sick dog of an economy, Japan.

China and India have been kind to investors of late. You can even earn 8.75% on Brazilian bonds while you've lost 16% to date this year holding dollars. That's the most important dynamic in global markets.

Look at the dichotomy another way. The FHA is handing out mortgages on the basis of a 3.5% down payment of the home's value. That's leverage approaching 30-to-1, the kind that brought down Bear Stearns and Lehman Brothers.

Meanwhile, 15 million people are competing for 2.5 million job openings. The amount of time people are looking for a job has hit a new record high. Debt to GDP is still high. Trillions in household wealth have been lost. A bull market in a feeble recovery cannot last forever.

(Source: Forbes)



Saverio Manzo