It aint over till the fat lady sings by housework


									                                                                                             January 2008

It ain’t over till the fat lady sings
Whether you like the show or not, there is a lot of evidence to suggest American Idol is one of the most popular
television shows of this past decade. People worldwide seem to enjoy watching teenagers embarrass
themselves trying to emulate their favourite pop singers. The popularity of this show has grown every year
since its inception seven years ago. In season one, approximately 75,000 hopefuls tried out at audition sites
across the US. By season three, over 300,000 people thought they had what it takes to become America’s
next pop sensation. This year, Idol producers auditioned more than 700,000 vocally challenged Americans. At
this rate of growth, experts predict every child in America will try out for American Idol in the year 2015.

That last statement was obviously preposterous. Most children (at least we hope) realize they aren’t meant to
follow in Carrie Underwoods’ footsteps. American Idol has done a great job capturing the attention of people
around the globe. Based on the year over year popularity growth, it seems possible it will remain the number
one show forever. But it won’t. It too will fall from grace at some point. It will fizzle out and become but a
memory; just like Happy Days, Cheers and Seinfeld.

Often investors treat current economic news in the same manner as American Idol fans view the growth of
their favourite show. They feel whatever is happening today will go on forever. Today’s trends are
extrapolated out indefinitely into the future. The result of this delineation is usually irrational exuberance or
disproportionate fear. Just as the number of people who try out for American Idol will one day dissipate, so will
most recent economic trends.

The Canadian dollar has risen from $0.64 US to parity since 2002 (that is $1 Canadian is now worth
$1 US). This is a growth of 56% over 5 years. This is a remarkable occurrence, but it would be a mistake to
project that the next 5 years will be the same. We will not see a Canadian dollar worth $1.56, five years from

Since the beginning of time people have made “recency” mistakes; taking recent information and extrapolating
it into the future. I imagine the first settlers to experience a Canadian winter thought it would never stop
snowing. Similarly, most, if not all, of the current headline grabbing economic news stories will eventually melt
away. They will be replaced by some other group of “exciting” economic indicators, which will once again
induce either irrational exuberance or disproportionate fear.

The key to generating significant rates of return is to remain diversified and focus on the long term. Admittedly
this can be difficult to do in volatile times. Your portfolio at Stewart Financial is well positioned, and while we
understand the current economic environment is uncertain, the short term is always that way. This is why you
are invested in a portfolio that will triumph over the long term, and be defensive in volatile times.

The most recent news stories; the surging Canadian dollar, a slowing US
economy and considerable housing difficulties are all cause for concern. They
are all important themes, and it is prudent to be watchful. It is not however,
reason to panic. The world is not falling apart. There will always be some
economic theme stirring about, making investors nervous. We live in an
increasingly complex world, and as illustrated on the next page, there is often
something to distract us from having a long term focus.
The chart below illustrates the growth in the Dow Jones Industrial Average (the US stock market) over the last
27 years. Overlaid on the graph are some of the more memorable events over this period. All of these events
evoked feelings of fear at the time. But those who had the courage to stay invested despite the fearful news,
have enjoyed over 10% per year growth.

              I don’t want to invest my money now
                               because …
                                                                                                     Record Oil
  14000                                                                         Y2K     Technology   prices
  12000                                                       Pakistan tests
                                                              nuclear bomb
  10000                                                                                                   Housing
                                                                                      9/11                bubble
   8000                                                      bailout
                                       “Black                                                             bursts
                                       Friday”        Asia crisis                             Iraq war
                US                                                              Unibomber
   6000         Embassy                                                                 Enron
                bombed                  Fear of Gulf War                   Oklahoma
   4000                                 recession                          City bombing
              Regan      terrorists                                 Fear of
   2000       shot                                   Russia         inflation
                                 Record US deficit   collapses
After several years of above average returns, your results for 2007 were comparatively poor. One major
influence on returns last year was the appreciation of the Canadian dollar. Your returns in local currency (that
is measured in the currency where the asset is located, i.e. a US stock valued in US dollars) were very good in
2007. Unfortunately, the Canadian dollar appreciated against all major currencies (including 17% against the
US dollar) eliminating most of the gains.

There are plenty of reasons to believe the next few years will likely bring back stronger rates of return; Central
banks around the world are lowering short-term interest rates, which bodes well for the economy. There are
trillions of dollars waiting to be invested from governments, pension funds, private equity and global
multinational corporations. When this capital is invested, markets will advance. Also, company valuations are
very reasonable, meaning quality companies are currently “on sale” due to recent volatility. Historically, our
portfolios have responded positively to these actions. We encourage you to be patient, and to remain invested
for the long term.

Your wishing Drew hadn’t tried out for American Idol investment advisor,

Duncan Stewart, MBA, CIM, CIMA

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