Jordan Wealth Management Group - ScotiaMcLeod Truro

As I speak with my clients every day, I see a mixture of investing personalities and outlooks. Some are eternal optimists, some the exact opposite, while most are somewhere in the middle – sometimes dictated by the latest headline or the recent change from month to month on their statement.

I thought I'd provide a bit of food for both - to let you know some of the factors I ponder every day lately in giving advice on how to best preserve and grow your capital.

What to worry about:

Economic data is still weak, while the stock market continues to go up. Does this mean it is a bubble ready to burst, once again?  The US and many other developed countries have promised that they will keep rates low till at least the summer of 2010 – why, because economies are still weak, and there is another raft of US homes with mortgage rates set to reset at higher rates the next 12 months. This knowledge, in turn is motivating aggressive investors and hedge funds to borrow again and invest in markets they feel can benefit from a weak US$ - such as Canada – for it’s stronger “petro-dollar”, for gold stocks, oil stocks etc. Many are concerned that massive government spending on infrastructure, and the like is artificially buoying the world economies. What happens when this ammunition is spent? How will we pay for it? What will we do about our ageing population? How will we adjust to the hard reality that the glory days for the US and the baby boom in general are likely over? Can we deal with the rising strength and influence of emerging economies from China, India, and Brazil? Maybe we need to embrace it! We are older. When we retire, we will be looking to draw an income, and also sell off some of what we own to others – well, maybe we should hope for growth in developing markets so that they will have the money to buy our assets from us – I know it is difficult to deal with the fact that the buyer may be communist.

Is oil going to $100 again, or is it ready to plunge? How will we adjust and pay for the pressing world need to reduce carbon emissions? Does this mean we stay away from investing in the tar sands, or embrace them because growing world oil demand will still make tar sands oil profitable?

Will job losses ever turn positive? Will we have massive inflation sometime in the future?

Anything I have missed?

Some positive notes:

We have technology that creates real wealth – it makes us more productive – a key ingredient for growth. The majority of companies reporting earnings have been meeting or exceeding expectations. General Motors sales to China have increased from 10% of global sales last year to 25% today. General Electric is entering into a 50/50 joint venture with the Chinese to manufacture avionics systems. Onex has seen the investments they made in two companies they bought in 2006 and 2007 do so well, and investor confidence turn around to the point they are now ready to sell these two companies in IPO’s in the next year. China and India have growing populations of middle class consumers that can take some of the slack off of us North American consumers.

Many will argue that the amount of the increase from the February lows are not unreasonable, seeing the extent of the decline we saw first (and we are still 23-27% away from the highs), and seeing that the world was pricing in the end of capitalism at one point. We now have a key ingredient back in place needed for more positive markets: Renewed access to credit, at more reasonable terms.

The challenge with pointing out the obvious reasons to fear that a rising market will not last, is that eventually you will be proven right to some extent; but in the meantime, the rising trend is against you, and it can stay in place longer than you would like. The market will eventually have some sort of pull-back – it always does – but no one can forecast how much and for how long.

We will always have something to worry about, I promise you! I also know that the human being is adaptable and smart and will work through it’s problems. Our markets will hit the old highs again, I just can’t tell you when. If the last two hits to our markets (Sept 2011 and the last correction) did not wipe you out; why give up now?