Briefly:

Previous Brieflies this week: | MON | TUE | WED | THU |

(August 16, 2007) A report from CIBC World Markets expects that financial markets will be able to bounce back from the current market downturn, which has been fuelled by worries about the U.S. sub-prime mortgage market and tightening credit.

“Odds are that in the North American financial market, fear will be overcome by favourable economic news, and that the current jitters will be seen, with hindsight, as a buying opportunity for equities,” says Jeff Rubin, chief economist and chief strategist at CIBC World Markets.

Rubin says there is strong fundamental growth and profit potential in equities and corporate credit, which he says will more than offset global credit worries.

“The U.S. mortgages aside, current equity and credit market selling pressure is more about fear than reality,” he says.

Rubin doesn’t dispute that the U.S. sub-prime crisis is real, and says the credit squeeze resulting from sub-prime defaults will directly hit the ongoing housing recession in the U.S. However, he thinks this problem will be isolated in the U.S. and will not greatly affect borrowing costs in Canada.

“Despite the huge widening in credit spreads, and the reduction in liquidity in certain areas of the commercial paper market, there has not been a systemic rise in defaults in the Canadian household debt market, or the global corporate debt market,” he says. He also notes that Canadian corporate balance sheets are in excellent shape.

Rubin doesn’t have a timeline for when the market trajectory will start to turn up again. In the near term, he expects that complicated structured assets “will amplify market perceptions of risk.” He’s optimistic, though, that this will not last long.

“Markets could rationally become desensitized to the bad news on mortgage defaults and CDO write-downs, both of which are now considerably priced in,” he says. “With the aid of central bank liquidity and a fundamentally bullish outlook for world economic growth, contagion effects are likely to be contained to a mid-cycle correction of the stock market.”

• • •

Project Alpha reveals leadership team

(August 16, 2007) The big bank-sponsored Alternative Trading System (ATS), Project Alpha, became a little less secret on Thursday, revealing the faces that will head up its leadership team and giving some small details about what investors can expect when the ATS is rolled out and goes toe-to-toe with the TSX.

Alpha’s senior leadership team will be composed of the following executives: CEO — Jos Schmitt; CFO — Tom Brown; head of legal matters — Michael Brady; CAO — Ian Hendry; CIO — Karl Ottywill; head of operations and regulatory matters — Randee Pavalow; head of marketing and sales — Tim Thurman.

“We have now established the cornerstones upon which the Alpha ATS is being built,” says CEO Jos Schmitt. “The quality and commitment of our team and our sponsors, however, make me feel very comfortable that we will successfully reach our destination: establishing an ATS that will provide Canadian capital markets with increased liquidity and improved efficiency, leveraging the virtues of competition.”

Alpha’s ownership group is composed of nine Canadian financial institutions: BMO Capital Markets, Canaccord Capital Corporation, CIBC World Markets, CPP Investment Board, Desjardins Securities Inc., National Bank Financial, RBC Capital Markets, Scotia Capital Inc. and TD Securities Inc.

• • •

Mackenzie launches global dividend fund

(August 16, 2007) Mackenzie Investments has announced the launch of Mackenzie Cundill Global Dividend Fund, which will replace the Mackenzie Universal World Growth RRSP fund effective immediately.

On Tuesday, unitholders of the Universal World Growth RRSP fund approved both the name and mandate change. The new fund will attempt to offer tax-efficient monthly distributions and exposure to global value investment opportunities. The fund will also hedge its foreign currency exposure as a matter of strategy to reduce volatility.

Mackenzie says the fund’s Series A and F units will pay a monthly distribution equal to 5% per annum.

Series T6 and Series T8 versions, which will provide higher percentages of income, will be offered for sale on August 27, 2007. Series T6 funds provide investors with tax-efficient monthly income of 6% annually. Series T8 funds provide investors with tax-efficient monthly income of 8% annually.

Investors in the fund may also benefit from tax losses accrued to the Universal World Growth RRSP Fund. The tax losses will be available for the fund to offset income earned until the end of 2009. Also, there are capital losses accrued to the fund that can be applied against future capital gains it may earn.

The fund will be managed by vice-presidents David Tiley, Wade Burton, Lawrence Chin, and Peter Cundill. Each fund manager specializes in a specific geographic area: Tiley in European equity; Chin in U.S. equity; Burton in Canadian equity; and Cundill in global equities.

• • •

IFIC provides Federal Budget wish list

(August 16, 2007) Federal Budget 2008 is months away but the Investment Funds Institute of Canada is getting its recommendations in early. IFIC is calling on the Feds to reintroduce a lifetime capital gains exemption of $100,000 for each individual, among other things.

Also on IFIC’s wish list is the creation of a tax-prepaid savings plan. With a TPSP, contributions would not be tax deductible and withdrawals wouldn’t be taxed, unlike an RRSP.

IFIC also believes the maximum annual RRSP contribution limits should be increased to $32,000 by 2010. And the association hopes the government will allow the preferred tax treatment of capital gains and dividends within an RRSP and allow RRIF income to be eligible for the pension income tax credit as well as for pension splitting below age 65.

Finally, IFIC suggested the government set up a special task force to examine retirement issues.

“It is essential for the Government of Canada to ensure baby boomers have sufficient savings so as not to become a burden on the state when they retire and thereby impair the growth of the Canadian economy,” said Joanne De Laurentiis, IFIC’s president and CEO.

(08/16/07)