THE MARKETS WHERE NOW?

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  The stock markets rallied back on Monday, which was a tremendous relief to nervous investors who had spent the weekend biting their nails after the steep plunge in Toronto and New York last week. But it’s too soon to say we’re out of the woods. It remains to be seen whether Monday’s rebound was the start of another upward move towards new record highs, or merely a brief respite in a downward spiral. We won’t know the definitive answer to that for several weeks.

On Monday, Tobias Levkovich, a strategist with U.S. financial giant Citibank, weighed in with his opinion that a market meltdown is not likely to happen, at least not now. He pointed out that second-quarter earnings are generally coming in higher than analysts had expected, noting that this has now been the case for 16 quarters in a row. Against that back-drop, a market collapse seems unlikely. He also commented that there is a lot of cash sitting on the sidelines, just waiting to move in and snap up bargains.

Depending on your perspective, the stock market glass can be half-empty or half-full. Optimists point to the strong second-quarter U.S. economic numbers and the generally good corporate earnings as reasons to stay fully invested. The pessimists focus on the mounting problems in the American sub-prime market, rising interest rates, and the prospects of a credit squeeze.

For the record, Yola Edwards, one of Canada’s top technical analysts and a contributing editor to the Internet Wealth Builder newsletter, predicted last week’s correction in the issue distributed on Saturday, July 21. She said the S&P/TSX Composite Index could fall all the way to 13,614. “This could happen swiftly or it could take a few months, but my money is on a swift move that will catch everyone except the hedge funds off guard,” she wrote. As it turned out, her call was very close to the mark: the TSX came within 100 points of her forecast, touching 13,704.97 on July 26. Let’s hope the second part of her prediction also comes true: “After that, I look for an equally swift rally.”

Even if it happens that way, however, there’s no doubt that sooner or later this bull market will end. It is already the third-longest in history and nothing lasts forever. It’s a matter of when, not if. To protect yourself, I suggest reducing positions in stocks/equity funds to a maximum of 60% of a portfolio (less for older people). Build cash and short-term notes and wait for the bargains that will eventually emerge.

WRAP MANIA

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  Mutual fund investors are increasingly putting their money into wraps, packaged portfolios of funds that are supposedly tailored to each individual’s objectives and risk tolerance. They’re very convenient, but I’m not convinced they’re the best choice for most people. You can read my detailed analysis of fund wraps at http://www.buildingwealth.ca/News/Featuredetails.cfm?NewsletterID=2855

SUMMER SIZZLER

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  Summer is usually a slow time for our newsletter business as people go off on holiday and forget about the real world for a while. That’s why we save our best deals for this season, with the idea of breaking through your relaxation mode for a moment with an offer you can’t refuse. We hope that this year’s special, which we call our Summer Sizzler, will do the job.

The offer is simple. You get a three-month subscription to all three of our newsletters plus three free bonuses for only $49.95 plus tax. The package includes:

* Three months (12 issues) of the Internet Wealth Builder, our flagship e-mail newsletter. It’s delivered every weekend and is packed with actionable advice that you can use immediately to make big profits. IWB members are currently sitting on a 575% profit in Brookfield Asset Management. Wouldn’t you like that kind of advice?

* Three months (6 issues) of The Income Investor, a twice-monthly e-mail newsletter that focuses on income-generating securities, many with tax benefits.

* Three months (3 issues) of Mutual Funds Update, a monthly e-mail newsletter that provides timely advice on which funds to buy and which to avoid. Check out the MFU Recommended List which contains more than 50 funds – it has a success rate of 96%!

* Access to the password-protected Member Section of the Buildingwealth.ca website where you can read past issues and review all the recommendations.

* FREE BONUS #1: Top 50 Funds 2007. This special report picks 50 funds that should outperform this year.

* FREE BONUS #2: Bonds: Profit and Protection - all the information you need to add a winning bond component to your investment portfolio.

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To order, call Customer Service toll-free at 1-888-287-8229 or go to http://www.buildingwealth.ca/bookstore/productdetail.cfm?product_id=606

SECURITIES LAWS ARE A JOKE

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  The United States has gotten tough with executives, corporations, analysts, and financial advisors who mislead the public. What are we doing here in Canada? Not very much says former professional money manager Tom Slee. In a recent column in the Internet Wealth Builder newsletter, he pulled back the curtain to reveal that our securities watchdogs and the RCMP are toothless tigers. Read his report at http://www.buildingwealth.ca/News/Featuredetails.cfm?NewsletterID=2872

EXCEL FUNDS REVIEWED

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  The Excel Funds specialize in two of the world’s fastest-growing economies, India and China. In recent years, they have produced amazing returns for investors. Just how good are they, and what are the risks involved? We recently updated our reviews of both funds in our On-Line Buyer’s Guide to Mutual Funds. Here are our comments:

Excel China Fund. As the name suggests, this fund focuses on the burgeoning China market. It was launched in mid-2003 and it may come as something of a surprise that it did poorly in its early years, posting losses in both 2004 and 2005. It was only in 2006 that it finally broke through, gaining an amazing 83.2%. But it should be noted that all China funds did well that year – this one wasn't alone, although it led in performance. The pattern continued into 2007, with the fund gaining 29.3% in the six months to June 30. Whereas most China funds hold the bulk of their assets in large-cap securities listed on the Hong Kong Exchange, the Excel managers take a different approach. The Hamon Investment Group (which handles 90% of the portfolio) focuses on small to mid-cap stocks listed on mainland China exchanges. They have been steadily increasing the fund's weighting in China B shares. These are shares in companies incorporated in mainland China that are traded in the mainland B-share markets (Shanghai and Shenzhen) and are priced in foreign currencies. Until a slump in late June, the Chinese markets had been on a huge run, which helps to explain the Excel fund’s strong recent performance. However, that market has also shown it can be highly volatile, so investors need to keep that in mind. We are giving this fund a debut rating of $$$. Although we are impressed with the latest results, we note that the fund has only been a top-rank performer for about 18 months so a degree of caution is advised.

Excel India Fund. Anyone who has been in this fund from the get-go in 1998 knows what a wild ride it has been. The fund got off to a jet-propelled start, posting an astounding gain of 202% over the 12 months to December 1999. Then the bottom fell out. In 2000, the fund crashed 47.1% and that was followed with another huge drop of 33.7% in 2001. By then, many of the original investors had taken their early profits and exited. The managers were able to recover with a small gain in 2002 and then in 2003 the good times came roaring back with a gain of 82.9%. The fund has continued to be a solid winner ever since, reflecting the tremendous economic growth in India. Over the latest three-year period, to June 30, investors enjoyed an average annual return of 30.9%. However, as you might expect, volatility is extremely high, even for the risky emerging markets category. The management team is based on the ground, in Mumbai, so they have first-hand knowledge of the Indian market. They focus on "superior Indian and multi-national businesses with good management, strong earnings growth rates, and valuations more favourable than the overall market average". The top 10 holdings include several blue-chip companies that may be familiar to Canadians such as ICICI Bank, which has branches here, and Infosys Technologies. The MER is on the high side but if you are looking for a dedicated India fund this is one of the very few choices available. Rating: $$$.

The On-line Buyer’s Guide to Mutual Funds contains reviews and ratings for 1,261 funds from 107 companies, which are updated on an on-going basis. A one-year subscription that allows for unlimited 24-hour access is available for only $49.95 plus tax. Details at http://www.buildingwealth.ca/bookstore/productdetail.cfm?product_id=72

NEW FREE READER SERVICE

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  I’m pleased to announce that we have entered into an arrangement with MPL Communications to provide our readers with a premium online service that gives you daily buy-sell advice from some of the best investment newsletters in the world.

This free service is called Daily Buy-Sell Adviser. Every day, you get detailed digests sent directly to your inbox of what some of the leading market advisories from across Canada and around the world are saying. These daily e-mails are packed with specific advice and detailed analysis that you can use right away.

Most investors pay hundreds of dollars annually to receive the advice of these prestigious market letters. So what’s the catch? Why are we offering this service free? It’s simple. Newsletter publishers such as our company and MPL often share information with each other and with other publishers around the world to bring our subscribers the most profitable advice possible. These publishers have agreed to let us include their top stories in Daily Buy-Sell Adviser in the hope that the profits you gain by following their advice will encourage you to sign up for their newsletters.

You may choose to do so, but that decision is completely up to you. You will always receive the investment advice of Daily Buy-Sell Adviser without cost or obligation.

So give it a try – it costs nothing. Simply click on the link below to sign up for this free premium service right now.

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A NEW ETF PLAYER

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  There’s no doubt about it – exchange-traded funds (ETFs) are hot right now. Hundreds of new ones have appeared in the U.S. in the past year and the action is starting to heat up here in Canada. One of the new kids on the Bay Street block is Claymore Investments Inc., which has come up with several unusual ETF concepts including a fund that focuses on water. Read all about it at http://www.buildingwealth.ca/News/Featuredetails.cfm?NewsletterID=2861

That’s all for our summer edition. We’ll see you again after Labour Day. Enjoy the heat!