BULLETIN ®

AUTUMN 2011 from: Jeffrey Sindall Better Than Banking ™

Corporate Office: 2005 Sheppard Ave E, Suite 200 Toronto, Ontario, M2J 5B4

Toll Free: 1-877-366-3487 Brokerage Licence # 10530 Web Site: www.mortgagealliance.com

TAKE ADVANTAGE OF LOW FIXED RATES!

The European sovereign debt crisis could lead to substantial interest savings on your mortgage. The liquidity concerns that the European banks face right now are similar to that faced by American banks in the fall of 2008. This has created a unique situation. Remember that when you receive a mortgage loan, the lender has borrowed the money from somewhere else. The interest rate you pay is directly related to the lender's cost of borrowing the money. Long-term loans have very temporarily become less expensive than short-term loans. Hence, we currently have a very rare situation for mortgages where 1-year and 2-year term fixed rates are lower than the variable rate! Fixed rates for 3 and 4 year terms are only slightly higher than the variable rate. Please see the table at right. How rare is this interest rate inversion? Since 1975, 83% of the time Canadians would have been better off choosing a variable rate even if the variable rate later increased above the fixed rate during the contract term. If you currently have a higher fixed rate mortgage it may be to your financial advantage to pay the penalty for breaking your mortgage contract and switch to a lower fixed rate mortgage available now for a limited time. If you currently have a variable rate mortgage but have felt uncomfortable with the fluctuating interest rate, then now would be a great time to lock-in at a fixed rate. While variable rates may stay low anyway, locking in to a fixed rate will provide you with peace of mind for the term of the mortgage. There is significant variance on the interest rates and payment options available in the mortgage market. Only mortgage brokers like me will have all the information and choices that are offered by all lending institutions, including the banks. Let’s give your mortgage a check-up with no obligation. Then you can make an informed choice. Please phone or email me today.

By: Shelley Saint, AMP, Mortgage Broker Direct Line: 905-538-5353 Licence # M08005270 Email Address: service@abbington.ca

Jeffrey Sindall, Mortgage Agent, Licence # M11000335

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MORTGAGE RATES As at October 24, 2011

TERM POSTED OUR

RATES*

Open (HELOC) 4.00% 3.25%

1 Year 3.60% 2.75%

2 Year 3.95% 2.49%

3 Year 4.35% 2.99%

4 Year 5.04% 2.99%

5 Year 5.54% 3.29%

7 Year 6.44% 4.49%

10 Year 6.80% 4.79%

Variable Rate 2.80%

Prime Rate 3.00%

* Rates may vary by province and are subject to

change without notice. OAC.

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® MORE ABOUT GREECE AND EUROPE

Imagine a family of with many adult siblings. Some of the siblings are more secure financially resulting perhaps from better employment and their superior money management. Now imagine that that one of the siblings, perhaps due to lower income and higher spending beyond their means, has debts which are beyond their ability to pay. Should the wealthier siblings immediately pay all the debts of their troubled sibling without any expected change in the one sibling's behaviour? Probably not.

Yet the other siblings do not want the actions of the one troubled sibling to ruin the reputation and credibility of their family. It's more likely that the other siblings would require of the financially troubled sibling a series of spending cuts so that the troubled sibling would come closer to living within their means. In return, the other siblings would provide money into a fund proportionate to each of their abilities, which will be drawn on as required to pay some of the monthly debt payments of the troubled sibling as the debt payments became due - thereby avoiding a default. This is essentially what is happening in the European family now.

There is an excellent and extensive article on the Wikipedia website which examines the European debt crisis with a focus on Greece including the history and causes of the current Greek government funding crisis. If you are reading the electronic version of this Bulletin, here is a direct link to the article: Wikipedia: European Sovereign Debt Crisis. Otherwise, go online to "en.wikipedia.org" and at the top right search for "European Sovereign Debt Crisis" to find the article.

The other member countries of the European Union have created a fund, called the European Financial Stability Facility (EFSF), to which all member countries will contribute proportionate to their abilities. This will aid Greece and also support the European banking system. During the first half of October 2011, all EU countries agreed to increase the size and power of the EFSF. It is also likely that European banks will be required to increase their holdings of cash and equivalents to help offset the impact of a Greek default on their balance sheets, and that they should accomplish this improved capitalization by temporarily withholding dividend payments to bank shareholders. These measures will help reduce or eliminate the feared contagion effect of a Greek default.

The most unfortunate aspect of this Greek financial crisis is the impact on the Greek population. Their government made spending promises, including higher payments for retiree pensions and public sector wages, which the government could not maintain. Now the Greek government is being forced to change its behaviour. Greeks are faced with significantly lower government pensions, extensive public sector layoffs, and higher sales taxes. It's no wonder many Greeks are angry.

To help place things in perspective, Greece is one of 17 member countries in the European Union. The Greek economy constitutes only about 2.5% of the European economy, and only about 0.5% of the global economy.

It's interesting that the European Central Bank on October 6, 2011, decided to keep interest rates unchanged even though "the financial market" was expecting an interest rate reduction. It appears the ECB has determined that the risks to the European economy are not as bad as everyone else perceives.

HERE IN CANADA

In Canada we are very fortunate that our federal government had budget surpluses during the years 1997 to 2008, beginning when Paul Martin was Minister of Finance and continuing into the early years of the Conservative minority government. It was a very responsible action by our Federal government, and placed our country in a much better financial position to weather the 2008/09 recession with some economic stimulus spending (yet it is very important that our governments at all levels balance their budgets as early as possible). Since his retirement from federal politics, Paul Martin has been an advisor to the International Monetary Fund, including with respect to Europe.

As I wrote in my previous two Bulletins, the great majority of publicly traded Canadian companies which my clients predominately hold in their mutual funds are doing very well. Profits are good, and overall Canadian companies have record high levels of cash on their balance sheets. (One notable exception are some insurance companies like Sun Life and Manulife, which are experiencing losses on annuity contracts entered into years ago when interest rates were higher.)

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With today's lower equity prices it's notable that dividend yields, especially those of Canadian banks, are very attractive right now especially when compared to the low interest rates available on Guaranteed Investment Certificates (GIC). You can very easily invest in a diversified portfolio of Canadian dividend paying companies with mutual funds available from me.

The news media has speculated about a "bubble" in the Canadian housing market. While home prices have increased nicely over the past several years I believe prices will simply level off for the next several years. There is no reason to expect a housing market crash like experienced in the United States three years ago. This is in large part due to the more conservative practices of Canadian mortgage lenders and because interest rates will remain low (allowing existing mortgages to remain affordable upon renewal). If Greece does default on its debt payments, then some people holding equities may panic and cause a temporary over-supply of publicly traded company shares on the stock market. This would cause equity and corporate bond prices to decline briefly, even for Canada's well-managed profitable businesses. Yet I am confident that European leaders are taking adequate steps to minimize the economic impact of a Greek default, and the contagion or ripple effect that the news media is speculating about will not occur. As we have seen happen after each previous equity market decline, prices will recover very quickly (the news media never provides advance notice about this). Only those who are already invested in equities will benefit.

MY RECENT CONVERSATIONS WITH CLIENTS

During the first two weeks in October, I had many telephone appointments with clients to discuss the European debt crisis and the impact on their investments. At September 30, 2011, investment accounts holding equities and balanced funds are down about 15% since March. While clients are generally concerned, I am very pleased that upon reviewing the financial health of the Canadian companies most widely held in mutual funds clients are resolved to wait out the current crisis and look forward to the price recovery when it occurs, as it did during the summer of 2009. Thank you to my investment clients for staying the course. You'll be glad you did.

Jeffrey Sindall New Direct Line: 905-389-3172 Email: jeffrey.sindall@abbington.ca

For scheduling appointments and transaction follow-up please continue to phone 905-389-3534.

Thank you for being our client. We enjoy being of service to you. – Jeffrey Sindall

The foregoing is for general information purposes only and is the opinion of the writer. This information is not intended to provide specific personalized advice including and without limitation investment, financial, legal, accounting or tax advice. Please phone me to discuss your particular circumstances.

Mutual funds provided through FundEX Investments Inc.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the simplified prospectus before investing. Mutual funds are not guaranteed and are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be returned to you. Fund values change frequently and past performance may not be repeated. An investor proposing to borrow for the purchase of securities should be aware that a purchase with borrowed monies involves greater risk than a purchase using cash resources only. The extent of that risk is a determination to be made by each purchaser and will vary depending on the circumstances of the purchaser and the securities purchased.

662 Upper James St., Hamilton, Ontario, L9C 2Z3

Telephone: 905-389-3534 Fax: 905-389-0345 General Email: service@abbington.ca