Canadians face embarrasement with the current illeged political corruption. This will come to light as the findings of the Gomery Inquiry become public. This may even force an election late in 2005 or early in 2006. In the meantime, many are wondering how this might impact the markets and their investments.

There are really two different components. The first is the threat of Quebec possibly separating from the rest of the country.  This would cause not only a fragmentation in the economy, but have terrible social effects on people across the country. Foreigners may become more reluctant to invest in Canada and in turn in Canadian companies.  As an offset, the government may have to allow for interest rates to rise and for the Canadian dollar to weaken.

The second and less obvious area is that proposed legislation may not have been passed. For example, you may be aware that the current foreign content restriction for registered investment plans of 30% was being proposed to be eliminated. This would be great for Canadian investors as the RSP 'clone' products which many investors have utulized to better diversify their investment accounts have an additional cost which would no longer be required. An early election may mean that this never takes effect. Another example is the proposed increased in CDIC protection coverage from $60,000 to $100,000 for certain deposits with certain deposit taking institutions may also never take effect.

Many people wonder what changes they should be making to their investment portfolios given these circumstances. If you are concerned about this, we encourrange you to contact us for a confidential review.