MARKETVIEW FEBRUARY 2006 NOW IT GETS CONFUSING I … · MARKETVIEW FEBRUARY 2006 NOW IT GETS CONFUSING I REALLY DON™T LIKE TIMES LIKE THESE The start of the new year always creates

Brant Securities Limited Page 1 2/2/2006

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MARKETVIEW FEBRUARY 2006

NOW IT GETS CONFUSING I REALLY DON�T LIKE TIMES LIKE THESE

The start of the new year always creates in me the need to forecast the great remainder of it. I need to see if the factors I see shaping the upcoming twelve months produce the markets I think they should. If one doesn�t have an overall view of where we are going, it makes it hard to invest effectively, to use our new motto. The fundamentals for the new year are the same only more so:

- George Bush and his henchmen are still running the United States; - The Federal Reserve continues to print money to keep the party going; - The US trade deficit continues to grow; - The US budget is out of control and closing in on one trillion dollar deficit; - The US and, to a lesser degree, Canadian consumers are maxed out on their

borrowing power and ability to consume; - Real Estate worldwide has appreciated dramatically, with near bubble conditions

in certain regions of the US and Canada;. - Interest rates are at decade lows world-wide; and, - Gold is at a multi-decade high

The chart patterns for many market segments are rising at unsustainable rates, but I am hesitant to sell precious metals, oils and the Japanese market with the probability of a major calamity in the US market being high. INTEREST RATES Rates continue to decline for long-term bonds. Short-term rates have risen in the period as the central banks have tightened credit marginally to address the price inflation experienced in both North America and Europe. This has created in inverted interest rate curve. The 90 day rates in the US are at 4.25% and the five year rate is 4.27%. There is no premium for the risk. An inverted or flat curve usually leads the way into an economic slowdown. This could have quite an effect on the US economy, especially the industrials The chart of 30 year treasury bonds is showing the interest rate paid. The trend of rates continues down.


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CANADIAN DOLLAR The Canadian dollar continues to rise against the US dollar, powered by strong oil, gas and metal prices. We are also now seeing a number of large takeovers of Canadian companies by foreigners which will further increase the demand for the Canadian dollar.

We are closing in on par with the US dollar, this will have major ramifications for Canadian manufacturers for years to come.


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EURO

I would expect a rise in the euro to the 129 level before any setback against the US dollar. YEN

A run to 102 yen to the US dollar is likely, a bonus for owners of the Japanese equities.


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NIKKEI 225 INDEX

The Japanese equity markets appear to have moved to a new level. It does not look as if there will be much resistance until the 20,500 level is reached,. We are now at 16,500.


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TORONTO S&P/TSX COMPOSITE

Last MARKETVIEW suggested that we would see a turn up with a resumption of the gold rally. This has now happened and we have broken out to a new high. This is possibly a new range for the market and a significantly higher level of support going forward. While it is hard to accept higher prices for oil, gold/silver, metals and other commodities, it appears Canada is on a roll. As stated earlier this is a very profitable market but is also a very dangerous market. A prudent investor would slowly take money out of this market as it rises.


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DOW JONES INDUSTRIALS

The message from New York is confused. After banging into the overhead resistance at the 10,900 level the market has moved sideways. With the retirement of the chairman of the US Federal Reserve, I think the US market will want to see what the incoming Bernacke will do. He is facing some major challenges, with a number of overheated markets namely housing and credit


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USA S&P 500 INDEX

While the broad market has risen since the last MARKETVIEW it has remained in the rising trend channel and turned down upon reaching the resistance line. There is a high probability we will see lower prices until the index is at the bottom of the channel. Still a market to avoid.


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NASDQ

As suggested last letter this was one of the least dangerous markets to buy. Now we are at the resistance level and may see a breakout to higher levels. Hold back for a clear buy signal above 2300.


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GOLD AND GOLD/SILVER SHARES


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Gold is still off the front page, the public has not caught on to the move up in both gold stocks and the bullion. As long as it stays off the radar screen and there is no buying frenzy, I think we will be safe holding our gold positions. MARKET VOLATILITY INDEX

The market participants remain complacent. I have trouble believing it can continue, but I�ve been wrong so far. (A low VIX implies little fear in the market of a correction. A high VIX occurs when most investors think the world is ending, -it can�t get worse, and it doesn�t.) I rarely refer to specific stocks but think there are three dogs worth looking at. I attach the charts for Merck, Pfizer, and Bristol Myers. All suffering with historically low stock prices, but they each pay a dividend, and are well managed.


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I am away the week of February 6th in the Bahamas, checking out the Caribbean economy. Please feel free to comment on my thoughts. Regards, John Housser Brant Securities Limited 416 596 4555 The material contained herein is for information purposes only and it is not to be construed as an offer or solicitation for the sale or purchase of securities. The information does not consider the specific investment goals and financial situation of the recipient of this document. Readers should consult with their professional advisor regarding the suitability of investing in any securities or pursuing any investment or business strategy, which may be described herein. Charts courtesy of Reuters

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MARKETVIEW FEBRUARY 2006 NOW IT GETS CONFUSING I … · MARKETVIEW FEBRUARY 2006 NOW IT GETS CONFUSING I REALLY DON™T LIKE TIMES LIKE THESE The start of the new year always creates