Critical Illness Insurance is a relatively new form of protection that provides money while you are still alive

Joe Chisholm is a managing partner of Queensbury Insurance Brokers and VP-Operations of Queensbury Strategies Inc. He welcomes questions, comments or suggestions for future interviewees at (416) 363-8500 or chisholm@queensbury.com

AS FAR AS FINANCIAL MARKETS ARE concerned, these are very troubling times if not for us, then for our clients. One of the realities of having enjoyed the longest bull market in my lifetime is that there are many investors and advisors who have never gone through a bear market as an interested party. So it was no surprise that the inclusion of long-term economic "experts" in the 2001 CAIFA Congress was well received by our audience.

We were treated to three great speakers who eloquently painted a picture for us of where the economy might be going. This featured the heavy weight match of highly recognized commentators, each with their own bias and background. The challenge for us was a lack of consensus. Nevertheless, here is a recap from the "three wise persons."

"Revenge of the nay-sayers" was the theme for this breakfast speaker. For those who weren't yet awake to join us for Mr. Coxe's presentation, his sober calculations of what lies ahead perked us up quicker than the coffee.

It is Coxe's contention that the party is over & NASDAQ is dead and advisors have to educate themselves and clients to a new expectation.

Many will know Don Coxe as a columnist for the Financial Post. Mr. Coxe has been an institutional investment executive since 1972. He has worked on Wall Street, in Chicago for Harris Bank and is currently Chairman and Chief Strategist for Harris and Jones Howard Inc.

For a couple of years now Mr. Coxe has been warning that NASDAQ valuation are outrageous, and sanity would eventually prevail. His warnings fell on our deaf ears as the composite index streaked past 5,000 in Q1 of 2000. Mr. Coxe was thought to be a dinosaur that didn't understand the "new economy" and still depended on fundamental analysis, Price to Earnings and Price to Book Ratios to valuate stock.

It was Warren Buffet who said, "When the tide goes out we will see who has been swimming without a bathing suit." With the NASDAQ flirting down near 1,500 (wiping out all the wealth created since mid-1997), it was Coxe's day to say, "I told you so."

But there was another message that was far more attention-getting. It is Coxe's contention that the party is over NASDAQ is dead and advisors have to educate themselves and clients to a new expectation. Remember the fall of the "Nifty 50" stocks of the late `60's? How about the NIKKI fall at the end of the 80's or the Canadian Resource Index crash? To date, there has been no recovery for these groups. For those of us who feel entitled to ever increasing growth in technology stock valuations, we have to step back from the mania and assess how solid the foundations of our beliefs are.

A noteworthy point made by Mr. Coxe was that when you have unanimous positive expectation, that is the time to run for the doors. Coxe referred to Sir John Templeton who warned that the danger point was when investors and analysts said, "This time it will be different." That is the time to take a defensive position. Coxe's argument is that "This time it will be different," was what investors were saying when they rationalized paying the multiples they did on technology stocks in the face of all time-tested valuation methods.

Coxe sees pressure coming to bear on the U.S. dollar and other currencies, such as the Canadian dollar gaining ground. This won't do anything to help U.S. markets. What Coxe suggests is a flight back to quality. He likes long bonds as he expects interest rates to stay low for the decade and he likes income-producing stocks or funds. This, along with tempered expectations on returns, will save clients another beating from growth stocks. If there is a rally that he suspects there might be, treat it as a selling opportunity to unload beaten up stocks or funds because it won't last.

Don't let the temporary set back fool you "technology is our future" was Dr. Cooper's message. Easily the most flashy and high-tech of the presentations, if the medium is the message, you could see that Sherry Cooper wasn't yielding from the "New Economic Paradigm" philosophy, which she writes about in The Cooper Files & A Practical Guide to Your Financial Future (her 1999 best selling book).

Dr. Cooper is Executive Vice President of both Harris Bank in Chicago and BMO here in Toronto. She also writes for the Financial Post, makes TV appearances and speaks to audiences all over North America.

Cooper argues that with the breakthroughs in biotechnology, the internet revolution and the tireless attachment to the demographics argument, there are still fortunes to be made. The only thing to fear is to be left on the sidelines when it happens. She drew our attention to the facts such as:

1.market penetration of high speed internet connectivity is only 10% so far and,
2.the decoding of the human genome will lead to unprecedented break-throughs in both the quality of life and commercial opportunities.

Cooper's pay cheque does come from an employer that benefits highly from her encouragement to buy more funds and stocks. That issue does make me sceptical when she says, "This is an unprecedented `buying' opportunity." But her point is worth noting that if you were out of the market for the best 10 days of each year over the last 30 years, you would have seen 100% of your gains washed away. Market movement can happen suddenly and no credible person has found a way to predict when it will happen.

Cooper was the only prognosticator that suggested that the U.S. dollar would continue to gain against foreign currencies. Canadians will be most affected as she suggests that our dollar will flirt with fifty cents. Cooper stops short of suggesting that we will be begging the US to adopt their currency sometime this decade.

Cooper suggests that economies have become so interdependent that it does not make sense any more to diversify by region. If telecommunication companies are hurting in the U.S. then telecommunications will be hurt across the globe. Instead, diversifying by sector is a better way to reap returns and lower volatility.

Reminding us that there is an economic world beyond Wall Street and Bay Street, Richard Lambert offered us an insight into how we North American's look from those who don't take us so seriously.

Since 1966 Mr. Lambert has been in the employ of The Financial Times in the U.K. He has had postings in both the U.S. and at home and now heads this paper as the Editor.

We were reminded of the difference between information and knowledge. Our clients are brow-beaten by daily news and hyperbolic headlines. And they will continue to be because headlines sell newspapers and circulation increases advertising revenue and newspapers are in this game to make money. As advisors, one of our roles is to act as a filter and to help keep clients focused on their long-term goals and not on the hype.

Lambert expects better growth prospects for Europe than they have seen in a decade. He notes that Canadian trade with the USA has increased every year for the last 10 years and is now 35% of G.D.P. Europe doesn't depend on the U.S. for trade to the same degree that Canada does and won't be as affected by the U.S. economic down- turn. Mad Cow Disease and the Hoof and Mouth have both stalled economic prospects in Europe.

The best recommendation that Mr. Lambert thinks that we can make to clients is to consider Europe as a travel destination because the impact of the bad press over livestock illnesses will hamper tourism to the point that there will be great discounts to be found in travelling overseas.

"What long term periods of prosperity have always depended on," argues Lambert, "are

1.International economic cooperation and integration,
2.Rapid technological advancement and
3.Selective catch-up of some of the leading economies."

He further goes on to suggest that these three pre-requisites are in place right now. And if this is true for Western economies, the table may well be set for East Asian economies in the next few years. "China and India make up 40% of the world population and only 16% of world output. This output level is growing at a significant level." Japan on the other hand needs leadership. They need to get a grip on fiscal policy.

Sometime early in this decade, Lambert does expect to see challengers to the U.S. for economic domination so the need for attention to investing in markets outside of North America should not be overlooked.

So, is the sky falling or is the future so bright, all we need is guts and sunglasses? It might be fun to put this article or your own notes in a forward file for review in the spring of 2002. Have a look at it just before you head out to next year's Congress. This should help us all decide how much weight to put in the words of the great prognosticators. The great comfort that these eloquent but divergent viewpoints brought home to me is that, the one thing, we can be sure of going into this new decade, is that clients need trustworthy and accountable advisors more than ever.