InvestWELL Financial Inc. - Markets This Week

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March 8, 2008 Dear Reader, During the last month, the market suffered further losses related to the loss of investors' confidence and the sub-prime lending crises. It is too early to say for sure whether the market has become a bear market or if the current stage is merely a correction. Our next InvestWELL Report will be released on April 5, 2008. (following the Labor Report which is generally recognized as a "market mover"). Derek Polcyn, President In This Issue: Investment Idea Quiz Our Results Market Highlights Behavioral Finance Indicators Answer to the Quiz

Investment Idea Question: Is gold a good risk reducer and diversifier? Answer: Historically, gold has served as an investment that can add a diversifying component to one’s portfolio. At the end of the day, if your focus is simply diversification, gold is not correlated to stocks, bonds and real estate. In terms of returns, however, gold has had a rather poor record of performance. One of the main differences between investing in gold several hundred years ago and investing in gold today is that there are many more options to participating in the intrinsic qualities that gold offers. Today, investors can invest in gold by buying: Gold Futures Gold Coins Gold Companies Gold ETFs Gold Mutual Funds Gold Bullion Gold Jewelry


Quiz Does it make sense to buy gold bars? A) Yes, everyone should have some gold bars at home B) Yes, it would be nice to show them to friends once in a while C) No, it could not be easily transported to other locations D) No, there are other alternative ways of holding gold Answer to the Quiz at the bottom of the newsletter


Our Results (Cumulative %) Investment Strategy – MEMBER SECTION InvestWELL Picks has been able to increase its performance gap over the general market (as defined by S&P 500 index.) Over the last several months, InvestWELL Picks has remained relatively stable, despite large volatility in the market. Chart 1.


Market Highlights During the last month, the US equity market declined sharply (Chart 2 & 3) as the sub-prime crises is taking its toll on the market and affecting other forms of investments. Charts 2 & 3. S&P 500: 3 Years and Last Month Charts courtesy of StockCharts.com During the last month, the Canadian market declined in tandem with the US market. However, over the last 3 months, the Canadian market has managed relatively well on the strength of energy stocks and the general economy (Charts 4 & 5). Charts 4 & 5. TSX Canada: 3 Years and Last Month Charts courtesy of StockCharts.com Last month, the US economy lost 63K jobs. More telling is the -101K decline in private payrolls as the government added 38K. The Labor Report marks two-month declines and a very clear downward path with weaker growth in each month since October. Last month, the Canadian economy added 43K new jobs. Currently, the unemployment rate stands at 5.8 per cent, the lowest in 33 years. As stated in our previous newsletters, we do not expect that the Canadian economy would be immune from what is happening south of the border. The growing services sector and domestic demand may offer some insulation however the drop in exports will have a negative effect on employment in sectors that are exposed to the US partner. Gold and oil prices marched to unprecedented highs, extending their recent rally into record territory. Gold is currently trading at $972 (U.S.), pushing closer to the milestone $1,000 level as the U.S. dollar fell to its lowest ever against the euro. On the other hand, the crude oil surged to a unparalleled $105.15 a barrel. Countrywide Financial Corp., the largest mortgage lender in the US, stated that foreclosures and late payments reached record levels in February 2008. Yet, anther proof of the lack of proper risk management in the lending industry. Noting that "commercial-real-estate values are starting to slide," the Goldman Sachs is projecting a decline of 21% to 26% in the next two years. However, it is possible that in contrast to housing, commercial real estate's problems may be more regional in nature and selective in their damage.


Opportunities and Risks – MEMBER SECTION Behavioral Finance Indicators (see explanation) Here is a direct quote from the Behavioral Section in last month's Member newsletter: "Overall, we believe the market will bounce back and re-test the highs set in December 2007". We were wrong. It looked like the market was going to test the highs but it decided to test the lows instead. MEMBER SECTION Charts 6 - 8: Advancing/Declining Line, AAII and Equity Put/Call Ratio Charts courtesy of StockCharts.com and DecisionPoint.com

Answer to the Quiz D is correct. There are many better and safer alternatives for holding gold as a part of a portfolio.

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