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Market Commentary May 10, 2010

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The $1 trillion (U.S) loan package unveiled yesterday by the supranational organizations EU and International Monetary Fund will assist Greece and some of its neighbours. They have taken the "parenting step" of co-signing the loan to buy time for Athens Lisbon and Madrid. For this assistance to offer any lasting effect, this aid must be followed up with some serious discipline. Politicians around the world need to get serious about cutbacks and debt reduction. It is called living within their means.

Listed below are the largest European Government deficits according to Eurostat:

	Size of Deficit as a % of GDP	Consolidated Debt as a % of GDP
Ireland	14.3%	64%
Greece	13.6%	115%
Britain	11.5%	68%
Spain	11.2%	53%
Portugal	9.4%	77%

An example of living with one's means is captured when we look at recent information from the Canadian Association of Accredited Mortgage Professionals and the Canadian Bankers Association.

• Of the 9.3 million homeowners in Canada, 5.55 million have mortgages on them
• The average outstanding mortgage is $138,000
• 0.45% of Canadian mortgages are in arrears as of February 2010

Time will ultimately determine whether this large and powerful rescue package will work. The EU / IMF action is very similar to the way the US and Canadian Governments dealt with the financial meltdown 1½ years ago. While there are significant hurdles for the North American turn-around, much of the news is encouraging. General Motors was one of the largest rescues.

$50 billion of U.S taxpayer money was invested in General motors. Mr. Rattner, the former head of Washington's Automotive Task Force believes that the US Government should be able to recover $40 billion. The U.S Government owns 60% of GM, and may have a positive return on their investment depending on what price the new stock is issued. But as it stands now, the $10 billion cost to the tax payer avoided a regional depression in the US Midwest and the loss of 1,000,000 jobs across the U.S. The financial re-workings of GM also lowered it to breakeven where they can make money on sales of about 10 million annually. Sales are currently on a trajectory to hit 15 million annually in the next few years.

The Canada Pension Plan (CPP) Investment Board announced that they have taken minority stakes in two office towers in New York City. While they have no clear knowledge that the European debt situation will not spread, they are investing for the long-term and believe there are some significant opportunities that will benefit the CPP in the years to come.

This same activity is taking place in the growth portions of the pension portfolios with Russell and Pinnacle. These portfolios stay invested and make changes to the portfolios as opportunities present themselves. Even in the wildly volatile day in the markets on May 6th, while the world's major markets and Canadian dollar were off by 3% - 4% or more, the pension portfolios ended the day basically unchanged. This global diversification provided portfolio stability.