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October 2005 Commentary

October Commentary:

A.                  Canadian $

With the central bank intent upon holding monetary policy firm, is it a matter of time until the Canadian dollar and the US dollar trade at parity

Technical charts indicate that while the US dollar is ready to resume it’s downtrend, the Canadian dollar is poised to rally to new highs.

B.                  China

China’s GDP per capita is at a similar level to Japans in 1962 and between 1962 and 1970 Japan’s economy grew at an average rate of 10% a year.  China has accounted for about 30% of the increase in global growth.

C.                   Major Indexes

The standard poor’s 500 is down 2.7% year to date.  The Dow Jones Industrials are off 5.3%; the NASDAQ composite 4.3%;  In general, the big money Banks expect the Dow to end the year at 10,869 – 5.7% above Thursday’s close.  On the same basis, the S&P and NASDAQ could each rally by 7.8% to 1270, and 2230, respectively.  The S&P 500 has risen by the grand sum of 2% since January 2004.

(see Equity Markets and Commodities charts attached)

D.                  Income Trust

Federal Finance Minister Ralph Goodale’s announcement of a consultation process on the tax treatment of income trust, and his decision two weeks later on September 15^th, to no longer provide advance tax rulings to companies contemplating income trust conversions has created considerable uncertainty and confusion in the income trust market.  Over the last 30 days to October 19, 2005 the S&P/TSX trust index is down –12,2%.

INDICES                                                    TOTAL RETURN (%)

                                                      Month (October)             Year to Date

SED/TSX Composite                              -5.7                              ll.0

S&P 500                                                  -1.7                              1.1

NASDAQ Composite                             -1.5                              -2.5

DOW JONES Industrial Average         -1.2                              -3.2

Edenview Investment Partnership        -3.99                            12.2%

*Price Return Only

Energy again dominated the index this month, but a downward contributor representing 3.3% of the composite’s 5.7% decline (about 60%) although it still represents 70% of its positive return year to date.  It is interesting to note that every sector of the S&P/TSX composite was a negative contributor this month (October).

Last month, some of the sharper investors on the planet got it wrong with the US dollar.  Macro hedge funds invest in stock, bond, commodity, and currency markets by monitoring large economic trends.  They showed their worst returns of the year in October, stemming mainly from beginning short the US$.  Returns for larger hedge funds dropped more than 2%.  The oracle of OMAHA, Warren Buffet, who pared back about 20% of his 31 Billion (US) short position after losses of $100 Million.  Keep in mind that even federal reserve Board Chairman Alan Greenspan has said predicting currency movements is better than flipping a coin.