David A.

Rosenberg July 28, 2010

Chief Economist & Strategist Economic Commentary
drosenberg@gluskinsheff.com
+ 1 416 681 8919

MARKET MUSINGS & DATA DECIPHERING

Breakfast with Dave

WHILE YOU WERE SLEEPING
IN THIS ISSUE
We are writing this in the wee hours of the morning and thus far it is a pretty
mixed picture. European bourses are flat-ish but Asia posting some nice gains • The risk trade is intact
(up 0.9% to a 10-week high, no less), especially the Nikkei, which rallied 256 • Comments on the market
points or 2.7% to 9,753 on the back of some positive earnings reports and a
• Home prices get an
positive response to the loose capital standards recommended by Basel III. For
artificial lift
a perspective on this, the Nikkei was 9,846 back on December 26th, 1983, so
it’s truly encouraging to see the Japanese market climbing back to levels • Poor in Richmond
prevailing 27 years ago. The Shanghai index is breaking out and registered a • The corner of Wall and
2.3% advance today, cutting its losses for the year to less than 20%. Credit Main
default swaps overseas continue to improve.
• Chain store sales still
below target
Even with all these flashy gains in the Asian risk trade and a slightly softer tone
to the dollar, bond yields are down a tad in the early going (outside of Japan, • Thoughts on the long-term
that is, as the JGB yield popped nearly 4bps today to stand at the lofty level of outlook for inflation
1.075%). This is a big story – despite the 9% in the S&P 500 since early July,
the yield on the 10-year note has not budged at 3%. (It would seem that Mr.
Bond is either looking at the economy through a different lens or is focussed on
the incoming data while Mr. Dow and Mrs. Jones are salivating over the earnings
reports.)

The commodity currencies are starting to sputter a bit here too. The Aussie
dollar succumbed to lower-than-expected inflation data (consumer prices were
+0.6% in Q2 versus +1% in Q1 and below consensus views of +0.9%), the Kiwi
was hit by a report showing lower business confidence and the loonie dipped on
a release indicating that consumer confidence is down now for two months
running.

On the commodity front, gold is about to face a critical test of the 200-day
moving average while copper has gone the other way and has broken out to the
upside. Oil is trapped in a range between the 50-day and 100-day moving
averages. If you strain your eye, you may be able to detect an uptick in the
Baltic Dry Index … until recently, as maligned an economic indicator by the
growth bulls as the ECRI index.

Please see important disclosures at the end of this document.

Gluskin Sheff + Associates Inc. is one of Canada’s pre-eminent wealth management firms. Founded in 1984 and focused primarily on high net
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July 28, 2010 – BREAKFAST WITH DAVE

MARKET COMMENT
A whole 1 point decline in the S&P 500 and for the bears it was like winning in
extra innings after a three-week losing streak (and in contrast to the rally days,
volume on the NYSE expanded 10% yesterday). We received all sorts of emails
yesterday that Barton Biggs had reloaded the gun and moved from 50% to a
75% weighting in equities. Maybe that was the kiss of death. Maybe we have
again stalled out around the 200-day moving average. Or maybe the market is
simply the most overbought it has been in nearly three months, according to
some oscillators.
We recall a survey that we
Perhaps, like Barton, everyone has gone long the market again and we recall a saw over the weekend that
survey that we saw over the weekend that PM’s are now 68% weighted in PM’s are now 68% weighted
equities in their balanced funds. We can also see from the CFTC data that the in equities in their balanced
net speculative position (futures and options) at the Merc has swung from a net funds
short position of 40,000 contracts in mid-June to a net long position of 3,300
contracts currently. That sort of move will certainly move the needle. Ditto for
the 1.2% decline in NYSE short interest over the past month. In the past two
weeks, Market Vane bullish sentiment on equities has moved up 5 points. It’s
all good. Meanwhile, consumer confidence has rolled back to a five-month low
(what does Main Street know, anyway?).

Earnings on the surface seem to be doing just fine but at the same time, we can
see that the economy slowed visibly as Q2 came to a close and the July data are
telling us to expect a slightly different tone to Q3 guidance. There was a nifty
article on Market News yesterday showing how 82% of the corporate universe
beating EPS estimates is standard fare and that only 68% are doing so in terms
of revenues (a figure lower than we saw in the second quarter of 2008 when the
Earnings on the surface
economy was knee-deep in recession). Sales are up the grand total of 9% YoY
seem to be doing just fine
and this being compounded off a -14% trend this time last year – so margins but at the same time we can
continue to stretch out to the limits and one has to wonder how long that is see that the economy
going to last. Who knows? Maybe profits end up going to 100% of national slowed visibly as Q2 came to
income and labour’s share totally vanishes. a close

I was asked yesterday in an interview how I respond to criticism for missing the
surge in the equity market. Well, for one thing, those that were long in 2009 got
their clients killed in 2008 and it’s still not even a wash. Second, I was
recommending credit and commodities last year, not cash, and these strategies
played out well. There are always ways to make money without having to go
whole hog into the stock market (if you think I’m bearish, there are others who
make me look like Jim Carrey – have a read of “Doomsday Shelters Making a
Comeback” on page 3A of the USA Today).

More to the point – we can get 80% rallies in a secular bear phase, and to be
totally honest, I have never billed myself as a market timer. There are others
here at GS+A that do that much better than me. The Nikkei has enjoyed
260,000 rally points in the past twenty years and the market is still down
70%. If you partake of these bear market rallies, know when to get out – or at
least sell call options and collect the premium. It is amazing how people are still

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stuck in this belief that the 80% rally off the lows is still somehow a prevailing
market condition – the S&P 500 peaked on April 26th and even with the
recovery of the past few weeks, the S&P 500 at 1113, with all due respect, is no
higher now than it was on November 16th of last year.

Through all the zigs and zags, this market has done diddly squat now for over
eight months. You were better off clipping coupons, even at these low bond
yield levels. And as for that 80% rally from March/09 to April/10, we wonder
aloud how many are going to remember it once we retest the lows – the market
rallied 50% in the opening months of 1930, as an example. Do you ever hear
anyone today talking about the great rally of 1930? Does anyone today ever
have much to say about 1930, or if they do, is it a fond memory? Well, the
9% of American households
market rallied 50% at one point that year. There’s not much left to say on this
rate business conditions as
one.
being “good”
For the time being, it probably pays to treat the market as a 1040-1220 decision
box as far as the S&P 500 is concerned. Even after the 9% rally of the past two
weeks, it is still at the halfway-point of this well-defined range of the past ten
months. What is amazing is how Main Street and Wall Street have diverged in
recent weeks. The market has rebounded nicely and all we see now is optimistic
prognostications about the outlook because of an earnings season that seemed
to contain most of its growth in April which was three months ago – meanwhile,
what did we see in the July consumer confidence report? That 9% of American
households rate business conditions as being “good”.

Are you kidding me? That’s all we get with a 0% funds rate, a near 10%
deficit/GDP ratio and a $2.3 trillion Fed balance sheet? By way of comparison,
back when Lehman failed in September 2008, 13% believed business
conditions were “good”, and when Bear Stearns failed in March of that year, the
ranking was at 16%. In the wake of the 9-11 tragedy, it was 19%.
44% give the business
Meanwhile, 44% give the business background a “bad” rating, so the ratio of background a “bad” rating,
growth bears to growth bulls in the survey is nearly five-to-one; we doubt you will so the ratio of growth bears
ever see that sort of ratio among surveyed economists or strategists. Now
to growth bulls in the survey
is nearly five to one
maybe these people polled by the Conference Board don’t know the first thing
about the economy, but last we saw, it is consumers that command a 71% share
of GDP so their opinions will count if they translate into (in)action.

Those that do not see how abnormal this so-called recovery has been, consider
that in expansions, consumer confidence averages 102; in recessions, it
averages 71; and we are at 50.4 as of July. So basically, the level of consumer
confidence is 20 points below what the average level is during a recession and
yet virtually everyone dismisses double-dip risks out of hand. Maybe there is no
double-dip because we never really fully emerged from the recession that we
know officially began in December 2007 – that was certainly the message out of
yesterday’s confidence report.

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July 28, 2010 – BREAKFAST WITH DAVE

HOME PRICES GET AN ARTIFICIAL LIFT … BUT GOOD NEWS FOR RENTS
The Case-Shiller home price index managed to come in a better-than-expected
print of +0.47% in May on top of a 0.6% lift in April. This is not the start of a new
uptrend since the inventory backlog is still massive and instead reflects the
effects of the last gasp of demand during the spring as the government tax
credits were about to expire (the index is based off a three-month average). No
reason to get excited – especially knowing that average new home prices
collapsed almost 10% in June.

Meanwhile, housing demand continues to weaken and we saw that in the Q2

Census data, which showed the homeownership rate dropping to a decade-low
66.9% from 67.2% in Q1 and 67.4% a year ago. It will take years to mean revert
to the traditional 64% rate and during that time, one would have to believe that
the direction of the demand and supply curves will lead to deflation in
residential real estate as opposed to any sustained price appreciation. The level The Q2 Census data showed
of vacant homeownership units for sale is stuck just below 2 million and units
the homeownership rate
dropping to a decade-low
that are empty and being held off market for “unspecified” reasons (the shadow
66.9% from 67.2% in Q1 and
inventory) jumped 3.2% to a record 3.74 million units.
67.4% a year ago
This puts the total vacant supply at 5.7 million units or nearly 8% of the stock if
ownership units are compared to a pre-bubble norm of just above 5%. That is
an excess of around 2-1/2 million units, which is a huge overhang. On the bright
side, rental demand rose 0.9% and occupancy here is up three quarters in a row
to 37.1 million units. The apartment vacancy rate, which peaked at 11.1% in
last year’s third quarter, has stabilized near 10.6%. Other data from MFP
Research show the vacancy rate now down to 6.6% form 8.2% at the end of
2009 – perhaps this is why the Bloomberg apartment REIT index is up 23% YoY,
double the trend for the entire REIT space.

POOR IN RICHMOND?
The Richmond Fed manufacturing index has followed in the footsteps of the
other regional industrial readings in the direction of weakness, not strength. The
diffusion index slipped to a four-month low of 16 in July, from 23 in June, 26 in
May and the nearby 30 peak in April – the month when the equity market
peaked.

Prices paid slowed to 1.59% annual rate from 2.31% in June, the low-water mark
of the year and even in the face of the recovery in raw material costs; and prices
received index also softened to a 1.45% annual rate from 2.39% -- again, For all the talk of how great
suggesting as was the case with the Dallas Fed Index that we are kicking off the the transports are doing, we
third quarter with margin compression. couldn’t help but notice that
traffic is starting to slow
As an aside, new order volume sank to 12 from 25 in June and well off the 41
nearby high in April. And the Richmond Fed survey index for services showed 0
for retail sector revenues and the employment index swung from 2 to -6 –
contraction in other words, for the first time since March. These numbers, sorry
to say, are not conducive to a prolonged stretch of beta/risk/cyclical
outperformance. These data are consistent with a 3-point decline in the July

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July 28, 2010 – BREAKFAST WITH DAVE

ISM index (Richmond Fed has a historical 77% correlation with it) – so stay
tuned for the data release on August 2nd.

For all the talk of how great the transports are doing, we couldn’t help but notice
that traffic is starting to slow – according to the ATA, the truck tonnage index fell
1.5% in June after a 0.2% dip in May As we said earlier, a lot of this great Q2 Main Street is not feeling
earnings news was frontloaded into April – but at least the bulls have another the love that Wall Street is,
three months to fret over the Q3 profit reporting season. that is for sure

THE CORNER OF WALL AND MAIN

Main Street is not feeling the love that Wall Street is, that is for sure. Consumer
confidence as measured by the Conference Board slipped to 50.4 in July from
54.3 in June – the lowest since last February and about half the level that is
typical of an economy out of recession. The “expectations” component, that
leads consumer spending growth, was the real link, having slipped to 66.6 from
72.7; the “present situation” component dipped to 26.1 from 26.8.

The details of the report were very soft. Plans to buy a home slipped to 1.9 from
2.0., the lowest since December 2009, and before that, it was in the 1982
recession. Everyone seems to be of the view that employment is going to be key
but out of the confidence data we see that the “jobs hard to get” subindex rose
to 45.8 from 43.5 to stand at a four-month high.

As an aside, Canadian consumers are feeling a little downbeat too with

confidence down 3.7 points in June to 80.0 – the second monthly decline in a
row.

CHAIN STORE SALES STILL BELOW TARGET

The weekly sales data just came out and showed a 0.7% decline and so far into
July the YoY trend is running at +2.7%, which is fractionally below the +2.9%
gain that was planned at the start of the month by the retailers.
In a sign of these frugal
times, many retailers are
Discount stores are doing fine, especially food. The Redbook survey cited offering Christmas in July
“sluggish business” for the rest of the sector and that consumers seem promotions
“unmotivated” even with back-to-school items already “arriving in stores in
recent weeks”. In a sign of these frugal times, many retailers are offering
“Christmas in July” promotions, hoping to attract shoppers to get their holiday
purchases done early. Who knows? Maybe it will start snowing too.

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July 28, 2010 – BREAKFAST WITH DAVE

THOUGHTS ON THE LONG-TERM OUTLOOK FOR INFLATION

Let me start out by saying that I do not believe that bonds are any “better" an
investment than stocks, at least in principle. They both have their advantages.
It is safe to say that the bull
For bonds, the advantages are that they provide an income stream – the market in bonds will end
principal and the interest payments are guaranteed in the case of most reasonably close to the point
government securities; and in the case of the corporate sector, it inevitably in time that inflation (or
comes down to the quality of the credit and the longevity of the company in deflation) bottoms
question. In addition, the yield at the time of purchase is almost always at some
significant positive spread over CPI inflation.

Stocks represent ownership in corporations that have assets and strive to make
a profit, often paying out a portion of the profit in the form of dividends and
retaining earnings to grow the business and increase the dividends in the
future.

But the primary purpose of this comment is to suggest what things may look like
when the Great Bull Market in Bonds, which began in 1981 with 30-year
Treasury Bonds yielding 15.25%, finally comes to its glorious end.

For starters, I think it is safe to say that the bull market in bonds will end
reasonably close to the point in time that inflation (or deflation) bottoms. This is
because we have determined that by far the major economic factor that
correlates consistently with the direction of market-determined interest rates, at
least for long term Treasury Bonds, is CPI Inflation (headline and core).
We could well see core
inflation receding from
The bond market, like politics, is an emotional issue and not well-liked in general around 1% now to near 0% in
by Wall Street because it has a negative correlation to the stock market most of the next 12-to-24 months,
the time. For a growth bull, the bond is the "enemy". The economic environment which would imply an
that most favours the long end of the bond market tends to be low or no growth ultimate bottom in the long
and bonds have traditionally been an asset allocation decision that is bearish on bond yield of 2.5% and 2%
the stock market.

As a result, fear mongering often takes the place of thoughtful and objective
analysis when it comes to bond market commentary. One way or another, the
long end of the bond market has continually been characterized as high risk for
the last 30 years that it has been outperforming the S&P 500. That’s a little
unfair – after all, it is the benchmark risk free asset for funding actuarial liability
when taken to the extreme of a 0% Coupon Treasury Strip.

Let’s move on and make a sensible and objective effort at making a long-term
forecast for core CPI Inflation. Based on our analysis, we could well see core
inflation receding from around 1% now to near 0% in the next 12-to-24 months,
which would imply an ultimate bottom in the long bond yield of 2.5% and 2% for
the 10-year T-note. We should add that as long as the Fed funds rate remains at
zero, reverting to a normal shaped Treasury curve would generate similar results
for the long bond and 10-year note at the point at which the inevitable "bull

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July 28, 2010 – BREAKFAST WITH DAVE

flattener" reaches its climax. As we saw in Japan, this will take time, but yields
at these projected levels will very likely come to fruition in coming years.

So what will be the cause of the next secular uptrend in inflation or

hyperinflationary shock? It pays to look back at history. Prior to the inflation of
the 1970s-early 1980s, periods of very high inflation were primarily associated
with war. Increased credit demands to fund the war effort combined with the What is perhaps most
drop in productivity that goes along with blowing everything up is an inflationary important to recognize is
stew. that whether it is war, OPEC
or rampaging Baby Boomers,
Wars were typically followed by brief periods of deflation followed by stable history supports the notion
prices until the next war. In the 1970s several factors other than war led to the that high inflation, at least at
brief bouts of hyperinflation and they are much debated. What is perhaps most the core CPI level, tends to
important to recognize is that whether it is war, OPEC or rampaging Baby occur in brief bouts
Boomers, history supports the notion that high inflation, at least at the core CPI
level, tends to occur in brief bouts.

A quick look at the core CPI chart shows that for all but a brief period since
WWII, inflation has been well below 5%. But it was the period from 1970 to
1980 that contained all readings above 5%. Coincidentally, this was the period
in which the Baby Boomers were buying their first refrigerators to go along with a
bungalow as they formed their households.

By 1983, core CPI was back down to 5% and never looked back, but the
psychological damage was already done. Inflationary expectations were
indelibly etched into the mindset of the Baby Boom cohort. So everyone
positioned themselves for inflation by leveraging up their asset purchases.
Inflationary expectations were the rationale for overconsumption and depleted
savings rates.

What resulted was an interesting dichotomy. Asset prices inflated during the
1980s, 1990s and into the 2000s. Although the secular bull market in equities
Core CPI on the other hand,
ran out of steam early in the last decade, most other asset prices (particularly
has been continually slowing
residential real estate) went parabolic into the peak of the secular credit cycle in
since the peak of 13.6% in
2007.
1980
Core CPI on the other hand, has been continually slowing since the peak of
13.6% in 1980 and even at the peak in the ratio of household debt to
disposable income in 2007, was running no higher than 3%. Unlike geopolitical
disruption or demographic shocks, asset bubbles and the credit cycle tend to
have an important secular behavioral impact on society and therefore, the
economy.

The credit collapse of the 1930s around the globe dramatically altered social
norms related to consumption, speculation and saving. Those who were adults
with families in the 1930s shunned debt and believed in “pay as you go” for the
rest of their lives. By way of comparison, the inflationary shock of the 1970s
enticed the Baby Boomers into a spending and speculative binge. Rather than

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July 28, 2010 – BREAKFAST WITH DAVE

save, they executed a failed strategy of speculating their way to a dignified

retirement.

Now the clock has run out and household behavior is poised for a dramatic
change. If the 55 year-old Boomer resolves to work longer and harder, cut the
budget to save more and liquidate debt, can we really expect the politics to
maintain the status quo? This type of behavior from the developed world will
exert enormous deflationary pressure. In addition, the huge amount of debt and Now the clock has run out
entitlement expansion that has occurred at the government level, particularly in and household behavior is
response to the financial crisis, will be an enormous drain on economic growth poised for a dramatic
as taxes are raised to service the debt and budgets are dramatically cut. change

For this reason, it is appropriate to consider the possibility that the next secular
uptrend in inflation must await the rebuilding of the household and government
balance sheets to levels that launched the last uptrend. That, by the way was
about 30% debt to disposable income in 1950, 60% in 1970, and realistically, it
could take a generation to get back to that range from current levels of around
125%.

The outlook is not entirely dependent on the behavior of the developed world’s
consumers and governments, however, if we are really trying to envision the next
20 years, the emerging market consumers (in places like China and India) have
extremely low debt levels and high savings rates. Changes in emerging market
consumer behavior should be, on balance, a source of counteracting inflationary
pressure. Then again, the forces that most contributed to disinflation in the
last three decades were globalization and technological innovation that lead to
dramatic improvement in productivity and lower unit costs.

There is no reason to doubt that these forces will continue to be moderately

supportive in the near future, even if higher marginal tax rates and reduced
labour mobility (due to the fact that one-in-four Americans with a mortgage have
negative net equity in their home and are thus "stationary") end up constraining
the noninflationary growth potential in the United States (and Europe).

While the disinflation from 1980 to 2007 was mostly supply-side related, the
deflation pressure now is coming from the demand side – a deficiency of Changes in emerging market
aggregate demand caused principally by the contraction in credit (40% of the consumer behavior should
private market for securitized consumer and mortgage loans has vanished over be, on balance, a source
the course of the past two years). of counteracting inflationary
pressure
So, putting it all together, it is reasonable to conclude that prices are most likely
to be stable for a generation. By stable, I mean flat and perhaps oscillating
around plus or minus 2% (look at Japan, where there has been no such
downward price spiral – the CPI sits right where it was 18 years ago).
Because the economy is still gripped with overcapacity in several sectors, real
estate and labour in particular, we may be headed towards an outright
deflationary backdrop over the near- to intermediate-term, but a deflationary
spiral seems overly pessimistic considering all the good things in the mix,

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including a reflationary policy backdrop which certainly helped establish a price

floor in Japan in recent years.

That said, a “V” shaped recovery has always been off the table from our
perspective because we still have so far to go in the secular credit collapse, so
all the balance sheet expansion that the Fed has done and will do in the future
should continue to offer up little more than an antidote. In turn, a reversal A “V” shaped recovery has
of CPI or core CPI trend to the upside for the next couple of years seems like a always been off the table
low- probability event, particularly given the demographic and retirement from our perspective
pressures that increasingly favor savings over spending in the broad consumer
sector.

And what about the end of the Great Bull Market in Bonds? It could come pretty
soon. You heard right. Long-term Treasury Bond yields could reach a secular
bottom in the next couple of years. And what will it look like?

Well, rates will likely be much lower than anyone expects and, as typically occurs
at secular market peaks, the public will probably swear by long bonds at the
primary lows in yields. After all, what other safe investment has delivered
inflation plus 2% or much better, guaranteed, in the past 30 years? But in order
for the public to adore 2.5% yielding long Treasury Bonds, it will first have to
believe in stable or modestly deflating core CPI as a long-term forecast. At last
count, households still have a near-3% long-run inflation expectation according
to the most recent University of Michigan survey.

The public will also need to be fed up with risk and, judging by the performance
of stocks and real estate in recent years, who could blame them? And for the
Baby Boomer at 55 or 60, “Gambler’s Ruin” isn’t an option. We can see that
they are already voting with their feet as the mutual fund flows clearly indicate –
increasingly towards income and away from capital appreciation strategies.

Finally, the public will probably need to be afraid to be out (of the bond market,
that is). That will most likely be due to a “flight to quality” as we continue suffer
the secular bear market in stocks and real estate and suffer the economic
setbacks of renewed recession sooner than many pundits think.

One last thought on stocks: Like I said before, bonds are not better than
equities. They are different. Every asset class has its time to be the leader. It
goes without saying that the best time to allocate to equities is at the point of And what about the end of
maximum pessimism and when the market is trading very inexpensively as it the Great Bull Market in
was at previous post-war secular bear market bottoms. Bonds? It could come pretty
soon
We know that historically, that “moment” has coincided with valuations below
10x on trailing “reported” earnings and dividend yields above 5% as measured
by the S&P 500 Index. Note that while many a pundit cites the consensus as
being $96 EPS for “operating” earnings for 2011, it is closer to $76 on a true
“reported” basis (so apply a 10x or even a 12x multiple on that estimate!).

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We also know that the conventional wisdom is oh, so wrongly linear at inflection
points, so not only is the market cheap at these secular lows, but the future is
much brighter than generally perceived. Pulling the trigger at that magic moment
when bonds have peaked (yields have bottomed) and stocks can’t hurt you
anymore, with dividend yields secure at twice the Treasury rate, would be nice.
But you never know for sure at the right time, or you think you know for sure but
are too early. Sentiment toward long
bonds and inflation are still
For now, we are not even close. Sentiment toward long bonds and inflation are extreme and recent survey
still extreme and recent survey data show the typical balanced institutional data show the typical
portfolio manager with a 68% allocation towards equities. As for bonds, the balanced institutional
yield on 30 year Treasury was recently core CPI plus 3%; 4% for a BBB corporate portfolio manager with a
bond; and a 6% real yield in the BB space. The S&P 500, meanwhile, sports a 68% allocation towards
P/E multiple of close to 15x and the dividend yield is barely over 2%. equities

In this light, it would seem highly appropriate to maintain a SIRP – Safety &
Income at a Reasonable Price – strategy for the near- and intermediate-term,
while keeping a close eye on the exit plan from this recommendation, though
that could still be a few years down the road.

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fundamental analysis.
investment portfolios.
For long equities, we look for companies
with a history of long-term growth and
stability, a proven track record,
$1 million invested in our
Canadian Value Portfolio
share price below our estimate of intrinsic
in 1991 (its inception
value. We look for the opposite in
date) would have grown to
equities that we sell short.
$11.7 million2 on March
For corporate bonds, we look for issuers
with a margin of safety for the payment
million for the S&P/TSX
of interest and principal, and yields which
Total Return Index over
are attractive relative to the assessed
the same period.
credit risks involved.
We assemble concentrated portfolios —
our top ten holdings typically represent
between 25% to 45% of a portfolio. In this
way, clients benefit from the ideas in
Our success has often been linked to our

long history of investing in under-followed

March 31, 2010 versus $5.7 million for the
and under-appreciated small and mid cap
S&P/TSX Total Return Index over the
companies both in Canada and the U.S.
same period.
$1 million usd invested in our U.S. PORTFOLIO CONSTRUCTION
Equity Portfolio in 1986 (its inception In terms of asset mix and portfolio For further information,
date) would have grown to $8.7 million construction, we offer a unique marriage please contact
usd on March 31, 2010 versus $6.9
3
between our bottom-up security-specific questions@gluskinsheff.com
million usd for the S&P 500 Total fundamental analysis and our top-down
Return Index over the same period.
macroeconomic view.
Notes:
Unless otherwise noted, all values are in Canadian dollars.
1. Preliminary unaudited estimate.
2. Not all investment strategies are available to non-Canadian investors. Please contact Gluskin Sheff for information specific to your situation.
3. Returns are based on the composite of segregated Value and U.S. Equity portfolios, as applicable, and are presented net of fees and expenses.
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July 28, 2010 – BREAKFAST WITH DAVE
IMPORTANT DISCLOSURES
Copyright 2010 Gluskin Sheff + Associates Inc. (“Gluskin Sheff”). All rights
reserved. This report is prepared for the use of Gluskin Sheff clients and
subscribers to this report and may not be redistributed, retransmitted or
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readers should be aware that Gluskin Sheff may have a conflict of interest
that could affect the objectivity of this report. This report should not be
regarded by recipients as a substitute for the exercise of their own judgment
and readers are encouraged to seek independent, third-party research on
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Page 12 of 12