December 8th Edition

Good Morning All,

Markets around the world were soaring as we slept here in North America and they were doing so on the back of a number of things, the most important of which was Friday's strong New York performance in reaction to the worst job numbers report in 34 years. This letter has stated more than once, and most recently on December 5th, that a market that rises in the face of bad news has found a base upon which to build. The worse the news, the more important the contrarian rally will become. We have just witnessed such a successful test at 818 on the S&P 500 slightly above our suggested support level of 815.

Adding to this good reaction to bad news market scenario was some actual good news as Barack announced plans for an Eisenhower-like stimulus package just as Congress appeared to reach a bailout agreement for the auto industry. China too has joined the spending fray as it now seems that stimulus will quickly replace my favourite candidate, the short-lived prorogue, as word of the year.

Infrastructure spending will not be limited to America or China as Governments around the world realize that bridges, roads, schools, hospitals and the sewer and water systems that supply them cannot be imported; better still both the workers employed and the companies employing them will be paying taxes. Beats the hell out of a 500 dollar cheque to individuals who will drive to Wal-Mart and boost the Asian economies and speaking of driving, think of how much of a tax cut the drop in gas prices is, about 400 billion I believe.

There will be no shortage of Canadian political news this week, beginning with a Quebec election and on through to the leadership change in the Federal Liberal party. A good week for both Charest and Ignatieff looms.

Look for a big week with 1025 S&P 500 in sight.