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www.insideHALTON.com · OAKVILLE BEAVER Thursday, November 10, 2011 · 12 Investing is global anada is not a safe haven for investors looking for opportunities to shelter their money from the world's economic turbulence. Global investing is still important. While world leaders have praised our home and native land for our sound financial system, we have only been partially protected from the financial problems that began in 2008. It was the under-regulated American financial system that caused the problems with their failed sub-prime strategy and triggered a series of failures worldwide. There was almost no control over the aggressive lending practices of residential mortgages. Massive government bailouts were used to stabilize the banking system. `Too big to fail' was the catch phrase of the time. Greece is next in the line-up of large entities requiring a bail out. These bailouts, however, come with a price. Greek citizens are being forced to take cuts in areas such as employment and pensions. The country's citizens protested against these austerity measures that were being imposed. Would you pay off your child's credit card debt if there was a high likelihood that they would just run it up again with no change in spending habits? Of course not. Austerity measures are necessary to improve habits. Meanwhile, European countries had lost patience and a mutual agreement between the European Union and the Prime Minister of Greece George Papandreou was made. That, as it turned out was just in theory. Upon returning home from the European meeting, the protest was so strong he changed his position and offered his citizens a referendum. Fast forward through that whole evolution, and as a result of the resistance within the European Union, Greece will now abide by the tough measures their creditors demanded. The reason for international patience and persistence is that the economic fallout would be too catastrophic if Greece were allowed to fail. Europe's next problem is worse. Italy is now effectively bankrupt. That is a more significant problem than Greece because Italy is too large to save. It is the ninth largest economy in the world and the most indebted in all of Europe. The initial feeling is that there are not enough financial resources available to bail that country out of its financial mismanagement. Does all that volleying back and forth affect financially sturdy Canada? Yes; more than we would like to think. The European debt concerns have caused the entire world to feel uncer- C Dollars & Sense By Peter Watson tain. Uncertainty leads to a decline in business activity. Both businesses and consumers decrease spending when they feel increasingly unsure about economic events. Last week we saw the Canadian ramifications of global uncertainty. It was announced that our job losses for the previous month were 60,000. Most of these were full-time jobs in the construction and manufacturing sector. This was a stark contrast to job gains in the previous month of 50,000. When fewer people are working and spending less money, the production of goods and services slows down. The government takes in less tax, and therefore, will have to re-think its spending plans. As soon as the negative economic news was released, Prime Minister Stephen Harper repeated what he has often said. Canada is not immune to world events. If Canada is poised to suffer as a result of foreign events out of our control, then we will have to revise our economic plan with stimulus spending and delay the Conservative Party election goal to balance the books by 201415 fiscal year. The parallel between the individual investor and our country is remarkably similar. Investors can make all of the correct, prudent decisions and there is still the cold hard reality that external events can impact our financial plans. The ripples of global political events affect people in all parts of the world. These events can have a dramatic impact on our stock markets as well. The outcome of political decisionmaking is difficult to forecast as we have seen with Greece. We will see what decisions are made with respect to Italy. Expect some twists and turns along the way. Does that mean people stop investing? No. It does mean you have to think globally even if you invest primarily in Canada and expect the unexpected. You may be a Canadian resident. However, when you invest you are a member of an increasingly smaller global village. -- Submitted by Peter Watson, MBA, CFP, R.F.P., CIM, FCSI.