New Markets & Research Portal WebBroker ... - TD Waterhouse

New Markets &
Research Portal
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Is the Stock
Market an Efficient,
Rational Pricing
Mechanism?
www.tdwaterhouse.ca
TD WATERHOUSE INVESTOR SERVICES
NEWS
S E P T E M B E R 2 0 0 1

2
Exclusive New “Markets & Research” Site Is Here!
Most comprehensive site of its kind in Canada – Available Free to Clients
TD Waterhouse has launched the most
comprehensive markets and research
website of its kind in Canada, with all
research available free to clients.
“We are thrilled to offer our clients access
to a caliber of research and market
information, that – until now – was
unavailable to the self-directed investor in
Canada,” says John See, Vice-Chairman,
TD Waterhouse Group, Inc. “This is a key
part of our strategy – to deliver the best
value proposition, and empower our clients
with the tools they need to make their
investment decisions.”
To access the new Markets & Research site
or portal, TD Waterhouse clients simply
log on to the new version of WebBroker*–
our premiere Internet-based brokerage
service. (For more about the new version
of WebBroker, see “Focus on Research,”
page 4.)
Once online, clients can use the tools and
information on the site to research
thousands of Canadian and U.S. securities,
as well as industry sectors and economic
trends. A version of the site can be
sampled via our public website at
www.tdwaterhouse.ca/markets
Exclusive research for TD Waterhouse
clients
“When we developed the Markets &
Research portal, we wanted to give our
clients something no one else was
offering,” explains David Sypher, Senior
Vice President, Direct Channels,
TD Waterhouse. “With the type of
information and exclusive research we’re
placing at their fingertips, we think we’re
providing our clients with a significant
investment advantage.”
In developing the new site, TD Waterhouse
built an offering of reports and information
typically only available to institutional
brokerage customers. TD Waterhouse
clients now have exclusive access to:
• Proprietary research from
TD Newcrest* & TD Securities*
TD Securities Research is highly
regarded in the securities industry for its
sector knowledge, commission impact
and report quality.
• Access proprietary comparative analysis,
key company and industry financials, and
buy/reduce/hold recommendations –
formerly only available to fullcommission
brokers.
• Select customized, institutional quality
industry and company reports spanning
18 sectors.
• Each morning you will receive a report
providing company updates and new
recommendations to stay on top of daily
developments.
• Standard & Poor’s “The Outlook” –
a regular weekly report on the latest
market commentary and recommended
stocks from S&P’s analysts.
The most comprehensive tools &
information, at no cost
In addition to the exclusive research
already mentioned, the new Markets &
Research site is designed to provide clients
with a broad selection of investment tools
and information, all free of charge. This
includes:
• Fundamental data on various securities
from the Financial Post and MarketGuide
• Live news feeds from Bridge, Canada
Newswire and CBS MarketWatch
• Market commentaries from Argus,
Bridge, TD Asset Management,
TD Economics, and Briefing.com
• Analyst reports from First Call, Vickers,
and Standard & Poor’s
• Earnings reports and notifications from
First Call and CCBN
• Stock screening using data provided by
MarketGuide, the Financial Post and
Standard & Poor’s that helps you find
growth, value, high-yield stocks, and more.
• Mutual fund tools from Morningstar
including the Analysts’ Choice* Funds
(see below)
In addition to our new research portal,
clients also have access to our Fixed
Income Centre and the Morningstar
Canada Research Website.
Research & trade bonds via our Fixed
Income Centre
Whether you’re a seasoned bond trader or
an investor seeking to diversify your
portfolio, TD Waterhouse puts online fixed
income trading and information at your
fingertips. Available free to all WebBroker
clients, the TD Waterhouse Fixed Income
Centre allows you to:
• Buy and sell bonds and money market
securities online
• Search for a bond that meets your
specific investment criteria
• Find prices and yields on numerous
bonds and money market instruments
• View daily commentary on the fixed
income market
• Review credit ratings from Dominion
Bond Rating Service (DBRS), Standard
and Poor’s (S&P) and Moody’s
Types of bonds available through the Fixed
Income Centre:
• Government of Canada bonds
• Government agency bonds
• Provincial bonds
• Municipal bonds
• Investment Grade Corporate bonds
• Zero Coupon or Strip Bonds (from a
variety of issuers – i.e. federal, provincial
government)
Types of money market investments
available – in terms of 30, 60, 90, 180 days
and one year:
• Government of Canada Treasury Bills
• Bankers’ Acceptances & Bearer Deposit
Notes
• Commercial Paper rated R-1 by DBRS
(R-1 is “Prime Credit Quality”)
Other highlights of the Fixed Income
Centre include:
• Quick Picks – Allows you to search for a
bond or money market security quickly,
based on the term to maturity.
• Fixed Income Lookup – Search the
entire list of bond offerings available, by
security type, issuer, frequency, maturity,
coupon, etc.
• Build Your Own Bond Ladder – Assists
you in building a ‘ladder’ of bonds with
different maturities that may reduce your
portfolio’s sensitivity to interest rate
fluctuations.
• Market Commentary – A weekly update
from TD Securities highlighting the
factors that influence the bond market.
Morningstar Canada Research Website
Through our alliance with Morningstar
Canada, TD Waterhouse clients have free

online access to one of the most
comprehensive and unbiased sources of
market information, investments and
research tools in the industry. Highlights
include:
• Fund Focus – Short list of recent articles
about funds to watch
• Fund Selector – Enhanced search engine
that allows you to select a mutual fund
based on your specific search criteria
• Fund Quicktakes – Four-page, detailed
report on an individual fund’s price,
performance, portfolio holdings,
management and fees. You can quickly
check a fund’s Morningstar Rating,
review its asset and geographic content,
and view its top -10 holdings.
• Fund Indices – List of mutual fund
indices and returns, organized by
Investment Funds Standards Committee
categories
• Analysts’ Choice* Funds – Exclusive
to TD Waterhouse clients, TD Asset
Management Inc.* provides a list of
high-quality funds, in each major
investment category, that stand out from
their peers in terms of above-average
historical performance and consistency
of returns.
• My Watch List – Allows you to track
changes to your list of funds and see
their performance relative to Morningstar
indices.
• Stock Focus – Similar to Fund Focus
• Stock Quicktakes – Similar to Fund
Quicktake Reports
• US Analysts’ Reports – Links to recent
reports about stocks on the move
• Tech Bytes – Links to timely articles on
the tech sector and specific stocks to
consider
• Editorial Content – Includes feature
articles, commentaries, analysis and
reports
Morningstar Canada is an invaluable
resource for all self-directed investors.
Information on the site is always changing,
so visit it often.
Visit our new Markets & Research site
today, and learn how it can help you
become the best investor you can be.
bondcorner
Inside Asset Backed Securities
Brought to you by TD Securities. By Adam R. Parkin, Trader
Fixed income investors are often faced
with a tradeoff between credit quality and
yield. In an environment with rising credit
defaults and an uncertain economic
outlook, credit quality is important, but
investing in bonds of higher quality often
results in a sacrifice of yield. Asset Backed
Securities, more commonly referred to as
ABS, may offer a credit conscious Fixed
Income Investor with the safety and
security of highly rated bonds, while
providing an increased yield over similarly
rated securities.
What are Asset Backed Securities?
Asset Backed Securities are bonds backed
by a select, diversified and defined pool of
assets. These assets can be pools of
financial receivables such as credit cards,
auto leases, personal lines of credit or
commercial mortgages. The assets are held
in trust by a “special purpose vehicle”
(typically a trust) and are structured with
various credit enhancements to receive the
highest possible credit rating –“AAA”.
The structuring and credit enhancement of
the assets helps to provide corporations,
such as banks, with a cost-effective means
of raising capital while providing investors
with a stable and secure fixed income
investment.
Asset Backed Securities were first
introduced into the Canadian bond market
in 1987 and have since grown to over $20
Billion in total bonds outstanding. The
safety and security of Asset Backed
Securities in Canada has been
demonstrated by the asset class’s track
record of zero defaults since its inception.
The positive characteristics of Asset
Backed Securities have made it a popular
investment among large institutional
investors such as insurance companies and
pension funds, and it is forecast that the
strong growth and acceptance of these
bonds will continue.
Benefits of Asset Backed Securities
• Attractive yields compared to similar
rated bonds
• Secure credit rating – usually “AAA”
• Actively traded, liquid market
• Spreads have remained stable during
periods of market volatility
• Bond collateral is actively managed and
monitored
• Bonds rated by two or more ratings
companies
• Less sensitive to dramatic market events
Why Invest in Asset Backed Securities?
Asset Backed Securities can provide
investors with a higher yield alternative to
GICs, Government of Canada and
Provincial Bonds. Maturities typically
range from one to ten years and payment
frequencies, although traditionally semiannual,
also include monthly pay and
amortizing monthly paying bonds. The
security of ABS makes these bonds
attractive to all types of investors; however,
most ABSs do not qualify for investments
in RRSP, RRIF or RESP accounts.
Types of Asset Backed Securities
Below is a list of the ABSs available to
TD Waterhouse clients. Each trust has a
multiple series of bonds with different
maturities.
• Genesis Trust – Personal Lines of Credit
Secured by home equity generated by
Canada Trust PowerLine Accounts
• Gloucester Credit Card Trust –
MasterCard credit card receivables
originated by MBNA Bank of Canada
• Golden Credit Card Trust – VISA credit
card receivables originated by the Royal
Bank of Canada
• Hollis Receivables Trust – Personal lines
of credit generated by ScotiaLine
Accounts
• Solar Trust – commercial mortgages
originated by Commercial Mortgage
Origination Company of Canada
The minimum required purchase of
Asset Backed Securities is $5,000 face
value and quantities above $5,000 are
purchased in increments of $1,000 face
value. For further information, pricing and
product availability please contact your
TD Waterhouse Fixed Income Representative
at 1-888-983-2663 or 1-888-983-BOND.
3

4
F O C U S O N R E S E A R C H
Exciting New Version of WebBroker is being Launched!
A new version of WebBroker* offers you
a faster log-in process, plus streamlined,
intuitive navigation that helps you access
the market research you need to make
informed investment decisions, and place
your trade orders quickly and easily.
Whether you’re just thinking about
web-based trading, or have been trading
online for years — check-out these
exciting, user-friendly features available
now through WebBroker — Canada’s
premiere Internet-based brokerage
service, exclusively from
TD Waterhouse — www.tdwaterhouse.ca
Faster access to tools & research
• Markets & Research – The unparalleled
selection of online market information
and research tools from TD Waterhouse
is now even better and it’s FREE to all
clients via WebBroker! Access a wide
range of TD-proprietary research, and
Canada’s most extensive range of thirdparty
investment research. (For more
information, see the “Markets &
Research” article on page 2.)
• Portfolio Tracker – With the enhanced
Portfolio Tracker, you can retrieve
summary and detail quotes on your
existing model portfolios.
• Quick Quote – Retrieve multiple realtime
quotes in any combination of
equities, options, mutual funds and
indices.
• Favourite Websites – Create and save
up to five links to your favourite
websites, and visit them while
navigating within WebBroker.
• Option Symbol Lookup – The strike
prices for most puts and calls offered
through TD Waterhouse are now
displayed.
• Fixed Income Centre – WebBroker
clients can now log on and use this
valuable resource to find prices, yields
and credit ratings on more than 1,000
bonds and money market securities,
and place orders online.
• Market Tracker – Click on this
WebBroker link to see our Market
Summary page with Canadian, U.S.
and international market indices.
Faster Trading
• Efficient & Intuitive Navigation – A
quicker log-on process allows for faster
access to your account, trading and
research tools.
• Portfolio Tracker transactions – You
can now place buy and sell orders
directly from your portfolio(s) in
Portfolio Tracker. Create and track
information on up to five model
portfolios in real time.
• Enhanced Mutual Fund Transactions
– Switch investments from one fund to
another (within the same fund family),
and review mutual fund orders, in
detail, using the ‘List Orders’ feature.
• New Order Entry – From the ‘Order
Confirmation’ screen, you can now go
directly to ‘Place Order’ or ‘Review
Orders’ for faster, easier navigation and
transactions.
• Option Order Entry – Now you can
enter option symbols as strings (with
spaces) when placing option orders. For
example, to buy a call option on
Microsoft for the month of November
at a strike price of $35, you would
enter MSQ C NOV 35.
• Funds Transfer – Transfer funds
seamlessly between your TD Canada
Trust account and your TD Waterhouse
brokerage account using EasyWeb*.
• Account Activity – Now view both the
trade date and settlement date for every
order placed within your account.
Customize WebBroker to your needs
• Customized Home Page – Now you
can customize your WebBroker home
page with the features you want to see
and use. Whether it’s your account
information, up-to-the minute market
activity, intra-day charts, or your own
real-time watch list – it’s your choice.
• Set Favourite Account – Choose and
establish an account that will be
displayed first for all of your transactions.
• Stored Trading Password – If you wish,
WebBroker can now remember your
trading password, so you don’t have to
enter it each time you place an order.
• Experience eServices* – Access your
account statements and trade
confirmations online through
WebBroker. Self-directed investing has
never been more accessible, flexible
and convenient.
If you are currently using WebBroker,
please note that on September 24th the old
version of WebBroker will be replaced by
this enhanced version.
TD Waterhouse is a world leader in
electronic brokerage and market
information services — as exemplified by
the great features now available in
WebBroker. Our objective is to harness
technology and turn it into user-friendly
products and services that are secure and
easy to use. To learn more about
WebBroker, as well as our other electronic
services, visit www.tdwaterhouse.ca.
As a TD Waterhouse client, you also
have access – 24 hours a day, 7 days
a week – to the largest team of
knowledgeable, service-focused Investment
Representatives in the Canadian
self-directed brokerage industry.
So whether it’s online or by phone, put
our premiere brokerage services to work
for you, and become the best investor
you can be.

Focus ARGENTINA’S
WOES
Argentina stepped back from the edge of
the precipice in mid-July, as a tentative
agreement between the central
government and the provinces to curtail
government spending alleviated fears of
an imminent debt default and/or a
currency devaluation. However, concerns
over Argentina’s deep economic and
financial problems have not been laid to
rest. Accordingly, Argentina will remain
in the spotlight in the coming months,
increasing the risk aversion of global
investors and representing an obstacle to
emerging markets, but the contagion
effects are not expected to lead to a
global financial crisis akin to that
experienced in 1997/98.
Argentina’s struggle to service its debt...
Concern has been mounting about
Argentina since last November, when a
dispute between the central government
and the provinces over the terms of the
2001 budget raised the spectre that the
government would be unable to service
its US$130 billion debt. The IMF rode to
the rescue with a US$40 billion aid
package, but the effects were short-lived.
By June, Argentina was forced to enter
into a US$29.5 billion debt swap, in an
effort to ease short-term financing
pressures. The government exchanged
bonds due in the next five years for
longer-dated paper, deferring some US$8
billion in debt service costs. The nearly
US$30 billion swapped was about 50 per
cent more than financial markets had
expected, revealing that global investors
responded favourably to the transaction.
However, the relative calm that followed
proved to be only a temporary lull.
…raises fears of devaluation
on the
economy
The catalyst for the latest wave of
anxiety was the introduction of a new
currency regime for the tradeable goods
sector, which replaces the peso’s
longstanding one-to-one peg to the U.S.
dollar with a 50-50 peg to the dollar and
12
10
8
6
4
2
0
-2
-4
-6
ARGENTINA'S GROSS DOMESTIC PRODUCT (GDP)
Per cent change in real GDP
91 92 93 94 95 96 97 98 99 00 01f
Source: International Monetary Fund, TD Economics
the euro. The new regime effectively
achieved a one-time devaluation of the
peso for the international merchandise
trade sector, such that exporters now
receive 1.07-1.08 pesos for each dollar of
goods they ship, while importers have to
pay this slightly higher exchange rate.
The adoption of the dual exchange rate
regime was intended to help stimulate the
domestic economy by boosting exports
and dampening imports. However, any
optimism it fostered was quickly
outweighed by a negative reaction in
financial markets. Despite assurances by
the Argentine government that the mixed
FX regime will not apply to the economy
as a whole until the dollar and the euro
are trading at parity, financial markets
increasingly fretted about the possibility
of a broader devaluation. The negative
international sentiment led to a difficult
Treasury bill auction on July 10, which
saw the government forced to auction 91day
paper at a yield of 14 per cent –
almost 5 percentage points higher than the
yield they had to pay in June. This led to
increased attention to Argentina’s woes,
which pushed interest rates even higher
and equity markets lower. Mounting
uneasiness also sparked outflows from the
banking sector, with private sector
deposits dropping almost 10 per cent
since March. To cap things off, all the
major international rating agencies cut
Argentina’s credit rating in quick
succession.
Carnage in markets elicits drastic
response from government
To alleviate international fears, the
Argentine government put forward a
proposal to cut the budget deficit to zero
this year. Although the package met with
some political resistance, a deal was
reached to proceed with the fiscal
retrenchment. It remains to be seen
whether this latest austerity package –
the fifth in less than two years – will
usher in a new era of federal-provincial
By: Gillian Manning, Economist and
Craig Alexander, Senior Economist
TD Economics
TD Bank Financial Group
cooperation on deficit reduction, or
whether it has merely papered over deep
faultlines in the political landscape that
will open up again. Regardless, the
government’s quick response has reduced
the financial stresses that were building
in early July.
Cure worse than the disease?
But, in the end, the biggest problem for
Argentina is likely to be the negative
economic fallout from the fiscal
retrenchment in an economy already well
into its third successive year of recession.
If the zero-deficit policy breeds more
years of sub-zero growth, interest rates
will likely remain high, as financial
markets will likely continue to price in
pessimism about the government’s ability
to meet its debt servicing requirements.
High interest rates combined with low
economic growth and a still-heavy
government debt burden represents a
vicious circle, in which Argentina is
trapped between fickle international
investor confidence and falling domestic
demand.
The effects of this are already visible.
Social unrest has been mounting steadily
in Argentina for several years now, as the
punishing effects of the currency board
regime – which keeps the peso pegged to
the U.S. dollar, the world’s strongest
currency – eat away at the country’s
external competitiveness. With monetary
and exchange rate policy driven by the
U.S. Federal Reserve, courtesy of the
dollar peg – and with fiscal policy
dictated by an IMF-sponsored program
of fiscal austerity – the domestic
economy in Argentina has borne the full
brunt of the loss in competitiveness. And,
the latest austerity package, with its tax
hikes and deep salary cuts, promises only
a further deterioration in already-weak
income and employment conditions.
continued on page 8
5

6
Trader’s Tips The Role of Central Banks in the Market
Central banks play an integral role in the
markets. Investors are paying closer
attention to economic news as more
individuals are participating in the
markets. Many investors are looking to the
central banks for guidance on the state of
the economy. The Federal Open Market
Committee in the United States has eight
regularly scheduled meetings per year to
decide on the direction of interest rates.
The Bank of Canada has recently adopted
a set schedule of meetings which is
similar to the United States, in order to
provide more structure and visibility in
the decision making process.
The main objectives of central banks are
to ensure that there is price stability and
sustainable economic growth in the long
run. They have three tools at their disposal
to control the money supply. These are the
required reserve ration, the discount rate
and open market operations.
eServices
California Dreaming Contest
Winner raves about
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Congratulations to Mr. David Benson of
Toronto – the winner of the “California
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spring. As the winner, he and a guest will
be spending a blissful week at Club
Intrawest in Palm Desert, California.
Mr. Benson opened his first brokerage
account with TD Waterhouse (at that
time, Green Line Investor Services) in
1984. He now has four active accounts
with TD Waterhouse and is delighted
with the service he has been receiving.
David Benson is a frequent traveler, yet
his business and personal interests in
investing require him to stay on top of
his portfolios at all times. He previously
did most of his account inquiries by
phone, until, early this year a
TD Waterhouse Investment
Representative informed him of the ease
A central bank can engage in
expansionary monetary policy by
increasing the growth rate of the money
supply. They can achieve this objective
three ways. They can lower the discount
rate, which is the interest rate that the
central bank charges when financial
institutions borrow money from them.
Alternatively, they can lower the required
reserve ration. This is the amount of
money that is set aside for the amount of
deposits that the financial institutions have
on hand. Lastly, the central bank can
engage in open market operations. This
occurs when the central bank goes out into
the open market and buys government
securities such as T-bills and/or bonds.
The governors of the central bank will
look at some key economic indicators in
order to make their decisions. Examining
indicators such as the unemployment rate,
consumer confidence, a gross domestic
product, etc., gives them a feel for the
and convenience of eServices. “eServices
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whose favourite aspects are the “efficient
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I need to stay up to date with trading
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eServices 37,000 clients know that
TD Waterhouse offers access to
account statement and trade
confirmations online …how about you?
Within WebBroker*, eServices empowers
clients to access their monthly statements
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subscribers can benefit from the following:
state of the economy and whether or not
they need to take a restrictive or
expansionary stance on interest rates.
Investors need to realize that the role of
central banks is not to “save the equity
markets” from these volatile times. Their
role is to provide an economic
environment in which allows long periods
of sustainable growth and price stability
(i.e. low inflation rates). The central banks
play a key role in the state of the financial
markets. They provide investors with an
indication of the state of the economy.
Whenever the central bank lowers or
raises interest rates, there will be a lag
time prior to the change having the desired
affect on the economy.
If you have any questions about when the
Federal Reserve or the Bank of Canada
meets next, please call your local
TD Waterhouse office.
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Online Mutual Fund Prospectuses
WebBroker clients who buy mutual funds
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a “View Prospectus” button is presented
and you can print or download
the prospectus.

Is the Stock Market an Efficient, Rational Pricing Mechanism?
Speculative Bubbles point towards No!
Tony Demarin, MBA,CFA,CIM,FCSI is
a Vice-President and Portfolio Manager
with Cardinal Capital Management, a
discretionary, fee-based money
management firm based in Winnipeg
Res tantum valet quantum vendi potest.
(A thing is worth only what someone
else will pay for it.)
Has the bubble of belief in rational
markets burst? The stock market is
generally considered to be a rational and
efficient pricing machine. However,
throughout history, episodes of mass
hysteria have occurred periodically, when
shares or products have been massively
overvalued by the ‘experts’ and public
alike. Such overvaluations have usually
been ‘corrected’ by the market. These
reevaluations have resulted in some of
the most disastrous stock market
corrections in history, with devastating
consequences. One conventional
investment theory, which is inconsistent
with the occurrence of bubbles, is the
Efficient Market Theory (EMT).
The Efficient Market Theory
Market efficiency infers that market
prices reflect all publicly available
information. This includes information
about confidence amongst investors and
consumers, as well as information
regarding the likelihood of future
corporate or economic events. If the
theory is correct, the market should
react immediately and correct prices as
it receives new information. In reality,
speculative bubbles involving persistent
deviations from a share’s ‘correct’
value, do occur and cannot be deemed
random. Are efficient markets consistent
with stock market crashes? EMT
implies that share prices should not
increase on the whim of the crowd.
A speculative bubble (a “self-fulfilling
prophesy”) exists if the reason that the
price is high is only because investors
believe that the selling price will be
high tomorrow- when ‘fundamental’
factors do not seem to justify such a
price. Holland, in the late sixteenth
century, is the earliest example of the
havoc which irrationality can play with
valuations. The infamous tulip bubble
craze occurred when tulip bulbs became
more valuable than gold. People sold
their land and jewels to buy a single
tulip bulb in the expectation that the
price would rise even higher and capital
appreciation would make them rich
beyond their dreams. Inevitably,
however, tulip prices fell until the bulbs
were worthless, and a prolonged
depression followed in Holland.
Similar speculative crazes have occurred
in Florida real estate, stock markets in
the late 1920’s, American blue chip
stocks in the early 1970’s, commodity
markets (silver in particular), growth
stocks, concept stocks, junk bonds, new
issues, biotechnology stocks, and most
recently, in the stock markets across the
globe in 2000/01. How can such events
occur in a supposedly efficient and
rational market? Is there no fundamental
basis upon which shares are priced?
Rational Pricing vs. Irrational Behavior
A fundamental assumption of the
efficient market theory is that all
investors act rationally. In the case of
speculative bubbles, rationality breaks
down, and economic theory goes out the
window. This is why economic theory
does not satisfactorily explain the Great
Depression, Black Monday, the craze
for tulip bulbs or even the dot com
meltdown. Behavior during speculative
bubbles appears to be outside the scope
of traditional economic explanation. The
idea that market prices fully reflect all
information and that price movement do
not follow any patterns or trends,
temporarily at least breaks down.
Although investors may have rational
beliefs, they do not always act
rationally. To understand the actions of
investors during bubbles, psychological
analysis may have greater explanatory
power.
The field of behavioral finance has
begun to gain mainstream attention.
Investors may be more concerned with
the behavior of their colleagues than
with market fundamentals. Stock market
corrections may result from such a
pattern of irrational behavior; if
investors perceive panic, or impending
hysteria, they themselves will panic.
Unfortunately, this paints an unflattering
picture of the stock market, as not
always acting in a rational or efficient
manner. In the end, pricing irregularities
and predictable patterns in stock returns
may well exist and even persist for some
time; however, any excess in market
valuations will ultimately be corrected.
The result may be a return of many in
the profession to the belief that the stock
market is, in the end, remarkably
efficient in its utilization of information.
The recommendations and opinions
expressed herein is those Cardinal
Capital Management and do not
necessarily reflect those of
TD Waterhouse and are not specifically
endorsed by TD Waterhouse.
Changes to
TD Waterhouse Fees
Please note the following changes to
TD Waterhouse fees or commissions,
effective November 1, 2001:
MoneyLink Fees
• ABM Debits – $0.50/debit
• Telephone Transactions –
$1.00/transaction
Historical Summary of Annual Trading
Activity
• $50.00/summary – prior to the current
tax year
Wire Payments
Wire Payment Commission
Dollar Value Charge
$10,000 or less $30
More than $10,000 $50
to $50,000
More than $50,000 $80
7

Focus on the economy...
continued from page 5
And, that suggests that Argentina is
likely to remain on investors’ radar
screens for some time to come.
Emerging markets feel the heat…
Although the crisis in Argentina has
been a long time in the making, the
country’s latest travails have come at a
bad time for other emerging market
economies struggling to cope with
slowing global demand. As TD
Economics discussed in a recent paper,
“The Domino Effect”, the current U.S.
economic slowdown is being felt around
the world, transmitted not just via trade,
but also through the tighter corporate
and financial market linkages
engendered by globalization. This
increased interdependence has fuelled
fears that the crisis in Argentina could
precipitate another full-blown spate of
global contagion.
Certainly, the more attention given to the
problems in Argentina, the more likely
international investors are to become risk
averse to emerging markets. This will be
a near-term hurdle for emerging market
currencies, especially in Latin America.
Virtually alone in the region, the
Mexican peso has weathered the storm
fairly well, owing to strong inflows of
foreign direct investment related to
market perceptions that the Mexican
economy will be a solid launching
platform for exports to the United States
if the U.S. economy recovers in 2002.
Nevertheless, all Latin currencies – the
Mexican peso included – will likely
weaken over the coming months.
Currencies in Eastern Europe and East
Asia will likely not be spared either, with
the latter group likely to be particularly
vulnerable, as economic conditions
continue to deteriorate in the Asian-
Pacific region.
All of these developments are a negative
for commodity-related currencies – such
as the Canadian dollar – as deteriorating
economic conditions in emerging
markets will likely lower world demand
for raw materials. In contrast, the
already overvalued U.S. dollar, which
stood at a record trade-weighted level in
June, should continue to benefit from
safe haven flows – to the detriment of
other major currencies, including the
Japanese yen and the euro.
…but another global meltdown not
in the cards
The increased risk aversion to emerging
markets will likely put upward pressure
on interest rates in developing countries,
which should erode both consumption and
investment. Weaker currencies may provide
some stimulus to exports, but this will
be offset by slacker global demand.
Nevertheless, the contagion effects are
unlikely to precipitate another global
markets crisis. Latin America and non-
Japan Asia are in better shape
structurally than they were before the
1997-98 financial crisis. Most
currencies are now floating freely, and
in Asia in particular, current account
balances are in surplus and debt burdens
are much lower. At the same time,
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global investors are less leveraged to
developments in emerging markets now
than they were in 1997/98, and while
regional banking systems may not be
robust, neither are they as vulnerable as
they were during the Asian financial
crisis. Perhaps most important, the U.S.
Federal Reserve’s aggressive interest
rate cuts since the start of this year and
the Bush Administration’s tax cuts have
created the preconditions for a U.S.
recovery beginning late this year or in
early 2002. That should shift the
dynamic of interdependence onto a
positive footing – as the transmission of
U.S. weakness abroad yields to a
firming in U.S. demand and increased
global exports, setting the stage for
export-led recoveries in Latin America
and East Asia. The bottom line is that
rough seas may be in store in the
coming months, but calmer waters
should lie ahead in 2002.
annual interest rates
Effective August 22, 2001
(subject to change without notice)
$CDN $US
TD Bank Prime
lending rate 6.0%
U.S. Prime
lending rate 6.5%
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