I have recently travelled to Dublin, Ireland; Las Vegas, Nevada and Phoenix, Arizona to attend conferences and have had the opportunity to talk to the mutual fund managers based outside of Canada. Here are a few of my discoveries.

Many European managers commented on the absolute mess that the European pension system is in. Pension costs in some European countries could soon swell to as high as 15 per cent of their GDP. This is more than twice the U.S. cost equivalent.

What does this mean?

1) There is no money in reserve to pay pensions.

2) The aging population boom will frantically cause governments to look for cash to pay for medical and pension requirements.

3) They don't know how to solve the problem.

With low and negative level birth rates (i.e. more people turning 65 than are born); the major issue will be immigration. Without immigrants, economies shrink.

Some speakers suggested that many retirements in the United States and in Europe will be destroyed by health care costs.

Other issues included the prediction of the Canadian dollar moving to a $0.90 to $0.94 cent range.

Economic unification of Europe has been a flop. Prices might be cheap, but much of Europe is in doldrums.

In Europe the returns are low, but costs are cheap and therefore of compelling value. It seems that the majority of international-fund managers have extensive euro holdings, but yet they do not have huge confidence in those same European holdings.

Most are staying significantly underweight in the U.S. market.

Many of the U.S.-based managers have suggested that U.S. based assets are now so cheap because of the depreciating U.S. dollar, that Canadian buyers should consider re-entry into the U.S. market, and buy those depreciated U.S. holdings with appreciated Canadian dollars.

What is getting these guys excited?

Japan.

Japan faced a non-confidence vote when the new Prime Minister forced through an unpopular bill that would affect all the cronyism of the business and banking community.

The non-confidence motion failed and the reforms went through. These changes in Japan look to be major and a significant opportunity now presents itself.

What's still wrong with the United States? Companies will now be required in 2006 to show future health care costs in the financial statements of companies.

Currently, they ignore this information and the forward liability it involves.

It is my expectation that you will see nothing but fear over this issue in the next year!

What does this all mean? I have been looking for strong re-entry signals to move money back into U.S. markets. As American assets are assets that are becoming less appealing, they become cheaper to the point of compelling value.

As mentioned before, Japan also appears to be an improving opportunity.

The Canadian dollar will continue to appreciate against American currency; therefore the hurdle rate (the amount you must make to break even) is in the four to eight per cent range next year.

When we compare American to Canadian dollar assets, the U.S. assets will have to outperform the Canadian by four to eight per cent just to stand still.

The problem of unfunded pensions and health liabilities many feel would be offset by the increasing value of individual homes.

Yet, if all the boomers reach retirement in the next 10 years at the same time, who will buy that real estate if everyone wants to sell?

In our financial modeling for 10 years plus, we have taken many of these potentials into account as mentioned by the international fund managers.

It is going to be a significantly different future.

Services will become a more important thing to invest in than hard goods. Government promises on taxation and areas that are considered sacred will be taxed.

- If you have a question for David, please e-mail him directly at askdavid@financialplanning.on.ca , or visit ww.financialplanning.on.ca. Call 1-800-870-8522 or drop by Money Concepts, 35 Worsley Street, Barrie.

- The information contained herein is based on certain assumptions and is for illustration purposes only.

While care is taken in the preparation of this document, no warranty is made as to its accuracy or applicability in any particular case. Unit values, yields and investment returns will fluctuate and all performance data represents past performance and is not necessarily indicative of future performance.