2nd  Quarter 2007 Newsletter
The main themes for the second quarter of 2007 were similar to those we had at the start of the year.  The subprime loans problems,
continuing slowdown in the housing industry, and high energy prices, have not yet negatively affected the rest of the economy. Although
slowing, the economy remains solid due to full employment and rising wages.

During the month of May, markets saw a strong rally that culminated with a new all-time high on June 4th for both the Dow Jones
Industrial Average and the S&P 500 Index, closing at 13,676.32 and 1,539.18 respectively.  The rest of June on the other hand, was
tainted by high volatility in the stock market, increasing rates in the fixed income space, a slew of mergers and leveraged buyouts, as
well as several large new offerings.

The Dow Jones Industrial Average closed the last day of June at 13,408.62, ending up 9.11% for the quarter and 8.75% YTD
1.  The S&P
500, a broader measure of the stock market, finished at 1,503.35, up 6.27% for the quarter and 6.96% for the year
2.  Within the U.S.
equity markets, large-cap stocks outpaced small-cap stocks, and growth stocks outperformed value stocks.  In the international arena,
the MSCI EAFE Index (a proxy for developed international markets) posted a return of 6.67%
3 for the quarter and 11.09% for the year.  
The MSCI EAFE Emerging Markets Index led the way in the equity markets space with a 15.05% return for the quarter and 17.75% for
the year.




























The bond markets retreated a bit during the second quarter of 2007, as the Lehman Aggregate Bond Index returned -0.52% versus
1.50% during the previous quarter.  U.S. Treasuries experienced mixed results, with a slight decrease in the ultra-short term yields, while
the intermediate and long-term maturity yields went up.  As at the end of March of 2007, the 30-day T-Bill yield fell to 4.52% from 5.03%,
while the 10-year note yield increased to 5.02% from 4.64% and the 30-year bond yield rose to 5.12% from 4.84%
4.

The U.S. Economy grew 0.7% during the first quarter of 2007, a sharp decline compared to 2.5% growth during the last quarter of 2006.
This was mainly due to a slowdown in the housing market.  The growth in the first quarter was also well below the forecasted growth rate
of 2.4%.  According to the last Bloomberg survey on June 8th, the forecasted
GDP number for the second quarter sat at 2.6%.

The Federal Reserve (“the Fed”) decided to leave rates unchanged at 5.25% during the quarter, a continued policy that has kept rates
stable for more than a year.  Measured by the Consumer Price Index,
inflation for the month of May was 2.7% on a year-over-year
basis
5.  Unemployment, as measured by the jobless rate released by the Bureau of Labor Statistics in May, was 4.5% - in line with the
three previous months.

Oil futures closed at $70.68 per barrel at the end of June, an increase of 7.3% from the $65.87 registered by the end of the first quarter
of 20076.  The U.S. Dollar depreciated against the Euro 1.46% for the quarter; while it appreciated versus the Japanese Yen gaining
4.53% for the same period
7.

As we move further towards the second half of 2007, we remain confident in your investment strategies and will continue to monitor them
closely against your financial objectives.  As always, please let me know about any upcoming changes to your financial goals and I
welcome the opportunity to spend time with you to review any questions you may have.




Regards,



Robert Valentine



Endnotes:

1 Bloomberg  These figures represent “Total Return” with dividends reinvested, which means the return includes not only the change in
price for the securities in the index, but any income generated by those securities
2
Ibid
3 Ibid
4 Ibid
5 Bureau of Labor Statistics
6 Bloomberg
7 Ibid
                                                                                      
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