Capital Link, Inc.

John (Yiani) Evdokias, Portfolio Manager from VISAVIS Investment Counsel Inc. talks to Capital Link about the World economy, their top - sectors, and the Greek Market.

Visavis is founded in Canada as an Asset Management Company. We have been in the business for 18 years, but Visavis is a new entity, formed in May/99. Our team - manages discretionary portfolios- - of high net worth individuals.

Q: Where do you see the overall world economy heading? What are your favorite sectors?

Basically, an important and 'big-engine' of the world economy is not pulling its weight; technology. This will soon change, and when it does, it will do so 'on-a-dime.' Just-in-time developments in economies are now fraught with abrupt starts and stops in the demand and need for inventory.

Auto and Real Estate are currently, in relatively great shape (lower interest rates help). Going forward, more weakness is anticipated in Auto--tinkering in production schedules will have limited impact if the economy tanks.

Consumers are still spending money they don't have, unemployment is creeping up in Tech and Telco sector, and the lull in economic expansion is now evidenced beyond North America.

We think the Fed has done a great job at deflating 'the balloon.' Had this not occurred gradually, over the last 14 months, the resilience and prospect of an economic recovery would be in question.

$US should now start to weaken as the foreign money which sought NASDAQ adventures is repatriated. Euro should start to perform very well, post monetary conversion scheduled in a few months.

Investor confidence has been shaken: market crash, industry abuses, analyst conflict-of-interest and herd-attitude, underwriters' conflict-of-interest.

Oil prices are high. Well, they are a lot higher in other parts of the world that haven't enjoyed the purchasing power of a strong currency as in the USA and, yes, Canada. (My mom still drives and has expressed no problem with the higher gas prices. Recently she shared her insight; Gas never costs her more than $20...sometimes though, it may not take her as far)

Inflation will come back and will probably at least double from current levels. Fiscal stimulus is the culprit as is the high oil price.

Interest rates will again start to increase, placing a curb on unfolding real-estate speculation.

US Government is already looking to enact legislation to curb investment-industry abuses and conflicts of interest. SEC is currently going through Congressional hearings to determine the need for such intervention and jurisdictional issues.

Q: Any comments on the international side of the Economy? Emerging and Developed?

Another one or two emerging economies will collapse. This is a concern to monitor. (Just about every industry has invested in Brazil.)

Technology is the future; and as we have pointed out previously, what we pay for this technology will affect our financial future.

Total world debt and equity exposure in Telco was about $1.4 trillion as of 30June00. Bankable calculations we have evidenced show a current valuation for these same assets of about $1 trillion; basically, 30% wiped out. Yes, there is now much more unused glass-fiber than before, and the photonic technology to light it up. Ownership of these assets is changing; the usefulness of these assets has been and is in question by some. We feel that it will take longer to implement many of the communication and technological advances we have witnessed. What is not in jeopardy is the eventual outcome.

Internet: an anathema to many investors; a lifeline to most people. (no, I don't live in a cyber-world, just vis-à-vis with it a lot)

The best performance was attributed to well crafted diversification. YTD (year-to-date), equity components for our accounts are on average, down about 2.5% in an stock-market environment that offers minus 10%. Yes, this is much better than the indexes but alas, still slightly negative. Going forward, we expect to maintain our target returns of 10% plus for balanced portfolios. The current market environment, although difficult, is ideal to structure portfolios. In the meantime, writing-options will bring in incremental revenue and will help with the uncooperative stock markets.

We've been at about 35% to 45% in equities for some time. This amount should be increased gradually to at least 50% in stocks. Why? Because stocks are now cheap. Not necessarily the lowest they will go, but low enough to productively deploy more money in the class.

Currency: suggest 15% Euro, 20% US, 5% Aussie/NZ, 60% home currency. Core industries: 20%Tech, 10%Telco, 10%Drug, 20%Industrial, some Gold and balance in special situations.

Q: How do you value the Greek Market and do you have any holdings in Greece?

We consider Greece one of many appealing geographies in which to invest. Yes, we have made some tactical investments in Greece, mostly in the Telco sector. - For now, the holdings -are relatively small., - There is also an overlap with our Eastern European Investments. Governments, in Europe especially, have difficult decisions to make; taxation, labor, and what to do with 'spectrum-defaults.' Some noteworthy and positive changes have been evidenced recently at OTE.(managements' attitude and government interface is becoming less problematic)

Greece now has the capacity to join the developed nations of the world and be of consequence; We think they now also have the heart and stamina to succeed. If proven correct, valuations of all asset classes in Greece will improve markedly.

We cannot adequately express our dismay and horror about the World Trade Centre calamity. Now there is a crisis, but this will also pass. Mankind is very resilient and so is the U.S.A.

So are the Capital Markets. However, both will be under stress for awhile. Based on our experience, we have found that during these exceptionally anxious times, executing any drastic changes in your asset allocation or investment approach is counter-productive and rarely arrives at the desired outcome. Yes, there is always opportunity for speculation. That presupposes that one knows the future. Current events may provide some opportunities to buy some 'good-names' however, successful long-term investing requires studied-detachment, a cool head and methodology to profitably deal with the extraordinary and frequent financial stress presented to the capital markets.

curbed consumer and corporate consumption
postponement of major capital expenditures. (increased localized expenditures)
political and social backlash
higher cost for trade and travel
fear and uncertainty to immobilize most; reflex reaction for many is to panic (manifested by selling assets?)
disrupted trade: air shifting to ground transport
manufacturing disruptions (just-in-time economy under stress)
Great effort by American Government to have the stock markets rally(or have muted drop). Most concerted efforts of these kinds are usually short-lived.
Concerted effort by Governments to stabilize markets (i.e. billions in commercial paper that needed to be rolled over this week could not because of system failures…fed stepped in to assure liquidity at the affected banks)
Short-term real-estate expansion in localized areas. Long-term, corporations will likely choose not to have such high concentration of resources in any geography. For NY City commercial market, this will have negative implications as demographics will change as they will for residential (employees to move with company to less descript geographies) · those who don't have a cellular phone will now find a good reason to get one. Internet backbone worked under exceptional stress and should take on an even greater importance.
Concerted effort by all governments to expunge current and future terrorist threat may be met with heightened retaliation. (worst case scenario we can contemplate?)

Interest Rates: to drop initially. Long-term rates to be volatile and increase.

Asset allocation for most of our clients has been more conservative than elsewhere; typically less than 50% in equity.

Scenario: If energy and precious metals rally substantially (say +15% ) and if market dynamics permit, it is our intention to sell these positions and redeploy these funds into contemporaneously depreciated industrial stocks (i.e. -15%) (most efficient is to purchase DJ Index and the TSE Indexes).

This kind of tactical move envisaged, will not change the current total allocation in equities held in your account, but may shift concentration within the industries groups.

For accounts that are below the equity target allocation, we hope to deploy some of these "budgeted" funds as markets permit(in an orderly fashion), into desirable and compelling investments.

Should you wish to review your target asset allocation (as per your June 30th statement) please call us so we can discuss the issue.