CanadaAs the seasons change here in Canada, and the weather has begun to cool, so too has the Canadian economy. After a sizzling first half of 2017, which prompted two interest rate hikes from the Bank of Canada, December’s report on Q3 results came in a little lighter than expected – GDP expanded at an annualized rate of 1.7%. This cooling effect led to the BoC standing pat in December’s monetary policy decision and ultimately leaving interest rates untouched in the quarter. That being said, Canada is still on track for potentially it’s fastest pace of growth since 2011. Much of that strength is due to a robust employment market – Canada’s unemployment rate sat at 5.9% in November; the lowest monthly rate since February 2008! What’s more, the vast majority of new jobs have been full-time. Wages and salaries are also growing at the fastest pace in years and experts believe it’s only a matter of time before that translates to a higher annual core inflation rate. These are all very encouraging signs and help to mitigate any near-term recession-related fears.

Meanwhile, Canada’s stock market continued to trend positively rising nearly 4% in the quarter. Not surprisingly, coinciding with those gains were oil prices – WTI Oil breached $60 USD/barrel, climbing more than 15% since the beginning of October. Along with strengthening oil prices came a final push from the loonie as it closed out the year nearly 7% higher against the U.S. dollar in 2017. While there are lots of benefits to a strengthening Canadian dollar, such as more purchasing power when buying U.S. goods and services, we must remind you that it can also serve as a drag on

in this issue

Quarterly market summary: Canada closes 2017 with the win in currency and S&P 500 achieves first ever perfect year

Cryptocurrency craze puts Bitcoin in centre stage

Examining Canadian Revenue Agency and Bank of Canada policy to get a glimpse of the year ahead

Check your mailbox for tax slips, account fee statements, and other important information

Capital Care Q4 2017

Quarterly Market SummaryMarkets remain resilient in spite of threats

our U.S. investments. We are mindful of the exchange rate when making USD investments, and we certainly like a few of the current catalysts in the U.S. that should keep the USD relatively strong heading into 2018.

United StatesSouth of the border, a similar theme played out in Q4 as all 3 of the major U.S. stock indices (Dow Jones, NASDAQ, and S&P 500) outpaced the Canadian index and rose over 6% each. In fact, the S&P 500 Total Return Index celebrated the New Year by rewriting its record books. 2017 became the first year ever that it returned a positive gain in each of the twelve calendar months! That is a stunning feat. Just as impressive is that it’s currently on its longest streak without a measly 3% correction – the last 3% correction occurred on November 4, 2016. This all paints a picture of abnormally low volatility in the markets during 2017, as evidenced by this last incredible fact – of the 56 lowest closing levels in the history of the VIX (CBOE Volatility Index) 47 of them occurred this past year. While these are extraordinary stats indeed, we believe they better infer an impending ‘reversion to the mean’, rather than a signal to relax and push all our chips in the pot. Investors will likely see a bumpier ride in the year ahead, which simply means a return to normalcy.

Joeford Lee B.A., CIM, CFP®, FCSI

Portfolio ManagerJFL Group - HollisWealth, a division of Industrial Alliance Securities Inc.

1 West Pearce St., Suite 703Richmond Hill, ON L4B 3K3

Telephone: 905-737-0737

Toll-Free: 1-877-554-0737

Fax: 905-907-0598

E-mail: joeford.lee@holliswealth.com

Website: http://www.jflgroup.ca

The investment landscape is a well-travelled one. Financial instruments like stocks and bonds are tools as old as the wheel. RRSPs, RESPs, and even the relatively new TFSA are vehicles iconic as the Model-T Ford. They’re not flashy, but they will get you where you need to go. As advisors, we feel that our duty is not to blaze a new trail, but share knowledge of the routes, signs, and occasional shortcuts that help clients safely reach their goals. Occasionally, news crops up of uncharted territory. When it does, our advice is always the same; steer clear. The invention of cryptocurrencies such as Bitcoin is one of those times. Here’s why.

Investors are not on a roller-coaster, but a bungee cord Like Christopher Columbus or Canada’s Samuel de Champlain, speculators are drawn to new opportunities because of their limitless potential, undeterred or ignorant of the equally infinite danger. In the interest of full disclosure, it is important to stress just how significant these rewards can be. On January 1st, 2011, a Bitcoin was worth 29 cents (USD). Roughly 6 months later, it had risen to over 29 dollars. It was just shy of a 10000% return. Investors who bought into Bitcoin in the weeks leading up to its peak on June 9th would quickly find out that volatility cuts both ways, as Bitcoin’s value fell steadily. It bottomed out at $2.11 and recovered to close out the year at $4.66. It would be another 20 months before the value broke $29.00 again. However, when it did, it smashed through the previous ceiling and broke into the triple digits, peaking at nearly $200 on April 10th, 2013. A week later, it had pulled back to $66.65. In that same year, it broke $1000. It would not do so again until 2017, over 3 years later. The point should be clear; Bitcoin has less in common with a stock than

value - that is the most revolutionary aspect of these new assets.

Several organizations have already begun to make use of blockchains. The Bill & Melinda Gates Foundation is one of the earliest adopters.1 It proposes applying blockchain technology to create a financial infrastructure to service the poorest people in the world, where building and staffing a network of brick and mortar banks might not be realistic. The U.S. Customs and Border Protection is another possible adopter, having created a committee to determine how the technology could be used.

Security without regulationOne of the main problems with investing into cryptocurrencies is the lack of oversight given to this relatively new asset class. The main issue is the lack of regulation over both the virtual wallets that contain cryptocurrencies and the exchanges that trade them. In Canada, there are numerous levels of strict regulation governing financial institutions and securities exchanges like the Toronto Stock Exchange. Deposits at banks and credit unions are insured in order to protect customers. While the security prohibiting the creation of units of cryptocurrencies seems sound, the history of cryptocurrencies is plagued by hacking, fraud, and deception.

it does with a roulette wheel. It may have the potential to pay out big, but where it’s going is anyone’s guess.

We have seen financial bubbles in a variety of assets in the past – everything from dot-coms at the turn of the millennium to Tulip mania in the Netherlands nearly four hundred years ago. The rise in the price of Bitcoins dwarfs even the largest of these historic bubbles. Believing that this kind of growth can be maintained would be ambitious, to say the least.

The science behind BitcoinBitcoin is just one of a number of new assets known as ‘cryptocurrencies’. These digital dollars get their collective name from the cryptography they use to control and track transactions, such as the creation of new units of the currency. Unlike typical currencies, assets like Bitcoin exist entirely on a network of computers. They are not backed by gold, silver, or any material commodity. Detailing exactly how cryptocurrencies work is beyond the scope of this newsletter. Suffice it to say that all of the computers involved continually fact-check each other. The larger the number of joined computers, the better the security. This communal fact-checking that cryptocurrencies use is known as blockchain technology. It is this technology - not the erratic

Bitcoin & cryptocurrencies are redefining money

Chart taken from Myles Zyblock, CFA Chief Investment Strategist, Special Edition of Macro Musings.

The Canadian economy has made “excellent progress during 2017”, according to a news release from the Bank of Canada (BoC). Evidence of the contrary abounds though, with a recent Manulife Bank survey reveals that Canadians are still heavily indebted. Additionally, the CRA has announced that the Tax Free Savings Account (TFSA) contribution limit for 2018 will remain at $5,500. This could be another sign that the economic outlook isn’t as rosy as our cheeks this winter. Finally, to really underscore the point, the BoC has continued to maintain its overnight rate at 1% throughout the last quarter.

The Debt SituationCanada is renowned as a world leader in many areas. We are proud of our contributions to scientific advancement, space exploration, and hockey. Unfortunately, we also lead the world in household debt. Part of this problem is attributed to the housing market, where bidding wars and foreign investment have led to the prices of homes rising dramatically in the last decade. Mortgages or rent are eating a historically high amount of the average family’s income. It is not surprising that the survey done by Manulife indicates that less than a third of debtholders (31%) achieved their debt reduction goals over the past year. Carrying debt is a heavy burden, as nearly everyone can personally attest to. In fact, most Canadians (53%) believe financial challenges take a toll on mental or emotional health, and a third claim issues like fighting of debt (34%) strain their physical health as well. Despite this knowledge, it is apparent that fighting debt is not something most people can do alone. Sadly, more than half of Canadians (55%) say they don’t talk to friends or family about debt.

With little personal support available, you would think that turning to

professionals is the only remaining option. However, more than 30% of Canadians are embarrassed or unsure of whom to talk to and hence never seek help. We would like to see that number change, and we hope you will help. 59% of Canadians who worked with financial advisors expressed satisfaction with their overall financial health; by contrast, only 36% of those managing their finances on their own expressed the same level of satisfaction. Talking about finances should not be difficult, as managing money is something every one of us has to do. If you know someone in need of a sounding board and solid advice, make the first move and recommend them to our office.

2018 TFSA Contribution Limit AnnouncedTowards the end of every year, Canadians find out just how much more than can put away in their Tax Free Savings Accounts. The TFSA increase is linked to the growth of the Canadian economy via the Consumer Price Index (CPI), a measure that approximates inflation over the last year. In the most simplistic terms, the faster the economy is growing, the higher the CPI – and by extension, the TFSA contribution limit – rises. This year, it was a close call whether TFSA contribution limits would increase by $5,500 or $6,000. Those of us who like to max out our TFSAs to take advantage of the tax-sheltered growth they offer were likely dismayed to find out that the 2018 increase was only $5,500. However, it’s important to remember that we can still take advantage of any outstanding contribution room from previous years. As of 2018, the total limit is now $57,500. If you have put in less than that amount over your lifetime, you are eligible to top up your TFSA today. You can do so even if your account has grown in excess of $57,500. Because of the way withdrawals and contribution

Waning growth, rising debt, and no TFSA increaseroom is tracked, keeping your TFSA topped up is a great way to keep your contribution room at its maximum. As long as you do not anticipate requiring the money in the next 12 months, we encourage you to top of your TFSA today.

Interest Rate Hikes Halted as Housing Market Heats UpTypically, rates are increased when the economy is doing well. Following two rate hikes, one in July and one in September, the Bank of Canada has been reluctant to raise rates again. This may be a sign of their lack of confidence in the Canadian market. However, it’s equally possible that the BoC may be waiting to see how the housing market reacts before rolling out additional rate hikes. Many provinces have recently implemented policies to attempt to cool their overheating housing markets. The government of British Columbia implemented a 15% tax on foreign home buyers in Vancouver, effective August 2, 2016. The Ontario government followed suit, announcing a similar 15% tax on both foreign home buyers and vacant properties in Toronto. At the federal level, rules were tightened in January 2017 which made it more difficult for homeowners with down payments under 20% of a property’s value to get financing. These rules will be extended to include all home buyers as of January 1, 2018. While all of these policies caused an initial drop in housing prices, it looks like things are back on track, for better or worse. The Canadian Real Estate Association (CREA) just released data stating the average price for homes sold in Canada as of November 2017 was just under $504,000, up 2.9% from one year earlier. Now that the housing market has proved its resilience, it may only be a matter of time before we see another hike in interest rates.

The paper in this document is sourced from an SFI Certified Chain of Custody company. SUSTAINABLE FORESTRY INITIATIVE Logo is a registered mark owned by Sustainable Forestry Initiative Inc. This information has been prepared by Joeford Lee who is a Portfolio Manager for HollisWealth® and does not necessarily reflect the opinion of HollisWealth. HollisWealth® is a division of Industrial Alliance Securities Inc., a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Portfolio Manager can open accounts only in the provinces in which they are registered.JFL Group is a personal trade name of Joeford Lee. For more information about HollisWealth, please consult the official website at www.holliswealth.com.

Important Year-End Information will outline the documents you will receive from both Scotia Capital Inc. and Industrial Alliance Securities Inc.

Keep all documents received

Please make it a point not to dispose of any documents you receive as they may be necessary when preparing your tax return. While some documents may appear to be duplicates, this is likely not the case. Reporting for 2017 will be divided up between Scotiabank and Industrial Alliance Securities: Scotiabank will report on activities and account fees between January 1, 2017 to August 7, 2017; Industrial Alliance Securities will report on activities and account fees between August 7, 2017 and December 31, 2017. You can differentiate these documents by looking for the words “HollisWealth, as a division of Scotia Capital Inc.”

Year-end Info: Account Details & Tax Slips

HollisWealth became a part of Industrial Alliance Securities Inc. in August 2017. With the close of 2017, clients will be faced with a number of differences from account normal reporting, particularly with the year-end documents from Scotiabank and Industrial Alliance Securities.

Document timingDocuments from from Industrial Alliance Securities Inc. and Scotia Capital Inc. may arrive on different days. Wait until you have received reports from both institutions before preparing your tax return.

Year-end reporting guidesTwo documents will be made available to you with your year-end statements. The brochure titled Understanding Your Annual Reports will new reports you will receive from Industrial Alliance going forward. The document titled

and “HollisWealth, as a division of Industrial AllianceSecurities Inc.”

One-time paper documents

Clients who have selected e-delivery of statements should note that documents issued from Scotiabank must be distributed to clients by mail. Additionally, revisions to any documents will be sent by mail, even if the report was initially available online. E-delivery of statements will continue in the future for clients who have selected this delivery preference.

If you would like to stop receiving paper statements and switch to e-delivery, visit www.my-portfolio.ca or contact our office. You may also reach out to us if you have any questions about your accounts, statements, or the new partnership with iA.

Managing an investment portfolio takes time, but understanding your performance and account details shouldn’t. We’ve designed a set of reports that are simple, user-friendly, and easy to read. Look for them in the mail in the weeks ahead.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. The indicated rates of return are the historical annual compounded total returns including changes in units value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns.  Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Views expressed regarding a particular company, security, industry or market sector are the views of the writer and should not be considered an indication of trading intent of any investment funds managed by 1832 Asset Management L.P. These views should not be considered investment advice nor should they be considered a recommendation to buy or sell.

Portions of this newsletter contain information sourced from Dynamic Funds©. ©Copyright 2017 1832 Asset Management L.P. All rights reserved. Reprinted with permission.  Dynamic Funds® is a registered trademark of its owner, used under license, and a division of 1832 Asset Management L.P.