This is my last post of 2007. I am taking an early holiday to rest up (I have had a cold all week), enjoy the family, retain water and watch a lot of meaningless college football bowl games. Before I write on 2008 predications, I wanted to thank everyone for reading and commenting this year and wish everyone a safe and relaxing holiday.

Last week, I received a 100 page report from the research department of a investment firm on 2008 predications. Because it clearly has a “do not distribute” sign on it,  I am going to have to keep the issuer of the report on a no-names basis lest the lawyers come a calling but I found some very interesting insights in the report which I will highlight. Please note that the outlook from investment firms are always short to medium term and, as usual, do your due diligence.

1. Stay in cash for 2008

The report indicated that an ideal portfolio for 2008 was 55% equities, 25% bonds and 20% cash. 20% is an unusual high proportion but reflects the fact that no one knows what is happening in the market these these days. Yesterday, I had the following conversation with my investment advisor:

Thicken: “any reason why Power Financial dropped $1.00 today? I don’t see any new press releases?”

Advisor: “No one knows what is happening now. Random stocks are rising and falling.”

Yikes.

2. A tough year for CIBC

This report came out before CIBC announced yesterday that it may take another large charge on subprime loans but it had dropped CIBC from its best picks list. I don’t know if CIBC has a sugar daddy to bail it out like UBS or Citigroup did. There is one rumor making the rounds that if CIBC gets into real trouble, another Canadian bank may buy it with the government’s consent (only a rumor at this point; a lot of things would have to happen for this to occur and to splash cold water on this rumor, CIBC’s financial ratios appear to be healthy even if it had to take some substantial losses). On a similar note, I had lunch with the family on Saturday and a friend of my Dad’s came by and he started complaining about how poor the service was CIBC; so much so, he changed banks to Scotiabank. When you hear things like this happening on the street-level, it should make the suits in CIBC sweat a little. It is one thing to lose a lot of money on bad institutional bets on subprime mortgages or bad commercial paper but when people on main street are leaving, it has to be very worrisome. Banks have a lot of different ways to make money but still rely on taking deposits as bread and butter business.

3. Load up Sin Stocks and Insurance

People drink and smoke in good times and bad- more so in bad times. So there is beginning to be a shift towards sin stocks. I asked my advisor about Rothman’s and he said that a lot of his clients are moving into tobacco. People also invest in financials- usually for high-dividend yield and stability. With the banks near future in uncertainity, the shift in this industry has been to insurance.  This report notes that investor may want to load up on sin stocks and insurance stocks.

That’s it for 2007! Don’t forget to make a donation to a charity this season; it will do your soul good and its tax deductible!