The S.& P. 500 jumped 3.16 percent Friday. Above, traders at the New York Stock Exchange.

Among Wall Street’s many proverbs, traders say one stands above the others: “As goes January, so goes the year.”

Works Progress Administration marchers in New York in 1937. Economists expect 1930s-style federal stimulus from Washington.

Many economists are heading into the new year declaring that the worst may soon be over. Others are pessimistic. 

Top 10 tax tips for 2009

Tax Expert

Jamie Golombek,  Financial Post 

For 2009, here are my 10 resolutions for saving more taxes:

Resolution #1: Open a TFSA. The new tax-free savings account, launched Jan. 1, is the ideal place to put up to $5,000 of savings and earn tax-free income and/or gains for life. Any withdrawals are not taxed, do not negatively affect eligibility for government-tested benefits and can be re-contributed the following calendar year.

Resolution #2: Maximize RRSP contributions. The RRSP limit for 2009 is the lesser of 18% of 2008 earned income or $21,000. Get a head start on your 2009 contribution today.

Resolution #3: Set up a spousal RRSP. The primary benefit of a spousal RRSP is that funds withdrawn can generally be taxed in the hands of the (hopefully) lower-income spouse.

Resolution #4: Earn tax-efficient investment income. For those who have maxed out their RRSP and TFSA contributions, consider tax-efficient investment income outside of these tax-sheltered plans by investing in Canadian dividends, which are eligible for the dividend tax credit, and capital gains, which are only half-taxable.

Resolution #5: Open up RESPs for kids. Don’t forget to make at least $2,500 of contributions to each child’s registered education savings plan (RESP) this year to take advantage of the $500 Canada Education Savings Grant. You may also be able to catch up on missed CESGs from prior years.

Resolution #6: Investigate pension splitting If you’ve received pension income in 2008, be sure to investigate whether splitting up to half of that income with your spouse or partner makes sense when you file your 2008 tax return this spring.

Resolution # 7: Consider income splitting. A spousal income-splitting strategy whereby the higher-income spouse or partner loans funds to the lower-income spouse or partner to invest may be ideal given the record low prescribed rate, which is set at 2% this quarter.

Resolution # 8: Donate “in kind” to charity. When planning your charitable giving for 2009, consider donating appreciated securities directly to your charity of choice and eliminating all tax on any accrued capital gains.

Resolution # 9: Plan now to avoid a tax refund. If you regularly get a large tax refund each spring, consider applying for a reduction of tax at source using CRA Form T1213. This needs to be repeated each year.

Resolution # 10: Consider opening an RDSP for a disabled person. If you or someone you care about has a disability, consider opening up a registered disability savings plan. Contributions to RDSPs, limited to $200,000 over the disabled beneficiary’s lifetime, may be augmented by up to $90,000 in Canada Disability Savings Grants and Bonds.

Late last month, the government extended the deadline for opening an RDSP, making contributions and applying for the 2008 Grant and Bond to March 2.

Jamie Golombek, CA, CPA, CFP, CLU, TEP is the managing director, tax and estate planning with CIBC Private Wealth Management in Toronto.

Units of H&R Real Estate Investment Trust have risen nearly 20% since it announced a $200-million debenture private placement with Fairfax Financial Holdings Ltd. on Dec. 23, 2008.

By Kelly RiddellDec. 26 (Bloomberg) — BioMS Medical Corp., a one-drug biotechnology company in Edmonton, Alberta, may hold a partial answer as to how Eli Lilly & Co. will replace $9.9 billion in sales threatened by expiring patents.

Lilly signed a $497 million licensing and development agreement for BioMS’s dirucotide, potentially the first treatment for advanced forms of multiple sclerosis to come to market. The medicine, which entered final trials, has so far escaped side effects such as influenza-like symptoms, fatigue and skin cancer that were reported by Basel, Switzerland-based Novartis AG on fingolimod, another late-stage drug in testing for the disease.

A mid-level study of dirucotide, involving 218 subjects, had “very impressive features to it,” according to Bill Chin, Lily’s vice president of discovery and clinical investigation. The drug represents a chance for “a breakthrough,” he said.

Multiple sclerosis affects about 2.5 million people worldwide. Most approved therapies treat early-stage MS and make up a $6 billion market that may double by 2013, according to research firm Frost & Sullivan in New York. Dirucotide may generate sales of more than $5 billion, said Douglas Loe, an analyst at Toronto-based Versant Partners Inc. who rates BioMS shares “buy.”

Approval of the drug and a potential takeover of BioMS by Indianapolis-based Lilly may increase the C$236 million ($194 million) market value of the Canadian company’s shares by fivefold to as much as 25-fold, according to Loe.

Patents Running Out

The shares, which have declined 36 percent this year, may reach C$9.62 in 12 months, according to a Bloomberg survey of four analysts. They closed at C$2.50 in Toronto on Dec. 24.

Lilly faces the possible loss of more than half of last year’s revenue when patents on its top-selling drugs — Zyprexa, Cymbalta, Gemzar and Humalog — expire by 2013.

The drugmaker declined to comment on the possibility of an acquisition and “looks forward” to a continued partnership with BioMS, said Christine Van Marter, a spokeswoman.

BioMS’s hurdle for dirucotide in clinical trials will be to prove that the antigen it selected, in this case a myelin-based protein, is the most effective therapy to block the immune-system response associated with MS, said John Richert, executive vice president of research and clinical programs for the National Multiple Sclerosis Society in New York.

“This drug could be a very important advance, but it also represents a significant challenge to researchers,” Richert said.

Wife’s Illness

Cambridge, Massachusetts-based Biogen Idec Inc. and Elan Corp., in Dublin, Ireland, removed the MS drug Tysabri from the market in February 2005 after three patients contracted a brain illness and two died. Four cases, with one death, were reported since the drug was reintroduced in the U.S. in 2006. Tysabri is aimed at treating an earlier stage of MS called relapsing- remitting.

BioMS was founded by Clifford Giese, a 61-year-old Alberta native who went into semiretirement after selling an automotive oil-change business 21 years ago. He licensed the drug from the University of Alberta in 2000 and took the company public in 2001.

While he had no interest in biotech, Giese wanted to save his wife, Robin, who was diagnosed with MS in 1977, he said.

“We were desperate to find a cure, to find or do anything that would stop the progression of her disease,” said Giese. “I was told about a peptide that looked promising, so we decided to give it a go.”

Now, after 12 years on the treatment, Robin Giese said she wakes up every morning to exercise, plays with her five grandchildren in the afternoon and attends parties with her husband in the evening. She suffers from secondary progressive, an advanced form of the disease.

Clinical Trial

Before entering the clinical trial for dirucotide, “I was consistently tired and needed help doing the most minor tasks,” the 60-year-old said in an interview in her kitchen. Today, “I keep improving. I’ve experienced no side effects.”

Most sufferers are first given a diagnosis of relapse- remitting, an early form of the disease marked by occasional flare-ups. More than 50 percent eventually progress to Robin Giese’s condition, characterized by continuous deterioration.

Giese predicted that Dirucotide will be approved and sold in Canada and Europe in 2010, followed by approval from the U.S. Food and Drug Administration about a year later.

BioMS lost money until the third quarter of 2008, when it recorded its first profit on a payment from Lilly for completing an interim analysis of the drug.

‘Long-Term Investor’

The University of Alberta is the company’s biggest shareholder, with a 19 percent stake, according to data compiled by Bloomberg. The Edmonton-based school received the interest as part of its licensing agreement with the company.

Giese, BioMS’s chairman, is the fourth-largest shareholder, with 1.9 percent. His brother, Kevin, owns 1.1 percent, according to Bloomberg data.

“We view ourselves as a long-term investor because the prospects for the company are very favorable,” said Ron Ritter, the university’s director of investments and treasury. “We hope dirucotide is a highly successful product, and all indications are the clinical trials will prove that.”

In mid-2009 BioMS will hand off dirucotide to Lilly so it can complete clinical testing and eventually sell the product. At any time during testing, Lilly can break its agreement with BioMS, which has no other drug in its pipeline. 

By EDMUND L. ANDREWS

The Federal Reserve must now turn to an approach called “quantitative easing,” because it involves injecting money into the economy rather than aiming at an interest rate.

For every bear there is a bull….  Good riddance November!

Regards,

Jonathon Gold

Put on your rubber boots and shutter the windows -  Octagon Capital Corp.’s technical analyst predicts we’re about to be hit by a “tsunami rally.”Leon Tuey wrote in a research note Friday that “conditions are ripe” for a huge turnaround in the coming months, and that investors had best “abandon bonds and buy stocks” to take advantage.

“Conditions are in place for a monster rally,” Mr. Tuey wrote. “There is nothing to fear but fear itself. Investors should maintain their staged buying program. Short-term weakness is not to be feared, but should be viewed as an outstanding buying opportunity.”

Skeptical, just because the market is down some 35 per cent so far this year? We’ll leave it to Mr. Tuey to explain in his own words:

The unprecedented monetary growth and co-operation of the world’s central banks will help to turn the economy around. Clearly, that’s their goal.

Despite the consensus, the explosive monetary growth and the dramatic steepening of the yield curve will cause the economy to recover, probably in the second half of next year, if not earlier. The current quarter will likely represent the trough of the economic downturn.

By any metrics, the market is exceedingly cheap. Historically, the price-to-book for the S&P 500 Index has ranged in the 1.0 - 4.2 area; currently, it’s 1.1x. Moreover, the IBES Valuation Model shows that the S&P 500 Index is 68% undervalued (on November 20, it was 73% undervalued). Furthermore, the dividend yield for the S&P exceeds the yield on the 10-year T-notes – the first time this has occurred in 50 years. From a valuation standpoint, the market is as attractive as in 1982, which marked the commencement of the biggest bull market in history. Buy low, sell high.

Fear has reached an extreme. In October, the VIX reached a record high, and fear was so extreme that it could not get any worse. In the months ahead, fear will subside, which implies the market will rally. It is interesting to note, however, that while the public is pulling their money out of their accounts, insider buying surges to record highs. Fools rush out, but the smart buyers are rushing in

Also, technically, the market is historically oversold; in fact, the whole world is oversold. However, commodities are also grossly oversold (on an intermediate basis), and as they rally – as they are doing so right now – it will just add fuel to the launch.

The Globe & Mail

TFSA is a registered savings account that allows taxpayers to earn investment income tax-free.  Contributions to the account are not deductible for tax purposes and withdrawals of contributions and earnings from the account are not taxable.

Frequently asked questions (FAQ): Tax Free Savings Account 

European Bank cuts half-point to 3.25 percent, Bank of England slashes 1.5 points to 3 percent

FRANKFURT, Germany (AP) — The European Central Bank cut its key rate by half a percentage point to 3.25 percent on Thursday, joining the Bank of England, Swiss and Czech central banks as they confront the looming recession.The ECB announced the cut from 3.75 percent shortly after the Bank of England lowered its key interest rate by a startling 1.5 percentage points to 3 percent.

The Bank of England’s cut was more than the full percentage point that most analysts had predicted and the biggest cut in 27 years.

The Swiss National Bank cut its key interest rate by half a percentage point to 2 percent, only its second reduction since March 2003. In Prague, the Czech Republic’s central bank cut its interest rate by three-quarter percentage point to 2.75 percent.

Both central banks, which followed the Fed and other banks in a coordinated cut on Oct. 8, have been criticized in some quarters for being slow to respond to the sharp economic slowdown this year amid fears about inflation. The European Central Bank actually raised rates a quarter-point in July as inflation spiked sharply higher.

Those inflation concerns, though, have eased, not least because oil prices have fallen by more than half from their July highs of around $147 a barrel — and growth prospects have diminished sharply.

The European Commission forecast Monday that the economy in the 15 countries that use the euro will barely grow next year, expanding just 0.1 percent, with Germany, France and Italy stagnant. And it said Britain’s economy will slump by 1 percent next year.

Many analysts suspected the Bank of England might go for a bold move, given that British interest rates had been at a relatively higher level and mortgage lenders have been slow to pass on previous rate cuts in full to hard-pressed homeowners and consumers.

The close: Welcome, November!

Good riddance, October. During the month that investors have learned to fear as one of the bumpier four weeks to be in the market, indexes around the world tumbled by double digits.

Still, it could have been worse: The Dow Jones industrial average had been down almost 25 per cent during the month, to its low point on Oct 27. Since then, though, it has rallied about 14 per cent, leaving it down 14 per cent for the month.

Canada’s S&P/TSX composite index made similar moves. It had been down as much as 27 per cent during the month, but has rebounded more than 14 per cent from its low. It exited October nursing a loss of 16.9 per cent.

On Friday, major North American indexes moved in different directions. In the United States, the Dow closed at 9325.01, up 144.32 points or 1.6 per cent. The broader S&P 500 closed at 968.73, up 14.64 points or 1.5 per cent.

A late surge gave financials a big lift, with JPMorgan Chase & Co. rising 9.7 per cent and Bank of America Corp. rising 6.1 per cent, on renewed efforts by JPMorgan to prevent foreclosures among U.S. homeowners. As well, Home Depot Inc. rose 3.8 per cent and General Electric Co. rose 0.8 per cent.

In Canada, the S&P/TSX composite index closed at 9762.76, down 93.45 points or 1 per cent – thanks largely to commodity producers, which had helped propel the index to gains of more than 350 points on Thursday. Goldcorp Inc. fell 8.1 per cent, EnCana Corp. fell 2.3 per cent and Canadian Natural Resources Ltd. fell 2.4 per cent.

Meanwhile, financials didn’t help much either: Although Toronto-Dominion Bank rose 0.9 per cent, Royal Bank of Canada fell 1.6 per cent and Manulife Financial Corp. fell 3.5 per cent. The biggest offset was Research In Motion Ltd., which rose 5.5 per cent.

The Globe & Mail