1. A Canadian investor who is saving for her retirement in Canada needs to fund her liabilities in Canadian dollars and having too much exposure to foreign markets introduces foreign exchange risk. Since valuations among developed markets are comparable and earnings growth in these markets is similar, the expected returns from Canadian stocks isn’t materially different from other developed countries. Therefore, the purpose of foreign stocks in a Canadian investor’s portfolio is diversification. One study by money manager Leith Wheeler found that Canadians can get most of the benefits of diversification by allocation 50% of their stock portfolio to overseas markets. Some could reasonably argue that the 70% allocation to foreign markets in the stock portion of the Sleepy Portfolio is too much, not too little.
2. In taxable accounts, eligible dividends paid by Canadian stocks receive favourable tax treatment. Assuming a 2.5% yield, investors in some tax brackets may find that more than 40% is lost to taxes for international stocks but only 20% in the case of Canadian stocks. Over the long term, all things being equal, a Canadian investor will earn greater after-tax returns with Canadian stocks than international stocks.
3. Canadian investors capturing exposure to global markets through ETFs listed in the US stock markets will experience additional leakage through withholding taxes. These taxes add to the cost of foreign investments and act as a drag on a portfolio return.

What’s your take? Is the 70% allocation to US, EAFE and International stocks in the Sleepy Portfolio too much diversification? Or is it too little, considering Canada makes up less than 4% of global markets?

PS: Spring has sprung and this weekend promises fine weather for an Easter Egg Hunt and just hanging out on the patio. Hope everyone has a great Easter weekend.

The S&P/TSX composite index was down 3.77 points to 12,040.44 in the final trading session of the second quarter.

Statistics Canada reported real GDP advanced 0.6 per cent in January, its fifth straight monthly increase. That was slightly ahead of the bullish estimate of a 0.5 per cent increase from December, or six per cent annualized, that economists had expected.

“The Canadian economy really continues to benefit from a stronger consumer, government spending and strong construction sector,” said Jeffrey Bradacs, senior investment analyst at MFC.

“GDP growth for the first quarter continues to outpace the bank of Canada’s forecast, and that increases the likelihood of a rate increase in June.”

The Canadian dollar, which has been hovering just below parity with the American currency, was ahead 0.46 of a cent to 98.55 cents US early Wednesday.

A separate report from Statistics Canada showed that total hours worked by payroll employees increased by 0.3 per cent in January while non-farm payroll employment was virtually unchanged.

TSX metals stocks were up 0.4 per cent on a flurry of activity in the sector. Inmet Mining Corp. (TSX:IMN) has arranged a $500-million equity financing through Ellington Investments Pte. Ltd., a subsidiary of a Singapore-based investment company with holdings in Asia and Latin America. Shares rose eight per cent, or $4.45, to $59.95.

Meanwhile, Wallbridge Mining Company Ltd. (TSX:WM) says it will spin off all its copper, gold and molybdenum properties in British Columbia to a new independent company called Miocene Metals Ltd. Its shares were up 2.5 cents to 28 cents.

The gold sector was also ahead, 1.1 per cent higher, as the May gold contract increased $9.90 to $1,114.40 an ounce on the New York Mercantile Exchange. The May copper contract lost one cent to a 19-month high of US$3.55 a pound.

Energy stocks lifted 0.9 per cent with the May crude contract on the NYSE ahead $1.33 cents to US$83.70 a barrel.

The information technology sector backed off 0.8 per cent ahead of earnings from BlackBerry-maker Research In Motion (TSX:RIM) scheduled after the closing bell. It shares were down 47 cents to $75.79.

On Wall Street, the Dow Jones industrial average dipped 14 points to 10,893. The Nasdaq composite index rose four points to 2,415 while the S&P 500 index was flat at 1,174.

In the U.S., payroll company ADP says employers slashed 23,000 jobs in March, compared to economists predictions which had forecast companies would add 40,000 jobs during the month.

The ADP report is seen as an early indicator of the U.S. Labour Department’s closely watched monthly employment report, which is due out Friday. However, there can be wide variations because ADP only accounts for private-sector jobs.

Economists expect the government report to show employers added 190,000 jobs in March. It would be only the second monthly increase in jobs since the recession began in late 2007. The number could be somewhat inflated because many temporary workers were hired to conduct the 2010 census.

Employment growth is considered vital to a strong recovery in the U.S. because it will give consumers more confidence to go out and spend money, the biggest driver of economic activity in the country.

The ADP report also outshone data from the U.S. Commerce Department showing that factory orders rose 0.6 per cent last month, a decrease from January’s upwardly revised gain of 2.5 per cent. Analysts polled by Thomson Reuters forecast an increase of 0.5 per cent.

What remains to be seen is whether the Oasis of the Seas can surmount non-physical hurdles, including a moribund global economy, growing concerns over the environmental impact  of luxury ships the size of small cities, and questions as to whether passengers will be willing to shell out more money for more, well, everything.

And make no mistake, the Danish-built Oasis does have more of everything: more cabins (2,700 in all, ranging from the 172-sq-ft inside cabins
to two-storey suites complete with libraries and grand pianos); more restaurants (24, including the massive 3,000-seat Opus Dining Room); more amenities, like swimming pools, volleyball courts, basketball courts, a mini-golf course, and a 750-seat outdoor stadium modelled after an ancient Greek amphitheatre.

At approximately five times the size of the Titanic, and 40% larger than its nearest competitor, the Oasis of the Seas is so big it’s divided into “neighbourhoods.” Central Park features a square surrounded by boutiques,restaurants and bars. Another neighbourhood is designed to resemble a jungle, with palm trees, vines and thousands of tropical plants. A third resembles an outdoor boardwalk and amusement park. And a fourth, dubbed “Entertainment Place,” features a jazz club, nightclub and comedy club.

And where, exactly, will the world’s largest cruise ship sail? On its maiden voyage in December, it headed to St. Thomas, St. Maarten and Nassau. With such a self-contained, floating universe, however, the real answer for passengers might well be, “who cares?”

These are awesome amenities, indeed, but it takes more than flowrider surfing pools, an aquatheatre, an onboard golf course and a faux boardwalk to make your cruise perfect (although all of this certainly could help). You also need to get your cruise for a good price, avoid getting seasick and make absolutely sure you’re not left behind at a port of call.
To that end we checked in with a few veteran cruisers for advice. We asked them to reveal their most savvy tips for making sure your next cruise is smooth sailing, from start to finish.

Get the best deal
Wayne Carle, a 46-year-old civil servant, has embarked on a total of 16 cruises in as many years with his wife Tammy. One thing he avoids when booking a cruise is travel agents. They offer few ad­vantages over do-it-yourself bookings. Wayne prefers to use the CruiseCompete.com website. Just enter the ship and type of room you want, and it automatically delivers quotes from a variety of tour operators.
You’ll be surprised at how much prices vary between oper­ators. That’s because some have more booking power with a particular cruise line than others, says Wayne. Don’t assume you have to book last-minute to land the best deals, either. There are excellent bargains to be had for cruises as far out as a year from now. Once he books, though, Wayne doesn’t forget about his holiday until it’s time to ship off. If prices fall between the time of booking and the time of sailing, he gets in touch with the tour operator and usually gets his payment adjusted accordingly.

Booking the cruise itself, of course, is only half the battle. “You still have to get to the water,” says Donald Mellon, a 47-year-old financial services representative who’s about to set sail on his fifth cruise, together with his wife Tammy. “Cruises can depart from anywhere—Long Beach, Tampa, San Juan, even Quebec City—so we research and book our cruises online a year or so in advance, and then start looking for deals on airfare. That’s often where the real savings are.”

The company of strangers
You can’t choose who you’re going to be spending a week or two sailing with, but you can select a cruise geared toward your age group and predilections. “We’re retired, so we don’t want a cruise filled with kids,” says Vancouver-based Rosella Lauden, who’s been on a dozen voyages with her husband Bob. To that end, Rosella prefers booking with companies like Holland America, Celebrity and Royal Caribbean, which offer more adult cruises. Carnival and Disney tend to cater to young couples and families.

Another way to avoid being overrun by gaggles of kids is to look for newly opened destinations. “Seniors tend to gravitate to new routes, so if a new route’s opened up, say Panama or Costa Rica, we’ve discovered that 75% of the passengers will be over the age of 65,” Wayne says. Then, a couple years later, the same route is servicing a much younger crowd.”

Maximize your sunsets
Seasoned cruisers recommend getting a room with an open-air balcony. “It costs a few hundred dollars more “but there’s nothing like having breakfast delivered to your room and eating it out on the balcony, then spending an hour or two reading and relaxing in the fresh air,” says Rosella.

To avoid sea sickness, the Laudens and Mellons both say they try to book rooms in the middle of the boat, where the rocking from the waves is minimized. The Mellons furthermore try to book rooms on the port side of the ship, so they get the view of approaching islands and landfall as the ship prepares to dock at each new destination. The Carles have yet another trick up their sleeve: to maximize the number of sunsets they get to see from their cabin, they figure out which way the ship will predominantly be sailing and book the side most often facing west.

The problem with ports
What other kind of vacation lets you visit seven different countries and experience seven different cultures in a week? But too many ports of call can be too much of a good thing, says Wayne. “It can become exhausting.” He prefers to book cruises with at least a day of sailing between ports.

Then again, no one forces you to get off the ship when it docks. While your shipmates go exploring, feel free to relax on board.

The best way to day trip
If you do decide to go exploring ashore, make sure you plan ahead. Before setting sail, the Mellons always go online and research each port of call, then book the excursions that interest them. You can book through the ship, Tammy says, but it’s cheaper to do it direct. “When the ship docks there’s someone waiting to greet you and guide you to whatever you’re interested in seeing, whether it’s ruins, or caves or shopping.”

The real danger is not booking in advance at all. In that case, expect to be “bombarded with people trying to pull you into their car to take you places, and you might not end up with a reputable guide,” Tammy says. “You might even miss getting back on board the ship before it sets sail again. It’s surprisingly easy to do.”

Avoid tables of four
If there’s one thing seasoned cruisers agree upon, it’s that the food is universally excellent on a cruise. “It’s similar to what you’d get at an upscale steak house,” says Wayne. Most ships have a number of specialty restaurants which have to be booked in advance, as well as a buffet and a large sit-down dining hall, neither of which require nightly reservations. Even here, however, there are tips that will make your cruise more enjoyable:

United States: 43.5%
Europe and Pacific (EAFE): 42%
Emerging Markets: 14.5%

It is interesting that the share of Emerging Markets has grown in the world stock markets from roughly 10% in 2005 to close to 15% now. Correspondingly, the share of US and EAFE markets has declined from about 45% each to 43.5% and 42% respectively today.

The Sleepy Portfolio started out with a 22.5% allocation to US and EAFE markets and a 5% allocation to Emerging Markets. This data suggests that the share of Emerging Markets in the portfolio should be boosted to 7% and US and EAFE market allocations cut by 1%.

Related Reading:

• Attractive valuations in stocks outside North America
• Sleepy Portfolio 1Q-2010 Report Card
• Tidying up the Sleepy Portfolio
• New iShares Emerging Market and World ETFs
• A Tour of ETFs: Vanguard FTSE All-World Ex-US ETF (VEU)

Stock Market Weightings excluding Canada is brought to you by Canadian Capitalist — Helping you to invest & prosper.

A good rule to follow is pay your remaining balances on time — there is a 5% penalty in place for stragglers. And, make sure you include all relevant slips and receipts — the Canada Revenue Agency will accept a note with the name and address of the payer in lieu of this. Do these two steps and you’ll see immediate results.

Canadians are also encouraged to look into things like pension splitting, which allows you to take advantage of your partner’s lower rate of taxation, and claiming legal fees in the case of a lost job.

With Fraud Prevention Month well underway, the Canada Revenue Agency recently issued a news release “reminding Canadians that the minority of tax preparers and promoters who try to make money at the expense of Canadian taxpayers are not getting away with it.”

“Since 2000, 19 tax preparers have been assessed nearly $1.7 million in third-party penalties. Audits of 15 tax preparers are currently underway,” says the CRA release.

Tax preparers have been identified by CRA as a group at higher risk of tax non-compliance. Indeed, they are one of three areas targeted for special prosecutions through a special CRA initiative labeled Project Trident.

The convictions section of CRA’s website describes some recent cases of tax preparers who bent the rules and were subsequently convicted. Here’s five:

1. Martine Laprise of Saint-Sauveur Quebec was fined $41,252 for providing third parties with a total of $518,197 in false child-care receipts. She also “hired fictitious caregivers, who declared income equal to the amounts on the receipts issued in order to avoid raising suspicions from the tax authorities [and expenses were claimed against this income to allow the parties to avoid paying income tax].”

2. Elavalakanar Kanakaratnam of Guelph was fined $96,000. “Kanakaratnam had gained a reputation with his clients, mainly new immigrants with no knowledge of Canadian tax laws, as someone who could get them substantially higher tax refunds than other tax preparers. To fulfill this claim, Kanakaratnam fabricated deduction amounts, including child care expenses, interest and carrying charges, employment expenses, charitable donations, and property tax credits.”

Kanakaratnam also directed refunds totaling $160,377 to himself and his wife by changing direct deposit information from his clients to reflect banking accounts maintained by himself and his wife. A routine CRA review … “showed 31 tax refunds for 27 different individuals were being deposited directly into one of two bank accounts.”

3.  France Desjardins of Grand Falls, New Brunswick was sentenced to three months in jail and fined $35,991 for preparing fictitious T4 information slips used by another tax preparer to file fraudulent income tax returns. This is the second time Desjardins has been charged with tax evasion (on May 13, 2008, she was fined $32,093 and sentenced to 16 months of house arrest). Two other Grand Falls, New Brunswick tax preparers are facing related tax evasion charges.

4. Daniel Paradis of Edmundston, New Brunswick was fined $275,196 and sentenced to a conditional term of two years less a day of house arrest. He operated a tax preparation business under the H&R Block banner; a CRA investigation found that he had obtained fraudulent income tax refunds in excess of $250,000.

5. William Ankomah of Brampton was sentenced to just under two years house arrest and fined $50,000 for overstating charitable donation receipts from various charities on his clients’ income tax returns.

From Larry MacDonald’s Investing Ideas blog on CanadianBusiness.com