Adrian Mastracci, president of KCM Wealth Management says "The consumer is already struggling with plenty of debt."

For Immediate Release

Vancouver, BC (January 15, 2002): The latest round of interest rate cuts from the Bank of Canada would, on the surface, be good news for borrowers. The pundits remind us that we need the consumer on our side to fire up the economic engines.

Adrian Mastracci, president & fee-only investment counsel at Vancouver based KCM Wealth Management comments, "The bank prime lending rate is now heading to 3.75%, the lowest rate in since the 60's. Some mortgage and other consumer loan rates will also follow suit."

"So is it time for consumers to rejoice?" asks Mastracci.

Let's dig a little deeper:

1. The consumer is already struggling with plenty of debt. Much of any new debt to finance new purchases would have to come from credit cards. Many of which are already at maximum, or in very hazardous territory. Not to mention that personal bankruptcies are on the rise.
   
   
2. Credit card rates have not fallen in step with the short-term rate reductions brought to you by Mr. Greenspan and Mr. Dodge. Credit card rates have remained high, some hovering around 28%. Say the interest cost is 18%. If it's not deductible for tax purposes, the real cost in the 40% tax bracket is 30%. Ouch!
   
   
3. The U.S. Commerce Department expects the personal savings rate to plummet from just over 6% in 1995 to around 1% for 2001. This is a sign that savings accounts are depleted and precious cash is being diverted, perhaps to service debt. Therefore, new purchases may have to be paid for from the sale of assets, like stocks and mutual funds.
   
   
4. Since the pesky bears have peeled the onion on the value of many stocks and mutual funds, the consumer could well resist selling assets at a loss. That, of course, assumes that there are assets to sell!
   
   
5. That same consumer may also be feeling overwhelmed thinking of how to replenish the bruised retirement nest egg.

"It's a tall expectation for consumers to carry so much weight for so long," observes Mastracci, "I think they want a little rest from the pressure of continued performance. Even at these great bargain rates!"

Something may just have to give.

NOTE: The information provided above is intended for general informational purposes only. It does not constitute advice for anyone's specific situation. Everyone should always first consult directly with their advisors to determine the appropriateness of any information contained above before taking any action. KCM Wealth Management Inc. assumes no responsibility for any loss or damage arising from the use of, or reliance upon the above information.