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Monthly Archives: July 2011


If financial planners want to make more inroads with high-net-worth (HNW) clients, they need to provide a broader and more integrated set of capabilities.

That is the bottom line of the Merrill Lynch Global Wealth Management and Capgemini World Wealth Report, released today, which argues that an enterprise value approach is especially critical in today’s environment because HNW clients expect their relationships with firms and advisers to create more sustained and broad value than before the global financial crisis (GFC).

Commenting on the findings of the report, Merrill Lynch Global Wealth management head John Thiel said that while an air of normality was returning to global financial markets, HNW investors had been deeply impacted by the effects of the GFC.

“Many high-net-worth clients have clearly rethought their investment and life goals and are now heavily weighing the amount of risk they are willing to assume in order to reach those goals,” he said.

Thiel said firms would need to bring the full force of their capabilities to bear to deliver an integrated response to the complex post-GFC needs of HNW investors.

The Merrill Lynch Capgemini research suggested that capital preservation had become more important to HNW investors, along with effective portfolio management.

Capgemini Global Financial Services head of sales and marketing, Jean Lassignardie, said that although HNW investors took on more calculated risk in search of better returns, at the end of 2010, they still held a significant amount of their assets in more conservative instruments such as fixed-income and cash and equivalents.

“Amid this mixture of trust and misgivings, firms and advisors must continually demonstrate their value and relevance to help HNWs meet their changing and complex needs,” Lassignardie said.

Mike Taylor
Money Management
June 23, 2011

Blog Archive



How to calculate what you can really afford

Live within your means!

You’ve found the perfect sofa for your living room. You need a sofa, right? A person has to sit somewhere. But can you afford the new sofa? For many people, ‘afford’ means having room on the credit card. Unfortunately, there is a big difference between having the means to pay for something and being able to truly afford it.

In today’s consumerist society, living within one’s means can seem like a quaint, old-fashioned notion, like paying cash for everything. However, knowing your financial limits and living within them remains the primary secret to attaining wealth and financial security.

You can probably justify any purchase to yourself — if you really want it. By denying the limits of your income and expenses however, you can quickly find yourself in serious financial trouble, on the basis of just a few too many purchases that you erroneously thought you could afford.

Your TDS ratio

There is a simple way to calculate what you can afford – or how much you have available to spend — on a monthly basis. It’s called the Total Debt Service ratio or TDS, as those in the financial-know like to say.

The rule of thumb for TDS is that all your monthly debt payments should be less than 40 per cent of your gross monthly income. This 40 per cent should include your housing costs (rent or mortgage payments), your car payments (leases or loans) and all the other credit payments you make each month – including credit cards (yes, those too!), lines of credit, student loans and other personal loans.

If you can keep your debt payments within 40 per cent of your income, then the remaining 60 per cent can be allotted to ‘discretionary’ spending — such as groceries, clothing, entertainment, transportation costs and your shopping habit.

Here is how to calculate your TDS ratio in three easy steps, so you can see how you’re currently faring; either do it personally or with your spouse to determine a household figure.

Step one: your salary income

Check your pay statements to determine your gross monthly salary. This means what you earn in total each month, before deductions such as taxes and CPP are taken off. If you are calculating your household TDS, rather than just your own, then add your hubby’s gross monthly salary as well.

Step two: add any other income

Now add any income that you receive on a regular, monthly basis. Maybe it’s child support payments, investment income or cash from a part-time job. (Maybe trust fund payments or royalties from the songs you wrote for Beyoncé? Don’t we all wish!)

• Step three: multiply by 0.40

Take your total income (step 1 + step 2) and multiply the total by 0.40. Voila! The result is your total debt service ratio — the maximum amount you can afford to spend on your monthly debts and expenses.

The upper limit

Suppose, for example, your TDS calculates to $1800. If you find you are actually spending less on your housing, loan payments and expenses – say $1500 a month – then congratulations frugal girl! Technically, you are living within your means. Just remember, that TDS calculation represents your upper limit.

On the other hand, if you are actually spending more than your TDS figure on monthly debt obligations, then your ability to afford the rest of your life probably feels severely constrained. Try to re-negotiate loan payments and make it a priority to pay down those debts and get your TDS back in line.

The other 60 per cent

The less you spend within your TDS ratio, the more disposable income you will have to enjoy each month. If your expenses and monthly obligations keep you at the 40 per cent limit, then you still have 60 per cent of your income for the business of daily living. By outlining a simple monthly budget of how much of that money has to go toward gas money, subway fare, groceries and other essentials, you can quickly estimate how much you have left each month to spend on fun stuff — like shopping (and SAVING, of course).

Your bottom line

Living within your means starts with knowing your means. With a credit card in hand, it’s so tempting to make purchases and tell yourself you can afford it by cutting back in other areas. The trouble is, that kind of impulse spending often leads you to dipping into money that is earmarked for paying bills — and your finances quickly get messy. Know your limits and live well!

Golden Girl Finance 
July 26, 2011

Golden Girl is a free personal finance and education site for women.
Nothing contained herein is intended to provide personalized financial, legal or tax advice. Before implementing any financial strategy, you should obtain information and advice from your financial, legal and/or tax advisers who are fully aware of your individual circumstances.

David Beckham credits his career to Sir Alex Ferguson for giving him his start at Manchester United
The English midfielder completed 90 minutes against his old club Manchester United on Wednesday night as part of the MLS All-Star team. In addition to his fan allegiance to the reigning English champion, the shared history made it an emotional venture for the 36-year-old midfielder.“Obviously, to play against Manchester United still with Sir Alex Ferguson as manager, still with some of the players I played with and the fans I played in front of for many years, is emotional,” Beckham said. “It’s always going to be emotional coming up against Manchester United. It’s always difficult as well.”

MLS quickly learned just how difficult playing the Red Devils can be. Two goals against the run of play in the first half paved the way for a comprehensive 4-0 win to the team still in preseason preparations.

Beckham wasn’t surprised at the gap in the scoreline.

“If you play at that level you don’t stop at one-, two-nil,” the midfielder said. “You want to work hard because you want to get your fitness. You’re not playing at a club like Manchester United to go through the motions and just to win 1-0.”That competitive mentality saw Man United win the Premier League season with perhaps a more functional than glitzy roster. It’s the same sort of mentality the side used to win the 1999 treble, Beckham claims, and it starts in the youth teams.
“Any new player who comes into Manchester United, they feel that straight away,” the LA Galaxy Designated Player said. “That seems instilled into you from a very young age as a Manchester United youth team player and it carries on all the way through the team. It’s [a] never-say-die attitude, is what Manchester United have.” Shane Evans
July 28, 2011
Posted by Dan Zwicker 
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McKinsey Consulting looks at social technology as more than social media. They view “social technology” as a significant enhancement to collaboration and communication processes. An enhancement that changes everything a business does, not just marketing and advertising. What new value can be created by improving communications and collaboration? Everything!

In an In article titled “Using technology to improve workforce collaboration“ James Manyika, Kara Sprague and Lareina Yee writes: Raising the quality of these interactions is largely uncharted territory. Taking a systematic view, however, helps bring some of the key issues into focus. Our research suggests that improvements depend upon getting a better fix on who actually is doing the collaborating within companies, as well as understanding the details of how that interactive work is done. Just as important is deciding how to support interactions with technology—in particular, Web 2.0 tools such as social networks, wikis, and video. There is potential for sizeable gains from even modest improvements. Our survey research shows that at least 20 percent and as much as 50 percent of collaborative activity results in wasted effort.

To put this in better perspective consider what happens when organizations use social media solely as advertising and marketing channel. They are likely to initially get the markets attention and in doing so increase the cost of responding to said attention. Worse, the market takes notice then criticizes the brand or organization for terrible service, poor customer relations or “spamming” the market. Worse yet is that the organizations employee attitudes reflected in their online conversations produce a negative sentiment about the organization. These incidents are happening everywhere because organizations do not think systemically about social technology. Rather they think about marketing and advertising. That thinking represents devolution.

Revaluations are driven by efficiency, effectiveness and innovation. Devolution of social media are the results of doing things that reduce the value of communications. It’s time to create a revaluation of this thing being called social media. That can only happen when there is a revolution in thinking. That would require a revolution in “what” we believe.

Jay Deragon
The Relationship Economy
July 22, 2011

Posted by Dan Zwicker at 7/24/2011 


I may live to see an uprising over the widening gap between rich and poor in North America

After all, that’s the cause of the regime change this year in North Africa and the Middle East.

Westerners have no less an acute sense of fairness than Tunisians and Egyptians. A few of us don’t get the $9.7 million (Canadian) severance payoff for top managers at Rupert Murdoch’s late, scandal ridden News of the World. And in particular the $3.9 million golden parachute for Rebekah Brooks, who oversaw that paper’s regime of spying and police bribery, and was arrested this week over those alleged improprieties.
Meanwhile, the 200 or so front line NOTW employees laid off with the paper’s closure will be fortunate to collect on their pensions. Their fate is akin to the 1,200 employees of call-centre operator IQT Solutions in Oshawa and Quebec abruptly laid off this week.

Declaring their firm bankrupt, the IQT owners hightailed it to parts unknown without giving the affected workers proper notice, their last paycheques, or accumulated vacation and severance pay.

That’s how it goes for the little people. But you have to wonder how much longer the cancer of excessive CEO pay will remain socially sustainable.

At some point, some of us will awaken to the fact that many of our social ills – including the American economy’s stubborn refusal to recover – can be traced back to a 30-year stagnation in middle-class incomes.

The economy, stock market and executive pay have all increased by several multiples in that time. But between 1976 and 2009, median income for Canadians rose just 5.5 per cent – median pay for Standard & Poor’s 500 CEOs jumpecl 35 per cent last year alone, to $8.4 million (U.S.).

The economy, inflation, the stock market and dividend payouts to pension funds and other institutional investors did not increase that much.

Nor, between 2009 and 2010, did CEOs become 35 per cent smarter or harder-working.

Pay for the average U.S. worker actually fell last year, after inflation. Not accounting for inflation, it rose a meagre 0.5 per cent. Americans are bracing for a forecast additional six million home foreclosures, having suffered the loss of about two million homes already since the Great Recession began in 2007.

The household debt of Canadians now surpasses that of the US., where consumer indebtedness remains at levels too high to allow for the usual consumer-led recovery that follows recessions.

No, we didn’t entirely lose our sense of prudence. As tuition, housing, gasoline, food and other costs rose over the past three decades while middle-class incomes stagnated, Canada and the US. first became nations of two income earners. And when that didn’t suffice, we began borrowing for essentials.

“We are feeling the deferred pain of 25 years of excess, as people try to rebuild their depleted savings;’ is New York Times economics editor David Leonhardt’s explanation for the current consumer strike.

But that’s not the whole story.

Many of us did not engage in “excess;’ yet are struggling to make ends meet. The real story is: Where did all the money go that has been generated by a North American economy that has greatly expanded since 1980?

And the answer is to be found in decades of outsourcing, offshoring, declining union membership and bargaining power, and productivity gains that have enabled employers to generate ever more revenue with steadily fewer employees.

What grates in this transformation is the sense of entitlement among the sole, conspicuous CEO beneficiaries of our New-and- Not -Improved-Econom~

In the erosion of the “social contract” between capital and labour dating from the end of World War II, we are not suffering equally. Indeed, we now reward failure in high places.

The shares of General Electric Co. have plunged in value by 60.8 per cent during the tenure of CEO Jeffrey Immelt, who was rewarded for this performance with $37.2 million in free stock in 2010. Shares in pfizer Inc., the world’s largest drugmaker, have dropped in value by 481 per cent over the past decade. Yet CEO Jeffrey Kinder retired in December clutching a $34.4-million severance package.

Rex Tillerson was paid $88 million in 2010, a year in which shares ofhis company, ExxonMobil Corp., generated a 5.8 per cent negative return.

Shares of  banking giant J.P. MorganChase & Co. inched up in value by 3.5 per cent last year, good enough for a 1,474 per cent hike in CEO Jamie Dimon’s pay, to $20.8 million.

For the approximately17 million North Americans who are unemployed, the economy has not recovered. But use of corporate jets has picked up by 6.2 per cent. And 24,666 oflast year’s flights were to West Palm Beach, Nantucket and the Hamptons, not known as hives of business activity.

We need to have an adult conversation about income distribution before we’re forced into an unruly one. For now, the occupant of the corner office isn’t ready. Asked about Goldman Sachs Group Inc.’s role in helping put the match to the Great Recession, CEO Lloyd Blankfein snapped that he is “doing God’s work!’

Jamie Dimon regards his bank’s eviction notices as an act of altruism. “Giving debt relief to people that really need it, that’s what foreclosure is.”

And Stephen Schwarzman, chairman and co-founder of private equity giant Blackstone Group, who has a net worth of $8 billion, balked over a rumoured Obama administration increase in taxes on private equity firms from a loophole-engineered 15 per cent to the traditional 35 per cent.

”It’s like when Hitler invaded Poland;’ Schwarzman said of the barbarian at his gate.

Decrying “short – termism” as central to the US. economic malaise, Sheila Bair, outgoing head of the Federal Deposit Insurance Corp. (FDIC), noted the failure to accept responsibility among directors and management of failed banks, who had neglected their fiduciary duties.

“The rationales the executives come up with to try to escape accountability for their actions never cease to amaze me;’ Bair wrote in a recent Washington Post op-ed. “They blame, the failure of their institutions on market forces, on ‘deadbeat borrowers,’ on regulators, on space aliens.They will reach for any excuse to avoid responsibility.”

A dialogue of the deaf would be one thing, but we’re not even talking about our greatest social ill, the maldistribution of income in North America

Well short of a revolution, this dangerous imbalance could easily be corrected simply by restoring the system of progressive taxation to where it was in the booming 1950s and 1960s.

That’s when leadership meant responsibility, not a hurried grasp for the brass ring, with the little guy paying for the consequences.

That, history teaches us, is a lousy business plan.

David Olive,
Toronto Star
July 23, 2011

Enforceable proficiency requirements and ethical principles for anyone providing financial planning services are being established

Financial planning is a rare pocket within the financial services industry in that it lacks national supervision. But momentum is gathering behind efforts to create professional standards and oversight for financial planners across the country.

In an unprecedented level of co-operation among industry sectors, five organizations have teamed up to create the Coalition for Professional Standards for Financial Planners. The coalition is aiming to establish enforceable proficiency requirements and ethical principles for anyone providing financial planning services.

“We think that we really need to get together and agree on some fundamental principles and values that any future oversight or regulation of financial planning should be based on,” says Cary List, president and CEO of the Toronto-based Financial Planning Standards Council, one of the five member organizations.

The other members are the Canadian Institute of Financial Planners, Advocis (both also based in Toronto), the Delta, B.C.-based Institute of Advanced Financial Planners and the Verdun, Que.based Institut québécois de planification financière.

These five organizations share the common goal of providing investors with clarity and better protection when working with financial planners. Currently, List says, investors have no reliable way of identifying financial planners who are qualified, competent and held to an ethical standard: “There’s insufficient consumer protection. We have piecemeal regulation.”

Throughout most of Canada, anyone can claim to be a financial planner without meeting requirements for qualifications or professional oversight. One exception is British Columbia, where advisors holding themselves out as financial planners must hold either the certified financial planner designation or another financial services industry designation, such as chartered financial analyst, registered financial planner or chartered life underwriter.

Quebec boasts the strictest requirements in Canada: financial planners must earn a diploma from the IQPF, obtain a permit from the Autorité des marchés financiers and meet continuing education requirements. “[The financial planning sector in Quebec],” says Jocelyne HouleLeSarge, president and CEO of IQPF, “is better regulated than in the rest of Canada.”

But even Quebec’s model doesn’t go far enough, she argues, because the rules are not properly enforced: “It doesn’t prevent people from calling themselves financial planners or financial advisors or offering services pretending to be financial planners. So, our concerns are the same all across the country.”

Outside of Quebec, the only financial planners subject to oversight and professional standards are those who hold professional designations, such as the CFP or RFP; the bodies administering these designations hold their members accountable to specific practice standards and codes of ethics. Designation-holders who fail to meet the standards are typically stripped of their designation — but are not prevented from continuing to practice without the designation.

This leaves a substantial proportion of financial planners who are not subject to any oversight, says List: “For every one person who holds the CFP who’s calling themselves a financial planner, there are at least two others who don’t hold the CFP.”

List adds that six of every 10 complaints that the FPSC receives pertain to industry practitioners who do not hold the CFP designation and thus do not fall under the authority of the FPSC.

The coalition is pushing for rules that would force all financial planners to be held accountable to a professional oversight body. This is one of four key principles that the coalition’s member organizations have agreed upon as the foundation for their work.

The other principles stipulate that those holding themselves out as“financial planners” must: meet certain proficiency requirements, including specific levels of education and experience, and passing a financial planning examination; meet prescribed continuing education requirements; and agree to be held accountable to a code of ethics, practice standards, and the rules and regulations of a professional body.

The proposed principles also include a requirement for planners to meet a minimum professional duty of care by: putting their clients’ interests ahead of their own, avoiding conflicts of interest; and fully disclosing and fairly managing any unavoidable conflicts of interest.

Many financial planners applaud the establishment of the coalition. “It’s nice to have a uniform set of standards and proficiency,” says Kevan Herod, a financial planner and owner of Peterborough, Ont. based Herod Financial Services, which is licensed by the Investment Industry Regulatory Organization of Canada and operates under the umbrella of Burlington, Ont.-based Manulife Securities Inc. “There has to be a level of standard to make it fair. What bothers me is that somebody can open up a shop and call themselves a ‘planner’ and not have to take any courses.”

Having multiple sets of standards only creates confusion among the public, Herod says. He adds that most clients are unfamiliar with the various industry designations and the factors that differentiate them: “As a consumer, you’d probably feel more comfortable knowing that there’s one body instead of multiple bodies. I think it improves the perception [by] the public, in the sense that it’s one voice or one set of rules.”

Financial services firms have also expressed support for the coalition.Winnipeg-based Investors Group Inc. supports new national standards, provided that they don’t limit methods used to compensate financial planners or impose onerous new requirements on financial planners who already hold credentials such as the CFP.

“Investors Group strongly supports the development and education of advisors,” says Debbie Ammeter, vice president of advanced financial planning at Investors Group. “We support incremental evolution and development of standards that serve clients well but also don’t destroy the fabric of a system that today is delivering value.”

Regulators also support the coalition’s efforts, says List: “We’ve had very positive feedback.”

Megan Harman
Investment Executive
July 2011

There is yet more proof, for those still in denial, that professional financial advice paves the way for a fulfilling retirement.

The latest TD Waterhouse Canadians and Retirement Report found Canadian retirees who are getting help from financial advisors are feeling confident about their retirement savings. The pan-Canadian survey of retirees, aged 55-70, also showed that 76% of retired Canadians are using an advisor to manage their investments.

“The good news is that Canadians are not only aware of the need to plan for retirement, but they’re taking the right steps to get there,” says Patricia Lovett-Reid, senior vice-president, TD Waterhouse.

Almost three quarters of respondents working with a financial advisor feel their retirement savings are on track compared to those without professional help. Respondents working with an advisor were found by the survey to be more likely to have a financial plan (52% versus 7% without an advisor).

And financial advice appears to be widespread among the survey cohort, with 76% of retired Canadians using an advisor to manage their savings and investments.

 “There’s no such thing as a tried-and-true retirement plan that is a perfect fit for everyone; it’s essential to develop and maintain a financial plan that is right for you,” said Lovett-Reid. “When it comes to money, emotions can run high. When you are trying to find an advisor, I suggest looking for someone that can help you assess your situation, both emotionally and financially.”

 Read entire article on

Vikram Barhat, editor

July 7, 2011

Do The Opposite

Business structures, models and cultures are being challenged by the crowd. Given the new world of transparency employees and customers are influencing market sentiment about any organization because of the fluidity of social media. These dynamics are forcing organizations to examine historical beliefs about what it takes today to run a successful business.

The very definition of “business structure, models and culture” is being redefined. These redefinitions eventually redefine how markets work and why they work. Thinking BIG is being replaced by thinking SMALL. The customer is no longer just a customer but instead a partner. Employees are no longer controlled and managed rather they are let loose to serve and do so in self managed groups. The office is no longer a physical address rather a virtual presence. Everything is changing and thus how we manage and what we believe must change.

The Opposite Works If Allowed

Richard Branson said: When my friends and I started the first Virgin business 40 years ago, we had no master plan – especially not one for a group of companies that by 2011 would number more than 400 businesses around the world and employ 50,000 people. Had we tried to plan for such a future, we would certainly have messed it up.

If there is a “right” way to develop your company’s culture, our experience shows that it should evolve organically. In 1970, my friends and I weren’t planning to do anything other than make some money and have a good time while doing something we loved. We loved listening to music, so we tried to sell records to other kids who wanted a fun place to hang out while deciding which ones to buy. We had no marketing plan or budget – our goals were simply to make enough money to pay the rent and our suppliers, and to have some cash left over at the end of the month.

Business owners often find it tough to learn how to handle success. When a business does well, many chief executives start to focus solely on increasing profits, no matter what the cost – leaving behind everything that originally made the business special. The founder usually moves to a big corner office on the top floor and never again sets foot in the factory. Employees who were integral to the company’s early success suddenly find they are the last to know what is happening, and their views are no longer valued or sought.

At Virgin, we have never had to struggle with the typical problems of big corporations, probably because we never really got big – we just diversified. Our growth was once described as “vertical disintegration” because our new businesses frequently appear to be tangential or even completely unrelated to our core mission. When Virgin was known for producing and selling records, for instance, we started up an airline.

If someone says, “That’s not the way a big company would do it,” take it as a compliment!

So future success is simple. Do The Opposite!

Jay Deragon
The Relationship Economy
July 8, 2011


Nobel economist Paul Krugman is due to address the Economic Club of Toronto Wednesday on whether the United States has “mortgaged its future.” If Mr. Krugman is true to form, he will tell his audience that it has not mortgaged its future enough. What is desperately needed is more government borrowing and spending.

Mr. Krugman is a Nobel-winning trade-policy academic economist who, over the past couple of decades, has gone increasingly to the liberal dark side, as evidenced in his columns in The New York Times. What seems to have driven him completely over the edge is a combination of Bush Derangement Syndrome and an evangelical desire to prove that Reaganomics was a failure. He criticizes Barack Obama for not going far enough. He hates Republicans with a passion and is Keynesian to the core. Thus he can only interpret the failure of government stimulus as evidence of “cowardice” or ”lack of political will.”

Like most liberal moralists, Mr. Krugman demonizes his opponents as not merely wicked and/or stupid/and or venal, but also “furious” because he is so right and they are so wrong. On election night 2008, he and his even more uncompromisingly liberal wife, Robin Wells, who is also a Princeton economist, had a party at which effigies of their enemies were burned. Salem, anyone?

Mr. Krugman constantly concocts conspiracies of the rich to grind the faces of the poor. He calls anti-Keynesians “The Pain Caucus.” He is currently lashed to the mast of not one but two sinking ships, the USS Keynes and the USS Draconian Climate Policy.

Modem American conservatism, he has written, “is, in large part, a movement shaped by billionaires and their bank accounts, and assured paycheques for the ideologically loyal are an important part of the system. Scientists willing to deny the existence of man-made climate change, economists willing to declare that tax cuts for the rich are essential to growth, strategic thinkers willing to provide rationales for wars of choice, lawyers willing to provide defences of torture, all can count on support from a network of organizations that may seem independent on the surface but are largely financed by a handful of ultra-wealthy families:’

Maybe he should check out what causes the Rockefeller, Carnegie, Pew, Hewlett and Packard foundations are actually promoting. It certainly isn’t climate change denial.

Mr.Krugmarn’s Nobel Prize for work in international trade and economic geography was widely praised. Early in his career he was a fan of markets and free trade, and attacked “popular” economists such as John Kenneth Galbraith,

Paul Krugman’s,affection for markets fell as he became obsessed with in equality, market instability and catastrophic climate change

Lester Thurow and Robert Reich, who catered to economic misconceptions beneath a cloak of liberal good intentions. However, that cloak in the end proved too attractive not to try on.

Mr. Krugman’s affection for markets has declined as he has become obsessed with inequality, market instability and catastrophic climate change, He doesn’t think consumers can be trusted to make the “right” choices any more, and has taken to the remarkably annoying habit of condemning free marketers as people who believe that people are always rational and markets perfect. Then again, straw men are easy to torch.

Mr. Krugman’s take on the ongoing crisis is remarkable not merely for wishing to keep doing more of what has failed, but his blindness to the role of government policy in its creation. Fannie and Freddie? Mere bystanders who only decided to help blow up the system ”late in the game.” Greece? It’s all the euro’s fault.

Anthropogenic global warming has become an article of religious faith for Mr. Krugman, which has required him to go through astonishing convolutions in the face of growing evidence of corruption. Climategate? A “fake scandal.” Remember those emails about a “trick” to “hide the decline”? According to Mr. Krugman this was an “anomalous decline.” Well, no. The decline was in actual temperature readings which failed to concur with the proxy data from tree rings. These had to be ”hidden” because tree ring data were essential to the credibility of the poster child ”hockey stick” graph that presented the twentieth century as a thousand year anomaly. The decline had to be hidden because it exposed fake science,

The former free trader now thinks that carbon tariffs might not be such a bad idea, and since cap and trade represents an alleged “market solution” to the catastrophe-to-come, the conservatives who (successfully) opposed it are, in Mr. Krugman’s view, hypocrites.

Mr. Krugman leans towards the global salvationist posturing of Lord Stern, whose climate review is a monument to perverted cost-benefit analysis. “Stern’s moral argument for loving unborn generations as we love ourselves may be too strong;’ Mr. Krugman has written, ”but there’s a compelling case to be made that public policy should take a much longer view than private markets:’

The problem is that it doesn’t.

The evil of Mr. Krugman’s opponents is all embracing. He has written that
“[T]hose who insist that Ben Bernanke has blood on his hands tend to be more or less the same people who insist that the scientific consensus on climate reflects a vast leftist conspiracy.” You see the connection? Leaving aside the blood libel, if you oppose further corruption of the monetary system you are clearly also a climate denier. And why doesn’t America have universal public health care? Simple, it’s due to “The legacy of slavery, America’s original sin.”

Once Mr. Krugman’s intellectual inspiration was Adam Smith. Now it’s Naomi Klein.

Peter Foster
Financial Pst
FP Comment
June 29, 2011

Posted by Dan Zwicker at 7/01/2011




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Successful investing should be boring, which may explain why so many excitement-seeking investors suffer disappointing returns. If you want excitement, go to Las Vegas. If you want to be a rich crashing bore, read a little book self-published by Edmonton-based wealth counsellor Marshall McAlister. It’s titled The Brilliance of Boring Investing: An Academic Approach to Portfolio Design.

It begins with a quote from Nobel laureate Paul Samuelson: “Investing should be dull. It shouldn’t be exciting.” But there’s a paradox, writes MeAlister: The portfolio process that requires less work from investors can actually deliver the best long-term investment returns.

Boring doesn’t mean lazy, he hastens to add. It requires discipline and a process, which is the true value of what financial advisors provide.

The kind of advisors I often meet at conferences sponsored by index fund maker DFA Canada, which is where I met McAlister last week. 

The featured speaker at the Toronto event was prolific U.S. author and money manager Larry Swedroe, who views investing very much like McAlister and DFA. St. Louis-based Buckingham Asset Management (BAM) is one of DFA’s largest clients.

Swedroe’s talk focused on his recently published The Quest for Alpha: The Holy Grail of Investing. “Alpha” refers to the goal of “adding value” by security selection, relative to “beta” or market returns delivered by index funds or ETFs.I’m surprised he didn’t title it  The Futile Quest for Alpha since that’s the book’s main thrust. Like McAlister, he believes timing the market is impossible, forecasts are for the gullible, and stock-picking is a mug’s game,Both advocate the “boring” route of low-cost “asset class” investing, which means creating portfolios built on low¬cost index mutual funds (like DFA’s, tilted in favour of value and small-cap stocks) or enhanced or fundamental-index based exchange-traded funds.

Swedroe says there are two main theories about markets:

the conventional wisdom that they are inefficient so can be “beaten” versus modern portfolio theory’s belief that markets are efficient and stocks priced roughly where they should be.

If markets are inefficient, the winning strategy would be to identify past “persistent alpha” and select managers with proven ability to add value through market timing and security selection.

Swedroe demolishes that school by reviewing the poor track records of actively managed mutual funds and venture-capital managers. Hedge funds are worse, he says, because they are illiquid, tax¬inefficient, lack transparency and offer no persistent outperformance beyond what might be randomly expected. The result is risk-adjusted returns similar to treasury bills.

But his most telling argument involves pension plans. If anything could beat the market, it should be them, since they pay lower fees than retail investors, use the world’s top managers and hire gatekeepers to monitor and replace managers if performance lags.

Sadly, all their activity has been for naught: They’d be better off imitating Rip Van Winkle and doing nothing. Swedroe concludes markets are indeed efficient, so efforts to “beat” it are futile after fees, trading costs and tax drag,

Therefore, the winning strategy is the “boring” one of focusing on low-cost fund construction and tax-efficiency, tuning out the noise and sticking to a long-term plan.

Not everyone believes alpha fails to add value. “It is difficult for most investors, amateur or professional, to consistently produce alpha,” concedes Bob Cable, director of ScotiaMcLeod’s The Cable Group. But while difficult, it’s not impossible. One way is to take advantage of seasonal patterns (such as “sell in May and go away”), a strategy Cable says is particularly pronounced in the Canadian market.

Both authors endorse the ‘boring’ route

Jonathan Chevreau,
Financial Post
June 29, 2011 

Posted by Dan Zwicker at 7/01/2011




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