Monday, October 12, 2009

Chapter One: Be Prepared!

In December of 2008, only nine days before Christmas, Sun Media chopped 600 jobs. A day or two later Pierre Karl Peladeau (PKP) sent out his annual Christmas message. His Merry Christmas wish was, shall we say, in the PKP tradition of his dysfunctional season's greetings.

Read what Canadian Entrepreneur said about his 2007 message, the one that many computers throughout the media chain were mercifully unable to play. (Quebecor originally posted his 2007 message but has since taken it down.)

Despite the layoff, I had a fine Christmas. You see, Sun Media, The London Free Press human resources department and the LFP union all worked together to assemble a fine buyout package. At age 61 and some months, I was retired.

Claiming my company pension and CPP payments three and a half years shy of my 65th birthday cut my Free Press pension by more than 17 percent and my CPP by about 21 percent. These cuts hurt but I was prepared. Three years earlier I had taken control of my pension plan, set goals, met them and felt confident that I could survive without The London Free Press.

I will be the first to admit that the cash buyout was generous and greatly appreciated. And having a retirement plan in place meant that I did not have to sit down and calculate whether or not my wife and I could survive on the buyout package. My computer already had the answer — and it was yes!

Preparing for Retirement  
Everyone should have a simple household budget. Like most of what I do, my method of  tracking my money follows the KISS rule — Keep It Simple Stupid. Let's be honest here, if it is not kept simple, it simply won't be used. Right?

1. Prepare a household budge using a spreadsheet. At the end of this chapter I have supplied a spreadsheet to get you started.

2. At the the beginning of the year enter your estimates of your monthly expenses.

3. As the year unfolds, near the beginning of each new month, enter the true expense numbers from the previous month, over-writing your estimates.

The problem almost everyone runs into is being unable to retain every receipt for correct entry. Most find keeping every grocery store receipt for a month impossible; I certainly do.

I get around the receipt problem by charging everything that I possibly can — everything. My wife and I spend less than $100 in cash a month. When my Master Card monthly bill arrives, I enter the amounts into my spreadsheet.

I use a Canadian Tire Master Card, and because I charge so much, I get a rebate on all my credit card purchases of two percent in Canadian Tire money. At the time of writing, GM still offers a Visa card that allows you to accumulate funds toward the purchase of your next GM car. I'm sure if you look around you can find a card which will make sense for you. (I saved thousands on the purchase of my Pontiac and other GM cars that I have driven over the years.)

The caveat is obvious. Do not charge more than you can comfortably pay. Once a month you wipe the credit card slate clean. Never, and I mean never, pay interest to a credit card company.

For instance, when my wife and I installed wood flooring in our home, we charged it. We earned about $240 in Canadian Tire credits and by keeping our money in the bank an extra month, we earned about $26 from a high-interest savings account.

You can either make your own spreadsheet using Google Docs or Excel or you can downloads one from the Internet for free. Here is a popular one from Google Docs. 

Google Docs - Family Budget Spreadsheet

Some tips on using a spreadsheet
Spreadsheets are incredibly popular and for good reason — they are great number crunchers. That said, there are some tricks to getting the most from your spreadsheet.
  • If you have a repeating expense, say a car payment, enter the payment in the first cell, the January cell. Then click on the cell. You'll get a heavy blue outline with a square, or handle, in the bottom right corner. Move the cursor to the handle and drag the heavy rectangle all the way from January to December. This will copy the January information into the cells for all twelve months.
  • To change the width of cells, touch the cursor to the line separating cells in the alphabetically labelled row at the top of the page. The cursor changes to a double ended horizontal arrow. Depress the mouse button and slide the line to a new position.
  • The above trick works if you must change the height of cells, just use the column of numerically labelled cells on the left side of the page.
  • If there are rows you will not use, say you do not have children, remove these rows by clicking on the row and going to Edit -> Delete Row. Make sure the row number shown is correct and delete the row.
  • Do not delete any columns.
  • You can modify the words in a cell by double-clicking on the cell.
  • I selected all the calculated cells, went to Format -> Change Colour With Rules and using the pulldown menu set the cells to display their results in red if the results were less than zero. Being retired, I do have some red cells.
  • The really neat thing about the Family Budget Planner spreadsheet available from Google Docs is that you can export it to your hard drive as an Excel spreadsheet. This is important for later chapters.
I use a Dell computer running Windows. My computer came with Excel and I believe most Windows computers have Excel. If you are running a Mac, you may have to jerry-rig something on your own. It is not that difficult, especially on a Mac.

Thursday, September 24, 2009

Bernie lost but half his clients won!

Read my updated take on Bernie Madoff while I work on expanding Rockin' On: Money.


Tuesday, September 8, 2009

Always invest such that you sleep at night...

Read the following in The New York Times today:

"Mr. Buffett refused to be drawn out on where stocks are headed, but he warned about the dangers of investing with borrowed money, or leverage, which proved disastrous when the crisis hit.

As for regrets, he has a few. His timing was bad, he concedes. He should have sold stocks sooner, before the markets tumbled. Then he served up a Buffettism that any investor might heed:

Asked if anything was keeping him awake at night, he said there was not. “If it’s going to keep me awake at night,” Mr. Buffett said, “I am not going to go there.” "

I am up about 30% for the year. Some of my investments have almost doubled in value, and others have lagged. I could have done better, if I had been bolder. But, I agree with Buffett - invest with an eye to sleeping at night.


Friday, August 7, 2009

GM slight of hand...0% becomes 7.2%

Recently I got a letter from GM/Saturn offering me a deal on a new Saturn Astra. I was sent the letter because I was a long-time GM owner. I was later told that this was GM's way of saying thank you. It turns out that a thank you from GM is as bankrupt as the company itself.

I visited the Saturn showroom and got a quote for a new Astra XR with 0% financing for six years. With all calculaltions completed, the car would cost $26,456.35. A lot of money for a soon to be orphaned car. If I paid cash, I could have the car for $4000 less but then I would be paying interest to the bank. The salesperson assured me that borrowing from the bank in order to pay cash for the car or simply paying more up front and taking the no interest loan from GM would amount to about the same monthly payment.

Today, I saw an Saturn Astra ad in my paper. $13,990 gets you a 2009 XE with air, it said in large red type. Of course to get that price you must be a "current Saturn" owner. The price is actually $14,990 for most folk as most folk are not current Saturn owners. Oh wait, the published price also includes a credit of $4000 for paying cash. So, if like most people, you don't fork over cash for your new car, the price is more like $18,990.

You must add $1400 to cover freight, and there are still the taxes and the registration fee with which to contend. By the time you walk away with your new $13,990 car, you will be out about $21,500. With 0% financing, and $500 down, you will pay about $291.67 per month for your new car.

This works out to be about a 7.2% effective interest rate. Remember, this vehicle sells to others for about $17,500 cash, but you paid $21,500 to be rewarded with a no interest loan. It is no surprise that in the fine print GM admits the effective interest rate is higher than 0%. All pretty cheesy, eh?

I googled "0% scam" and found "The Zero-Percent Financing Scam" by Joseph Ganem. He has a calculator that compares the claimed 0% rate with the rate offered by banks for car purchases. I checked it out and it appears to work. Take a look and have fun. It is an eye-opener. If you're looking to buy a car, this calculator is quite handy.

Why the MSM does not report this scam.

When I worked for a local daily, I tried to interest the paper in doing a 0% interest rate story. The editor I approached readily admitted that they were not going to attack the car companies; they were simply too important to the paper with their many full page ads.

We essentially published press releases from the car companies when it came to their pricing claims. We were, and are, not alone. Read the following from a recent CNN Money story.

"For customers financing $30,000 on a new vehicle purchase, 0% financing would be worth almost $8,000 compared to current rates, said Jesse Toprak, an analyst with the automotive Web site . .

. . . Customers trading in a GM car or truck they now own who forgo the financing offer may be eligible for cash incentives that could total as much $7,000. . . "

Did you catch that? 0% financing supposedly saves you almost $8000 in interest charges but if you had paid cash you could have bought the vehicle for almost $7000 less. Think effective interest rate. In this case a vehicle that sells to others for about $23,000 was sold to you for $30,000. the 0% financing is about a 9.18% effective rate!

Not only do things like this make me suspicious of the car companies but the manner in which they are covered by the press makes me question today's media.

I went to a retirement breakfast for print media folk Wednesday. One of the fellows recalled an incident from his days at the paper. A woman, who felt she had been shafted by a local Chrysler dealer, had taken to the street to picket the dealership. The paper took pictures and interviewed the woman. Soon the dealer was at the paper, first talking with the editorial department and then with advertising. Four decades ago when this happened, the editorial department ignored the pleading of the advertiser and the ad department. The paper ran both the story and the picture. Back then it was an easy decision; it was news.

Thursday, August 6, 2009

Advice for the Blogger Met at the Blogger Dinner

Last night there was a blogger dinner in London, Ontario. Once a month local bloggers get together for a face-to-face get together. They swap stories, laugh, share knowledge on how to best set up their personal sites . . .

One fellow there was talking about investing. He was just starting out and I foolishly told him that I was working on a site that addressed many of his concerns. My site is still in the formative stages, much of it is still be formed in my mind and has not made the transition into code.

If you are that fellow, here is a list of links that may do you some good. Cheers, Rockinon.

This post points out the dangers of not doing one's homework but simply entrusting your financial future to the experts.

One needs trusted benchmarks in order to judge how you are doing. If you made 10% on your investments while a no-brainer benchmark returned 20%, you're doing poorly. Read my post on benchmarks and follow the links. This is important.

If you are serious about investing, then read this and follow the link to Peter Ponzo site. This former university professor and math department head is a clear thinker and a clear writer. If you enjoy math, you'll love his site. If you hate math, you may still enjoy his site. Like I said, he is a good writer.

Lastly, if you are still enthralled with self-proclaimed experts, read this take on Jim Cramer.

Dear blogger, maybe we'll meet again at the September blogger dinner and maybe I'll be able to tell you my Money site is up and running and full of helpful advice.


Monday, August 3, 2009

Freedom Fund down 71% Puts Mattress Up 345%

Since writing this about three and a half years ago, I called London Life to make sure my investment was now in a dividend weighted fund. My personal portfolio is dividend weighted and it does well. My ScotiaBank stock alone, bought early in 2009, is up something like 110 percent while pumping out a dividend every three months. The dividends help pay the bills in retirement.

My London Life investment is still lagging. It is still the worst investment in my portfolio. Heck, the bath I took with PennWest Petroleum (PWT) doesn't come close to matching my present Freedom Fund loss -- and PWT, to its credit, is helping to support my wife and me in our senior years. Who knows, PWT may even recover some of its former value. [True when written. No longer true today. (Feb. 12/2016.)]

I am posting an actual photo, with minimal enhancement, of my June 30, 2009 London Life retirement savings plan statement. It details the loss suffered by my Freedom 55 investment.

I won’t say much. My wife has me on a short leash. She worries about being sued. She wishes I wouldn't post the statement. I am 62, retired, and I do have financial freedom but no thanks to the financial wizards at London Life.

The media has made quite the story of Mr. Madoff and his scam. But I have managed to lose about 71% of this investment without dealing with Madoff or his ilk. I did it right here in London, Ontario — no trip to the Big Apple necessary. Luckily, I didn’t have much invested with London Life but still I’d love to know how much money went to management fees to pay for this sterling work.

I have a rule: putting money under a mattress should never out perform an investment. I would have about 345% more money today if I had just shoved my money under my mattress rather than putting it in a Freedom Fund.

As Rod Serling warned, “You are about to enter another dimension . . . Next stop, the Twilight Zone!”

This is the actual “Total change in value of your investments” graph from my statement. There have been no withdrawals. This fund lost it, all on its own, without any help. Nice work.

Some background: I gave this money to the Freedom 55 rep with instructions to put it where he thought it would perform best. Hey, he was the expert. I believe he shoved it in their best performing fund from the past year. If he did, it was a bad move. I will blog about why later, for now just believe me when I say studies have shown that if you want to have a poorly performing portfolio always ensure your money is in last year's big winner.

Since this money was invested in March of 2000, I'll bet this retirement money went into a dot-com bubble fund. I'm sorry that I don't still have my records but I don't. Next rule, bubbles are not for retirement funds. London Life should know this.

I called and had what was left of my investment moved into another fund but it did not do all that well either. My own money, the money I have taken control of, is well into the black. My personal portfolio is weathering the recession with admirable aplomb.

Oh well, come age 69 — oh, make that 71, the rules were recently changed — London Life is obligated to return at least 75% of my original investment.

Wait! I have had a eureka moment. It's not me that gains freedom at 55 thanks to this fund, it's my adviser at London Life! I have to go back and read the fine print. I may be on to something.

For another view on Freedom 55 check out this blog by Darren Barefoot.
For an update on this blog, to see where the Freedom 55 investment was as of Dec. 31, 2012, follow this link.

Thursday, July 23, 2009

Work Long, Die Early, The Road to Successful Retirement

I read a funny piece by Gordon Powers on MSN Finance. It was entitled: How not to ruin your retirement. As I'm retired, forced out of the workforce last December by a layoff, I was interested.

I learned: "the biggest payoff comes from ensuring that you don't retire during a sharp downturn." That's right, during a downturn don't get a layoff notice; It's bad planning. Damn. I made my first mistake right there. Only accept a layoff notice during boom times. It's a good rule. No argument there.

Cutting back on your payout period will also up your chances of not running out of cash during retirement. Powers actually looked at doing this by working longer but since we are in a downturn that's difficult. Another approach to this, and easier to boot, is just don't live so long. Hey, 84 or 85 what's the diff. Try this with any financial calculator; It works! Need more security, cut your lifespan again. If I'm gone by 79, I'm in good shape financially. It's a plan!

Lastly, to kick your chances of success up another notch, Power suggests putting more of your money in stocks. The biggie here is do not put the money in bad stocks, don't be silly. Only invest in good stocks that are going up. Use your head. Invest wisely. If there was ever a time that you considered Northern Telecom, GM, or the big American banks as safe investments, maybe this ploy isn't for you. Hmmm...well, maybe stock market ETFs or a cheap index fund would be O.K. Rumour has it that even losers win with those. (I've done well.)

There may have been more insightful tips but I didn't have time to finish the piece, I was busy chopping more years off my expected time of departure. I can relax. I now have a goal that is more retirement appropriate. My retirement funds are safe, unless I am unlucky enough to live. Damn. Always a fly in the ointment.

Saturday, July 18, 2009

It's all a gamble!

The other day I blogged on investing for retirement and a reader questioned my ideas. The questions were very good and very pointed. My questioner made it clear I had not taken a very good in-depth look at where I was considering putting some of my precious retirement funds.

I don't want to appear too flippant but somehow, at some point, all is a gamble. No one steps up to this table and walks away a winner.

On the way to our eventual loss, and we all ultimately lose this game called life, we like to feel in control. Our investment strategy is no different; we want to believe if only we take control, do it well, take care to make no mistakes, we will succeed.

I hate to tell you, but this not necessarily true. In the end, it is out of our hands.

I like to dream that I am a movie writer working on a successful script. (I make a mint, it may star Tom Cruise.) In my movie, an inventor perfects a time machine and a criminal acquaintance, Tom Cruise who is facing certain imprisonment, kills him in order to travel back in time. He believes that he will avoid imprisonment plus benefit from knowing the outcome of everything.

He uses his new knowledge to quickly accumulate wealth, all is going as planned. He puts all his money in IBM. He knows it will beat Burroughs, drive them into the ground. He discovers that life, given a chance to be replayed is not at all like a stage performance with lines etched in stone. It is life, living, breathing life. This time the execs at IBM make some small mistakes and the ones at Burroughs don't. Burroughs buries IBM, leaving them making electric clocks and money-losing Selectric typewriters.

The man loses everything. He realizes life is not unfolding the second time as it did the first. Each day life moves farther and farther away from life's original path; the one with which he was familiar. Events are not repeated. He turns to crime as he is a criminal; he gets caught and is sent to prison.

Somethings don't change.

My point. Move carefully in the financial world, follow the rules. If you don't know the rules, visit the library and borrow a few books. A visit to Chapters might be in order as the library does not carry all the good books. Spend a little money on some books — think of it an investment.

Then, set your goals, buy a mix of stocks, bonds and GICs, spread the risks, and sit back and relax. Really, it is out of your hands.


p.s. In a future post I will look at Monte Carlo calculations as they apply to financial planning. I have an Excel spreadsheet tracking my portfolio. The true average annual return of my investments is plugged into a Monte Carlo calculator, as is the true value of my investments. The calculator factors in my wife and my old age pensions which will kick in in a few years. It looks at the dividends and the distributions that I am actually receiving as of today, and lastly, it factors in my true living expenses which it takes from my home budget page.

At the moment, I won't become a burden on the government until I hit 91 according to Mr. Monte Carlo. Cheers!

Monday, March 23, 2009

An Almost Classic ETF Index Portfolio

O.K. So, here is the first of my own fun benchmarks. I call them fun because they are all based on stuff that I have read on the Web or in books. They were all presented as ways to practise buy and hold investing.

None of these portfolios exactly mirror the original portfolios. They reflect my thinking after being strongly influenced by my reading.

I call my first benchmark - My Almost Classic ETF Index Portfolio
It is composed of:
20% Money Market Fund - I use the Saxon and the Royal Bank money market funds.
30% XSB - this takes care of the bond exposure
35% XIC - this takes care of the Canadian equity market
15% XSP - this gives a some exposure to a foreign market

A pure classic portfolio simply puts 1/3 in each of the following: XIC, XSP, XIN. I had a benchmark based on this for some years but was not impressed with its performance. Very volatile and not a lot of income from dividends.

As a retired person, I need the ability to get at some cash quickly. This explains the generous money market holdings in my version of the classic.

The bond holdings are there because of my age. They lessen the portfolio's volatility. In the past year, bond ETFs in a portfolio have delivered as promised and mellowed out the financial ride. I worry that going forward, as interest rates rise, bond ETFs will become a drag.

The last two ETFs are the equity portion of my benchmark. Being retired, I wanted to minimize currency risk and so weighted this fun portfolio towards Canadian equities. Lastly, I plunked all my imaginary money in the States for my foreign exposure. (In reality, I have portfolio exposure in Europe, Asia, and South America, along with the States. This diversification in my own portfolio has not delivered the protection from volatility as hoped.)

Since starting this blog, this Almost Classic ETF Portfolio is up almost 6% as of Sunday! But, this means nothing over such a short period.


Saturday, March 21, 2009

Benchmarks or A Man's Gotta Know His Limitations

Today is an important day for me - I'm going to tackle benchmarks. I will not get done, my wife has yardwork waiting for me, but I'll get started and finish as the week unfolds. But, I guarantee I will blog enough today to keep you busy with your own financial homework.

First, I am not going to reinvent the 'benchmark wheel' here. For an excellent article of the value of benchmarks, please go to:

These two chaps, Richard Croft and Eric Kirzner, designed three indices, which can be found on the Financial Times site at:

There is an index for the growth investor (down 5.22%), another for balanced portfolios (down 3.7%) and a final one centred on income (down 1.09%) for folk like me. The nice thing about these three indices is they can be easily assembled in reality. Their make-up is transparent.

I may say income folk like me but the truth is I am a mix of all three approaches, like many investors. I figure if I am doing better than the growth index, I'm doing O.K. And today, Saturday, March 21, I am down 4.74% for the year. Ouch! But the FPX Growth Index is down 5.22% year to date (YTD). Easing the financial pain is the fact that I on my way, thanks to dividends and distributions, to being able to withdraw 4% or more from my RRSP without encroaching on my mutual funds or securities themselves. (But with the economy still in the grips of a bear, it is still anyone's guess how dividend and distribution cuts will affect my final cash holdings for the year ending in December.)

For another perspective on the success or failure of my portfolio I have put together a number of benchmarks based on the financial stuff that I have read. There's my Hi-Yield Lazy Dude, my Canuck Retirement Strategy, my Almost an ETF Classic, and my TD e-Funds Approach - more on these later.

Lastly, I enjoy following some of the stuff posted by Frank Russell. Frank posts Sovereign Sample Portfolios on the Web. YTD the posted conservative portfolio has dropped -5.54%, the moderate portfolio has dropped -8.21%, and the aggressive one has racked up a double digit loss of -10.54%. Do you use Frank? How do your results compare to these?

If you check out the Frank Russell LifePoints portfolios you will find that the balanced growth portfolio has lost -4.71%. Does that number look familiar? My portfolio is keeping up with Russell's herd of financial experts. This is comforting.

Frank's Sovereign site is:
Franks' LifePoints site (Frank capitalizes the P in the middle - too cutsey in my book.) is:

Return Monday and I'll tell you about my fun indices, their make-up and what they tell me about investing.

Have a nice weekend.

p.s. If you are interested in the books written by Croft and Kirzner, I read Protect Your Nest Egg and recommend it, click on this link:

Wednesday, March 18, 2009

A Financial Myth Buster

I started handling my own investments after a financial adviser asked me how comfortable I would be losing 25% of my money (my wife recalls he said 30%). No matter, I decided I didn't have to pay someone to lose my money. I could do it for free . . . in my spare time . . . make a game of it. In the present economy, I have succeeded at all three.

I now find myself put out to pasture early, retired, in the position of having to take money out of my RSP at the very time I would rather be putting money in. Oh, how I miss those bi-weekly paycheques. Buyouts aren't all they are cracked up to be.

On the positive side, I am not alone. There are lots of do-it-yourself (DIY) investors, many are retirees and many share their wisdom on the Internet.

One of my favorite sites was run by the retired former head of the mathematics department at the University of Waterloo - Peter Ponzo. Ponzo, now in his 70s, has weaned himself away from his financial blogging and returned to his writing and painting. But his site is simply too good to let fail - unlike A.I.G. It is moving to:

Ponzo asks the same questions that many of us ask but goes an important step farther, he tries to supply an answer. He focuses the power of mathematics on financial questions and shows that many of our cherished beliefs may be more myth than fact. He expands our understanding of things financial while lowering our expectations of finding easy answers.

A Quote Without Comment

"Let’s not forget, A.I.G. was basically running an unregulated hedge fund inside a AAA-rated insurance company. And — like Madoff, who was selling phantom stocks — A.I.G. was selling, in effect, phantom insurance against the default of bundled subprime mortgages and other debt — insurance that A.I.G. had nowhere near enough capital to back up when bonds went bust. It was a hedge fund with no hedges. That’s why taxpayers have had to pay the insurance for A.I.G. — so its bank and government customers won’t tank and cause even more harm."

Thomas L. Friedman - New York Times - March 17, 2009

If and when the NYT begins charging to visit their site, it will be money well spent.

Another Quote Without Comment

Jeff Zucker, the chief executive of NBC Universal, has called comedian Jon Stewart "incredibly unfair" and "completely out of line" with his recent witty criticisms of CNBC, of Mad Money host Jim Cramer and of the entire financial media in general.

For another viewpoint, go to Barron's online and read:

Shorting Cramer
by Bill Alpert of Barron's

"Over the past two years, viewers holding Cramer's stocks would be up 12% while the Dow rose 22% and the S&P 500 16%, according to a record of 1,300 of the CNBC star's Buy recommendations compiled by, a Website run by a retired stock analyst and loyal Cramer-watcher."

"We also looked at a database of Cramer's Mad Money picks maintained by his Website, . . . you would have been much better off in an index fund that simply tracks the market."

. . . an excellent two-page article examining Cramer and how his numerous stock market picks have fared.

Monday, March 16, 2009

Calculate Your Financial Comeback

If you are still contributing to your RRSP, back in January the New York Times posted their Comeback Calculator, estimating when your plan will climb back to its peak.

To get a quick look at the Asian markets and later to view the markets in Europe - both views are available before the markets open here in Canada and the U.S. - I have bookmarked this New York Time's link.

For a good quick read of mainly U.S news I have found the New York Times and the Huffington Post sites quite good.
New York Times -
Huffington Post -


Sunday, March 15, 2009

Bucket Shops and Credit Default Swaps

This Sunday (March 15, 2009) the New York Times carried an opinion piece titled: Following The A.I.G. Money.

The article said that the now infamous credit default swaps, often referred to as a form of insurance, were more like gambling wagers than insurance policies. Huh? I did a Google search for more information.

I learned that 60 Minutes did a piece last October called The Bet That Blew Up Wall Street. It was an investigation into the central role credit default swaps played in the present global economic upheaval.

As everyone now knows, Warren Buffet called credit default swaps “financial weapons of mass destruction.” For most of the 20th century the present deep, unregulated involvement of the large American banks in the world of derivatives was illegal. But in 2000 Congress changed the law, passed the Commodity Futures Modernization Act of 2000 and exempted Wall Street. It seems odd, but page 262 of the legislation prevents states from invoking existing gambling and bucket shop laws against Wall Street. Gambling? Bucket shops?

What, pray tell, are bucket shops? Well, before the stock market crash of 1907 American cities had gaming houses called bucket shops where gamblers placed bets on whether the price of a stock would go up or down. The speculators did not have to own the stock to profit. They were making, as they say, a side bet – a bet, usually made by gamblers on the outcome of an event, say a poker hand. You don’t have to be a participant in the event to place a side bet.

Like gamblers, the players in the credit default swap market did not have to have, as they say, skin in the game. It was a side bet. They did not have to own the investment on which they were buying private insurance contract – contracts that paid off if the investment, say certain mortgage securities, went bad. They didn't have to own the investment to collect on the insurance – memories of the bucket shops.

Recently Alan Greenspan, the Federal Reserve Chairman at the time, admitted he had put too much faith in the self-correcting power of free markets. A humbled Greenspan acknowledged that he had discovered a flaw in his ideology. He told the House Committee on Oversight and Government Reform, “Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief.”

Under Greenspan the credit default market grew from millions of dollars to a more than $50 trillion dollar monster – and totally unregulated. Neither the big banks nor the investment houses that sold these derivatives set aside the money necessary to cover their potential losses and pay off their bets, a result of deregulation. When the derivative market turned south, and with no money behind their quickly souring obligations, the big players, among them Bear Sterns, Lehman Brothers and A.I.G., all found themselves not on the hook but hoisted painfully high on their own petards.

Rep. Henry Waxman, chairman of the house committee, asked Greenspan if he had learned that his view of the world was not right. Greenspan confessed he had. He said he had “found a flaw” in his personal ideology and he was shocked by his discovery.

“This crisis,” Greenspan has now admitted, “has turned out to be much broader than anything I could have imagined.” And yet, there are still bonuses being doled out on Wall Street.

Read These Articles in the Sunday New York Times

Appalling - simply appalling. You must read these two articles in today's Sunday New York Times. They work together but if you only have time for one, read the second. It is time that some of the speculators, whose bad bets - and they were bets and not investments - were faced to suffer the consequences of their stupidity and greed.

According to the Times article the reason that many of the credit default swaps were not classified as illegal gambling is that Congress specifically exempted credit default swaps from state gaming laws back in 2000.

". . . some 80 percent of the estimated $62 trillion in credit default swaps outstanding in 2008 were speculative."

More on this later . . .

A.I.G. Planning Huge Bonuses After $170 Billion Bailout
Following the A.I.G. Money

If the New York Times does begin charging for their online paper, these two articles are two fine arguments for spending the money to have access to the paper.

Wednesday, March 11, 2009

Years ago banking fiasco foreseen . . .

Much of the mainstream media (MSM) in the United States has been reporting that no one saw this economic disaster on the horizon. But, if one stays alert and reads a lot, there are stories in the MSM challenging this position. The New York Times today, Wed. Mar. 11, 2009, had an excellent article about a research paper written sixteen years ago titled simply: “Looting.”

Economists, George Akerlof, who later won a Nobel Prize, and Paul Romer, a well respected expert on economic growth, argued the promise of government bailouts isn’t merely one aspect of a banking disaster like the present one; no, the government safety net is the core problem.

Read the article here:

Tuesday, March 10, 2009

Can you beat Jim Cramer?

Comedy Central's Jon Stewart has been having fun at the expense of Mad Money's Jim Cramer. Stewart has been pointing out that just weeks before Bear Stearns crashed and burned Jim Cramer was encouraging investors to buy Stearns stock. Check out the link to the Huffington Post story.

Cramer has been making the rounds, The Today Show and Morning Joe with Joe Scarborough, trying to defuse the Stewart criticism.

What's the truth? Is this Bear Stearns stuff really being taken out of context, or is it indicative of the poor quality of Cramer's advise? Check out Cramer's track record at:

His accuracy is less than 50%. One could do as well flipping a coin and yelling "Booyah!" Take a bow, Jim, and slink off the stage. "Boo, yah!"

Saturday, March 7, 2009

WisdomTree DTN and DOO Cut Financials

About three years ago some things occurred in my life that caused me to think about retirement. I soon realized it is one thing to save for retirement but it is quite another thing withdrawing those savings. I did not find the idea of selling large chunks of my stock portfolio to cover living expenses appealing. I decided to take the dividend approach.

I put a lot of our RSP money in an ETF called Barclays Top 100 Equal Weighted Income Fund. We bought BTH.UN at around $10. It consistently paid a distribution of 10% on our original investment. It lost a couple of dollars after the Canadian government income trust bombshell but we didn’t sell in a panic. We held on for months, continuing to collect our distributions. When BTH.UN had climbed back to $10 we baled.

Now, we find ourselves in another dividend fiasco. Companies that had not cut their dividends in a century or more are now cutting, or eliminating, their dividends. Ouch! Our retirement portfolio allocation has 14% of our investment in American ETFs specializing in dividend paying stocks. Many of these ETFs have a minimum of 25% of their money in financials and some have as much as 50% or more. Again – Ouch!

Not only are stock values dropping by the day but the income needed to wait out this mess is shrinking. So, it was with great interest, and some relief, that I read WisdomTree is switching the investment strategy of two of its dividend-rich ETFs and removing their exposure to the financial section.

The WisdomTree Dividend Top 100 (DTN) and its international sibling, the WisdomTree International Dividend Top 100 (DOO) are replacing their large financial positions with other dividend-paying stocks. Both are replacing the "Top 100" in their names with "Ex-Financials."

With money in DTN, I appreciate this change in focus. This lessens my exposure to the American financial sector. Finally, a “Yeah!”

WisdomTree announcement:

Wednesday, March 4, 2009

I passed on Frank Russell.

Well, the markets around the world collapsed again on Monday, March 2, 2009. If, like me, you decided to tough out this downturn, you must be worrying, “Where is the bottom?” I believe the simple but unsettling answer is no one knows. Certainly many of the expensive money managers do not have confidence-inspiring records.

Let’s examine the road not taken, at least not by me. Once I considered entrusting my RSP funds to Frank Russell Canada Ltd. In the end, I passed. Today, doing the research for this piece, I came to the same conclusion. Frank is not for me.

Using the mutual fund information available on I discovered that $10,000 invested in the Russell LifePoints Balanced Income B fund back in August 2000 would have grown only by $469 by early March 2009. Not much growth.

I then looked at the CIBC Monthly Income fund – a no-load fund that can be purchased with an initial investment of $500 rather than $5000 required by Russell. How would a similar investment made with the CIBC have fared over the same period? It would have grown by $6542 – a return almost 14 times greater than the gold-plated Russell offering. The Russell fund had a yield of 4.49% based on the last trailing 12-month total, while the CIBC fund returned 7.56%.

It leaves me shaking my head.

Today I propose creating four benchmarks based mainly on ETFs and publishing their results along with the results of a couple of Frank Russell Canada Ltd. Funds. Russell posts the fluctuating daily value of their funds at:

Let the games begin.

Oh, if anyone has had any personal involvement with Frank, with good experiences or otherwise, I would love to hear from them. (An addendum - a Canadian reader contacted me to say that he/she was told that Russell funds purchased through a large Canadian bank do not carry frontend loading.)


Sunday, March 1, 2009

Time to dump the TD Monthly Income fund? Nope!

If you're here, you are looking for information about the TD Monthly Income Fund. I've posted a screen grab (click the link) showing how an investment in this fund would have grown if invested right at its inception. The TD Monthly Income fund is actually quite amazing, see the screen grab and I'm sure you will agree.

At the deepest drop during the crash of a couple of years ago, it seemed this fund had possibly lost its way. I dumped about three quarters of my units. Today, I have 15% of my portfolio in the CIBC Monthly Income fund and about 10% in the TD Monthly Income fund. My goal is to bring the TDMI fund up to the 15% level.

I've withdrawn about 9% of  my original retirement money to live and I am still up almost 50% in just more than two years. These past 26 months have been a fine time to be in the market. (I'm writing this March 22, 2011 and I have been retired since January 9, 2009.)

Welcome to my post and to my first blog with teeth. This post has been extensively modified since it was originally written. Today, August 28, 2010, I must again modify this post as a month ago Morningstar took another look at the TD Monthly Income fund. It is back in their good graces.

The following is taken from that Morningstar Quicktake Report. These reports are available to me from both ScotiaMcLeod and the TD Waterhouse.

"New risk profile strikes a more conservative stance.

After posting significant losses during the credit crisis, this fund has gone through a bit of a redesign and the net result should be a less risky offering. Style changes like this can sometimes be a cause of concern, though here the adjustments appear sensible and well executed . . . "

One big concern has been addressed. At one point, according to Morningstar, 35 percent of the bond segment of this fund was almost entirely made up of corporate issues, with roughly half of them below investment grade. For this reason, over a year ago I dumped 75 percent of my TD Monthly Income holdings and bought the CIBC's similar offering.

As of the end of July, the total bond weighting was about the same, but it's been redesigned in line with TD Canadian Core Plus Bond. The high yield allocation has been cut in half and the maximum allocation to equities and income trusts has been lowered from 70 percent to 60 percent. This should remove some of the risk and some of the volatility that had crept into this once numbingly consistent investment.

These changes were made in the aftermath of the fund's 12-month loss of 24.9% for the period ending February 2009. Although this was roughly in line with the category median, it was far worse than most of the other monthly income funds offered by the big Canadian banks.

To the credit of the firm and the managers, the fund hung in and made a very strong recovery in both absolute and relative terms as markets recovered. The fund had a great bounce back because the managers wisely did not hastily take risk off the table at the worst possible time. I have to confess, I switched funds at the worst possible moment and have paid dearly for this lack of confidence in the TD managers but I slept well and that is important, too.

There's more to life than investing but investing makes more possible.
Since the recent meltdown in the global markets, I have done quite nicely. At one point I was up about 37 percent. Today I am well off my highs but I am still up about 29 percent since taking a buyout and retiring. And this is despite having spent a big chunk of retirement savings on an almost six week holiday crossing the States and Canada in my vintage British roadster --- a 1969 Morgan Plus 4.

My present portfolio allocation has 15 percent of my RSP invested in the CIBC Monthly Income fund and 5 percent in the TD Monthly Income fund. If the economy continues to slowly rebuild, I am looking at dumping a lot of the bank stock that I purchased at the depths of the stock market crash and moving that money into these two monthly income funds and a mix of ETFs. Retired, and a little desperate, I strive for a successful mix of stocks and bonds delivering both capital gains and cash rewards. (But with bond interest rates so awfully low, I hate to confess, I am totally in the market and out of bonds, except for the bonds buried in my monthly income funds.)



I started this site as an experiment and thought it had failed. A month past and my site did not appear when Googled. Today I tried again and - amazingly - it showed up.

I am off to a Morgan owners meeting in Burlington today but on my return we will get this blog going.

I had thought of blogging for The London Free Press, if this failed, but now I feel more confident with this approach.

Let me blog for a week and then please let me know what you think.

Ken Wightman

Wednesday, February 4, 2009


I read about Animoto on the New York Times site. You supply about seven images, pick-out a copyright-free snippet of music from the Animoto library, and then Animoto makes a short, up to 30 second, video.

To get an idea of what can be done, check out my MOA IV movie.


Saturday, January 31, 2009

Morgans Over America IV 2005

Morgans Over America IV was held in May and June of 2005. Approximately a hundred Morgan owners with 45 Morgans gathered in San Francisco for a six week adventure. The group would travel the Great Pacific Highway, Highway 1, follow Route 66, visit the Grand Canyon and Monument Valley, take a cruise on the Mississippi River, take a deak north into Canada and much, much more.

If you'd like to get straight to the photo album, click here:
Note the slideshow tab and if you click on a picture you can change the speed of the slideshow or even pause it.
This car is also found on The New York Times site:
... or stay here and just read on.

My wife, Judy, and I left our home in London, Ontario, Canada, in late April in our 1969 Morgan Plus 4. We took mainly two lane roads across the continent to San Francisco where we met up with other Morgan owners from the United States, Canada, Great Britain and Europe. The europeans had their cars shipped, three to a container, to San Francisco, retrieving their cars from customs for the tour.

It truly was an adventure, especially for us. On our way to San Francisco, just outside Salt Lake City, Utah, we had our first flat tire. With spoked wheels and an odd tire size, we were lucky to get it fixed as we needed a replacement inner tube; the tube stem had failed. We had our second flat on day two of the tour and it, too, was caused by an inner tube stem failure. It was then that I realized that even though I had had a number of sets of tires over the years, no one had ever replaced the inner tubes. I'm not rich and always make this clear to those installing new tires. To save me money everyone had reused the inner tubes. No one realized that these tubes were the originals. We were driving on 36-year-old rubber!

Then, just days into the trip, the tappets began to clatter. Not being a mechanic, I knew little about tappets, other than it was not good to hear them as while driving. As we crossed the States, the tappet noise grew louder and louder. But we made it all the way to our hotel in Toronto before the engine died. It only refused to start once on the trip and that was at our hotel in Toronto and then it just refused.

We had the car towed to CMC Enterprises in Bolton, Ontario, where Martin and Steve Beer diagnosed the problem; my camshaft was pooched. We ended our segment of MOA IV by train. I had only been able to arrange a block of five weeks away from the newspaper and so Judy and I had not planned on doing the Toronto to New York city leg of the MOA IV. My little car had completed its part of the tour with one camshaft tied behind its back, so to speak.

Before we picked up our car from the Beers, they installed a complete new set of inner tubes. We haven't had a flat tire since.
This is my first blog. I recently retired from The London Free Press, London, Ontario, Canada - they had a layoff and I took the fall for our department. But, I must say that the company and our union working together made the layoff less painfull than it might have been. I am planning on blogging about retirement, travel, finance, Morgans and more. Please give me a few weeks to get this off the ground, hope you visit again and I look forward to your comments and suggestions. Cheers, Ken Wightman