February 26, 2011

The following article is not a glowing review of the financial industry in the US. In fact, it may be a little disheartening.  However, I felt I needed to get this type of information out as it is the environment we are investing in and suggests that we need to have perspective and where we need to be cautious as investors.

Rolling Stone (link below) did an in depth review of the investigations, the evidence and what happened to the individuals at all the financial service banks and institutions involved in the financial crisis of 2008 which caused a 50% decline in stock markets.  The result, after all the congressional hearings and investigations is – absolutely nothing. Despite all the strong evidence against a number of senior CEO’s and others who created the real estate mortgage investment schemes that eventually collapsed and cause the market decline – no one has yet to go to jail.

There are a number of reasons for this – possibly that financial crimes are not seen as real crimes, or that the markets have recovered, or that many of these people hide behind high priced legal firms and have friends in high places in government or whatever…The sad fact is, no one has yet to be punished.

Fortunately, the impact of the temporary market declines from a recession or the actions of a few individuals can be mitigated and even an opportunity.  The average investor wins if they (with the help of a trusted advisor!) recognize that market “events” are short in duration and have never caused permanent declines and if investment continues while waiting the market volitility out. 

Since markets move based not only on proftis, interest rates, sentiment and greed, investors need to always consider the following:

First, recognize that investor greed and sentiment is reality – the capitalist system is the worst system in the world, except for all the others.  Greed and sentiment drive markets. The prices of our investments will fluctuate because day to day prices are based on investor emotions and greed – and emotions are fleeting and the impact of greed temporary. Fluctuations in prices are a fact, fundamental, necessary at times and an opportunity in equity markets.

Second, the weight of historical evidence concludes that “owners” of businesses (those who buy equities or stocks held within mutual funds for example) build more wealth than “loaners”, those that loan their money for a guaranteed return (from GIC’s or bonds) Equities fluctuate around a long term mean average of 10%-14%. For many of us, being “owners” is the only realistic option given the wealth we need to fund our retirement.

Third, realize that you aren’t just buying stocks, you are investing in businesses. These businesses have assets and profits, future potential and real value – despite what the current price of their stock is. Businesses are a vital means to provide jobs and grow wealth and the best businesses will continue to do so.

Fourth, any investment approach that isn’t a pure purchase of a basket of stocks (such as a plain vanilla equity mutual or index fund) needs careful and serious scrutiny to insure it is not some scheme that creates an investment dependant on anything but the real assets and profits of the underlying investment. Bernie Madoff was the manager of a sophisticated hedge fund that promised returns better than average but turned out to be nothing more than a ponzi scheme,

Fifth, insure the managers of the active fund investments you own have the experience and are stock pickers and a policy of serious analysis of the stocks they do buy and invest in their own fund. They may still get fooled every once in awhile – but not often.

Lastly – always have just enough cash (or fixed income investments) to ride through the inevitable down cycles or surprises equity markets offer.

If you want to know the gritty detail, read the article, but be warned, it’s long and painful to read. These guys should be paying for what they did.



Just got back from a last minute vacation in Cuba with my t-shirt, souvenir cigar and bottle of Havana Club. The week off was nice and warm and relaxing. Cuba is a 3 ½ hour direct flight and you cannot beat the beaches, people and interesting history. The one major difference with Cuba from most of the other Caribbean destinations is that all of its citizens get free healthcare, education, shelter and a basic amount of food. So crime is almost non-existent and begging is not a huge issue. (But you will run into Cuban bands playing for you and then trying to sell you one of their CD’s). Cubans love Canadians – I was told when a Canadian gets drunk in Cuba, he or she starts hugging everyone. Most of who I met were other Canadians of course so it was kind of a strange Canadian holiday. Wonderful to be back in Canada and despite the weather, glad I live here.


Richard WR Yasinski CFP


January 28, 2011

David Foot, of “Boom, Bust and Echo” fame is still following the boomers impact in our lives.  The first Canadian boomer born in 1947 will turn 65 in 2012.  The following video clip has him sharing his views on what we may expect.

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Canadians sitting on cash

The most dramatic 2008/09 decline experienced in many years was followed by one of the most dramatic recoveries experienced ever.  Despite the recovery, Canadians and American’s have not completely returned to purchasing securities for their retirement and instead are holding onto piles of cash.  One has to wonder what will happen to prices once it’s realized equities have returned to growth.

Benjamin Tal – CIBC world Markets comments on the cash Canadians have yet to invest

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Two Hundred countries, Two Hundred years

 The following clip is a graphic demonstration of the improvement in the world’s living standards over the last 200 years.  It plots income level and average life span between countries as measured each year over the last 200 yrs.  The message from this we need to take from this is that although the pace of growth was different between countries, all countries living standards have continued to improve..


Canada’s employment rate – not to hot/not too cold

 No employment report is ever without its blemishes but there were very few in the January 7th Canadian jobs report, which portrays an economy that is still operating at a very high level even if the pace is off the mini-boom that immediately followed the depths of the recession. The only blemish was that the workweek was down 0.3%, and the average duration of unemployment made a new 12-year high of 20.1 weeks, but once again, no report is perfect. Overall employment rose 22k in December; a tad above expectations, but the devil is always in the details, which were actually more impressive than the headline because all the gains and then some were in full-time jobs (+38k) as well as private sector payrolls (+52.5k). The official unemployment rate stayed at 7.6%; the consensus was looking for an up tick to 7.7%. A year ago, the jobless rate was sitting at 8.4% and at the peak it was 8.7% in the summer of 2009. That is otherwise known as progress.

Through the first nine months of the year, the Canadian economy was generating about 40k net new jobs per month and in Q4, that pace moderated to an average of 20k, which is as close to not-too-hot/not-too-cold as you can get. Nothing here for the Bank of Canada to get excited about, that is for sure. Growth has moderated, the expected closing of the output gap has been delayed by a full year and underlying inflation pressures remain well contained — as evidenced by the fact that median wage growth was basically flat last month.

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