The Madoff Economy [NY Times, 19Dec08] "How different, really, is Mr. Madoff’s tale from the story of the investment industry as a whole? The financial services industry has claimed an ever-growing share of the nation’s income over the past generation, making the people who run the industry incredibly rich. Yet, at this point, it looks as if much of the industry has been destroying value, not creating it. And it’s not just a matter of money: the vast riches achieved by those who managed other people’s money have had a corrupting effect on our society as a whole."
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The swimming naked awards [Economist, 16Dec08] "'You only find out who is swimming naked when the tide goes out', Warren Buffett famously observed. In 2008, the financial tide went out further than anyone expected, revealing a multitude of skinny-dippers. To help them cover up their embarrassment, Business.view is proud to announce the following winners of the 2008 'naked shorts' awards."
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Bank forms can be risky business [Toronto Star, 14Dec08] "Filling out these forms can be time-consuming and tedious. But don't rush through the process. Your responsibility as a client is to know what's on the 'know your client' form. It will become a key piece of evidence in any disputes that arise between you and your investment adviser."
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We all go together when we go [Guardian, 06Dec08] "The first great financial crisis of the 21st century has begun. Nobel prize-winning economist Paul Krugman explains how it happened, and how it can be cured."
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Watch out for fees on tax-free savings accounts [Globe&Mail, 02Dec08] "Go on out and get a TFSA, by all means. Sign up now, avoid the rush. And don't forget to ask about fees because while the TFSA is most certainly tax-free, it's not always fee-free."
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Healthful hints for coping with ailing economy [Waterloo Record, 28Nov08] "Sheer chance had me aboard the Holland America Line in the middle of the Pacific Ocean when the stock market crashed with devastating results. If I'd been in Canada I could have cried on my financial adviser's shoulders while asking why so much hard-earned money was going down the drain. And as the news became progressively worse, I wondered if I could even afford a canoe to return to Canada. So how did my psyche cope with this "mother" of all economic disasters? Hopefully, this advice will help others who have seen their finances melt."
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November 2008

Barclays Canada launches iShares Portfolio Builder Funds [BGI Canada, 18Nov08] "Two of the new funds, the iShares Conservative Core Portfolio Builder Fund (XCR) and the iShares Growth Core Portfolio Builder Fund (XGR) are a convenient way to achieve cost-effective, efficient and diversified solutions to meet specific portfolio needs based upon your risk tolerance. Designed to be the sole holding in a small account or a core holding in a large account, these funds offer risk-mitigating diversification. The fees for these funds are 60 bps."
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Only the Good Buy Young [Slate, 15Nov08] "Why 20-year-olds should invest way more in the stock market, and 50-year-olds, way less."
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The End of Wall Street's Boom [portfolio.com, 11Nov08] "Sooner rather than later, someone was going to identify me, along with a lot of people more or less like me, as a fraud. Sooner rather than later, there would come a Great Reckoning when Wall Street would wake up and hundreds if not thousands of young people like me, who had no business making huge bets with other people’s money, would be expelled from finance. "
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BGI announce "couch potato" and "target date" ETF portfolios [ETFguide.com, 10Nov08] "Target date funds automatically adjust the ratio between equities and fixed income as you get closer to your retirement date (target date). Target date funds appeal to [RRSP] owners who prefer to leave the research and allocation models up to fund managers." Note the ~0.3% MERs. Can Canadian versions be far behind?
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Stick to the plan [MarketWatch, 05Nov08] "You have to invest knowing that times like this are going to happen, just as you know that the market will also have its good times. Your portfolio may have problems on any given day or year, but you're trying to have a strategy that will pay off in time, and there's no doubt that the stock market will pay off for investors again."
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The Street should do the right thing. Dig a grave for those wretched PPNs [Globe&Mail, 01Nov08] "If we've learned anything in the past year, it's that we don't want to buy something we don't understand and/or is a layer or three removed from the underlying asset, whether it be stocks, commodities or home loans. Because of their complexity and poor disclosure, PPNs are incomprehensible to all but the most sophisticated investor and adviser. Most people can't possibly know what tradeoffs they are making when they buy a note."
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October 2008

Extolling the Value of the Long View [NY Times, 25Oct08] "Despite 'an orgy of speculation' that has hurt the global economy, [Bogle] remains convinced that if long-term investors stick to the basics, 'put blinders on' and try to have 'strong stomachs,' they can ride out the rough patches and ultimately prosper."
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Why stock picking is a losing game [CNN Money, 21Oct08] "Don't bet on it. Here's why trying to outguess the market will always be a losing game."
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Top Theorists Examine Rippling Economic Turbulence [NPR, 21Oct08] "As the financial sector shifts, so does the reach of the jolt to economic structures around the world. Economist Nassim Nicholas Taleb and his mentor, mathematician Benoit Mandelbrot, speak with Paul Solman about chain reactions and predicting the financial crisis."
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Market Moralist [philly.com, 19Oct08] "Investment bankers caused this mess, and apparently they're not going to pay anything to get out of it! Any time you have a system that privatizes the rewards of an enterprise and socializes the risks, you're going to be in trouble!"
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Take a Deep Breath, Turn Off the TV, Calm Yourself [Wall Street Journal, 18Oct08] "With stocks swinging wildly, it's easy to panic; some advice for fighting the herd mentality"
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It's the economy, Charlie Brown [Globe & Mail, 17Oct08] "In an online discussion this week, U.S. investing guru Jack Bogle outlined a series of steps he would like to see to help heal financial markets"
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Buy American. I Am. [NY Times, 16Oct08] "Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: 'I skate to where the puck is going to be, not to where it has been.'"
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Advice for Today's Market? Diversify Wisely [Business Week, 16Oct08] "Two pros say the fundamentals remain in times of market turmoil—and smart risk management can spare you financial pain in the long run."
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Keep Your Money in the Market [Wall Street Journal, 13Oct08] "Just because stock markets have panicked, investors should not... We are not going to have a depression, and we have survived financial crises before. A century of investing experience, as well as insights from the field of behavioral finance, suggest that investors who bail out of equities during times like these are almost always making the wrong decision."
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September 2008

August 2008

July 2008

The Prescient Are Few [NY Times, 13Jul08] "A new study builds on this research by applying a sensitive statistical test borrowed from outside the investment world. It comes to a rather sad conclusion: There was once a small number of fund managers with genuine market-beating abilities, as judged by having past performance so good that their records could not be attributed to luck alone. But virtually none remain today. Index funds are the only rational alternative for almost all mutual fund investors, according to the study’s findings."
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Stop Worrying, and Learn to Love the Bear [WSJ, 12Jul08] "Investing is simple: Diversify, buy and hold, keep costs low. But simple isn't easy in a market seething with 'free' online trades, funds that promise to transform losses into gains, and TV pundits who shriek out trading advice as if their underpants were on fire. The real secret to being, or becoming, an intelligent investor is bolstering your self-control."
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A simple plan for riding out a bear market [The Gazette, 08Jul08] "Right now is a very tough time for investors because they're getting lots of sound bites from their friends, from the media, from investment gurus. There are all sorts of very bold predictions in today's marketplace. Half the battle is not doing things. You don't chase (hot investments). You don't time the market. You don't do massive tactical shifts. You don't get spooked by predictions. What do you do? You build well-diversified portfolios based on your objectives, risk tolerance and time horizon."
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Web reference tool helps traders pick the best bond price and yield [Toronto Star, 06Jul08] "There's only one problem with buying bonds on your own without an adviser. How do you know if you're getting a good deal? The bond market, unlike the stock market, is not transparent. Each dealer carries an inventory of bonds and marks up the price to cover the cost of selling the bond. The exact size of the markup is a well-kept secret. Only by comparing bond prices and yields at many dealers can you know if you're paying too much. Comparison shopping was tough for do-it-yourself investors until a new website launched this year."
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Spending Safely [Business Week, 03Jul08] "Bengen and other financial wonks now advocate less rigid approaches to the tricky challenge of sustaining a [retirement] nest egg."
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Money and Your Mind [Journal of Indexes, Jul/Aug08] Includes Your Money & Your Brain by Jason Zweig • An Interview With Jason Zweig • Behavioral Finance And Indexing roundtable with Ed McRedmond, William Bernstein, John Prestbo, Ross Miller, Terrance Odean, Francis Kinniry and David Blitzer, and more.
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June 2008

How Canada stole the American Dream [Maclean's, 25Jun08] "The numbers are in. Compared to the U.S., we work less, live longer, enjoy better health and have more sex. And get this: now we're wealthier too... because we have less debt."
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Investing During Market Turbulence [inFocus, Summer08] "These are turbulent days in the financial markets. Investors are looking for answers about what they should do... I'd say: 'Don't do something. Just stand there.' Investors should stay the course, because successful market timing is near impossible. More importantly, ten years from now, earnings in the S&P 500 will be much higher than they are today."
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Casinos on Wall Street; Main Street Loses Big [AlterNet, 18Jun08] "Move over Las Vegas. The big time gamblers are on Wall Street and they are gambling with your money, your pensions, and your livelihoods... With each cycle of failure, the burden of government bailouts grows larger, meaning debt, deficit and your tax dollars... Why is it that these financial bosses never learn? Because they never pay for their gambling."
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Pension idea needs your help [Toronto Star, 12Jun08] "Ambachtsheer told students and other interested observers at Rotman School of Business yesterday that a new supplemental pension could cost contributors less than 0.2 per cent of assets per year, or about 2 percentage points less than mutual fund investors typically pay. That savings could add as much as 40 per cent to the retirement income a person could generate from each dollar of savings."
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Mutual fund reports are about accountability. Some companies fall short. [Globe & Mail, 06Jun08] "Management of this fund was changed last year because of a decision to load up on US financial stocks that have been annihilated in the past year. AIC tells us the fund generated a one-year return of '(42.3%),' which is how accountants, not everyday people, express a financial loss. Unitholders are then told that a firm called Ariel Capital Management took over the fund on Oct. 25, 2007, and that all commentary will focus on the period between then and year's end. This is an odd decision, given that between May and October the fund turned an investor's $10,000 into just over $6,200. AIC's response is that it has been keeping its clientele updated on the fund by communicating extensively with investment advisers."
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Efficient way to build wealth [Financial Post, 03Jun08] "When he decided to leave fund giant Investors Group Inc. to start up his own fee-only financial-planning firm, Gordon Stockman knew there was plenty of room to cut investment-management fees and still have a viable business practice... Many are 'paying too much for too little,' says Stockman. 'They are supporting their mutual-fund company's efforts to find new clients, not just manage the existing ones.'"
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May 2008

The fee debate and your obligation to clients [Advisor.ca, 16May08] "U.S. advisors have been disciplined in situations where a fee-based account has clearly been detrimental — where commission-based accounts would have been significantly cheaper for buy-and-hold investors or for those who purchased mutual funds with embedded asset allocation or rebalancing fees included in the fund's management fee."
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Warren Buffett interview [Der Spiegel, 28May08] "I have everything I need. But that's also the way I felt at 25, when I didn't have that much money yet. I have a wonderful family. I have a job that I love and wonderful people who help me with it. It can't get any better than that... I'm happy when I can spend every day doing the things that I like to do. That's my luxury. Things could have gone differently, but I was lucky... I get a lot more fun out of life without all the bells and whistles."
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Inside the mutual fund industry [Globe & Mail, 23May08] "Investing doesn't have to be that complicated. If you're confused by what you're being offered and dissatisfied, I'd focus on a few low-fee funds and ETFs...beween 4 and 6 in total... We don't offer a large cap U.S. fund...I think a low-cost ETF is a better option."
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Steadyhand Diaries by Tom Bradley [Globe & Mail, 22May08] "Veteran money manager Tom Bradley broke all the rules by launching a low-fee, direct-to client mutual fund firm. In pursuit of his dream, he chased down the right talent, endured the glare of regulators, got a new liver and squared off with a grizzly bear."
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Index investing: 'Just set it and forget it' [Toronto Star, 19May08] "Index funds are suitable for those who have little money to invest and want to buy small amounts on a regular basis. You can find links to low-cost index funds at www.bylo.org/idxfunds.html... Index investing makes sense for people who don't find finance fascinating... It's the perfect 'set it and forget it' strategy, giving satisfactory results and requiring very little attention, so you can get on with your life."
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Bogle's Corner [Journal of Indexes, May/June08] "I believe that the mandatory and prominent disclosure of shareholder returns alongside fund returns would alert fund investors to the true returns that managers have actually achieved for their shareholders. Such disclosure, I suspect, would also discourage fund managers—and brokers and financial advisors, too—from following 'the fund of the week' syndrome; remind them of the perils of aggressive marketing; and give them some self-discipline regarding the creation and promotion of high-risk funds."
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Who speaks for investors? [Ellen Roseman, 06May08] "Instead of listening to a committee of investors, the OSC and self-regulatory organizations will listen to each other. They will talk about issues that concern investors — and invite a few investors to chat from time to time — and that’s all... It seems to me there are many articulate people who can speak for investors. There’s no lack of input. The bigger question is: When will the regulators and SROs start listening to investors? And taking action on what they’re told?"
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April 2008

Book helps advisers and their clients [Toronto Star, 29Apr08] "Toronto lawyer Ellen Bessner has distilled 20 years of experience defending and teaching financial advisers into a simple book... Tips in her book should make for better advisers, fewer surprises and less misunderstanding. Meanwhile, consumers who read the book will be better equipped to select the sort of adviser who acts with care and professionalism, and know better how to work with that person."
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Tough questions for advisors [Strategic Imperatives, 28Apr08] "In recent conversations with financial advisors, I’ve asked them about the tougher questions they’ve gotten from prospects - here are some of the questions which advisors have been asked."
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Fee-only pioneers keep time [Financial Post, 22Apr08] "Despite the similarity of terms, there is a huge difference between fee-based and fee-only. True fee-only advisors work like lawyers or accountants, charging by the hour or setting fees for defined tasks, such as wills or tax returns. They do not receive commissions on the sale of securities, investment funds or insurance products nor asset-based fees. More than 10% of the United States' 57,000 certified financial planners are fee-only, but they are relatively rare in Canada."
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Fee-based accounts sound good, but they're just as open to abuse [Globe and Mail, 22Apr08] "Securities regulators are taking a close look at an increasingly popular trend where people pay for investment advice through a regular flow of fees based on the size of their account... Reputable people in the investment industry believe fee-based accounts are the most ethical way to do business because they eliminate the bias for advisers to recommend products that benefit them more than clients. But it's now obvious clients can be exploited in fee-based accounts, too. What's an investor to do? Put integrity at the top of your list of requirements when finding an adviser."
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The increasing complexity - and masked risks - of wealth management [Globe and Mail, 19Apr08] "In any investment structure, the majority of the extra return, if there is any, belongs to the buyer who is taking the risk. In too many products today, this is not the case. The current generation of structured products have little or no transparency and, as a result, they mask the risks being taken and how the potential rewards are being apportioned... If you don't understand what you're getting into, don't buy it."
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And It All Comes Down to This... [WSJ, 06Apr08] [If link is dead, search Archive for "clements", then select 04/06/08 article.] "How can I keep you on track in the years ahead? Here, culled from my two decades as a personal-finance writer, are eight simple suggestions.
   1. Embrace humility.
   2. Control what you can.
   3. Save yourself.
   4. Put pen to paper.
   5. Keep your balance.
   6. Take comfort.
   7. Think big.
   8. Take the long view."
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March 2008

Just think, the fees you could charge Buffett [Financial Times, 12Mar08] "Warren Buffett's emergence as the world's richest man illustrates the power of compound interest. Warren neither pays nor makes management charges... Suppose he had adopted a more conventional investment management structure, charging the 2 per cent management fee and 20 per cent of performance common in private equity and hedge funds. How much of that $62bn wealth would have been the property of Buffett the manager – Buffett Investment Management – and Buffett the investor – the Buffett Foundation? The answer is astonishing. At “2 and 20”, the split is $57bn for Buffett Investment Management and $5bn to the Buffett Foundation."
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CanadianFixedIncome.ca [PFIN, Mar08] "CanadianFixedIncome.ca provides investors with the information they need to invest knowledgeably in the Canadian fixed income market. We provide access to the best offer prices and yields available through CBID - Perimeter Financial's electronic fixed income marketplace."
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At its heart, investing is about risk, and stacking the odds in your favour [Globe and Mail, 08Mar08] "Investing is about taking risk. Being thoughtful about it. Prudent. And stacking the odds in your favour when you can. Risk is the fuel that drives a portfolio. It must be present to generate returns in excess of the risk-free rate, namely Government bonds... There is a wonderful piece written by François Sicart, the chairman of Tocqueville Asset Management in New York, in which he describes his unbreakable rule. He says, 'I never invest in a situation in which I cannot lose money.'"
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Beware: Same price, but fewer tax returns [Toronto Star, 08Mar08] "QuickTax Standard for 2007 includes two returns for Canadians with more than $25,000 in income, compared with five returns in previous years." There is, of course, no reduction in price for this 60% reduction in number of returns. There are, however, several lower cost alternatives to QuickTax.
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New tax-free account means there's planning ahead [Globe and Mail, 01Mar08] "TFSAs are an investing equalizer. No matter what you put in it, and you can invest in all the same things as you can with an RRSP, you don't pay tax on your gains. Nor is there any tax to pay when you withdraw money from a plan... investors have some planning to do in the lead-up to the introduction of this new program next year."
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February 2008

How well do you know your financial adviser? [Toronto Star, 25Jan08] "It's RRSP season and as we scramble to make contributions in investments that will yield us the best returns, the critical question you must ask yourself is: how well do you know your financial adviser?... Take the time you need by placing the RRSP contribution in a cash account until you have had adequate time to select a financial adviser with the credentials to provide you with investment strategies consistent with your needs. Investors must understand that anyone with as little as several hours of online instruction can refer to himself as a financial adviser."
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Pension questions to ask when changing jobs [Toronto Star, 24Feb08] "Here's advice for anyone switching jobs: Find out how the new pension plan works. Ask the right questions... Barbara was in a defined benefit pension plan. She was contributing 7 per cent of her income, an amount her employer matched. She asked whether there was a defined benefit pension plan at her new workplace. No, she was told. There was a defined contribution plan... In her new job, she was shocked to find she was contributing only 2 per cent of her income and so was her employer."
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How to tell if it's just a bad patch, or if it's just some bad advice [Globe and Mail, 12Feb08] "To properly gauge whether your investments are performing well, you need to compare them to the appropriate mix of benchmark stock and bond indexes. Here's an example of how this might work using the benchmark calculator on a website called Show Me The Benchmark (showmethebenchmark.com)"
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Straight From The Source: Jonathan Clements [IndexUniverse, 07Feb08] "IndexUniverse.com assistant editor Heather Bell recently spoke with Jonathan Clements, senior special writer for The Wall Street Journal, who writes the newspaper's widely read personal finance column, 'Getting Going.'"
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Anti-bank rivals offer interesting choices [On Your Side, 07Feb08] "ING has hopped onto the bandwagon of index funds and introduced its own version of the couch potato portfolio. The Streetwise Fund lets you bundle index funds together into a portfolio that suits you. The balanced fund, for example, is 40 per cent Canadian bonds, 20 per cent Canadian stocks, 20 per cent U.S. stocks and 20 per cent international stocks."
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New ETFs a rung higher than mutual funds [Globe&Mail, 07Feb08] "There are two new reasons for investors to consider exchange-traded funds before they so much as touch a mutual fund. One is the Claymore Premium Money Market ETF, which will be listed for trading on the Toronto Stock Exchange on Feb. 19. The other is the Claymore 1-5-Yr Laddered Government Bond ETF, which began trading last week under the symbol CLF. Both are low-fee options in categories where cost is the crucial difference between products."
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Fifty Years from Now [Efficient Frontier, Feb07] "What will the best-practice portfolios of our children and grandchildren look like? What rules will they operate under? Put another way, which of our beliefs and intermediations will they retain, and which will they look back on as quaint and outmoded? Only a few things are certain: First, human nature will not change. There will always be bubbles and panics; valuations will go to extremes in both directions. Second, risk and return will continue to be joined at the hip."
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January 2008

Vanguard Steps Up To The Plate [Forbes, 28Jan08] "The master of indexing got a late start introducing ETFs. For investors, it was worth the wait... Brennan's rationale for selling ETFs to investors is like that of a dad with teenagers: They're going to drink anyway, so it's safer if they drink at home. 'It's paternalism,' he says with a sigh. 'But I guess it's better that they buy a health care ETF than health care stocks.'"
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Diehard II: Reboot [IndexUniverse, 25Jan08] "Now in its 10th year, the Diehards forum has built a reputation as one of the best sites on the Internet. You can find some of the most intelligent discussions on everything from debates about individual asset allocation plans to critiques of the latest research and articles pertaining to index mutual funds and exchange-traded funds (ETFs)"
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Advice to Investors: Sit Tight and Batten Down the Hatches [Knowledge@Wharton, 23Jan08] "What about the small investor, the individual who is socking away modest sums for retirement or college costs? Should small investors rush for the sidelines? Or should they view this as a buying opportunity and plough more money into the market? Neither, according to the majority of experts Knowledge@Wharton interviewed in recent days..."
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What's a Small Investor to Do? [WSJ, 23Jan08] [If link is dead, search Archive for "clements", then select 01/23/08 article.] "How do you keep your head, when all about you are losing theirs?... My advice: Calculate what portion of your portfolio is in stocks and stock funds. After the recent market carnage, you likely have far less in stocks than your original allocation called for -- which means it's time to start buying. What if stocks keep falling? You keep buying, so you maintain a full stock-market weighting. That's what I plan to do."
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