A Great Financial Understatement

I spend a fair amount of time reading and reviewing some of my older posts, mostly to check the awkward writing style, and to repair broken links and such. I tripped across a classic understatement I made in the summer of 2008

Bad Day on the Market

That was the day after the market meltdown that eradicated a great deal of wealth in a few short days. Remember that the real obliteration of wealth happened on September 20th, 2008, but this was a start (thanks to me being laid off I was a little preoccupied, so I didn’t write about the huge market drop on that day).

In a short paragraph I stated:

Figured I’d add my 2 cents to the fray of Bloggers talking about the problems on the Stock Market these past few weeks. Is this an opportunity to buy? Should we be selling? Is it time to crack open skulls and eat the goo inside? Don’t ask me, I am standing pat for now, and we shall see what happens. My portfolio is down a fair amount, but my feeling is, now is the time, just to “Not Look”. Remember most of my stock holdings are in an RRSP, and thus aren’t a short-term investment either. I am watching TD with intent.

I do like the line, “…Is it time to crack open skulls and eat the goo inside? …” (I stole that from Kent Brockman on the Simpsons), but I was a man of my world, I didn’t touch my holdings (and at the time I still held Nortel, that had not gone bankrupt quite yet). This market apocalypse did lead to my Best Financial Decision Ever, but only because I had money from my Severance Package to invest.

Always interesting to review the past, wonder when the next Stock Market Apocalypse will happen? Hope not soon.

 

 

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The Next Big Stock Market Crash ?

October 29th is the anniversary of the big bang or the first big stock market crash , which was a large contributing factor to the great depression of the 30’s, and it begs the question, when is the next big stock market crash, and how can I prepare for it?

How bad was the crash of 1929? The following useful 10 year graph might help:

The Stock Market Crash of 1929

The crash and it’s follow on

Amazing stuff eh? I didn’t know about this period.

  • There was a short recovery in January 1930, and then everything went down from there
  • It took a long time to get back to 1929 levels
  • There was still a great deal of market volume along the way too

What Can We Learn From This?

The Economic situation back then has about as much to do with today, as it did with the great Tulip Bubble Burst. Some say the world is a very different place. Don’t get me wrong, this kind of catastrophic drop will happen, just that comparing 1929 to now is foolish, so many things are different, not much can be learned from 1929 (other than, this can and will happen again). If you’d like PBS supplies this Useful Timeline Leading up to the Crash, if you think you can find any parallels there.

Is this another “fire and brimstone” rant about losing money, and such? No, in fact, if you are an Index’er or Couch Potato I would give the same advice as I gave many months ago (and stole that advice from our friend Preet), Live With It and Don’t Look. You will most likely have to re-balance in a while, but do that when you normally would and go back to your regular life, is the only advice I could give.

If you “timed” the market right, good for you, it is most likely through blind luck, but good on you, if you dodge the “big one”, but it was luck (unless you are part of the inner sanctum of traders who knew it was coming, in which case you are most likely guilty of Insider Trading).

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Warnings on Financial Products

After a thoroughly enjoyable discussion with the National Capital Financial Bloggers (and some honored added guests), I feel reinvigorated. The discussions around the table were about many topics and my guess is I will be writing about a few of them over the next few days, but one excellent topic came up from a representative from Horizen ETFs who was visiting with our highly regarded group (why I was included in this group is again a mystery), and the question arose, “Should there be warnings on financial products ?”.

The observation made was that some investment and savings vehicles might need to have better warnings, and in fact Rob Carrick (an honored special guest) pointed out that if you put a strong warning on financial products, some folks might just buy it because of the warning (I believe you would call that the “Cigarette warning syndrome”).

With this in mind, let me give you a possible scenario:

If you were on your standard On Line Broker web site and you started a new BUY transaction, and you selected say BCMETF.XXX (hopefully a fictitious ID for the Big Cajun Man Exchange Traded Fund (the Nitroglycerin and Blasting Caps version of the fund)), and the following warning icon came up on your screen, when you attempted to finalize your transaction:

warnings on financial products

Dangerous Investments Warnings

My question would be, if you saw this kind of warnings on financial products come up on your screen (hopefully with a loud klaxon noise in the background), what would you do?

  1. Would you turn off your computer, and run and hide in your bed with the covers over your head? (which I think is the correct answer)
  2. Get all macho and say, “I can handle it!”, and plow on ahead?  (the wrong answer IMHO)
  3. Go back and read the prospectus on the savings vehicle one more time to be sure?  (an OK way to deal with it, because at least you go in with your eyes open)

Please reply in the comments, I am very curious, since I might try to start a side business publishing financial warning signs.

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Financial Apocalypse and Sunday’s Best

What are we actually living through is really up for debate these days. Some are saying this might well be the economic system falling (worldwide) falling apart, others are saying, just another bump in the road, and still others are saying this is an opportunity to make a lot of money (those people always make me scratch my head, but they are the ones who might do it (or might not), me I am just standing pat for now). Is everything being manipulated, or is this just the whole system finally collapsing under the weight of countless financial misadventures world-wide? Feel free to discuss, me, I will be in my room with my head squarely under my pillow.

This week has been an interesting one for me, with a peak into the hell that is 2011 for me (personally) and a few other interesting oldies but goodies on Twitter:

  • The Sunday Thought for the week was Pay it Forward, and I think that is important in these scary financial times, to make sure we don’t just think of ourselves, but we need to help out others too.
  • With Stats Canada talking about spiralling tuition fees, I figured I’d bring back University Costs (again), pointing out just how expensive this can be.
  • Remembering my Dad, I recalled Advice: Best Financial Advice Ever, I will miss him.
  • Staying on that topic I also wrote about Fathers and Money.
  • I remember a year ago CPI was at 1.7% but these days, we are just not that lucky.
Enjoy the weekend, it’s Sunday!

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Ethical Investing?

I had a look at one of my older posts Vultures and while it is an interesting rant which fires in all directions the first comment made me think about something that I keep hearing about these days, and that is the concept of Ethical Investing.

The commenter in that specific post pretty much called me a scum bag for investing in banks, which given my rants about how terrible the service is that Banks give, makes me more of a hypocrite than a scum bag (IMHO), but I only bring this up to start the discussion.

Yes, I do invest in the Canadian Banks, mostly because they do seem to find new and exciting ways to make money, most likely in a way that screws regular folks royally, but I don’t have an issue with that, but that is pretty much where I draw the line for where I invest. You might ask what I don’t invest in (directly, I may invest in these because I hold many index funds and ETFs that may spread funds to these industries/areas):

  • Payday Loan companies: interesting that I will invest in banks which make a fortune off consumer debt using credit cards and bad loan terms, yet I don’t want to invest in Pay Day loan companies, which are just a much smellier part of the same financial compost heap. I am a complicated guy that way (or a hypocrite as I am sure someone will point out).
  • China: I am staying the heck away from China and Russia (to a lesser extent), just because totalitarian governments worry me, and what they have done to their populations just makes me leery of giving them my money.
  • High Tech: this is mostly a once bitten, twice shy scenario where I have lost enough money in this area in my younger days, and frankly the scum bags that run some of these companies are really in the same category as a few dictatorships I have read about.
  • Carbon Footprint Offset Funds: I don’t understand it, and I really don’t trust any of it. I think I’d rather invest in Sanitation Companies before I got into this Green Shell Game.
I do not go out of my way to live up to these high ideals that I have put down, but I do try to steer clear of these areas (and some other areas which seem shady at best). Is this Ethical Investing? Somewhat since it is my own ethics that I am following, but I think it is not Big E ethics, more small e ethical investing.
What areas do you stay away from and are you a Big E Ethical Investor, or a small e?

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