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Following the Crowd is Safe?

A classic rant from 2011. Always ask why the crowd is going in a direction, before following. Following the crowd financially can be an expensive mistake.

Safety is Relative

So you think following the crowd is safe, because you are with others?

Ask a lemming if following the crowd is a good idea.Better still ask a cow in line at the slaughterhouse. Everyone else is going in this direction, it isn’t safe?

As you can tell I have been on a Risk management course. I am now full of pithy comments about risk and such. Just because everyone else is doing something, you must at least ask yourself if this is the right thing for you. This is true when it comes to your money.

Many folks who were badly singed in 2008 with stocks are looking for safer places to put their money. They think Putting Money in Bonds is Safe (or at least in Bond Mutual Funds, or Bond Indexes). Normally bonds are safe(r), but there is a perfect storm right now that makes this less safe.

Everyone in the day thought Nortel was rock solid and safe. One misguided financial media maven Garth Turner was still sending misguided investors back into the killing fields of Nortel even as the stock imploded. I remember people saying, “If Nortel goes down, Canada is going to be in a bad way“, or “The Government won’t let that happen“. It did happen, the majority of the herd were wrong again here too.

The experts are saying commodities and Gold are a safe place to hide against wars and all the calamities of today. I don’t understand these markets enough to feel safe in them, so I am staying out of them. Living in Canada I am effectively already feeling the benefits of commodities and gasoline. The Canadian economy was continuing to grow thanks to Oil and Commodities, maybe I should hedge some other ways to take this into consideration?

For a non-financial example look at the proliferation of tattoos in younger folks, is this the right decision? I have no idea, but my “not following the crowd” comment to my kids is, get into Dermatology, because in 20 years all those butterflies are going to be condors, and their owners are going to want to have them removed (oh and all those folks getting multiples piercings are going to want them filled in too).

The Herd is Right Sometimes

Most of the time, most of the people make mostly correct decisions. This does not mean there should be a blind following on your part, especially when your money is involved. You must ask questions about why your money should be where it is. Why it should go where folks think it should go, and don’t follow simply because everyone else is doing it.

Remember what your mother used to say, “If everyone jumped off the bridge would you follow them?”, kind of like what I did with Nortel.

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A Year Ago

This was written in 2009 a year after I had been laid off, and I was about to start a new job, interesting reflections

This is the one year anniversary of my lay off notice from Nortel. A lot has happened in the past year (unfortunately not a job offer for me, but I am still optimistic), that have me thinking that for something bad, it may end up being a good thing.

Nortel
Nortel Once a Giant Now Deceased High Tech Firm

Relaxed

The atmosphere at Nortel had been such that since about 2000, there was a constant feeling of the Sword of Damocles hanging over you. I lived through about 16  lay off rounds in the various groups I had worked in, so the actual lay off was almost a relief in a very odd way.  My minister made that exact comment that since he had first met me every time he spoke to me I mentioned something about impending lay offs, so my eventual lay off was anti-climatic in a perverse way.

Severance Paid

From my calculations I was in the last group (or nearly the last group) that received full severance from Nortel. The people after me are on a long list of creditors who will be paid little or none of what they are owed (or were promised by the company). There are many very sad stories that I have heard from people I used to work with, and I count myself as very fortunate.

The latest stories are sickening to hear that they will be withdrawing payments to people on long term disability, as well as pulling their medical coverage. Hopefully there will be government assistance to these folks, but I am not optimistic.

Pension Losses

I suspect that Nortel’s pension debacle may only be the tip of the ice berg in corporate Canada, with Air Canada already having done this (and doing it again).  I took my pension money out of Nortel when I could, which in hindsight was a great decision but at the time it was more my lack of trust in the company that made me do it, not any great insight.

All pensions these days seem to be under pressure (even the Public Service pension lost $9Billion dollars this past year), which makes me wonder how the retirement of the Baby Boomers is going to go, and whether all pensions can deal with this huge out flux of cash from their reserves?

Save up to 50% on life insurance.

Reflections So Far

My real view of my lay off last year is that I have been very lucky, and I was lucky to have worked at Nortel/BNR for the time I did. The experience I picked up continues to get me job interviews, and I worked with many wonderful and amazing people, so even at times when I seem to be a “bitter former employee”, I am not, I am grateful for the experience and hope to soon find a new place to ply my trade.

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Sometimes it’s better to be lucky

Another look back at the events that ended my career at Nortel and its impact on me. More importantly, on many other folks (as I got out relatively safely, only losing a lot of stock and options). I wrote this on the day that Nortel declared bankruptcy. Folks at the time, said was only temporary, it wasn’t. These are my raw feelings on that day (January 15, 2009). It is better to be lucky in life.


With Nortel’s bankruptcy protection announcement yesterday, there is a sickening scenario for some very unlucky folks (many I know personally). Today’s title comes from one of my favourite expressions, “Sometimes it’s better to be lucky than talented,”. That is how I feel right now.

I  am OK

Nortel it is better to be lucky
Nortel Once a Giant Now Deceased High Tech Firm

As background, let me outline what has happened to me regarding my layoff.

Due to restructuring, I was notified of my redundancy on July 30th of 2008. This meant that I would still be on the Nortel payroll for the next TWO months. I would have access to my office and such, and I could look for jobs inside of Nortel. On July 30th, I was also given the specifics of my severance package. The severance was quite generous, pretty much a complete year of pay.

As part of the severance procedure, I had to take my entire severance payment (lump sum) on September 30th, or I could take some then and delay some until January 2nd 2009. The lump sum was payment was split and I received a part in September and a portion in January. This was done so I didn’t have a huge tax bill for 2008.

I also was given a choice to opt-out of the Nortel pension plan. I did so, and I received those funds just before Christmas as well.

All this means Nortel owes me no more money. There is a small caveat to this, which is not worth mentioning. Therefore Nortel filing for bankruptcy protection has no direct effect on me financially. Hence to comment about better to be lucky.

Some are Not So Lucky

Those notified of their redundancy after November 16th, 2008, are now in limbo (or possibly hell, I am not sure). I have heard from one former associate that his severance package is now “gone” because he has not received it yet.

I do not know if this is just hearsay, rumour or fact, but it is possible. The severance package becomes part of the liabilities Nortel owes. It may well be that these severance packages are now “unsecured debt” and must be dealt with as part of bankruptcy protection.

If these folks do not get their packages, this would be diabolical (in my opinion), and I hope this is not the case, but I suspect it is a real possibility. (it was, and many folks got little or none of the money they were owed).

As for pensioners (retirees from Nortel), I do not know where this leaves the pension plan, given it is underfunded and the repayment of the short-fall must be dealt with as part of the bankruptcy protection plan.
In terms of investors, anybody who still holds stock in Nortel is out of luck, the paper is worthless (at least that is my guess, I am willing to hear arguments to the contrary), and the Bondholders are now part of the bankruptcy protection plan as well.

I didn’t know that since Nortel was self-insuring, all folks on Long Term Disability were treated as creditors and lost their benefits.

Bad Day Financially and Other Ways too

A sad day for me, seeing a company that I worked for and enjoyed most every day there take another step toward oblivion. Many of my co-workers and former compatriots are in a “bad way” thanks to some very questionable decisions by the Senior Management Team.

I remember I was at a GIS where the present CEO, Mike Zafirofski , was attempting to put a friendly smile on the capping of the pension scheme. A former co-worker went up to the mic and criticized the CEO and asked the pointed question at the end, “… I don’t know how you sleep at night!” I wonder how Mike Zafirofski is sleeping these days?

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Pensions and Severance

I wrote this back when I was laid off from Nortel, and before settling my pension and severance. This ends up being very prophetic. The Nortel pension did actually collapse, and sooner than I thought. Luckily, I got out of it before that happened.

One of the major interesting issues that I am facing is whether to opt out of Nortel’s pension plan. If I opt out I get a lump sum payment (which will mostly be transferred to a Locked In Retirement Account (LIRA)) . The other option is to leave the money in Nortel’s pension plan. If I leave it I can draw from it at either age 55 (at an actuarially lowered rate) or 65.

pension and severance
Nortel Once a Giant Now Deceased High Tech Firm

As I have said previously I will be opting out. I have very little confidence the money will be available when I get to retirement age. I read in the Globe and Mail the following (by Derek DeCloet):

The bad news is that at the start of this year, Nortel’s plans were already short by $1.2-billion (U.S.). The worse news is that 53 per cent of the assets were in stocks, which have been annihilated. So the pension hole has become a cavern – one that will have to be filled with cash that the distressed company would rather use for other things. Like surviving, for instance.

Derek DeCloet Globe and Mail
Questrade

I am concerned, as I was supposed to receive information within 30 days of my severance about my pension options. I have not received anything in the mail as of yet, and I now wonder what new “wrinkles” may arrive in terms of this money.

My view is that this money is mine, and I have earned it over the 20+ years I worked at Nortel. Given they “capped” this pension as of January 1 2007, leaving my money there makes little or no sense to me. If anyone cares to comment or disagree, please feel free I am open to discussion on this issue.

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Twenty Years in One Line

I wrote this article about a month after being laid off from Nortel in 2008. It was before I realized how lucky I was to get laid off at that time. Getting severance paid was a massive thing for me.

The Finality of Severance

As of Tuesday October the 30th 2008, I am officially no longer an employee of Nortel. The “severance machine” started grinding this past Friday. The portion of my severance that I have elected to take this year appeared in my bank account. My first reaction was shocked seeing that value in my bank account.

After panicking that my instructions had not been followed for my severance (they had), I then calmed down and became my usual philosophical self and started hearing that old Peggy Lee song, “Is that all there is?”. Twenty years of my life summed up in a bank entry (a five-digit bank entry, so I am not complaining about the sum itself). It just seems so final.

Over my twenty years at Nortel, I have met and worked with some of the most amazing people. I have seen technological changes that staggered me when I think about how life was before these technological “miracles.” I have had four children, and many beautiful things have happened. Many sacrifices were made for work. At the end of it, I have one line in a Bank Statement to sum it up.

It could be worse. I know people that don’t even have one line in their bank account.

To The Folks I leave Behind

My other regret is I never got to send a “So Long and thanks for all the fish” e-mail. For those who are still on the inside at Nortel, please treat this posting as my “You’ve been a great group of folks to work with” posting. I learned a lot at Nortel. Let’s see if it is true that Nortel/BNR was a “great place to have worked at.”

With Severance in Hand Now the Hard Part

I need to get a new job (some prospects) soon. I can then apply this package to some serious financial planning and debt reduction schemes. Finding a job these days is not a simple one, and I have learned a lot but still have more to learn.

I leave you with this one factoid I have learned, 80% of jobs are found through networking, so simply applying to a plethora of employment is not enough. You must go out and market yourself and “press the flesh” like a politician to find your next job.

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