Category Archives: investing

December: a podcast premiere

The nice folks at http://www.thisweekinenergy.tv/ (TWiE) invited me to guest on their podcast on their late November episode, Good News, Bad News, Ugly News. While most of their guests are leading experts in their fields, and I’m just a talkative and reasonably-knowledgeable former fuel cell engineer, I heeded Gore Vidal’s wisdom and agreed. :)

It being the first time my comments were being recorded for posterity (well… outside NSA headquarters, that is) I spent a few hours doing homework, researching the backgrounds of the energy stories we were scheduled to discuss, and refining / rehearsing a few talking points.

And in retrospect, maybe I should’ve gotten some vocal coaching instead. Listening to the podcast after the fact, I was struck by how high my voice sounded. I sounded a bit like Preston Manning, the high-talker who led Canada’s Reform Party (or, as he said it, the Re-foooorm Party) out of the political wilderness and into… well, I guess he led them around in the wilderness for awhile. :)

Fun fact: Preston is the son of long-time Alberta Premier Ernest Manning, who – in a twist that would have given Christopher Hitchens an aneurism – led the province six days a week, then spent Sundays leading the most popular radio show in Alberta: “Back to the Bible Hour”.

Manning may have set the precedent that former professional wrestler and Minnesota Governor (yes, Minnesota Governor) Jesse “the Body” Ventura followed back in 1999 when he guest-refereed a WWF match at their Summerslam pay-per-view while Governor. Ventura dismissed the backlash, arguing to the effect of “I work six days a week; what I do on Sundays is my own business”.

Another thing I discovered while listening the podcast was that the care I took to carefully compose my sentences meant that I wound up speaking those sentences. Clause by clause. Just like Captain Kirk used to do. On the old TV series. Never shall I mock. William Shatner. Again!

GCR

I had a couple pieces go up in GreenCarReports in December – the first being the usual monthly assessment of the Canadian EV market. While these pieces are generally about as exciting to read (and write) as financial statements, I was able to weave in a reference to the fact that – hitting a very rough patch after a string of gold and platinum records in the 1970’s – one of the members of Chicago suggested sarcastically that a recent album had gone “aluminum, maybe plywood”.

Henceforth, I’ll be trying to award an aluminum/plywood medal to the lowest-selling electric vehicle in Canada each month. Maybe one day they can add it as an 8th-place medal to the Olympics. That way, the athletes not in the running for the regular medals can have something to shoot for. :)

Speaking of last place finishes, the gold-o-phile Klippenstein investment account sank like lead this past year. Ah, if only I could shrink our life’s other problems half as effectively… ;)

It was classic: just like last time (late 2008/early 2009) I ran out of investible cash before the market ran out of “down”. There’s probably a lesson to be had somewhere in there, but I haven’t the patience to learn it. :)

My other GreenCarReports article featured some data that Waterloo-based MyCarma had passed along, about the effect of winter temperature on electric vehicle range. (It’s also the most popular thing I’ve written for them — at almost 8,000 page views, it’s as if the entire population of the French island of St. Pierre et Miquelon had read it. Canadians may know it as “that tiny island France owns just off Newfoundland”.)

This was awesomely cool to write, as it gave me the chance to shape the messaging around fairly new data about how EV range suffers in cold weather. Keeping with the Seinfeld references, I termed the phenomenon “range shrinkage”. :)

CT

Lastly, I wrote a piece for CleanTechnica on Ontario KO’ing coal, which earned a re-tweet from Canadian Green Party Leader Elizabeth May. (And a few other folks who don’t merit their own Wikipedia entries. ;) )

On the topic of KO’s, in 2013 Canada’s Liberal Party somehow recovered from Michael Ignatieff’s self-inflicted knockout punch, and ended the year leading in the polls, surpassing both the Conservatives and New Democrats. (The average of recent polls is currently running at 34-27-23.)

And considering how many “please-donate” mailings the Liberals are sending me (a former donor) I’ve got to think they’re for real. Only a few years ago, I practically had to pull a Fry to find out where to address a cheque.

While Stephen Harper’s character-assassins did a fine job on the prior two Liberal leaders, Trudeau is proving a harder target. As Spike Lee might say, “it’s gotta be the hair”. Worse yet for the Prime Minister, the Liberal leader has a well-known charity boxing record: if challenged on his plans to reform the Senate, the son of Trudeau could always turn around and quip:

“Look, I beat Patrick Brazeau into a bloody pulp [in the boxing match]. You think anyone else in the Senate is going to pull any shit after that?”

Heck, given how loose-lipped he is… he just might! ;)

Very amateur investing, yellow-tinted glasses edition

(originally written Oct 2, 2011.  Part of Great Upload of 2013.)

I find it amusing that, while many of my fellow Vancouverites are attending places of worship this Sunday morning, I’m taking a break from work to muse about money, that root of all kinds of evil.  :)

Right now, the stock market is a relatively cheery (I said relatively) topic for me, since I’ve fared so badly in my first few attempts at Fate of the World, a computer game in the “Civilization” genre where you, at the head of a UN-like agency, attempt to prevent catastrophic global warming.

Designed in conjunction with climate researchers, you need to shrewdly manage your budget by enacting effective climate legislation, while appeasing locals on each continent just enough that they don’t kick you out and pursue their own path.  :)

In addition to the well-known options like cap-and-trade, renewables, biofuels, nuclear and efficiency policies, you can do more exotic things like legislate organic farming, enforce a vegetarian diet (cows burp a lot), spray aerosols to reflect sunlight, or use a Tobin Tax on financial speculation to raise funds.

Meanwhile, back in Reality…

While the planet (or at least, Texas) burns, stock markets hit an important milestone recently, with dividend yields from American blue-chip companies surpassing the yields on US gov’t bonds.  This hasn’t happened for a very long time, and is a signal that in several years, the price of most stocks (relative to earnings) will reach the point where even your financial advisor can invest your money for a decent rate-of-return.  ;)

This is due to the fact that — for whatever reason — stock market prices tend to cycle between too-optimistic (1929, 1966) and too-pessimistic (1947, 1980).  We came off a too-optimistic high around 2000, so one would reasonably expect that after about five more years of investment purgatory, stock price trends will slant upwards again.

In the absence of catastrophic global warming, that is.  :P

Gold

Gold feeds off stock market pessimism, so one would expect that maybe sometime between the next two Winter Olympics, it will spike upwards in a manner that dwarfs the frenzy that happened in August.  I guess I’ll insert yesterday’s Dilbert cartoon here:

Dilbert Oct 1 2011

Gold has properly dropped for the past month, but past precedent has such hangovers lasting two.  Too many enthusiasts are still humming “don’t stop believing”.  ;)

The corporate locusts known as gold mining stocks didn’t go up much earlier this year, and as such are likely to enjoy a big run-up through next spring.  [note from 2013: this totally didn’t happen.  By which I mean, the absolute opposite happened.]  The main reason is that companies’ profit margins have now gone through the roof, which means they’ll increase dividends, which in turn will attract pension funds and other big money pools.

It’s worth wondering why the stocks would rise with the metal in winter but not in summer.  The most plausible explanation I’ve encountered, is that when a commodity price rises to unprecedented levels (as gold did in the summer) no one thinks they’ll stay there for long.  After all, it’s unprecedented…!

A Tim Thomas tangent

Taking a hockey example, goalie Tim Thomas had a great year in 2008-2009.  But since he was 35 at the time, and had never really shone before, a lot of people thought it was a fluke.  Especially since he had a ho-hum year in 2009-2010, even losing the starting goalie position to Tukka Rask.

But if a commodity starts creeping upwards a second time to hitherto-unprecedented levels, stock analysts start revising their price assumptions upwards; companies get valued much more richly; and thanks to stock options, mediocre executives get valued most richly of all.  ;)

Back to hockey, Tim Thomas did the impossible and put up better-than-Dominik-Hasek numbers in 2010-2011; what with his 2008-2009 performance, everyone now expects him to the best goalie in the league, and he was probably the first goalie picked in every hockey pool this fall.  This, despite the fact that at 38, he can’t have that many good years left in him.  Such are our human foibles.

On Expert Foxes and Hedgehogs

We recently covered a book (Future Babble) in our work book club about the uselessness of expert predictions for the future.  The author argued that experts who present themselves (over)confidently — that is to say, expert “hedgehogs” — are more likely to be wrong than the ones who hedge their predictions (expert “foxes”).  A good pairing here would be that of Dennis Gartman and Richard Russell.  …and the argument holds!

Gartman, a bombastic investment newsletter writer, made the mistake of enabling skeptics (such as me) to follow his performance, by allowing an exchange-traded fund to follow his instructions.  It was outperformed by 98% of mutual funds in 2009, and 82% of funds in 2010.  I’m looking for a three-peat come December.  :)  [note from 2013: I think Gartman actually did above-average in 2011 among mutual funds.  But not compared to the index, of course.  :)  ]

Richard Russell has been writing his financial newsletter writer almost as long as Elizabeth II has been the Queen of England.  Apart from beating his drum about decadal trends, he doesn’t claim to know much about where things are going.  But he takes subscribers’ money anyways.  ;)

He’s credited with recommending buying stocks at the bottom in 1974, switching from gold to stocks in 1980, and then switching back in 1999, all of which were prescient.  I remember reading something he wrote around 2003, suggesting that by the time gold finished rising, one ounce would almost buy the Dow.  Emphasizing his reluctance to predict the number, he suggested that if absolutely forced to guess he’d say $3000, but that he wasn’t confident in it.  (It was about $300/oz at the time.)

At the time I thought, “must be nice to have rich-person problems”.  Actually, come to think of it, I still do… :)

The Black Swan’s Thanksgiving Turkey

(originally written Nov 24, 2011.  Part of Great Upload of 2013.)

It came to my attention that Naseem Nicholas Taleb, who authored The Black Swan (surprisingly, not about a ballet dancer, but about financial crises) discussed other avians in his book, among them the Thanksgiving turkey.  Per the Wikipedia page, he seems to’ve co-opted the idea from a turkey anecdote by philosopher Bertrand Russell, whose atheism doubtless led antagonists to brand him cuckoo.  ;)

The abrupt change in the turkey’s situation is part of an argument that it’s ridiculous to project present trends very far into the future, because, well, things change.  Hockey-wise, the Gretzky-led Edmonton Oilers of the 1980’s inspired a high-scoring decade for the NHL.  This was followed by a low-scoring decade inflicted on fans by the New Jersey Devils’ success with the neutral-zone trap in 1994-1995.  (As per the viral video most of you’ve doubtless seen, the Tampa Bay Lightning are going retro with their 1-3-1 system.  Lightning GM Steve Yzerman was part of the Red Wings team the Devils upset in the 1995 Stanley Cup Finals.)

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The world (of investing) according to Dante

(originally written Oct 21, 2011.  Part of Great Upload of 2013.)

It seems like the financial markets will have an “upwards bias” for the next few months, despite the circling-the-drain quality of the macroeconomic picture, which inspired this magazine cover from the Oct 1 issue of The Economist magazine.

20111001_CNA400[1]

If there’s anything I’ve learned over my years watching stocks (and, to be perfectly honest, there isn’t  ;) )  it’s to do the opposite of what The Economist says on its cover, a phenomenon known as the magazine cover indicator:

  • you’d’ve tripled your money in Ford in about two years by buying them after the July 2009 “Detroitosaurus Rex” issue
  • a couple months prior to that, the cover story “The Jobs Crisis” coincided with the bottom of the stock markets
  • of course, their timing is occasionally off; they did an oil-barrel cover in May 2008, and the price increased several percent into July before plummeting.

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Sniffs from a Schiff…

(Originally written March 7, 2012.  Part of Great Upload of 2013.)

A colleague once showed me a book by Peter Schiff, in which the author and investment-house CEO purported to explain how the US got into the muddle they’re in.

Like so many textbooks I left it unread, but according to Wikipedia, Schiff believes a lot of the US’s problems would go away if people just saved more money.  (Oddly enough, there’s no mention of drastically-higher taxes on high-income earners like himself.  Go figure…!  ;)  )  As is typical for people in the financial sector, he finds a way to blame government.  :)

So it’s hilarious that his brother and coworker Andrew Schiff is saving so little from his $350k salary that he’s worried about the effect a smaller-than-average bonus would have on his lifestyle!  (It’s all over the web, so you may well have been pointed to it already.)

Schiff, 46, is facing another kind of jam this year: Paid a lower bonus, he said the $350,000 he earns, enough to put him in the country’s top 1 percent by income, doesn’t cover his family’s private-school tuition, a Kent, Conneticut, summer rental and the upgrade they would like from their 1,200-square- foot Brooklyn duplex.

“I feel stuck,” Schiff said. “The New York that I wanted to have is still just beyond my reach.”

– – – – – –

The malaise is shared by Schiff, the New York-based marketing director for Euro Pacific Capital, where his brother is CEO. His family rents the lower duplex of a brownstone in Cobble Hill, where his two children share a room. His 10-year-old daughter is a student at $32,000-a-year Poly Prep Country Day School in Brooklyn. His son, 7, will apply in a few years.

“I can’t imagine what I’m going to do,” Schiff said. “I’m crammed into 1,200 square feet. I don’t have a dishwasher. We do all our dishes by hand.”

Welcome to the club, Schiff — may I suggest cucumber-scented Method dish detergent?  It’s “aromatherapeutic”!  ;)

And a note to my fellow 10-percenters

Not that we should snort too loudly of course; if any of us 10-percenters [most folks on I emailed this to, being fellow engineers or other professionals, are probably among the top 10% of individual income earners in Canada] were to complain about the lifestyles we strive for being just out of our reach (thanks to the hedonic treadmill), there’d be people a-plenty across town, let alone across the world, justly ridiculing us for our own fiscal profligacy and distorted lifestyle expectations!  :)

From housing to plumbing

(originally written Mar 4, 2012.  Part of Great Upload of 2013.)

Readers (regular and irregular both) may know that about six years ago, I was quoted in MacLean’s saying Canadian housing was in a bubble.  So after six long years of looking very wrong, I was delighted to see the right-wing rag run a cover story proclaiming that Canadian housing is in a bubble!  So I’ll dedicate this email to all the stopped clocks out there — twice a day, your time will come!  :)

Like anyone else challenged by a cognitive dissonance between ego and evidence, I naturally prefer the delusion that I wasn’t wrong, just early.  ;)  Having figured prices would fall by 2008 at the latest, I like to think I was only off by an Olympiad, or eight “Friedman units“.  On the more forgiving fossil-record timescale, I nailed it!

MacLean’s take

MacLean’s cites low interest rates and lax lending standards as a (sub?)prime reason for the real estate boom-turned-bubble.  This can kind of be expected, because most people aren’t great with money.  It’s a financial variant of Sturgeon’s Law, which says that “ninety percent of everything is crap”.  Take housing market predictions, for example…  ;)

Given the opportunity to make very bad decisions by enabling financial institutions, most people will do so.  Indeed, the mutual fund industry owes its existence to people’s predilection for sub-par performance!  Of course, most guys who throw their own darts probably do even worse, so the best way to look at mutual funds is probably to see them as a less-damaging “cowpox” to the “smallpox” of DIY investing.  :)

My take

As you’d expect from a left-leaning atheist on an issue like this, I’m with… Jesus, and blame the bankers.  ;)  If people are trying to borrow beyond their means, competent financial institutions are supposed to not make loans.  Of course, fewer loans means lower profits and much lower stock-option-based executive compensation.  (As they say, no good deed goes unpunished.)  By loosening lending standards, bank executives can enjoy kingly compensation; and by the time the crisis hits, they’ve moved on to other pillage-able pastures.  Which explains why cartoons like this make the rounds:

Banks lending / too much damn money / to people, is a haiku microcosm of how Greece came to be in its quandary: it borrowed more than any sane lender could’ve reasonably expected it to repay.  Which is why European governments are trying to work out “bailouts” by which they launder money through Greece to recapitalize their countries’ banks.  The “choose your own adventure” blog entry here does a pretty good job of showing the stalemate.

Compounding the problem, austerity packages are being pitched, which will only make the crisis worse; in cutting public services, austerity measures reduce a country’s GDP (because public-sector activities count towards GDP) meaning debt has to be repaid from an even smaller national account.

The endgame seems to be that Greece defaults and reverts to its own currency, while everyone else does the duck-and-cover.  After mistiming the Canadian housing market — and fuel cell vehicle commercialization for that matter — I’ll decline to guess when that happens.  ;)  A cheaper currency would cement Greece as a cheap vacationing spot (tourism is one of their biggest industries) and allow them to attract some manufacturing jobs with which to rebuild their economy.

There’re many precedents for thinking that default and devaluation would work.  Iceland defaulted a few years back; its GDP is now higher than pre-crisis levels, and its government debt is now back at “investment grade”!  Argentina also did pretty well after its default in the early 2000’s… and a forgiving of debts (effectively a society-wide default) preceded the rise of democracy in classical Athens.

The march of progress.  And plumbing!

Pessimists might note that we’re not always that good at learning the lessons of history — even as Iceland resurges, Latvia is in a “Shock Doctrine” death spiral.  But here on Team Glass-half-full, I like to think that we do in fact make slow progress.  :)   Consider universal indoor plumbing, which none of us would want to live without.  First invented around 2000BC by some proto-Tommy Douglas of the Harappan Civilization in the Indus Valley, this was such a breakthrough that within thirty-eight centuries London, England — capital of the globe-straddling British Empire — had decided to build its own!  Progress — there’s no stopping it!  ;)

Goodness, the biggest bull market in history is about to begin — eventually! :)

(originally written May 8, 2012.  Part of my “Great Upload of 2013”)

There was a great article in the Globe & Mail investment section about one John Maudlin’s predictions that after the stock market moves down for awhile, it will move up.  Which, I’m sure you’ll agree, is brilliant stuff — blindingly insightful.  Worth every penny!  (Mainly because his online newsletter is free.  :)  )

Alas, as much as I’d like to skewer his ideas, there’s a maddeningly good chance that he’ll be right.  If stocks actually start rising “for good” five years from now, there will have been a 17-year period where the stock indexes stayed flat, finishing at roughly the level where they started (2000-2017).  This was preceded by an 18-year period where stocks kept moving up (1982-2000) which was itself preceded by a 16-year period of relative flatness (1966-1982) which was preceded by a 17-year period… well, you get the picture: tide goes in, tide goes out.*

With this kind of self-reinforcing 17-year cycle, you would think the stock market’s mascot would be a cicada.  But no, they inexplicably chose a bull and a bear; about the only thing they have in common, is tapeworms.

Of course, bold predictions don’t always turn out well, as gold mutual fund runner Charles Oliver found out last month.  Having bet his hair in April 2008 that gold would hit $2000 by last month, he now sports the Lex Luthor look.  Mercifully declining to go double-or-nothing, he maintains a confidence that gold would hit the big 2-0-0-0 by year’s end.  As of this morning [in May 2012], he’s “only” got $400 to go.  ;)

I’d imagine the two aforementioned predictions will interrelate, because bad times float gold’s boat, while in good times it drops like the rock it is.  (And that generally means platinum gets cheaper, so yay, fuel cells!)  Dr. Evil above foresees ongoing misery pushing gold upwards, and Mr. M sees it keeping stocks down.  But whenever we go through the looking glass to prosperous times, gold is likely to lose its allure.  So I plan to be decidedly dismissive towards the stuff from roughly 2017 to, let’s see… 2034.  ;)

Good times ’til the mid-twenty-thirties would be nice for guys like me, who would be pushing sixty; it would imply that our retirement savings could be in reasonably good shape — even if the retirement age will be something like 80 by then.  :)  (I wonder how long until London Life changes its product name to “Freedom 65”?)  Of course, this all depends on one’s being in the position of being able to save money, something that commentators often forget, because that’s generally not their problem.

Upon achieving crotchety old geezerdom, I for one am particularly looking forward to regaling young-folk with boring stories about how much better things were when I was young — once you factor out the lesser technology, widespread poverty, appalling injustice and environmental wreckage.  ;)

Of course, I’ll want to emphasize how much tougher we were as kids.  For example, we attended seismically unsound schools: the Vancouver School Board recently announced plans to raze my earthquake-vulnerable elementary-school alma mater, L’Ecole Bilingue, and replace it with something a bit less crumbly.  Of course, having been built long before bilingualism — back in 1912, when BC was led by Premier Dick McBride (seriously) — for the first few decades it went by its maiden name, “Cecil Rhodes School”.

——-

* there’s nothing magical about 17 years, except for the fact that since it’s happened a few times before, enough people are likely to expect it to happen again, causing a self-reinforcing cycle.  More mundanely, if the stock market is still at current levels five years from now, dividends and profits are likely to be attractive enough that “value investor” types come out of hibernation and shovel gobs of money into stocks, eventually driving them upwards.  :)

Dinner with the Overclass (II) (“Great Upload of 2013”)

(written April 10, 2012 – part of my Great Upload of 2013)

So I got special, spousal dispensation to go to a mutual fund dinner the other night.  As a thank-you for generating a lot of fees for the company, attendees got dinner (including drinks — pity that I don’t), a pen, paper pad, mints, and chocolate wrapped up to look like a silver bar.  (Milk chocolate; they didn’t spring for the good stuff.  Even financial houses have their limits, I suppose.)  I guess it’s kind of like how some credit cards offer a cash-back option, which kicks back a fraction of the interest their victims clients pay them!

I met my account representative for the first time, as well; and discovered to my great pleasure that I’m taller than him.  (There’s a complex in there somewhere, I’m sure of it. :) )  The funny thing is, I think he was assigned to me because the company thought I was Jewish — the tip-off being when they sent me a New Year’s greeting last September, in time for Rosh Hashanah.  I wonder whether, given the economic strength of the Chinese ethnic minority in south-east Asia, financial advisor types over there send Lunar New Year cards to clientele with Chinese-sounding last names?

Goooooold

Summer came early to many parts of the US this spring; in March, record high temperatures outpaced lows by a 35:1 margin, and a couple states even broke their month-of-April temperature records!  It also came early to the precious metals markets, starting with a suspiciously-instantaneous $50 drop in gold on Feb 29.  (What self-interested seller would unload so much product so suddenly as to crater the prices they can get for it?)  Up ’til then, copper’s curiously-coveted cousins had followed their usual pattern of floating upwards until roughly summertime blockbuster-movie season, leaving me sitting giddily (and smiling Cheshire-ly) in the catbird seat.  Two months on, it feels more like a litter-box.  :)

A couple weeks back, things got so aberrationally low that I even sold the company stock that I bought last year, netting a vanishingly small profit of about $120 after fees.  (Timbits for everybody!  Whee!)  The money was reallocated to a gold-related mutual fund, which promptly moved… floor-ward.  (Timbits offer postponed.)  As pleasing as it is to get stuff on discount, there’s always a twang of regret when you see a lower clearance price, later!  Of course, there’s nothing much to do but wait for the “sale” to end, and regular prices to return.  Such is the nature of the “long game”.  :)

(Note: “buying and waiting for the sale to end” is an astonishingly poorly-advised strategy when it comes to individual companies, but works fairly well on an index-of-companies basis.  While individual companies are prone to bankruptcy, stock indexes tend to bounce back: they tend to include not just weakened companies going out of business, but the stronger ones driving the weak ones into extinction!)

How to miscalculate debts owing…

During the evening, one of the gold-pushing, silver-tongued speakers made a cringe-worthy comment to the effect that the US has a $12 trillion economy, but had outstanding obligations of $100 trillion.  This meme has been making the rounds, and the reader/listener is generally supposed to conclude either that the US dollar is doomed (so they should stampede into gold as a store of value), or that the welfare state is doomed (and so we have to cut taxes on the rich.  Wait, what?).

Here, the magician’s trick is to compare the size of this year’s economy, with the cumulative cost of every expense reaching decades into the future.  It would be as if we told Leo, “our household annual income is X; the cost to raise you for the next 18 years is way bigger, so here’s a copy of Oliver Twist, keep in touch”.  Similar chicanery is used in “tax freedom day” calculations, which overlook the fact that the yin of taxes paid is matched by the yang of public services.

Of course, I shouldn’t be overly critical of the low-taxation philosophy pushed by right-wing American think-tanks and their Canadian franchisees (e.g. the Fraser Institute).  If a recent book is to be believed, one of the reasons Canada even exists today is that when the Americans tried to manifest their destiny in the War of 1812, American hawks refused to raise taxes enough to pay for a proper army, making it possible for a combination of British soldiers, Canadian militiamen, First Nations warriors, and Laura Secord, to repel them.  :)

A toast to low taxes … in America, that is!

So, this coming barbeque season, on the bicentennial our southern cousins’ northern invasion, feel free to raise an occasional glass to toast the role that low taxes — another country’s low taxes — played, in the history of how Canada came to be the nation it is today!  :)

Dinner with the Overclass (“Great Upload of 2013”)

(originally written Nov 17, 2010.  Part of the Great Upload of 2013.)

We had the pleasure of dining with the overclass on Monday, at an event put on by the wealth-services branch of a mutual fund company.  I’d charmed our way into that club earlier in the year, despite falling well short of the minimum asset requirements, using those charismatic powers that my wife seems curiously oblivious to. ;)  What clinched the deal for me, was the lure of a free dinner every time those guys swung through town — finally, someone giving us something for letting them gamble with our money! ;)

While there were a few of us pre-retirees there, the crowd leaned well-dressed and geriatric. No doubt some were keen wanting to move from merely ostentatious to fully obscene wealth — the kind of folks who might have forgotten (or never known?) the more immediate financial concerns of the bottom 98% of their fellow citizens, even in a well-to-do country like Canada. I believe I was the only person wearing sneakers. :)

A lot of people looked like they could’ve been from (exclusive Vancouver private boys’ school) St. George’s class of 1960. Or maybe 1950. But ex-Ballard colleagues were there — which was pretty cool. If anyone wants to get in touch with them, let me know.

The Eur-“uh-oh”-zone

The evening consisted of free (I wish I was a drinker!) cocktails followed by a dinner lecture during which each money manager discussed their economic outlook — which generally fell somewhere in the ominous-to-apocalyptic spectrum. (“The market giveth, and the market taketh away…”) Mainly for the reasons described in this deservedly-viral YouTube video.

With catastrophic irony, though the US Federal Reserve is trying to weaken the dollar with “quantitative easing” (to improve their economy through exports) it seems more probable (60/40?) that the US dollar will rise from here. (It’s notable that the Japanese government has been trying on and off to weaken the yen for, oh, half my life, but their currency recently hit all-time highs against the US dollar.) As bad as things are in the US, they’re even worse in Western Europe. It’s as if the US has halted its horse on the racetrack… but the EU’s horse is moving backwards.

Ireland is going to need a bailout; they’ll probably get one, because Germany leads the Euro bloc, and German banks are acutely exposed to Irish debt. Portugal’s also looking “sinking ship”-shape, and Spain — whose economy is roughly the size of Canada’s — is listing badly. Back in the day the US used “domino theory” to justify propping up governments in south-east Asia to prevent communism from spreading (“if Vietnam falls, Cambodia will fall, then Laos, and then … eventually, India”).

Right now, Eurozone governments are using similar logic, trying vainly to contain the financial contagion. Political problems are inevitably going to emerge from German bankers imposing austerity on Ireland, French citizens subsidizing Greek ones, and so forth. At least in the US, while “red states” might be irritated at having to bail out California, they share a national identity and mythos.

Siiiiiiilver

The speakers spent a bunch of time talking about silver, which has gotten a bit of attention with its sharp ascent (and descent) lately. While falling industrial consumption can negatively impact prices during tougher times, it would seem that in upcoming years it should continue to do well. This is mainly because, over the years, the “geniuses” at certain investment banks placed highly-leveraged bets on the commodity’s price… never imagined that anyone would actually be paranoid enough to take delivery of the actual metal, instead of booking paper profits. So they’re actually on the hook for a lot more silver than is readily available for purchase on the market.

Smelling blood, their deep-pocketed rivals have been hoovering up all available silver, in a successful-thus-far attempt to create scarcity and gouge the investment banks. As an example, the Sprott folks recently started up an exchange-traded fund whose business plan is… to store silver bars in a vault. They had to cut their IPO back from $750 million, though, because they could ‘only’ find about $600 million worth of silver on the open market. One of those ‘rich people problems’…

Mind you, I largely ignore the silver market. Because it’s so small, it’s insanely volatile — relatively small flows of money (by global standards) can completely distort the market, upwards or downwards. Most developing countries which successfully navigated their way to reasonable prosperity restricted capital flows for this same reason: too much money suddenly coming into a small economy can quickly create a bubble, and too much money suddenly leaving can exacerbate misery, neither of which are particularly beneficial.

517 – 1 !!  Awwwright!

One bright side for the global south did come out of the Overclass Night, though — it was the firm’s assessment that after centuries of colonization, mercantilism and marginalization, developing countries are generally in much better financial shape than their First World counterparts. Stagnation in the West for the next several years, should contrast with relative health in the majority world. Score one for the underdogs! :)

By my scorecard that makes it — let’s see, Columbus was 1492, right? — oh, about 517-1. ;)

Green byelection blues

Alas, the Green Party didn’t pick any seats up in the Nov 26 Canadian federal by-elections.  While their strong showings probably count as a real moral victory, I imagine at this stage they’d prefer amoral, real victories.  ;)  As it turns out, Parliament’s composition is unchanged, “while my green heart gently weeps”.  Despite donating to the Official Opposition (whomever it’s been) since 2008, I have a soft spot for the plucky upstarts.

Chris Turner got 25% of the vote in the Calgary Centre riding; which, according to a Globe & Mail commentary from Canadian polling blog threehundredeight, could mean that he pulled a lot of the “Red Tory” voters.  Since probably only 1-2% of Canadians are dues-paying members of political parties (see p16 of this report), some of this blog’s other readers might not be up to speed, so I’ll attempt to summarize for their sake.  :)

After years in the political wilderness first as an Opposition member and then as a lobbyist, current PM Stephen Harper succeeded in uniting far-right-wing (by Canadian standards) Alliance party with right-wing (by Canadian standards) Progressive Conservative party.  And promptly positioned the new Conservative Party considerably to the right of the old Progressive Conservatives.

In the recent provincial elections in Alberta, the federal Conservatives openly supported the far-right (by Canadian standards) Wildrose Party, infuriating many Albertans who vote Conservative federally, but vote Progressive Conservative, provincially.  These folks are called “Red Tories” because they’re on the progressive side of the conservative spectrum, and globally, red tends to be the colour of progressive parties, and blue is the colour of conservative parties.

The main exception is the US, where the red party — the Republicans — are the conservatives.  (And wow, are they ever!)  This is because they actually used to be the progressives, and the Democrats used to be the conservatives, with a hammerlock on the white vote in the southern US.  This all changed in the 1960’s when the Democratic Party embraced the Civil Rights movement.  The Republicans went after the white southerner vote, which is why the US has a progressive (by American standards) “Blue” Party and a conservative (by any standard) “Red” Party.

But back to Alberta, these so-called “Red Tories” appear to have defected en masse to the Green Party in this byelection, in displeasure at the Conservatives’ “as-right-wing-as-the-Wildrose-Party” candidate.

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