Tag Archives: mutual funds

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. ;)