Can Captain America Save the World’s Economy?


The U.S. economy is considered the cleanest shirt in the laundry basket. Its GDP grew by only 2.6% during the 4th quarter which was below estimates. Considering the low-cost of energy, most economists were predicting faster growth. Money is still flowing into the U.S. bond market. The yield of the 10 year bond is down to 1.66% from 1.8% which indicates the fear level is still increasing. The S&P 500, the Dow Jones and NASDAQ are all down for the month of January.


The Euro Zone is awash in red ink, debt levels in the  southern regions are still hindering growth. The collapse in energy costs are deflationary which will hamper the effectiveness of Q.E. A possible Greek exit from the Euro, along with a Russian debt default could send shock waves throughout the financial markets.


U.S. multi-national corporations have to do battle in foreign markets and the results are weaken due to the strong U.S. dollar. The sales and profits that they make are reduce once they convert back to U.S. funds. The Fed is talking about raising interest rates sometime in 2015 which will put more pressure on profit margins. Raising interest rates could also affect the weak housing market making borrowing more expensive.


Can economic growth in America stop the Canadian economy from sinking further? Our economic growth was only 1.9% and was negative for the month of November. Is it in danger of plummeting along with our dollar? The United States is our biggest trading partner. When they get a cold, Canada gets a pneumonia. The Loonie has already dropped 9% for the month of January. There is speculation that the Bank of Canada may cut interest rates again which could drive the Canadian dollar down to the $0.70 level.

us def

The defensive sectors of the U.S. economy has started to head lower. Consumer staples, health care and utilities are still demonstrating positive returns for 2015 but the above chart is a little disturbing.


It is still too early to jump into the oil sector. The positive news on Friday that the number of oil drilling rigs are coming down is only part of the story. A good friend of mine suggested that the new King of Saudi Arabia is more worried about Iran’s nuclear program than competition from U.S. production. Before he became King, he was the minister of defense. A long period of low oil prices may bring Iran’s economy to its knees causing social unrest. It could force the leadership to suspend its nuclear program in exchange for a cut in oil production by Saudi Arabia.


My defensive strategy for 2015 has been working well so far. Moving money out of Canada has boosted my investment returns by 9% so far. A possible rise in U.S interest rates and another cut by the Bank of Canada could even increase the value of my U.S. cash by another 10% if the Loonie falls to $0.70 by the end of 2015.

To my American readers enjoy the Super Bowl and remember the best offense is defense!

Bear Market in the Canadian Oil Market


bear2   bear1

I have been a bear when it comes to Canadian oil companies. My view hasn’t changed much because our biggest customer is the U.S. and fracking has made importing oil from us less important. Plus the only way to get it there is by rail which is more expensive than by pipeline. Remember that 99% of our oil exports goes to the U.S. and our oil trades at a discount to WTI.

The keystone pipeline looks like it will not be approved until Obama is out of office and it will take another few years to build. The provinces, Federal government along with our native Indians are still fighting over the Northern Gateway pipeline. I have no idea if or when it will be built. We have two refineries in the east and no oil pipeline linking them to Western Canada

We don’t have any exporting LNG plants operating in Canada. We are still 3 to 5 years away from building one in British Columbia. The Bank of Canada is basing its monetary policy on the price of oil staying around $60 for the next two years. Not very bullish in my mind.

Canadian oil companies may bounce back when oil prices come back up but long term, we are years away from exporting oil & gas to other areas in the world.



Money Tip: Ask for Job Perks


There are many things that I miss about being self-employed. Being the owner of a small business has both its perks and major difficulties. I really miss having the government subsidizing my travel. However, I don’t miss the employee headaches!  Trying to keep key employees happy without breaking the bank was very challenging. Payroll taxes in Canada are ridiculous high, as much as an extra 10% on every dollar of wages.

I found giving an employee a monetary bonus was sometimes less effective as an incentive than giving them a memorable experience. Giving an employee some tickets to a sporting event like hockey, football or baseball was really appreciated. Theatre tickets and taking the spouse out for dinner worked wonders for employee morale. Conducting a business meeting inside the clubhouse lounge, after playing 18 holes of golf, was ten times better than a stuffy conference room.

Small companies are more apt to be creative in job perks. You may have to be bold and ask or even make suggestions to your boss. Bigger companies tend to offer a wider variety of deals.

Here are just a few possible job perks:

  • Discounts on purchasing company’s stock
  • Child daycare services
  • Gym memberships
  • Educational reimbursements
  • Discounts on cell services & data plans
  • Preferred pricing on computers & mobile devices
  • Group rates on car insurance
  • Preferred pricing on car leasing or purchases
  • Adding vacation days to a business trip to do some sight-seeing
  • Ask to take your spouse on a business trip with you

I learned the hard way that job perks sometimes are more effective than offering more money. I used to offer my plant  workers who were on piece work extra money for increasing production. I came to realized that some of them preferred a shorter work day over money. I put in a quota  system in giving them the option to get paid extra for every piece over quota or go home early.

The results were so amazing that I added a weekly production quota for the whole crew. Beat the quota and the  company paid for lunch on Friday. Pizza or chicken for lunch, along with some soft drinks was a small price to pay for the increasing production.

My humble beginnings started here!

It only took me 10 years  to get to here and I was a lot happier!


This is where I now work five months of the year. I am really happy if I can par this hole! You will have to guess how long it took me to get to this point in my life.


Remember that even a taxable job perk is cheaper than having to pay for it yourself. Hopefully, your boss values your work efforts and is open to creative job perks.        You will never know if you don’t ask!

If happen to be a boss reading this post, remember to reward the people who work for you!

I added a new page to my Smart Money web site; Suggestions for Blog Posts, please visit and drop me a line!


3 Central Bankers Surprise the Markets


Last week the Swiss central bank surprised the  markets with removing the peg of the Swiss Franc to the Euro. Maintaining the peg was costing the Swiss central bank billions in losses. Gold prices shot up and many hedge funds lost a bundle. ( I wonder if Super Mario gave them a heads up to his Q.E plans).


Canada’s Central Banker cut interest rates in Canada by .25%, the currency immediately fell!! He called the cut an insurance policy against the effect of lower oil prices to the Canadian economy. His team believes that the price of oil could stay in the $60 Range for the Next 2 YEARS. A lower dollar will hopefully help manufacturers to export  more and offset the lost of oil revenue. He didn’t rule out another rate cut if oil prices don’t rebound later in the year.


The European Central Banker surprised the markets with the size and duration of their new Q.E. program. They are going to buy 60 billion euro bonds per month until Sept. 2016 and longer if necessary. Only investment grade bonds will be purchased which excludes Greek bonds.

Why should you care? Most investors do not take currency risks when allocating their investment dollars. My fellow Canadians have gained investment returns if they have investments  in  the U.S. My U.S. readers who own investments outside the U.S. lost money this morning. Think again if you think that you are safe by owning U.S. stocks. J & J reported an 8% drop in earnings because of currency conversion from foreign profits. American multi-national corporations get as much as 40% of their total revenue outside the U.S.

I added a new page to my Smart Money web site; Suggestions for Blog Posts, please visit and drop me a line!

Are you a financial wizard?


I am a big fan of Harry Potter, if you haven’t read the books or seen the movies then this post will be very confusing. Sometimes my kids think that I am a wizard when it comes to money. It seems that I just have to wave my magic wand and money appears. I wish it was that easy.

I believe that behavioural phycology plays a bigger role than analytical skills in successful investing. What kind of financial wizard are you?


Ron can be scared and confused sometimes when it comes to investing. He wants to invest, he knows that he should! He comes from a family of very good investors which intimates him. There are periods that his investments aren’t very good but every so often he does comes up with a brilliant investment idea.



Harry is a bold and reckless investor. He jumps in without thinking. Even when he does make an investment plan, something always goes wrong. He has a lot of natural talent but most of his successes comes from just blind luck. Without the aid of his investing friends, he would have lost everything.


Snape is a market timer and sometimes a day trader. He thinks he is smarter than the whole market. He can invest for the  long-term or short sell the market. He gets in and gets out of the market numerous times but ends up losing everything. (Snape could also represent the mind set of Hedge fund managers)


Dumbledore is an overconfident and arrogant type investor. Although, he is very knowledgeable and a seasoned investor, he refuses to get any advice. He makes many mistakes which eventually destroys his portfolio.



Hermione is a hard-working, dedicated and insightful investor. She comes from a non-investing family but that doesn’t discourage her from being the best in her class. She is always doing research and see things that others miss. She is always prepare and reacts well to pressure. She not only invests wisely, she knows how to protect her portfolio and gets excellent investment results.



These people look like they all work on Wall Street?


When it comes to making investment decisions, does gender play a role? There are some interesting theories and studies available. I found these two thought-provoking:

“A six-year study by two professors, Brad Barber and Terrance Odean, found that men trade 45% more than women, and it reduces their net returns by 2.65 percentage points per year as opposed to 1.72 percentage points for women. The study involved using account data for over 35,000 households from a large discount brokerage.”

“There are three significant ways in which men and women differ on financial decisions, as described in a new analysis by Nelli Oster, director and investment strategist at BlackRock. “Several studies, including a national survey by LPL Financial, show that women tend to research investments in depth before making portfolio decisions, and the process, as a result, tends to take more time,” explained Oster. “Women also tend to be more patient as investors and consult their advisors before adjusting their portfolio positioning, whereas men are more prone to market timing impulses. To gather information, women often prefer group discussions to men’s more independent learning approach.”

What do you think, does gender play a role in making investment decisions? Which fictional character above defines your investment decision making process?




Is the U.S. Stock Market on a Roller-Coaster?


I HATE roller-coasters of any kind.  It looks like the 2015 stock market may have started the new year by jumping on one. It could be a short  ride or turn into a very long nasty ride. My stomach never seems to get use to them. Unfortunately, you are never sure when the ride is going to be over. I used to try trading the ups and downs when I was young. However, at my age, I can’t afford losing money plus watching my portfolio drop 30% to 50% is just too gut wrenching. The last major crash took three years to recover. The dot-com bubble took even longer,  no one knows if  2015 has started with a minor correction or is heading towards a crash. 

roller1 fighting1

Extreme volatility is not a good sign. The bears and the bulls are in a bitter battle. The inter day price movements have become even more erratic lately with big point swings in the U.S. markets during the trading day. An up swing during the morning turns into a big downward reversal in the afternoon. This is a warning sign along with a massive rush to bonds. The U.S. ten-year bond is my fear gauge, a lower yield equals more fear. The yield went from 1.92% on Monday to 1.82% on Friday.  That doesn’t seem like much of a drop but takes a lot of buying to move the yield. It was much lower during the week.

Ten day chart of the S&P 500, that is one bumpy ride!


The biggest benefit of lower oil prices is the transportation industry. The fast money has made  big profits in transportation stocks from Oct to Dec. Are they getting out? The spider sector EFT (xtn) has being falling in 2015 faster than  the S&P 500.


Where is the fast money going? Would you be surprised to know that the best performing sectors in 2015 was the  consumer staples (XLP), health care (XLV) and utilities (XLU).


In previous posts, I talked about protecting my portfolio by increasing my cash position. My U.S. cash is now worth 3% more, thanks to the fall in the value of  the Canadian dollar. The lower Canadian currency has also protected my U.S. investments, which are up 1%  for the year in Canadian dollar terms,despite the S&P being down 2%!

I love living in Canada but is it time to sell? I see big trouble ahead for the next few years. Our stock market has a 50% weighting in energy and materials, two sectors that will be slow to recover. Our financial industry is going to be affected by slow growth, a slowdown in housing and bad loans in the oil patch.

The Canadian business media experts point to the fact that a  lower Canadian dollar should help our manufacturing sector. Yet, Magna which manufactures car parts, dropped 12% this week after reporting lower revenue expectations for 2015! Bombardier which manufactures airplanes, just laid off 1,000 workers and the stock lost 25% of its value in one day. How low does our dollar have to go?

The Toronto market was up 267 points on Friday. Mostly due to a snap back in oil future prices which could give you some false hope. However, the U.S. markets are closed on Monday, if I was short oil futures, I would have covered yesterday along with other short sellers driving prices higher! Why cover a short position? Because you never know, an oil producer  could easily announce a production cut over the long weekend.

The chart below is the Toronto market in 2015 (I-shares XIC) compared  to the S&P500


One last point regarding the Canadian economy. The drop in our currency will make buying imported goods more expensive which will off-set a large portion of any gasoline savings. (Target is closing all its Canadian stores) Sorry Canada but more of my investment dollars are leaving the country.

To my U.S. readers “Enjoy Your Long Weekend”

Predicting the Price of Oil



The business media is having a field day with falling oil prices. There is a parade of oil experts on the air waves making forecasts on where they think that the oil price will find a bottom. Eventually some of them will guess right but no one knows for sure.

I have shared my opinions on the oil sector in previous posts. I decided to do some additional research on the subject and share some of my findings. Oil is sold on the futures market which is a centralized market place for buyers and sellers from around the world. The futures contract will state the price that will be paid and the date of delivery.

A simple example of a future contract

Let’s pretend that you are a farmer that produces tomatoes. To cover some of your farming expenses you could sell a portion of your crops in the futures market to a ketchup maker. The farmer has a guarantee price for some of his crop to be delivered sometime in the future and the ketchup maker protects itself from a possible shortage of tomatoes. The oil futures market works the same way.




Problem # 1 Oil Hedges

No one really knows have many oil producers have sold their upcoming production at higher prices using future contracts. These producers will not stop pumping oil because they have a guarantee selling price that is higher than current prices.

oil tanker

Problem # 2 Storage

Oil wells from fracking technology have a short life span, somewhere between 12 to 18 months. They can’t stop pumping or they will lose the oil in the well. How many wells will continue to produced and put their oil into storage tanks? (There has been an increase in demand for oil tankers to store oil.)


Problem # 3 Short Selling

How many buyers of oil futures contracts at higher prices are trying to reduce loses by shorting contracts? How many speculators are short selling oil futures driving the price even lower? Hedge funds and big U.S. bank’s trading desks have a long history of short selling in the futures market.

DEFINITION of ‘Short Selling’

The sale of a security that is Not Owned by the seller, or that the seller has borrowed. Short selling is motivated by the belief that a security’s price will decline, enabling it to be bought back at a lower price to make a profit. Short selling may be prompted by SPECULATION, or by the desire to hedge the downside risk of a long position in the same security or a related one. Since the risk of loss on a short sale is theoretically infinite, short selling should only be used by experienced traders who are familiar with its risks.

Sometimes I find that my research raises more questions than answers. My common sense tells me that the price movements in oil futures reminds me of an old 80’s movie.


Story line On the commodities trading floor, the Dukes commit all their holdings to buying frozen concentrated orange-juice futures contracts; other traders follow their lead, inflating the price. Meanwhile, Valentine and Winthorpe sell futures heavily at the inflated price. Following the broadcast of the actual crop report, showing that the orange crop will be normal, the price of orange-juice futures plummets. Valentine and Winthorpe buy back their futures at the lower price from everyone but the Dukes, turning a large profit. The Dukes fail to meet a margin call, and are left owing $394 million.


Is it possible that the supply / demand imbalance isn’t the whole story behind the current prices for oil future contracts? Is it also possible that the $100 per barrel of crude oil was inflated by commodity traders?

I don’t know the answers so I am staying on the side-lines and let the big players in the commodity market fight it out. I will buy when there is blood on the street.


Not everyone agrees with me:

The U.S. Oil Fund ETF has attracted investor money this year, with the fund ranking fourth in fund flows at $413 million, according to The fund uses derivatives to track the front-month oil contract and is getting pounded, down 15.4 percent year to date. Also, despite its underperformance the Oil and Gas ETF is pulling in money as well, drawing a net $279.5 million in inflows even though its performance also has been dismal, down 9.8 percent. 

Chart below compares S&P 500 and Spider oil sector ETF -XLE










Am I Liable if I Marry Into Debt?

I just received a wedding invitation and one of my best friends’ son just got engaged. Laura’s excellent research applies to Canadians and well worth a read.

OMG I'm Thirty

The other day a friend of mine and I were having dinner and she was discussing buying a house with her boyfriend. They’d been together for some time and were hoping to get married within the next few years.

“I’m wondering though,” she said, “if I’ll take on his debt when I marry him. ”

For the last two or three years, the number of people I know who are engaged, about to be engaged, or married has skyrocketed. This definitely corresponds with the thirties- many people hitting their thirties are (possibly) beginning to settle down and find others they want to be with for the rest of their lives. Not everyone, of course, but it’s definitely been a trend.

Which is why I was surprised that I didn’t know the answer- I felt like I’d researched this before, and the answer was no, but I couldn’t be positive. I actually…

View original post 453 more words

Don’t Throw The Baby Out With The Bathwater


I used this phrase when I was a financial advisor during the market correction of 2008. Clients would call in a panic wanting to get rid of good quality investments which is like “throwing the baby out with the bathwater”. I would ask them; are you going to stop buying groceries, turn off all your utilities and hold off buying medicine? Their answer; “Well no”. I reminded them, even defensive sectors like consumer staples, utilities and health care will fall in price when fear hits the markets.

In my three-part series on Investment Ideas for 2015, I mentioned that investment fear is creeping back into the stock market. The first few trading days in 2015 have been very volatile. The black line is the S & P 500, the three lines above it are the spider ETF’s for health care (xlv), consumer stapes (xlp) and utilities (xlu). The worse performing sector is of course the oil ETF (xle). I still believe  that 2015 is going to be very unpredictable. I am not suggesting that you try to time the market.


Fear makes no sense, investors are willing to accept  1.95 % interest for ten years and lose a bundle if rates go back up. I understand that money flows to safety and the U.S. dollar is considered the best place to be. Especially, when the other major currencies are trying to devaluate. However, the math on the yield of the 10 year U.S. bond doesn’t work for long-term investment returns when inflation will negate the interest payments. I would rather raise some cash and buy some bargains.


One way that I take advantage of fear is a systematic investment plan.  I have used this method before and it has boosted my investment returns.  For example: if after doing some research I wanted to buy the financial sector and decided on the spider ETF(xlf). Using charts of XLF, I would invest 25% of my available funds at a time. The one year chart below has the 50 & 200 day moving average,  I would buy 25% of my position every time the XLE hit the 200 day moving average. If  the correction was worse than I thought,  I would hold off buying until the price chart moved above the 200 day moving average. It is a simple method of protecting your capital from large losses during in times of great fear. It also allows you to buy part of your position in a sector at bargain prices


On the other hand, the one year chart of the spider oil ETF (xle) hasn’t made a bottom and is trading below the 50 & 200 day moving averages. I am in no rush to invest in this sector.


Hedge fund managers  love to gamble on trying “to catch a falling knife” because it isn’t their money. If they are right, they can go on T.V. and tell investors how they bought at the bottom boosting their returns. These are the same managers that were on T.V. in the spring of 2014 predicting a rise in U.S. interest rates because the U.S. Fed was stopping Q.E. later in the year. The rise in interest rates never happened and they lost a bundle shorting the stock market.

The 10 year chart below is the S & P 500 and it shows that it took 3 years for the market to recover after the 2008-2009 correction. Remember Rule No. 1 Don’t lose money!


“You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets.” – Peter Lynch  

I have been investing for over thirty years but I am overly cautious. Being in my early 60’s, I can’t afford to jeopardize my retirement nest egg. Sometimes I wish that I could go back in time to my 30’s, knowing what I know today. My nest egg would have been so much bigger.

Please do your own research before investing your hard-earned money or consult with a licensed financial advisor.

Ten Key Events That Preceded The Last Financial Crisis That Are Happening Again RIGHT NOW

I thought that this is very interesting.

EMerging Equity

By Michael Snyder

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 2.0 Generic License. CC BY-NC-ND 2.0

If you do not believe that we are heading directly toward another major financial crisis, you need to read this article.  So many of the exact same patterns that preceded the great financial collapse of 2008 are happening again right before our very eyes.  History literally appears to be repeating, but most Americans seem absolutely oblivious to what is going on.  The mainstream media and our politicians are promising them that everything is going to be okay somehow, and that seems to be good enough for most people.  But the signs that another massive financial crisis is on the horizon are everywhere.  All you have to do is open up your eyes and look at them.

Bill Gross, considered by many to be the number one authority on government bonds on the entire planet, made headlines all over the world on Tuesday when he…

View original post 2,153 more words