The Inevitable Grexit

Why are the markets going crazy over 11 million Greeks who refuse to live within their means. No surprise, it is about time for them to leave!


So it appears the Eurozone crisis has finally crossed the Rubicon. Greece is going to default on Monday and this bloglikely will put in motion its departure from the currency union. The Eurozone as we know it may soon cease to exist.

Was this breakup inevitable? Many observers would say yes. The Eurozone, after all, is not an optimal currency area and therefore likely to create problems. Martin Feldstein, for example, in 1997 wrote this in Foreign Affairs:

Monnet was mistaken…

If EMU does come into existence, as now seems increasingly likely, it will change the political character of Europe in ways that could lead to conflicts in Europe…What are the reasons for such conflicts? In the beginning there would be important disagreements among the EMU member countries about the goals and methods of monetary policy.

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Money & Life Lessons from My Immigrant Father


In honour of Father’s Day, this post is dedicated to my father who left this earth way too soon. You may find some of these money lessons in this post out dated but I hope that it will  inspire you to make some positive changes in your life.

The first life lesson that I learned from my Italian father is “Life is not fair!” In 1939, my father was forced to serve in a war that he didn’t believe in. He was only 18 years old at that time and was lucky to have survived. He rarely talked about his war experiences except that he ate potato peels that he found in the garage because he was so hungry.

Life after the war in Italy must have been horrific for my father to come to Canada, leaving his pregnant wife to earn some money. I can’t imagine going to another country with no marketable skills and not being able to even speak the language. He found that the streets of Toronto were not paved in gold. Two years later, my mother & I left Italy with only a suitcase and a few dollars in our pockets. A whole new meaning to “Desperate times requires desperate measures!”

I am amazed that within four years my parents who were illiterate, with no education, manage to save enough money to buy a house. They earned extra income by renting a portion of our house for many years to assist with the mortgage payments. My mother used her sewing skills to earn extra money making bridesmaid and wedding dresses.

As a kid, I never played in the backyard because it was turned into a vegetable and herb garden. It never occurred to me how much that garden help reduced our family’s grocery bill until much later in life.


Homemade food products that also reduced the grocery bill:

  • Pasta sauce – we still make a year’s supply of pasta sauce every September
  • Pasta – my mother’s ravioli & cannelloni would make even top chefs envious
  • Pizza dough / pizza
  • Cured meats – ham, bacon, salami …etc.
  • Sausages
  • Wine & sometimes vinegar
  • Preservatives – jam, peaches, peppers, pickles…etc.


My father had a background in farming back in Italy and would often purchase some meats directly from local farmers to save money. Chickens, rabbits, pigeons and quails found their way into a large chest freezer and later on to our dinner table. For years, my father raised his own rabbits in the garage. (Rabbit is still one of my favourite meals)

Other ways that my father saved money:

  • Avoided eating out, told people that restaurant food made him sick
  • Always took a bag lunch to work – thermoses full of leftovers & coffee – ate by himself to avoid ridicule from his co-workers
  • Paid cash – never own a credit card
  • Rarely borrowed money – only from family and always paid them back
  • Car pooled to work
  • No pets, in his opinion, a total waste of money
  • Restricted vacations to going back to Italy to visit family
  • Limited his entertainment to visiting friends & relatives (plus weddings of course)

When I was in high school, my father got me a high paying summer job at the industrial plant where he worked. He stressed that doing the most boring, dirty and repetitive jobs well would guarantee that I would get rehired next summer. Following his advice, I ended up working at the same plant all through high school and university, graduating debt free. (After three summers, I was put in charge of an all student afternoon shift)

My father taught me that it is easy to excel in jobs that you enjoy but surpassing expectations doing lousy jobs can have its benefits. In my opinion, the real irony was the work experience from my summer job was more valuable in running my own small business than my university education. An argument that I never won with my father even after his plant shut down and he had to come to work for me. “You will always have that piece of paper to fall back on!”

Considering that my father was a teen during the Great Depression and then drafted into World War II, he enjoyed the simple things in life to the fullest. Despite all his hardships, he was proud to own the roof over his head. He really enjoyed sharing a home cooked meal with his friends, along with a glass or two of  his homemade wine. To honour all the sacrifices that he made, I followed a old Italian tradition and named my son after him.

wine   Salute Papa!





The Power of Negative Thinking


Love is blind is an adage often used for someone who is in love but cannot see any faults in the other person. It can also apply to investments. Keeping emotions out of your investment decisions is easier said than done.

Falling in love with certain stocks or sectors is a common mistake made by the average investor. Being overly optimistic or hoping that a losing position will regain its original purchase value can damage your investment returns.

Negative Thinking Can help you Avoid:

Bottom Fishing

Investing in stocks that are cheap because of a problem with the company or the economy. A bottom-fishing investor speculates that the stock’s depressed price is temporary, will recover and make for a profitable investment. Bottom fishing is a risky strategy because the company’s stock price is depressed for a reason and may not bounce back.

Value Trap

A stock that appears to be cheap because the stock has been trading at low multiples of earnings, cash flow or book value for an extended time period. Stock traps attract investors who are looking for a bargain because these stocks are inexpensive. The trap springs when investors buy into the company at low prices and the stock never improves.

Dollar-Cost Averaging

The technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. More shares are purchased when prices are low, and fewer shares are bought when prices are high.  I found averaging down on a losing position will result in losing even more money. (Averaging up on a winning position is a much better strategy)

Don’t Catch a Falling Knife

Most people just can’t resist a good bargain. But the stock market works in a different way. Stocks that seem high in price tend to go even higher. Stocks that fall usually go lower. Buying a falling stock can have the same effect as trying to catch a falling knife: You’ll get hurt, almost every time!

Dead Cat Bounce

A dead cat bounce is a price pattern used by technical analysts. It is considered a continuation pattern, where at first the bounce may appear to be a reversal of the prevailing trend, but is quickly followed by a continuation of the downward price move.

Pigs get Fat, Hogs get Slaughtered

The market can punish greed through unreasonable expectations. An investor who is doing well might expect to do even better in the future ignoring reversion to the mean. This may cause the investor to hold onto stocks past the optimal time to sell them or overpay for new holdings. This mistake commonly occurs in market bubbles.

Cockroach Theory

A market theory that suggests that when a company reveals bad news to the public, there may be many more related negative news that have yet to be revealed. The term comes from the common belief that seeing one cockroach is usually evidence that are many more that remain hidden.

A Rising Tide Lifts all Boats or Even Turkeys Fly in a Strong Wind

Two old stock market clichés that says, all stocks tend to go up when the market has a large powerful upward move. Although there is an element of truth in this, many stocks were left behind in the second quarter of 2009.

Buy on Rumour, Sell on News

You often see stocks rise in the lead-up to earnings announcement, only to fall immediately after the good news has been revealed. This is because savvy investors will buy stocks on the first sniff of good news and then take profits once the news has been released. (I believe that information is often leaked to the business media ahead of time)

Ever wonder why advice from parents or grandparents tends to lean more on pointing out the negative side of things?Does wisdom come from age or do past experiences with making bad decisions make older people more cautious?

The real power of negative thinking is being objective and putting equal weight to the pros & cons to your decision-making process. It shouldn’t stop you from taking risks but it should prepare you for things that could go wrong. For example: I started my own business knowing that 80% of Canadian small businesses fail within the first 5 years. I put money aside to cover six months of living expenses and updated my resume just in case. 

Part III: Cashing in on Millennials

millennials 4

The economic torch is being passed from the Baby Boom generation to their Millennial children. The number of U.S. Millennials is estimated to surpass their parents in 2015. It is a world-wide phenomenon especially in the BRIC countries where millennials already make up between 27% – 30% of the overall population. The average age of  India’s workforce is 28 and 49 in China.

The 25 to 34 age group is becoming a powerful force due to improvements in job opportunities and wage growth. Experts believe that new family formations could reach 8.3 million by 2018 adding 2 trillion dollars of extra spending in the U.S. economy.

Millennials currently account for US$1.3 trillion in direct consumer spending in the United States, but that is expected to balloon rapidly. Bank of America Merrill Lynch estimates that millennials will account for 75 per cent of the workforce by 2025 and their combined income will hit US$8.3 trillion by 2025.

The head of Thematic Investing, Sarbjit Nahal at Bank of America Merrill Lynch was on Business News Network (BNN) this week. “Generation Next: how to make money off the millennials” Here are some of his comments which I found very interesting and somewhat amusing.

  • 73% of Millennials prime goal over the next 5 years is buying a house.
  • 87% of Millennials sleep with their smart phone
  • 50% of Millennials would give up their sense of smell before giving up their smart phone
  • 71% would rather go to the dentist than talk to a banker
  • 4 of 10 of the biggest U.S. banks are the least favourite brands of Millennials

It’s no secret that Millennials are attached to their mobile devices. They use social media to share which products and services that they like and don’t like. However, investing in the spending habits of Millennials can be risky because you have to distinguish what is a bona filed trend or just a fad.

“Sell the sizzle, not the steak” was a phrased coined by Wall Street stockbrokers while cold calling for new clients back in the 1980’s. What worked on the phone then, works on-line today!

Some examples of IPOs geared to millennials with a lot of sizzle are Groupon, Zulily, Twitter, Dropbox and Etsy. You would have lost money on these stocks if you bought them during the first few trading days. Even Facebook was hyped by Wall Street and it took over a year for the stock to surpass the sizzle price. (IPO – Initial Public Offering)

Here is a short list of some companies that Wall Street hopes will go pubic:

  • Pinterest
  • Spotify
  • Snapchat
  • Uber
  • Lyft
  • Tinder
  • Birchbox
  • Airbnb
  • Rent the Runway

Bank of America Merrill Lynch said “millennials likely won’t reach peak purchasing power for another five to 10 years, but added there are  different ways for investors to play the trend.”

They said some of the possible winners as millennials become parents include family oriented companies such as Walt Disney Co., Hasbro Inc. and Netflix Inc., as well as food companies like Starbucks Corp., Whole Foods Market Inc. and delivery service GrubHub Inc.

millennials 5

I don’t own Netflix, Amazon or Chipotle because of the high growth valuation that Wall Street keeps pricing into the stock price. I plan on buying some Disney and Starbucks in the near future.  I have taken profits on both of these stocks and am hoping  for a pull back in their stock prices. Another stock that I have on my watch list is InterActiveCorp (IACI), a big bet on finding love on the internet!

IAC is  a media and Internet company.The Company is organized into four segments: The Match Group, Search & Applications, Media and eCommerce. The Match Group consists of dating, education and fitness businesses with brands, such as Match, OkCupid, Tinder, The Princeton Review and DailyBurn. Search & Applications includes brands, such as,, and Investopedia. Media includes businesses, such as Vimeo, Electus, The Daily Beast and CollegeHumor. eCommerce includes HomeAdvisor and ShoeBuy.

What’s Hot, what’s Hype?  What is on your Millennial radar?



Part II: Top Ten Stocks Owned by Millennials


Millennials have had a rough introduction to the working world. They graduated after paying the highest college tuitions on record only to face reduced job opportunities compared to past generations. They may be the first generation that doesn’t assume things are going to be better for them than they were for previous generations.

It is no surprise that Millennials are risk averse, so they have the most conservative portfolio mix of any age bracket under 65!


A recent survey by the Boston mutual fund company MFS Investment Management, found that nearly half of millennials said they “never feel comfortable investing in the stock market.” The survey also showed millennials keep more of their assets in cash, less in stocks, and have a shorter time horizon — less than five years — for their investments than boomers or Gen Xers.

Part of the problem is most schools still don’t have financial literacy programs in place. Plus many parents are reluctant to have conversations with kids about money. No surprise since many parents also have very little financial knowledge!


Affluent millennials hold 52 percent of their money in cash and 28 percent in stocks, compared with 23 percent and 46 percent for older people, a UBS survey released in the first quarter found. The study focused on 21- to 29-year-olds with $75,000 in income or $50,000 in investable cash, and 30- to 36-year-olds with $100,000 in income or assets.

TD Ameritrade has shared a new batch of statistics with Benzinga that are focused on investment strategies among 4 different generations of stock market investors. I found it interesting  to compare the holdings of Millennials with their baby boom parents.

Millennials (born 1980-1997)        

  1. Apple (12.3 %)
  2. Facebook (2.1 %)
  3. General Electric (1.7 %)
  4. Berkshire Hathaway (1.7 %)
  5. Bank of America (1.6 %)
  6. Walt Disney (1.5 %)
  7. Tesla Motors (1.3 %)
  8. Microsoft (1.3 %)
  9. Alibaba (1.2 %)
  10.  Exxon Mobil (1.2 %)

Baby Boomers (born 1946-1964)

  1. Apple (9.9 %)
  2. General Electric (1.7 %)
  3. Microsoft (1.5 %)
  4. Facebook (1.4 %)
  5. Bank of America (1.4 %)
  6. Intel (1.3 %)
  7. AT&T (1.3 %)
  8. Exxon Mobil (1.2 %)
  9. Berkshire Hathaway (1.1 %)
  10. Johnson & Johnson (0.9 %)
Seven out of ten stocks were the same. It raises the question; are Millennials getting their stock picks from their baby boom parents or are they selling their winners too soon?

I find the lack of high growth names in semi-conductors and bio-tech an indication that both generations are ultra conservative. I am totally shocked that both Netflix and Chipotle didn’t make the list of popular stocks owned by Millennials. A large part of revenue growth of both these companies comes from the spending habits of millennials.


In another study, released earlier this year by Northwestern Mutual Life Insurance, only 11 percent of those age 18 to 29 said they are comfortable with the risks associated with growth strategies in their portfolios. Just 14 percent said they are pursuing as much growth as possible.

However, most young adults are not benefiting from sitting down with a professional who can ease their mind about the stock market. According to a report from The Northwestern Mutual Life Insurance Co., only 13 percent of adults age 18 to 29 work with a financial advisor.

Here is another example of how Millennials can affect the financial service industry. The automated money manager company WealthFront crossed the 1 billion market in assets under management in June of this year. It only took two and half years since its founding. In contrast, it took Charles Schwab six years to reach the 1 billion mark. The difference is 60% of WealthFront’s client base is under the age of 35!

As their financial resources grow, the millennials will come to wield enormous influence in the financial market. What products and services will they spend their money on? As a stock picker, I am always looking for new opportunities to make money. The problem lies in determining if it is a substantial trend or a fleeting fad.

One thing for certain, baby boomers are spending less and saving more for retirement. The Millennials, as a group are a force that investors can’t afford to ignore.

Disclaimer: The above lists of stock ownership comes from only one source and it is for discussion purposes only!

Part III: Cashing in on Millennials

Part 1: Are U.S. Millennials Destined to be Worse Off Than Their Parents?


Millennials are the second largest age group surpassed only by their boomer parents. The road a head is anything but smooth.  Millennials, born in the early 1980s, entered adulthood just as the dotcom bubble burst and terrorists took down the World Trade Center. Just a few years later the housing market crashed and the country plunged into the Great Recession. Even the youngest Millennials are entering a job market that is still recovering.

More than 70 percent of students leave college with school debt and the average loan balance is growing. The class of 2014 graduated with the most debt in history estimated at $33,000 per student and this year’s graduating class is on track to top that. Millions of college graduates are facing big loan payments and it may feel like the end is nowhere in sight.

A new study finds that Millennials, who will dominate the U.S. labor market, may face another problem. They’re less prepared for today’s job market than many of their international peers, putting them at a distinct disadvantage in an increasingly global economy.

A recent report by the Educational Testing Service (ETS) examined data from the Programme for the International Assessment of Adult Competencies (PIACC), which showed that American Millennials are badly lagging behind in numeracy, literacy and problem-solving skills. The study shows that even the top-performing Millennials are not measuring up to their counterparts overseas.

“We did not do well across the board in all three of the skills that we looked into, particularly in numeracy,” said Madeline Goodman, director of research at the ETS and one of the study’s co-authors, adding that the report presents troubling implications for the future of American competiveness.

Nearly two-thirds of Millennials scored below the minimum standard in math. “If these individuals are going to be trained for jobs that have remuneration … then they need to have basic skill level” she said.

Among the 22 participating countries, U.S Millennials 18 to 34 years old ranked 21st in numeracy — only Spanish Millennials had lower scores. In literacy, half scored below the minimum proficiency level, ahead of only Spain and Italy. For problem solving in technology-rich environments, 56 percent of American Millennials met the minimum standards, behind every other nation.

One of the central paradoxes of the ETS study is that the millennial generation is the most educated and the study’s authors make the case that many post-secondary institutions are not adequately providing students with the skills necessary to be successful in the job market. The skills from a liberal arts / general studies grads are not marketable.  Another problem facing Millennials is their baby boomer parents are postponing retirement, working longer because of lack of retirement savings, which limits older Millennials  access to higher paying jobs.

One-third of employers said they plan to offer higher pay than last year, according to a new survey of 2,175 hiring managers. While 26 percent said they plan to offer salaries under $30,000, another 26 percent said they do plan to offer at least $50,000. (Certified nursing assistants, teaching assistants and bank tellers are among the worst-paying entry level jobs, according to an analysis by Wallethub.)



“Millennials are facing strong headwinds in securing satisfactory careers,” said Peter Miller, certified financial planner and president of Zoe Wealth Management in Charlotte, N.C. They’re also entering the workforce at a time when pensions are fading away, and unlike their parents, they’re wary of depending on Social Security payments to cover expenses later in life, he said.

Their pessimism has prompted many to start saving earlier and to participate more in their retirement savings accounts than baby boomers did at their age. Millennials have been less inclined to take on consumer debt, perhaps because many have seen their parents struggling with massive debt loads. It is difficult to take on more debt when they are already carrying the burden of large student loan debt.

Millennial investors have trust issues even though the stock market is booming and the economy continues to grow, the 2008 financial crisis is having a lingering effect on many young adults’ willingness to take risks. They have seen the executives of major banks continue to receive eight-figure salaries and bonuses even as they were belittled before Congress for causing a worldwide financial crisis. Millennials have avoided putting money into the stock market after watching what happened to their parents’ retirement portfolios in 2008.

They are equally wary of financial advice from the mainstream media and traditional “experts.” Millennials are more likely to form opinions based on what they hear from friends, social networks and their own research. They want tutorials and an interactive website with links, videos and smartphone-capability. They’ll consider all the information in making their determination.

A Bankrate  report showed that Americans age 18 to 29 are more likely to choose cash as their favorite long-term investment over any other age group. In fact, 39 percent said cash was their preferred way to invest money not needed for 10 years or longer.

No surprise that Millennials have been forced to delay moving out from their parent’s homes. They are not getting married or starting a family until much later than their baby boomer parents. They are avoiding  home ownership due to their inability to save enough for a down payment.

Canadian Millennials face the same challenges as their U.S. counter parts. Their student debt load maybe a little less based on provincial differences in tuition fees and living expenses.                   ($20,000 – $27,000)

Why should you care if  Millennials are delaying adulthood? A recovery in housing depends on first time home buyers. Your house in the suburbs may take longer to sell and sell for less. If you invest in  stocks, lower retail sales and slower wage growth could lead to years of below normal economic growth. Slower growth means future  stock market returns could be in the single digits.

Ignoring the “ME” Generation could be hazardous to your financial well-being.

Next Post

 Part II : Top Ten Stocks Owned by Millennials