Sunday, December 20, 2009

Rhapsody in fluffy white

Not much seems to have been achieved in Copenhagen on the issue of climate change, but things appear to be working alright for now meteorologically. Here's Boston earlier today. Handsome and elegant in any weather, it's looking good in the coat of soft snow.


Snowy BostonMeanwhile, in Toronto it was just cold.

Twenty years ago, Eastern Europe was welcoming a long-awaited spring. The Cold War was ending. How's that for a promising global warming!...

Season's greetings!

Photo by il.

Monday, December 14, 2009

Frugality forgone

Frugality finality. It's so typical. The moment my proven lifestyle, sized on nolens volens and casually, seemed to have been finally and fashionably embraced by most — disappointment. Simon Houpt and Marina Strauss, in Frugality fatigue hits shoppers from this weekend's Globe and Mail, find strong evidence for the end of frugality.

We admit, we got excited. We envisioned the environmental benefits of spending less and saving more, and we recalled the moral benefits that had long ago prompted our patron saint Adam Smith to speak of frugality as a virtue.

We said you had changed your ways forever. You hit the malls in droves. Dare we say we were mistaken?

In some quarters, money is flowing again like water at Lourdes.
The Globe is "Canada's national newspaper", so they must know. Frugality, RIP.

That which Margaret Wente called the nouveau chic appears then to be already gone. Was this past year or so just a transitory, desultory bit of profligacy fatigue?

One positive outcome of frugality's ephemerality could be the auspicious demise of some of the many frugality-themed postings and entire blogs. The crowds are reading, with such an unfrugal extravagance, all possible and kooky advice out there, proffered with equal abundance. Many also came to this blog, only to leave utterly disappointed. Our quote at the time of that post was "Frugality is misery in disguise." (Publilius Syrus).

Frugality ethereality. I had my suspicions all along. As my friend ml said, What recession? The cafés and the restaurants were crowded all summer. The malls full. Renovation bins throughout the neighbourhood. The guy next door, while not at all surprised to see the streets so animated during what are otherwise working hours, was amazed by all the consumption going on.

The guy next door is unemployed. He knows. What frugality?

Frugality whimsicality. There are contradictory messages. The announcement for a talk on frugality (only £10.-) by Tim Harford this past Sunday, which ml brought to my attention, says:
Tim will preach a timely message about reducing waste, curbing indulgence, and suppressing the need for instant fiscal gratification in favour of simpler and more lasting sources of pleasure. He’ll argue for the rehabilitation of Ebenezer Scrooge, a self-denying hero unfairly maligned by the slanderous ghosts of Christmas.

By the end of Tim’s sermon, you will have learned [...] why frugality is not a miserly vice but the most noble of virtues.
Tim is an economist, so he must know. Long live frugality.

So — which is it? Are the British, as always, different? Are we different?

I don't know. Somehow, I feel lonely once again.

Saturday, November 28, 2009

A stroke of luck

This time of year here in Toronto the weather is gloom, boom, and doom. All that talk of green shoots is irrelevant by now. Summer was a blast, but mainly because it was so short.

Trust the business side of things to provide a ray of sunshine.

Weather Network Web screenThis is a snapshot of the Weather Network for Toronto. There are two ads on the right. The top invites you to the new Bacon Deluxe (just look what's in-between those buns), at the bottom there is mention of heart and stroke and odds of 1 in 3. "Best odds ever." You bet!...

Heck, we never really understood the world of advertising.

Tuesday, November 24, 2009

Ceci n'est pas un lawn

Ceci was a lawn, as grassy and pristine as they come.

geothermal pump installation
geothermal pump installation
Doing the right thing for the environment sometimes means messing up a bit with it first. The alarming photos are of a geothermal heat pump installation. The good news from the trenches is that in the end it's all worth it (at least for a more rural kind of property): cheaper heating during the long winter and cooling during those couple of weeks of summer, and some hot water too. A FAQ also mentions cuts in your personal emissions (something we already avoid in social situations). Can't go wrong.

NextEnergy has a simple explanation of how this works and generally what's involved. Our friend rw indicates that the extent of the digging (for the underground pipes) is dictated by the size of the house to heat, and that it can also be done vertically (which is more expensive, unless of course you hit oil). Several federal and provincial grants make this enterprise somewhat more affordable.

Mind you, last year my front yard looked pretty much the same. Some guys painted Plumbers on their truck but couldn't find a sewer pipe if it dripped on them. Then recently NASA used a similar technique to ascertain there is water on the moon; luckily, NASA employs more competent people.

Back to the geothermal thing. It's also good for the environment. Just installing it should give one a warm feeling.

Photos by rw.

Saturday, October 31, 2009

Tricks, no treats

Want something scary? Dark pools (mucky waters for upstairs trades)! Bullet dodging, round-trip trading, churning! High-frequency trading! Flash orders!! And the list (we can only assume) goes on.

Some are too big to fail. We feel too small to succeed...

Something scarier? Try the US debt clock! (No daylight savings for this clock.)

US Debt ClockIf the US numbers are not doing it for you (and you're not afraid of heights), have a look at the big picture: the current global public debt! (If this is global debt, who's buying it? The martians??)


(Scared the living daylights out of you yet?)

B o o ! !   Happy Halloween!

Thursday, October 29, 2009

The sure things in life — the guides

Updated December 3, 2009: reference the new, 2009-10 Tax Planning Guide

There aren't many certainties in life. A couple, maybe, come to mind, being always mentioned as they are. As luck would have it, CGA Ontario does an admirable job at writing about both clearly and concisely. And then some.

Less taxing taxes. Whether you do your own taxes or not (and unless you have a business or a complicated tax situation you should do them yourself, preferably aided by a computer program), Your Personal Tax Planning Guide is an excellent overview — both the big picture and useful details — of how taxes work in Canada.

CGA Personal Tax Guide coverThe contents are pretty much those of the familiar Income Tax Return guides, but the simple fact that a different wording and shorter sentences are used may clarify lots of matters for the tax-language challenged among us.

The introduction stresses the need for continuous financial planning, and the need to be familiar with changes to the income tax legislation, in order to minimize or defer the payable taxes. This is actually the goal which drives the explanations in this guide.

The following sections cover the specifics:
  • major federal and provincial changes affecting individuals for the tax year
  • income and expenses - employment income and deductions, business and self-employment deductible expenses, investment income and expenses, personal deductions
  • tax planning issues - income splitting, deferred income plans: regular and spousal RRSP, TFSA
  • tax credits
  • Ontario provincial tax issues
  • several handy appendices - marginal tax rate tables, important tax planning and filling dates.
Tax tips are sprinkled throughout. For example:
  • A computer used by a professor to teach and create music was ruled to be a musical instrument and thus eligible for employment deductions.
  • You may include premiums paid for private health insurance in your medical-expense claim.
  • Fees for your child's extracurricular classes may also be eligible for the tuition credit if your child is at least 16, the classes are taken through a certified educational institution, and the program provides occupational skills. Dance or skating lessons are examples of classes that might qualify.
Updated every year, the new edition appears in December.

Where there is a will. Then there is the Executorship booklet. It's a guide to the various duties of the estate trustee, the one appointed to administer the will. These may include locating and examining the will, taking an inventory of the property and debts involved, and administering the estate: dealing with the assets (such as cash, investments, insurance policies, personal possessions) and settling the liabilities (such as taxes). The booklet's stated purpose is to make one aware of what is involved, either for deciding whom to choose for the task, or for accepting such an appointment. It can also be useful in organizing one's affairs and preparing a draft of the will.

Several government web sites are listed, and additional references are suggested. The glossary lists, among other terms, ademption, hotchpot, and per stirpes. This in itself makes it worth the price.

Good grief, more. Several other information booklets are available, such as:
  • Tax Tips for Students - tax information for Ontario post-secondary students; we also highly recommend CRA's own Students and Income Tax
  • ABCs of Accounting - definition of the more common accounting terms, like depletion, engagement, just-in-time, and ethics, some of which in accounting have a meaning different from what we knew; we couldn't locate creative accounting
  • Introductory Accounting for Not-For-Profit Organizations - describes a simple bookkeeping system developed by CGA Ontario for small organizations, and enumerates a series of items to deal with in running such an enterprise — sales tax and GST, workers' compensation insurance, employer health tax, incorporation and insurance, etc.
  • Resource Guide for Business Immigrants to Ontario - lots of useful contacts for anyone contemplating self-employment: professional and trade associations, programs of interest to new businesses — such as Small Business Enterprise centres, forms of business and registration — sole proprietorship / partnership / corporation, licenses, government assistance programs, sources of financing, labour laws, registration for regulated professions, certification, intellectual property, federal provincial and municipal taxes, available export and import assistance.
Free hard copies of all the guides can also be ordered. Most have smiling faces on the cover, including the Executorship one.

Finally, if you're young and looking for a career, and your parents have always been on your case pushing you to become an accountant, this site also provides the information on becoming a CGA.

Monday, October 12, 2009

Badadadada-dada Thanksgiving

Earlier today, long weekend and whatnot, we spent some time talking to the guy next door. Turns out he's been laid off, for a while now.

After decades of hard labour and stress, he assures us he's having, at long last, a real great time.
Slow down, you move too fast,
You got to make the mornin' last.
Just kickin' down the cobblestones
Lookin' for fun and
Feelin' groovy...
Badadadada-dada feelin' groovy...
The slang is dated, the feelin' is current. He showed us an e-mail he sent to a previous co-worker:

I discovered I'm again enjoying the simpler stuff, even taking pleasure in, say, the occasional cleaning of old stacks of papers (or the basement), or doing the boring chores I've been dutifully postponing for years. I remember years ago (we were still in the old building), crossing the parking lot towards the bus station at the end of the day, I noticed a colleague walking ahead of me. She stopped, then stooped a bit to smell the flowers near the manufacturing building. [I was living in a cliché!] At the time I was sure she must have been a student (that age, when we are all romantic and everything). Now that I think about it, I'm inclined to reconsider — maybe she has also been laid off!?
Hello lampost
Whatcha knowin'?
I've come to watch your flowers growin'.
Ain'tcha got no rhymes for me?
Doo-it an' doo-doo,
Feelin' groovy...
Badadadada-dada feelin' groovy...
He worked (in and around the house) this entire Labour Day, last month. When everybody rested. Never having taken a real vacation in so many years of employment, or too many weekends for that matter (thanks to the on-line technology), he got into the habit of being a bit of the contrarian. And now that all that free time he's owed has been granted, in one big chunk, he allows himself the occasional transgression.
I've got no deeds to do,
No promises to keep.
I'm dappled and drowsy and ready to sleep.
Let the morningtime drop all its petals on me...
Life, I love you,
All is groovy...
Guy next door, not one to lay about, updated his skills scrupulously during this period. He's proficient now, for example, at catching fruit flies (mid-air), thanks to the garbage strike which provided Toronto with an abundance of these. He's having a riot every time he opens the credit card bill (the bills, sure enough, keep coming as if nothing changed — which, in a way, is reassuring), and reads the travel-protection inserts that seem to have started appearing the exact week he was, mercifully, let go. We are committed to offering you travel protection solutions that can keep you covered wherever you go. Does he need insurance for traveling around his own backyard? For dragging the garbage bins to the curb and back once a week?

He finds all the recent news about the end of the recession a bit alarming. If jobs reappear, and everybody gets working again, is miserable, and shops patriotically in support of the economy, will people's oh-that-poor-guy feelings of sympathy turn into plain oh-that-lazy-bum resentment?!...

For now, he's thankful. Doo-it an' doo-doo, Happy Thanksgiving!

Feelin' Groovy (The 59th Street Bridge Song): lyrics by Paul Simon. Simon & Garfunkel, Parsley, Sage, Rosemary and Thyme, 1966.

Wednesday, October 7, 2009

|| ||| | |||

I will not be pushed, filed, stamped, indexed, briefed, debriefed, or numbered.The Prisoner. Nor bar-coded?!

Google search's logo-replacement doodle (quite recently into UFOs, crop circles, and such) was today all in praise of the ubiquitous bar code, so we couldn't resist...

Ours was created by Barcodes Inc.'s free bar code generator (in Code 128B). Feel free to scan us.

Tuesday, September 29, 2009

Live entertainment

Today we received in the mail what at first glance appeared to be an invitation to the open house of a new school. When we looked a bit closer, we decided it's for an upcoming Halloween party.



It's neither. To find out where all this fun is taking place, you also may need to take a closer look (e.g., click on the invitation, see address at the bottom).

Seeking guidance from Investopedia, we immediately unearthed defunct company, graveyard market (the investors can't get out of it, and the investors who aren't in it don't want to be — likely not even at the visitation centre), tombstone (which provides investors with bare bones information on a security), zombies (also known as the living dead), ghosting (a rather illegal practice), and witching hour (the heavy trading of the last hour — once in a while, happy hour in our experience). There are more...

Anyhoo... We are dead sure business must be good. If you're alive and fancy a defunct company, drop by.

Monday, September 21, 2009

Markets at dusk?


In his book The Great Depression Ahead (Simon & Schuster, January 2009) Harry S. Dent, Jr. predicts the following:

The economy appears to recover from the subprime crisis and minor recession by mid-2009 — "the calm before the real storm."

Stock prices start to crash again between mid- and late 2009 into late 2010, and likely finally bottom around mid-2012 — between Dow 3,800 and 7,200.

This points to a sr. dent in the markets right ahead of us, or a jr. dent in soothsaying right behind us...

Image: Boston at dusk, view from the 13th floor. Photo by il.

Sunday, September 20, 2009

Animal spirits, the movie

At the end of the day, someone gets the money. Or the girl.





The remarkable writer and Financial Times journalist Gillian Tett, who also knows how to milk a goat (it is wise to have something to fall back on), introduced us to social anthropology through her research in a Tajik village. The action depicted in this post, presented to you courtesy of our friend Hannes Kruger from Leopard Hills Private Game Reserve, was captured in South Africa's Kruger National Park. Not on Wall Street, in spite of the similarities. There, at the closing bell the action is far from over...

Saturday, September 19, 2009

Tears gas

We already knew of real gas, ideal gas, perfect gas, and Boyle's Law. Noble gases. And a few others. Stomach gas too. We learned a lot recently, on a less fortuitous note, about natural gas (natgas in the lingo of experts burned by it).

Extra-strength gas reliefIn physics, a gas is a state of matter that consists of a collection of particles, without a definite shape or volume, that are in more or less random motion. So too in investments, it seems.

This week finally provided some relief, and the opportunity to dump some HNU, which when held in the wrong trend, at the wrong time, or for too long vaporizes through fissures such as daily rebalancing, contango, and the rollover of futures contacts.

HNU.TO July-Sept 2009No laughing gas this one. Not particularly natural either. We understand so much better now why that rotting cabbage smell...

Friday, September 18, 2009

Under-the-covers Economist

Interesting developments are always taking place in the field of economics. After Bhutan, Costa Rica, and a recent French report, it's becoming inevitable:

Man does not live by GDP alone. A new report urges statisticians to capture what people do live by. [..]

In recent years economists have therefore been looking at other measures of well-being — even "happiness", a notion that it once seemed absurd to quantify.
We are scratching our heads trying to determine what would the stimulus package be in case the economy goes into a recession once the new GDH economic indicator is in effect. We speculate it would have something to do with either latex products, Viagra, or both. Which leads to our next dilemma.

Now, we here at financial tactics do not have the means to keep an undercover economist on staff. Not even a fictitious economist, of any sort. (Nor a more prolific writer, for that matter. Hence our low post count.) We therefore address our quandary to the real expert in the field. Virtually, of course.

Dear Economist,

We have a question, which has puzzled us for a while now, for the Undercover Economist in your employ.

Considering that sperm cell counts have fallen by 50 per cent worldwide since 1940, or so according to a Danish study, apparently due to an increase in pollutants such as petroleum by-products and polychlorinated biphenyls (though we strongly suspect this has more to do with the stressful overtime activity that the employed male of the species is forced to undertake), how would you advise (purely from an economic point of view) to handle a prophylactic full of LNG (Liquefied Nomadic Gametes): Carefully drop it into the recycle bin? Relegate it to the compost bin (towards the generation of somewhat fertile soil)?! Dispose of it in the rubbish bin (though what we have over here are mere garbage cans)?

financial tactics, Toronto

Milky Way? Astral plane? Knighting of the ghosts?


As a matter of fact, none of the above. It's one of ft's editorial offices at night. More specifically, the lights of the modem, router, power suply, phone (unlike others, over here we do know how to access the phone mail), mouse, and keyboard.

How can someone make money out of this? It's a legitimate question. Let's see. Sell the office furniture and invest the proceeds in natural-gas futures?

As always, history may offer a better solution.

Professor Thomas F. X. Noble blends cultural, political, and economic topics in his course The Foundations of Western Civilization.
The period from 900 to 1300 was one of the longest eras of sustained growth in world history. Political Europe expanded physically as new states emerged, the European population grew as never before, the European economy achieved unprecedented levels of prosperity, while new technologies were introduced.
The correct answer, then. Do not sell the office furniture. Money is bound to follow. Eventually...


TECHNOLOGY IS THE WAY!

The pigs are pumping ship corrosion-free

Some light is being shed on the copper quandary:

Pig farmers and other speculators may have amassed more than 50,000 metric tons [of copper], Jeremy Goldwyn, who oversees business development in Asia for London-based Sucden, wrote in an e-mailed report after a visit to China. That's about half the level of inventories tallied by the Shanghai Futures Exchange, which stood last week at a two-year high of 97,396 tons.
See China’s Pig Farmers Amass Copper, Nickel, Sucden Says.

Well, now we are wondering who bought all that sugar...

Sunday, September 13, 2009

And no one knows why the wine is flowing...

Good grief, time flies. Who would have thought!? A friend of mine became, just like that, a grandma. (A very young one, it should be noted, just to be on the safe side.) It all happened overnight. Yesterday worried about the upcoming geometry test, today grandma. QED... Hi there, baby. Howdy, grandma!

Iceberg, Greenland
And Welcome, welcome cries a voice,
Let all my guests come in.

Sunset, Greenland
All this business of time flies babies et al. makes one ponder even deeper and wider. So, here it is. We should do our better best, so that the new babies of today and their babies of tomorrows will enjoy this planet as much as we still do. We are all party guests of these majestic green lands, and should pay our respects to the generous host. Time is running out. Let's not throw scraps beyond the garden wall...

Images: Greenland, photos by fs.

Tuesday, August 25, 2009

Economics in the Malaysian jungle

WWF JeepJeep for hanging jungle apparel out to dry — free. Provided courtesy of WWF.

parang, Malaysian jungleParang — MYR 30. Great for cutting through the dense foliage. Keep in mind that the rattan, with its thorny vines that cling and drag into your skin, may be too thick for the regular parang, at least in the hands of the less adept user.

Bathing with elephants, MalaysiaBathing with the elephants — priceless...

Thank you ds, teammates, WWF.

Monday, August 24, 2009

UofT book sales, a fall tradition


It's once again the end of August. The good times are almost over. It's back to school. It's back to autumn. In Toronto, the kitschy Ex. And, of course, the book sales at UofT.

As second-hand bookstores in Toronto disappear one by one, these sales are a welcome reprieve. The selection is huge, the prices great. A visit to the St. George campus at this time of year is rewarding in its picturesque self.

The first day of each sale is characterized by admission charges (students with id usually excepted), big crowds, long line-ups (excellent opportunity to make a new friend, one who reads), and being able to spot book dealers hunting for bargains and rarities.

Some sales go 1/2 price or just lower on the last day or during the last hours. All accept credit cards.
Victoria College
24 - 28 September 2009
Alumni Hall & the Chapel, Old Vic — 91 Charles Street West (Museum subway station), 416-585-4585
Thursday, Sept 24, 4 pm - 9 pm ($3 admission)
Friday, Sept 25, 10 am - 8 pm
Saturday, Sept 26, 11 am - 6 pm
Sunday, Sept 27, 11 am - 6 pm
Monday, Sept 28, 10 am - 8 pm

University College
16 - 20 October 2009
15 King's College Circle (Museum subway station), 416-978-0372
Friday, Oct 16, noon - 8 pm ($3 admission)
Saturday, Oct 17, 10 am - 6 pm
Sunday, Oct 18, noon - 8 pm
Monday, Oct 19, noon - 8 pm
Tuesday, Oct 20, noon - 6 pm

Trinity College
23 - 27 October 2009
Seeley Hall — Trinity College, 6 Hoskin Avenue (Museum subway station), 416-978-6750
Friday, Oct 23, 4 pm - 9 pm ($5 admission);
Saturday, Oct 24, 10 am - 8 pm;
Sunday, Oct 25, noon - 8 pm;
Monday, Oct 26, 10 am - 8 pm
Tuesday, Oct 27, 10 am - 8 pm

St. Michael's College
27 - 31 October 2009
John M. Kelly Library (Reading Room) — 113 St. Joseph Street (Museum subway station)
Tuesday, Oct 27, 6 pm - 9:30 pm (preview and reception lecture, $20 admission)
Wednesday, Oct 28, 8:30 am - 8 pm ($3 admission)
Thursday, Oct 29, 8:30 am - 8 pm
Friday, Oct 30, 8:30 am - 8 pm
Saturday, Oct 31, 10 am - 2 pm.
Photo:  Old Vic, Victoria College, University of Toronto. Source: Wikimedia Commons.

Monday, August 3, 2009

The heavenly motions of the markets

It is always hard to argue against a bull market. And against science. And against the animal spirits.

Sir Isaac Newton, the genius of his age (science-wise, that is), lost extravagantly on South Sea stock by buying, selling, and then getting back into the market just before its collapse. His conclusion:
I can calculate the motions of the heavenly bodies, but not the madness of people.
James D. Stein states in his book How Math Explains the World:
The first and second laws of thermodynamics seem to appear in so many diverse environments that they have become part of our collective understanding of life: the first law says you can't win, and the second law says that it's not possible to break even.
And to put things in some perspective, a pertinent observation from, where else?, Barron's:
The rally of 2009 marches on. We're told it was the best five-month stretch for the Dow since 1938. For the Standard & Poor's 500, there hadn't been as spiffy a July performance since 1997. That is, until one checks where the S&P stood at the end of that July of '97: at 954, versus 987 today — just a 3% rise, after a 12-year slog.

With wit and very little money

It's Simcoe Day / Civic Holiday in most of Canada, when the workers rest (thank you John Graves Simcoe! / thank you Civic!). So we decided to take it slowly (and not only because HNU could not be traded just when natural gas decided to go crazy) and did some quiet reading.

Here's what we learned from Niall Ferguson's The Cash Nexus: Economics And Politics From The Age Of Warfare Through The Age Of Welfare, 1700-2000.

Karl Marx wrote to his long-time comrade Friedrich Engels in June 1864:
The time has come again when, with wit and very little money, it's possible to make money in London.
According to a recent biographer, Karl may have been tempted to become a day-trader by the German socialist Ferdinand Lassalle, who had boasted of his stock market speculations.

A spectre is haunting the stock markets. What's the deal with all these socialists using tools of the decadent capitalism you may ask, with good (if a bit naive) reason. The key, which will surprise you not a little, may be found in a letter Karl wrote to Lion Philips, also in the summer of that year:

I have, which will surprise you not a little, been speculating — partly in American funds, but more especially in English stocks, which are springing up like mushrooms this year (in furtherance of every imaginable and unimaginable joint stock enterprise), are forced up to quite an unreasonable level and then, for the most part, collapse. In this way, I have made over £400 and, now that the complexity of the political situation affords greater scope, I shall begin all over again. It's a type of operation that makes demands on one's time, and it's worth while running some risk in order to relieve the enemy of his money.
The unbearable lightness of trading. And, of course, relieving the enemy of his money. If only he'd made a killing on the stock markets, history may have been different. Marx Financials Inc. could have been today too big to fail... But nothing of consequence happened.

Finally, we read in the Marx & Engels Internet Archive that Engels wrote Marx in 1852, in a hopeful (if a bit naive) spirit:
The minor panic in the money market appears to be over, consols and railway shares are again rising merrily, money is easier, speculation is still pretty evenly distributed over corn, cotton, steam boats, mining operations, etc., etc. But cotton has already become a very risky proposition; despite what is so far a very promising crop, prices are rising continuously, merely as a result of high consumption and the possibility of a brief cotton shortage before fresh imports can arrive. Anyway I don't believe that the crisis will this time be preceded by a regular rage for speculation; if circumstances are favourable in other respects, a few mails bringing bad news from India, a panic in New York, etc., will very soon prove that many a virtuous citizen has been up to all kinds of sharp practice on the quiet. And these crucial ill-tidings from overstocked markets must surely come soon. Massive shipments continue to leave for China and India, and yet the advices are nothing out of the ordinary; indeed, Calcutta is decidedly overstocked, and here and there native dealers are going bankrupt. I don't believe that prosperity will continue beyond October or November — even Peter Ermen is becoming worried.
Regretfully, no favourable circumstances yet. As we well know, just cyclical business as usual...

Saturday, July 25, 2009

Family energy savings and the slow return to prosperity

The world's foremost financial shaman started his latest post with:

Eh? What's going on? Why am I writing on a Saturday afternoon? Is there something wrong with me? No, dear reader, I'm just feeling a bit bored...
As for me, no, I'm not bored, though I am writing on a Saturday night. Instead, I'm poor again. Empty as a pocket with nothing to lose. The #%$* US dollars from my account vanished. For an illuminating cause, but just like that. Yeah baby, no more dance for you tonight.

I am poor again.

To compensate somewhat for this sorry state of affairs, save the day, and edge forward, I'm watching Le plus grande cabaret du monde on TV5.
On voudrait des sous pour acheter des frites, on voudrait des sous pour aller dancer...
The lyrics are emboldening, the dance phenomenal. Moreover, it seems that many more are looking for some kind of change.

At the same time, as someone raised for, and used to, multitasking activities, I'm reading with reasonable optimism through this interesting research paper, 'Smart Family' Opportunities for Energy Savings. It claims to allow families to save up to $10,000 per year per home in energy bills (emission abatement included), by using a range of simple technologies. [The practical Canadian home owner may want to refer to CMHC's Renovating for energy savings and, in Ontario, also to OPA's Every kilowatt counts.]

Who knows.

Sous by sous, one might become riche again...

Sunday, July 19, 2009

Start small, grow rich

Singapore, Taiwan, Austria: what do they have in common?

All these countries have extremely performant and export-oriented economies.

Singapore - iShares MSCI Singapore Index (EWS)

Singapore has an export-oriented economy, one of the most exposed to the global economy. This city-state does not expect to return to growth until the global economy shows its signs of recovery. Most notably, the full recovery will depend on the economic performances of overseas markets such as the US, China, and Japan. However, once the external trades start to pick up, Singapore's economy is likely to be among the first to rebound.

Taiwan - iShares MSCI Taiwan Index (EWT)

Another heavily trade-dependent economy, it will continue to suffer until global economic recovery takes place. Several economic indicators point to a slight easing of Taiwan's deep economic recession during the second quarter of 2009.
Six of the seven components of the index — export orders, average monthly overtime in industry and services, book-to-bill ratios in the semiconductor machinery industry, monetary aggregate M1B (currency in circulation, current-account and passbook deposits [M1A] plus passbook savings deposits), stock prices, and producers' inventory — showed positive movement. However, the barometer, which uses five colours to measure the health of the economy, continued to flash blue, indicating recession, for the ninth month in a row.
Austria - iShares MSCI Austria Investable Market Index (EWO)

The latest Purchasing Managers' Index (PMI) released by Bank Austria showed a slowing of the downturn in June, and points to a turnaround of Austria's industry most likely in the summer.
Decline in new orders, stocks of finished goods and output lose momentum. Layoffs remain at a high level. Industry poised for stabilization but a clear recovery is not anticipated.
Sources: Economist Intelligence Unit, Bank Austria

Special Drawing Rights

The Special Drawing Right (SDR) is an international reserve asset created by the IMF in 1969 to supplement the official reserves of its member countries. Nowadays, its main function is to serve as the unit of account of the IMF and some other international organizations.

The value of the SDR was initially defined as equivalent to 0.888671 grams of fine gold — which, at the time, was also equivalent to one US dollar. After the collapse of the Bretton Woods system in 1973, however, the SDR was redefined as a basket of currencies, today consisting of the euro, Japanese yen, pound sterling, and US dollar.
The currency value of the SDR is calculated daily (in US dollars). The valuation basket is reviewed and adjusted every five years.
The SDR is neither a currency nor a claim on the IMF. It is a potential claim on the freely usable currencies of IMF members. Holders of SDRs can obtain these currencies in exchange for their SDRs in two ways: first, through the arrangement of voluntary exchanges between members; and second, by the IMF designating members with strong external positions to purchase SDRs from members with weak external positions.
Each IMF member country is assigned a quota, based on its relative size in the world economy. A member's quota, denominated in SDRs, determines its financial commitment to the IMF, its voting power, and access limits to financing from the IMF.

People’s Bank of China (PBOC), among other important emerging markets countries, has called at the beginning of this year for a new global reserve currency:
Special consideration should be given to giving the SDR a greater role. The SDR has the features and potential to act as a super-sovereign reserve currency. Moreover, an increase in SDR allocation would help the Fund address its resources problem and the difficulties in the voice and representation reform. Therefore, efforts should be made to push forward a SDR allocation.

Tuesday, July 7, 2009

The abundance of thrift

There has been an explosion of frugal advice in the blogosphere, both individual posts and entire blogs dedicated to the subject. Given the crowded space, tightwads are, unavoidably, forced to read through profligate portions of excruciating cut-and-paste spam, and not of the thrifty, edible kind.

Piet Mondrian, Composition with Yellow, Blue, and RedWe find most suggestions rather impractical ("how to save money by dumpster diving"; "breast-feeding saves me a lot of money"; "brush your dog's teeth" or, more economical yet, "pass on pets" altogether), a few which are nothing new ("use condoms" and, possibly related, "look for inexpensive entertainment options"; and then, in the inauspicious case you skimped over the first piece of advice herein, "switch to cloth diapers" and "make your own baby food"), and several downright ludicrous ("make your own feminine products", "quit smoking", and "reduce alcohol"). We managed to uncover more usable information in Paul Simon's 50 Ways To Leave Your Lover.

For those who lived in Romania during the Golden Era, what with the daily Scînteia (The official organ of the Central Committee of the Romanian Communist Party) the toilet paper of necessity more often than not, it is difficult to find real value in North American blogs advocating frugality (oh yeah, "cut down on your visits to the spa"). Granted, this is a tough audience for such a topic, economic crisis or not. A reader of one of these blogs dismissed a long list of penny-wise tips with the comment, "In other words, become an Amish."

In the minimalist spirit of the time, here's a couple more pieces of frugal advice, courtesy of financial tactics. A friend of ours suggested once that rather than getting married, buying a house, etc., you'll be much better off in the long run living in a hotel, eating at restaurants, and frequenting a friendly professional. We won't be so extreme as to propose such a long-range commitment. And unlike the typical tip in the blogs of frugality, there isn't even the need to track down and print coupons, nor generally expend time and effort (quite the contrary, at which we excel). We equally refrain from swinging to the other extreme on the advice scale ("time is money, so blog less"). By the bye, if your printer is still of the dot matrix variety, you may have already given these a try.
  • Do not shave. Or, at the least, not as often. (Don't you ever watch House?)

    Cut down on blades et al. If you are dedicated enough to go all the way, then once you don a sizeable beard you can, without anyone asking questions or dropping hints, take up painting or, if that's not thrifty enough for you (materials being pricey and all), get into philosophizing. Blogging, which comes free, is optional. A tub, preferably second-hand, is also something to consider.

  • Laughter is the best medicine. 'Nough said.

    Ditch the health plan. Even signing up for a comedy channel may be cheaper. The best we could find in the above-mentioned blogs was the suggestion to downgrade the current medical insurance plan, which is clearly for the novice. We are aware of one instance where this fails (at the doctor, knife in the back, "Are you in great pain?" "Only when I laugh."), but it's statistically negligible.
Image: Mondrian, Composition with Yellow, Blue, and Red, 1937-42, oil on canvas, 72.5 x 69 cm, Tate Gallery, London. Source: wikipedia.org.
References: squawkfox.com/2008/09/02/50-ways-to-save-1000-a-year; thesimpledollar.com/2007/06/24/trimming-the-fat-forty-ways-to-reduce-your-monthly-required-spending; queercents.com/2008/05/26/how-to-save-money-by-dumpster-diving; frugalhacks.com/2008/11/10/cheerful-frugality-nurses-well

Monday, June 29, 2009

Another man's treasure

Among the garbage and the flowers. Toronto streets have been getting unheralded summer detritus ornaments for a week now. And the sun pours down like honey. And it all spills onto the sidewalk.

Guy next door, as usual when details of the benefits of unionized gangs are disclosed in the news, offered no opinion other than to say "it stinks". Us Toronto taxpayers, mortals who effectively pay a handsome rent just to stay in our own homes, we prove to be a generous and stoic bunch. (And kudos to the folks in Windsor!) Notwithstanding the high taxes that go towards the many unions and the few services, this is not really much of an inconvenience.

Torontonians already spend a good time faithfully screening, sorting, bagging, dragging their oversized multi-coloured bins back and forth, and once in a while visiting the Drop-off Depot for special occasions. We know caulking tubes don't go in the Blue Bin but in the Gray One. Catheters are rinsed, double-bagged, and go into the Gray Bin. Oversized items are put 0.5 m away from the Garbage Bin, toilet tanks first removed from the bowl. Cheese paper, but not chewing gum, goes into the Kitchen Container and then is reassigned to the Green Bin. Kitty litter goes into the Green Bin, pet fur into the Gray Bin. Dead animals are not accepted by the City. (So to get rid of a pesky pet, doing away with it first will get you nowhere.) The circumference of our bundled brunches (no Bin here) never exceeds 0.6 cm. And we all know what to do in case there is excess Green Bin material.

The last step, hauling the accumulated rubble away to transfer stations and scuffling with the picketers, is a natural progression. I'm confident debris scientists are busy applying for government grants right now in their quest to discover new ways to torment us.

And she feeds you tea and oranges, that come all the way from China. With all this intensive debrial (debriferous?) activity and the odiferous litter piling up, I could not help pondering on the reasons there is so much garbage stuff in the first place.

It is, of course, because there is so much stuff. The Story of Stuff tells us as much. Of the stuff, by the stuff, and for the stuff.

Deliberately a bit rough, a bit too instructional (reminiscent of a high-school lecture, Annie Leonard the stern teacher; Will this be on the exam?), and not as in-your-face strong as The Corporation. But the documentary is a nice overview of a big problem, and it's not merely for those pure raucous sanctimonious souls who are trying, a bit too hard, to save the planet (as we all were once). It makes the fashionable frugal even cooler, and more pertinent.

This story of stuff (21 minutes long) is divided conveniently (as you cannot rewind) into seven parts: Intro, Extraction, Production, Distribution, Consumption, Disposal, and Another Way. You'll learn quite a few things along the way: shoe buffing (the Corporation is bigger than the Government), the need for more planets. Synthetic chemicals (100,000 of these), such as the BFRs in your pillow, and the need to find a better way to prevent our heads from catching fire at night. Breast is (still) best (but we kinda suspected that much). Whole communities getting wasted (sic). Low lower lowest prices at Big Box-Mart and externalized costs. Consumption as a way of life. Designed for the dump (planned obsolescence) and skinny heels (perceived obsolescence), as 99% of the stuff we buy is trashed within just six months. Working, shopping, and the national happiness. And, sure enough, garbage. Brought to you by the letter G.

But really, yes, stuff is bad. The System, it stinks. It is high time to switch to something else entirely.

Thursday, June 25, 2009

The last words in

The June 2009 edition of Oxford English Dictionary's online Quarterly update commentaries addresses, among others, two words pertinent to the current bleeding state of economic affairs.

John Simpson, Chief Editor, provides ample commentary on the revised entry for recession. Its recorded history, starting in 1606, exhibits various meanings such as a temporary suspension of an activity, physical receding, being recessed (especially in architectural design or artistic representation), a cavity or depression (as in a rock), and specialized meanings in astronomy, geography, dentistry and surgery, phonetics, and religion. The first encounter with an economic recession is found in an 1847 Guardian article, where it signifies a reduction in value or amount. Finally, its modern sense of 'a period of economic decline during which trade and industrial activity are reduced' well precedes the Great Depression:

For OED3 we have found the sense being used (in a regional American newspaper) in 1905, of the short, sharp recession of 1903, when (as we might recognize) "the bottom was knocked out of the speculative craze which had seized the country".
Graeme Diamond, Principal Editor of New Words, remarks on the newly-added bailout. The earliest quotation is from a Time article about $40 million in aid to, blimey, the tobacco industry, after a bad crop. (Considering how well this industry has been doing since, it appears the money was effective.) Amusingly, the underlying metaphor is either figurative water being bailed out of a 'sinking ship', or money being provided to 'get someone out of jail'. (I believe nowadays we've seen cases of bailouts followed by getting someone into jail.)

If you go on reading you'll also learn about turducken, the friendly merger of three birds, a real sweetheart deal.

OED is, of course, "The definitive record of the English language". Investopedia is "A Forbes Digital Company". Here's recession and bailout in the latter's dictionary. (No turducken in Investopedia, but the inquisitive mind will be somewhat edified by World Wide Words.)

One final word — you too can subscribe to OED News by e-mail.

[One finaler note — there is fascinating stuff in the online OED archive too.]

Monday, June 22, 2009

finarcical tactrics

Financial shmanancial. Now it's summer for real. Long on days, short on nights. Lazy. Volumes are lower. Hazy. Uptick, downtick. Crazy. Time is not money — I've got the time. Anagram Genius twists financial tactics into A fantastic clinic. It certainly explains a few things...

  tactics

  tictacs
PS If you don't see a big clock under tictacs, then clocklink.com may be down. If you don't see the King Gambit chess game diagram under tactics, then you may need glasses.

Monday, June 15, 2009

Lazy, hazy, crazy days of summer

To paraphrase Axel Munthe (The Story of San Michele), there is a Toronto qui s'amuse, but if you happen to belong to the Toronto qui travaille (loosely speaking here), it becomes another matter. A sizeable part of our editorial board is away. The other, left behind, is just green (which, in a different ecological context, and along with frugal, in the same contextual crisis, are the in mots du jour, at least for now).

We've always planned to post lifestyle articles in this blog. Many business magazines and their Web sites have such a section. It shows you what you can do with the money you made investing (while subliminally promoting that warm fuzzy feeling that anyone can make it, and big), or perhaps what you're missing because of the money you lost investing. Today, we're optimistic.

Here's a brief report put together from the latest generous dispatches from the field sent by the above-mentioned globe-trotting segment of our staff.

Viennese café on a tranquil Saturday morning
Viennese café on a tranquil Saturday morning

Remembrance of verses past:

  Now in Vienna there are ten pretty women...
  There's a lobby with nine hundred windows...
  There's a piece that was torn from the morning
  And it hangs in the Gallery of Frost.

  Take this waltz, take this waltz,
  take its broken waist in your hand.

Cappuccino at a Viennese café
Cappuccino for one cup and two mouths, €7

That's exactly what you do when you find yourself in Vienna's airport with five hours on your hands. You put up €16 (return ticket) for the CAT and in as many minutes you're in the heart of the city, on the Terrasse.

Bega Canal, Timişoara
Bega Canal, Timişoara

Silviu Brucan is remembered for his 1990 contentious Nostradamic moment, when he asserted Romanians would need 20 years to become accustomed to democracy. Timişoara, for one, seems to be already there, when comparing it to even a couple of years ago: the city is clean (Bega Canal included) and full of flowers, government buildings underwent renovations, new construction shows taste, and everyone is busy working (On Corso, yours truly and the local retirees being the exception). And cars, only recently an impossible luxury, have become a necessity in the new capitalism.

Democracy is coming to Romania. The miners charter gave way to Vienna charter flights...
Crişcior, Romania
Crişcior, Hunedoara County

The green motif at its pastoral best. Outlasting the golden one, just as rich, of yesteryear. It brings to mind the opening lines of the ballad Mioriţa (here in the translation of W. D. Snodgrass):

  Near a low foothill
  At Heaven's doorsill,
  Where the trail's descending
  To the plain and ending...


The pristine air, the distant barking, the roosters' early-morning proclamations complete a picture that sends you back in time to an innocent, now seemingly unreal, childhood. "I sometimes stop and call to mind the customs and people there used to be in my part of the world at the time when I had, so to speak, just begun to put a foot over the threshold of boyhood." — Ion Creangă.

Cluj-Napoca
Cluj-Napoca from the distance

Back to business. One Canadian dollar buys you 2.6 Romanian lei (RON). An issue of Fortune magazine will set you back RON 33, so you may feel a bit richer with just Ziarul Financiar, or the new Forbes Romania. In a debate on B1 TV the consensus was that another 20 years and 500 billions (mainly for infrastructure) are still needed for Romania to reach the level of the Western world.

RON 600 in four days on restaurants, cigarettes, cabs, and books seem by all accounts money well spent.

Alba Iulia
Transilvaniei Boulevard, Alba Iulia

Oh well. Summertime. And the bloggin' is light...

Sunday, June 7, 2009

Money, poetry on the way

Not only the Industrial Revolution was British, but also a more contemporary, poetical revolution. London's Poems on the Underground program began in tube carriages (which are, in all probability, subway cars) in 1986:

Up in the morning's no for me,
Up in the morning early;
When a' the hills are covered wi' snaw,
I'm sure it's winter fairly.
— Robert Burns, Up in the Morning Early

When all the pre-market happens.
Like any brilliant idea, it spread in all directions. Once it got to the New York subway, as Poetry In Motion:
For the sword outwears its sheath,
And the soul wears out the breast,
And the heart must pause to breathe,
And love itself have rest.
— Lord Byron, So we'll go no more a-roving

Presumably about a slow day in the markets.
it was only a matter of when it will arrive in Toronto.

So if you happen to take the subway in Toronto1, you must have noticed the occasional rush-hour verse or two. Poetry on the Way is how I discovered Pat Lowther:
Couldn't write then maybe
but how I could love —
When I said "Tree"
my skin grew rough as bark.
I almost remember how all the leaves
rushed shouting shimmering
out of my veins.

Even now
I can almost remember
how many hands I had
hooked in the sky.
On Reading a Poem Written in Adolescence

On all that was once passion, and is today primarily technique...
Which leads naturally to another concept, long overdue, to wit money-management tips delivered to the captive, commuting populace in similarly small doses. I certainly could have used something like this.

Don't neglect your DC so-called pension plan: unless it's all in effectively-losing GICs, it's in the other definitely-losing small choice of funds.

Contribute to your RRSP: retirement may be a long way off, but you'll be able to withdraw funds soon, and pay only minimal taxes, when you get terminated.

Be careful about putting money in MER-hungry mutual funds: in a downturn, when care is needed most, the guys supposedly taking care of your money lose your said money faster than this train.
etc. etc.

As to a catchy name, I don't know. Money on the Way, devoid of specificity regarding the where (on the way up? down??), leaves you hanging-wanting-to-read-more alright, but also may scare the reader off. Money, by the Way lacks force. Money is the Way is already taken2, sort of. Money, the Way it was is merely nostalgic, so of no much help. My Money, no Way! is not constructive.

Once the naming question is resolved and the project gets going, New York can have its turn copying Toronto. But with something called more in the American way: It's the money, stupid.


1 This may occur either 1.- because your car broke down ("Oh, I do my part for this poor planet of ours whenever I can, you know!"), or 2.- because you cannot afford a real car ("I live downtown, so I don't really need a car!").

2 One of the blogs listed on our sidebar (in the blogshelf? blograck? bloglog?! bloglogog??) is Money is the way, seldom about money as such, quite often pure poetry. And in motion, too. At times a bit jerky for the uninitiated, but always rich, colourful, and worth reading — once you get familiar with the usual inhabitants of Michael Fowke's landscape, such as the Master, the shamans, Big Herb, those children of the desert, and bien sûr episodic muse Gillian Tett.

Monday, June 1, 2009

The worst of the epidemic is over, but Mexico's economy is hit hard

Mexico’s economy caught the flu rather badly, and has contracted 8.2% in the first quarter of 2009. Experts assess that it is likely to continue to sink further and faster than had been expected. Look for a recovery of the patient in the second quarter of 2010.

Mexico factsheet (data from the Economist Intelligence Unit):

  • Area 1,972,545 sq. km.
  • Population 104.9 million
  • Number of households 24.1 million
  • Fertility rate (per woman) 2.4
  • Adult literacy 91%
  • GDP US$677 billion
  • Agriculture 4.1%
  • Industry 26.4%, of which manufacturing 19.5%
  • Services 69.5%
  • Mobile phone subscribers per 100 pop. 36.6
In the meantime, your research for investment opportunities may start with the following Mexican funds and companies: iShares MSCI Mexico, Telefonos de Mexico, Cemex, Mexico Fund, Mexico Equity & Income Fund, Cimarex Energy, America Movil.

After which, look forward to the good times of tequila, the doffed sombrero, and the siesta...

Sunday, May 31, 2009

CMDF, my own toxic asset

Updated February 4, 2010: add VenGrowth Advanced Life Sciences Fund's suspension of redemptions

LSIFs. If you're like me (poor cash drip, investment sense, et al.), years ago you loaded labour-sponsored investment funds (LSIFs) into your RRSP to claim some investment under your name via minimal actual money, and then maybe continued to do so even when the terms lost some of their appeal, and then perhaps even did a roll-over or two with whatever was left, in a futile attempt to come out ahead. Now you're probably getting out of them as soon as practically possible, moving that petty cash into something that doesn't merely recede.

But if you thought you could just mark February, future year(s) in your calendar as the expected day of Redemption (in more than one sense) and forget about it, forget it. Don't, that is.

Things are never easy with these funds. You'd think having invested in them is sufficient punishment. Keeping track of all the renamings and incestuous mergers & acquisitions makes it tough enough (what and how much can I dump this time around after the requisite 8 years?), with no need for added pain.

Festina lente. If you had CMDF (Canadian Medical Discoveries Fund — talk about discoveries...), and didn't yet know any better, you may have noticed in your portfolio its conversion last week to GrowthWorks Canadian Fund. That's all fine and dandy, you're used to this kind of thing, but come next/future February be very careful in your enthusiasm to sell. There is a heavy 35% penalty to pay if you withdraw more that 11.74% in the first, 15% in the second, and 20% in the third year following this felicitous merger. These figures are not cumulative.

This is also explained in a Morningstar article, from which I learned about the CMDF redemption freeze of last year, and that other funds are in a similar predicament. For instance, VALS (VenGrowth's Advanced Life Sciences Fund), which can no longer be redeemed, but will be wound down through annual distributions starting November 2010 and expected to last three to six years.

So I suspect, in case you own these things, that there is a good chance you were already peeved off...

Saturday, May 30, 2009

Whither goest thou, inflation?

There is an ongoing debate among economists and historians on whether inflation will ensue, and to what degree, following the humongous government stimulus packages and central banks' liquidity boosts, released all over the place in the prolonged attempts to remedy the financial imbroglio we're witnessing.

How economists can misunderstand the crisis
By Niall Ferguson
Published: May 29 2009

Yet a cat may look at a king, and sometimes a historian can challenge an economist.

A month ago Mr Krugman and I sat on a panel convened in New York to discuss the financial crisis. I made the point that "the running of massive fiscal deficits in excess of 12 per cent of gross domestic product this year, and the issuance therefore of vast quantities of freshly-minted bonds" was likely to push long-term interest rates up, at a time when the Federal Reserve aims at keeping them down. I predicted a "painful tug-of-war between our monetary policy and our fiscal policy, as the markets realise just what a vast quantity of bonds are going to have to be absorbed by the financial system this year".

© 2009 The Financial Times Ltd.
Read the article here.

Which leads us to the thought of the day: invest in commodities and oil.

An abundance of investment opportunities to feed the world

A recent article in The Economist talks about outsourcing's third wave, identified to be the agricultural investment abroad. Although it can be argued that outsourcing traces its roots to thousands of years ago, on a global scale in modern history the manufacturing and services sectors may be deemed as the first and second wave of outsourcing.

An interesting paper signed by Joachim von Braun and Ruth Meinzen-Dick of IFPRI (International Food Policy Research Institute) provides more details about the new trend of global investments in farmland abroad.

Two companies that will benefit from this powerful, and potentially very fertile, global trend could be Deere & Co. and Monsanto.

Wednesday, May 27, 2009

Market history and investing in high supply-and-demand economies

What drives supply and demand? High wages and cheap energy, asserts Professor Robert Allen in his enlightening book The British Industrial Revolution in Global Perspective. Published last month by Cambridge University Press, this is the first volume in the Economic History Society’s series New Approaches to Economic and Social History.

Why was the Industrial Revolution British?
Robert C. Allen © voxEU.org
15 May 2009

It is still not clear among economic historians why the Industrial Revolution actually took place in 18th century Britain. This column explains that it is the British Empire's success in international trade that created Britain's high wage, cheap energy economy, and it was the spring board for the Industrial Revolution.
Read the article here.

Sunday, May 24, 2009

Came so far for beauty, left so much behind...

In the interest of clarity, transparency, and full disclosure, here's an approximate but revealing summary of this blog so far. In the spirit of self-improvement, a matter we take very seriously, we undertake to broaden, extend, and expand our vocabulary, and in general lucubrate more. After we apply for some government stimulus.

words in this blog so far
My masterpiece unsigned

Saturday, May 23, 2009

VIX and stocks run in opposite directions

The VIX (CBOE Volatility Index®), or "investor fear gauge", measures market expectation of near-term volatility, as conveyed by a range of S&P 500 index option prices (both calls and puts). It is, essentially, the price of buying options in order to protect stocks.

A high VIX value is seen as a greater degree of market uncertainty, while a low value reflects greater stability. As the graph below shows, when the VIX goes up, the stocks go down (S&P, Dow, NASDAQ). Conversely, when the VIX goes down, the stocks go up. Hence, an investment in iPath S&P 500 VIX Short-Term Futures exchange traded notes (which track VIX futures) can act as a bearish hedge.

Other volatility indexes: VXN tracks the NASDAQ 100, VXD tracks the Dow Jones Industrial Average, and MVX tracks option prices on the S&P/TSX 60 index ETF. Note that Vicks is another thing entirely.

VIX chartA couple of questions arise:
  • Q: Are rising volatilities almost always a precursor to falling stock prices, as the market wizard stated in Steven Sears' Barron's article, or are falling stock prices the cause for rising volatilities?

    A: Yes.

  • Q: What is the relationship between VIX and Viagra?

    A: With all due respect, it seems that the markets do just fine without Viagra, in particular when the VIX comes down.

All we need is benefits

I was glad to read in today's newspaper that Canadian taxpayers are forking out billions for GM pension aid. The article also quotes CAW President Ken Lewenza: "We have preserved our wages, we have preserved and secured our pension benefits, and we have protected most of our core benefits". As a taxpayer and strong believer in the right of everyone to live in decency after a life of hard work, I'm happy to oblige.

The guy next door, he's not so happy. And that's precisely because he shares my said strong belief — the everyone part in particular. He's already resigned himself to the fact that government employees (and Canadians are so blessed here, with three levels governing them with plenty of care) have indexed pensions and benefits, while he, having toiled for a private non-unionized very big Company, has effectively none of these. He was disturbed a few weeks ago to learn of the existence of a Viagra benefit that US GM pensioners enjoyed (literally), then had to give up (mostly), though the drugmaker came to the rescue ("for up to a year" or, as he — incorrectly — read it, "to up for a year").

Guy next door's not clear whether said medicine is also part of the aforementioned "core benefits" here in Canada. He is happy to have OHIP, but that plan won't even fork out the few bucks needed for a bottle of aspirin to subsidize Guy's own option, "Not tonight dear, I have a headache"...