Did Warren Buffet know ahead of time that banks would fail? Do you remember the 5 billion he invested in Goldman Sacs on Sept 23,2008? That was in the midst of the bank collapses in 2008. Granted Mr. Buffet is very rich, but did any bank have 5 billion to lend him? Did he have it set aside in cash?
The markets were growing in 2006 and 2007. A shrewd investor could reduce his exposure by selling a portion of his shares periodically and still grow his assets by letting other stocks run with the bulls on wall street. That could leave him with $5,000,000,000 cash to jump back in with when the opportunity arose.
Making a newsworthy investment like that would help slow the panic and subdue the fears of jittery investors. This would help convince the clients of his investment firm to not jump ship. In fact it would have an impact across the board. It was the correct thing to do at that time as it calmed fears a little. Perhaps it only helped turn panic back into fear but any show of hope and investment savvy was assuring to smaller investors. Mr Buffet's noteworthy investment was also a wise decision as it would quiet fears of clients of his company, Berkshire Investments.
So if Mr. Buffet did know this crash was coming ahead of time why then didn't he warn us? The answer is obvious. He couldn't.
Why couldn't he? Because if the most esteemed investor in the western hemisphere was to say I'm selling my investments because some banks may go bust soon, couldn't you just hear people running down the sidewalks to withdraw money and cash in stocks?
No, it's not up to Warren Buffet to look after your investments. That's your investment adviser's job.
Warren Buffet did exactly the right thing and he did it at the right time.
So does your adviser just mimic what the super wealthy do? That's not what she/he should be doing. If they were watching behind the scenes they would have forseen that the crash in 2008 was inevitable. I staked my reputation on it in 2007. My procedure of operation during 2007 and early 2008 was advising my clients they would see at least a 40% or 50% drop in the markets sometime in 2008 or 2009. Each one who was invested with me was contacted several times unless they believed me the first time. They needed to move their money out of equity investments and into interest bearing products. At this point we need a clarification. No matter how sure I am that a shift is needed I never recommend 100% shift. In this case I recommended moving from 50% of their funds to 80% to low risk products.
There isn't a one size fits all investment program. What works for Warren Buffet isn't good enough for you unless you also have billions to work with. Every good plan is individual.
One key issue is to watch out for systemic failures. The dot.com fiasco of 2000 and the mortgage melt down of 2008 were both predictable. Both events had some things in common. These things to watch for are rapid or extended growth period in the markets coupled with an abandonment of sound business norms in favor of paper wealth.
The sound business norm in 1999 and 2000 that was tossed aside was 'price to earnings ratio' in evaluating stocks. Investment bankers sold those that would believe them that we no longer needed to use time tested guidelines. They said that in the 'new economy' where dot-com companies could grow so fast that we could guess what they might make down the road instead of looking at what they were earning today. The P/E ratios were multiples of sensible norms and well beyond common sense.
The disruptive business practice that affected markets in 2008 was lending money without doing due diligence. That was a no brainer, especially when we were warned by reliable media reports that these risky mortgages amounted to trillions of dollars.
Greedy, incompetent CEO's who sell the public that they are increasing company values to benefit their shareholders, meanwhile reaping extremely huge bonuses in spite of that incompetence is a further factor. When you have these indicators showing up together watch out. Who knows where the next wave of falsified profits may show up? Could it be pharmaceuticals? Flu vaccines? What we need to do is to not worry. Excessive wealth in Dubai or other places around the world could pose problems in the future. Watch your step. If problems arise they will be kept hidden by big business if possible for a few years, the next drop of over 25% should be a few years out. But who knows for sure?
Gordon has over 30 years experience in banking and financial services industry. He shares his awareness of behind the scenes practices that work to the advantage of banks, investment houses, and big business in general but seldom benefit consumers. He also shares insights into how to improve your financial health and wealth without worry and stress.
Give a FREE ebook to a teenager or young adult. Help them to appreciate the value of money and avoid common financial mistakes. They'll appreciate it.
Visit http://www.smartchoicelife.net/ and download my ebooks at no charge.
Also check our NO CHARGE INSTANT LIFE INSURANCE QUOTING system at http://www.smartchoicelife.com/free-quote/. While you are there check out our Unique Anonymous Personal Financial Planning System which was designed by Gordon to serve internet cleints where you get direct personal access to Gordon and ongoing coaching is included with your plan.
Monday, March 8, 2010
Tuesday, January 20, 2009
You should be happy about the recent market declines
In 2007 my clients were coached to move some or most of their money into daily interest accounts. Why? Because I knew markets would decline at least 40% during 2008 and 2009. (It was inevitable considering the sub-prime mortgages and real estate fiasco taking place in USA ) I predicted that the TSX would hit 9,000 or 10,000 in 2008 or 2009 and it could be 2010 or 2011 before it would begin a stable growth period again.
TSX (Toronto Stock Exchange Index) was near 14,500 in 2007 when I suggested a defensive position. The TSX was recently around 9,000. So I believe it’s about 2/3 of the way down now.
Are you protected now?
When markets are down stocks and mutual fund shares are on sale.
The way to make money is to buy low and sell high……not the other way around!
My clients are beginning to or about to begin buying back into the markets slowly over the next twelve to twenty four months. They’ll be likely to hit the lowest prices on shares. The point is to get bought back in before stock markets begin their growth period without losing a large percentage as it continues to drop.
TSX (Toronto Stock Exchange Index) was near 14,500 in 2007 when I suggested a defensive position. The TSX was recently around 9,000. So I believe it’s about 2/3 of the way down now.
Are you protected now?
When markets are down stocks and mutual fund shares are on sale.
The way to make money is to buy low and sell high……not the other way around!
My clients are beginning to or about to begin buying back into the markets slowly over the next twelve to twenty four months. They’ll be likely to hit the lowest prices on shares. The point is to get bought back in before stock markets begin their growth period without losing a large percentage as it continues to drop.
Bulls, Bulls and more Bulls – watch out for the B u l l S _ _ _!
“Two ways to lose big with your investments” Some serious updates for you. No Bull!
If you are my client you would have been warned well in advance (summer and fall of 2007) that the stock markets would drop in value in 2008 and 2009. My original prediction was about a 40% drop to about 8,000 or 9,000 on the TSX – I believe now it could be even worse than that. Bank bail outs by governments will only keep certain firms from going bankrupt and may head off mayhem and riots in the streets. It won’t correct a recession or even a depression form happening.
There are two ways to lose big time in the markets:
#1) Market Timing (changing investments in reaction to monthly, weekly or daily news) most people get it all wrong and many lose more than they would if they stayed invested. Those that do get it correct much of the time rarely come out ahead of fund managers.
#2) Staying Invested through Systemic Failures (This are when the bulls are running crazy!) You can detect the impending systemic failure by noticing the Bull S_ _ _ !
One example of the BS I refer to is the myth created in 1998 and 1999 that ‘dot.com stocks’ (which were trading at ridiculously high price earnings ratios) were of a ‘new era’ in trading and fundamentals didn’t matter. BS! That smelled like BS and I knew it. That’s why I coached my clients to move between 20% and 40% from equities to bonds or cashin Jan 2001 and again another suggestion to move 20% to 40% more in June 2001.
The clients that listened were protected from a 30% to 40% drop in their funds. They were able to switch back into equities at lower prices. This put them over five years ahead in returns when compared to those that stayed invested!
The BS was obvious again in 2007. You can’t lend huge mortgages to people in low income jobs and expect to continue a never ending, artificially created, growth cycle in real estate prices. CNN and other media have been reporting this ludicrous practice for several years now.
These USA banks were lending money on mortgages and lying about people’s incomes on applications just to sell a mortgage. Their angle was that the real estate prices were increasing so fast that these poor people would be able to refinance in three years and keep their payments down.
It just couldn’t happen…..a mathematical impossibility. The houses stopped getting built at some point and when the market was flooded with extra houses the prices started to fall. Those poor people never stood a chance of remortgaging. It was simply logical to me. When you throw away the basic principles of finances things have to go wrong. When the practice is so widespread as we were informed for 2-3 years now it had to bring about a collapse. There was no other way.
This stock market decline didn’t happen in October 2008 it was in the making for several years – we just didn’t know which day or which month it would drop. That’s why I advised my clients to move to safe ground in 2007 and early 2008. They are happy now! That saved up to seven years worth of growth on their funds. (See comparison on below)
To those have not followed my advice so far it isn’t too late. These markets aren’t even half way down yet. (September 2008) The TSX will continue to drop to probably 8,000 or maybe even 7,000 before it turns around - you can still move and avoid losses and be set to earn more when growth starts again.
I can set you up with a systematic investment approach that will protect your money and make sure that you don’t miss out on the next growth cycle. I’ve done it now for two systemic failures and can still help you now. Just call me at 459-2224 (This prediction is not guaranteed – but it is based on my experience in predicting 2 to 5 year trends in the markets and I’ve not been wrong to my knowledge yet.)
Jane sees systemic failure ahead and Bill does what fund managers and politicians want him to do to help them save face and that is to stay invested.
JANE moves to safe investments
BILL stays put.
JANE moves $100,000 to bonds and cash
BILL leaves $100,000 in equity funds
Markets drop 50% like they did from 2000 to 2003
JANE gets about 5% return for 3 years = $115,000
BILL funds drop by 33.3% (fund manager does not drop as much as markets) BILL has $66,600
DIFFERENCE between $115,000 and $66,500 = $48,500
CONCLUSION:
When the Bulls are running, run with them, but when the bulls start running wild, stop, sniff around. If you smell the B U L L S_ _ _ then get out of the way. If you don’t you may get run over by the stampede or get covered in BS
If you are my client you would have been warned well in advance (summer and fall of 2007) that the stock markets would drop in value in 2008 and 2009. My original prediction was about a 40% drop to about 8,000 or 9,000 on the TSX – I believe now it could be even worse than that. Bank bail outs by governments will only keep certain firms from going bankrupt and may head off mayhem and riots in the streets. It won’t correct a recession or even a depression form happening.
There are two ways to lose big time in the markets:
#1) Market Timing (changing investments in reaction to monthly, weekly or daily news) most people get it all wrong and many lose more than they would if they stayed invested. Those that do get it correct much of the time rarely come out ahead of fund managers.
#2) Staying Invested through Systemic Failures (This are when the bulls are running crazy!) You can detect the impending systemic failure by noticing the Bull S_ _ _ !
One example of the BS I refer to is the myth created in 1998 and 1999 that ‘dot.com stocks’ (which were trading at ridiculously high price earnings ratios) were of a ‘new era’ in trading and fundamentals didn’t matter. BS! That smelled like BS and I knew it. That’s why I coached my clients to move between 20% and 40% from equities to bonds or cashin Jan 2001 and again another suggestion to move 20% to 40% more in June 2001.
The clients that listened were protected from a 30% to 40% drop in their funds. They were able to switch back into equities at lower prices. This put them over five years ahead in returns when compared to those that stayed invested!
The BS was obvious again in 2007. You can’t lend huge mortgages to people in low income jobs and expect to continue a never ending, artificially created, growth cycle in real estate prices. CNN and other media have been reporting this ludicrous practice for several years now.
These USA banks were lending money on mortgages and lying about people’s incomes on applications just to sell a mortgage. Their angle was that the real estate prices were increasing so fast that these poor people would be able to refinance in three years and keep their payments down.
It just couldn’t happen…..a mathematical impossibility. The houses stopped getting built at some point and when the market was flooded with extra houses the prices started to fall. Those poor people never stood a chance of remortgaging. It was simply logical to me. When you throw away the basic principles of finances things have to go wrong. When the practice is so widespread as we were informed for 2-3 years now it had to bring about a collapse. There was no other way.
This stock market decline didn’t happen in October 2008 it was in the making for several years – we just didn’t know which day or which month it would drop. That’s why I advised my clients to move to safe ground in 2007 and early 2008. They are happy now! That saved up to seven years worth of growth on their funds. (See comparison on below)
To those have not followed my advice so far it isn’t too late. These markets aren’t even half way down yet. (September 2008) The TSX will continue to drop to probably 8,000 or maybe even 7,000 before it turns around - you can still move and avoid losses and be set to earn more when growth starts again.
I can set you up with a systematic investment approach that will protect your money and make sure that you don’t miss out on the next growth cycle. I’ve done it now for two systemic failures and can still help you now. Just call me at 459-2224 (This prediction is not guaranteed – but it is based on my experience in predicting 2 to 5 year trends in the markets and I’ve not been wrong to my knowledge yet.)
“Enhancing lifestyles no matter what happens in an uncertain world"
COMPARISONJane sees systemic failure ahead and Bill does what fund managers and politicians want him to do to help them save face and that is to stay invested.
JANE moves to safe investments
BILL stays put.
JANE moves $100,000 to bonds and cash
BILL leaves $100,000 in equity funds
Markets drop 50% like they did from 2000 to 2003
JANE gets about 5% return for 3 years = $115,000
BILL funds drop by 33.3% (fund manager does not drop as much as markets) BILL has $66,600
DIFFERENCE between $115,000 and $66,500 = $48,500
CONCLUSION:
When the Bulls are running, run with them, but when the bulls start running wild, stop, sniff around. If you smell the B U L L S_ _ _ then get out of the way. If you don’t you may get run over by the stampede or get covered in BS
Financial Plan Offer
Most people don’t have a clue how much they’re missing………could you be one of them???Survey Says: 79% of people confuse investing with financial planning - they are very different!Survey Says: 78% think financial planning is the same as retirement planning – again different!Survey Says: 72% are afraid of planning or don’t plan in general – we make planning easy! Survey Says: 69% don’t understand how advisers get compensated – we’ll clear that up for you Survey Says: 64% are looking for a quick fix rather than a long term strategy –
Survey Says: 63% have no idea what a financial planner does –
Survey Also Says: 97% of people who had a financial plan done for them found it beneficial!
Source of first six statistics are from a survey done by Financial Planning Standards Council of CanadaSource of the last statistic is from a survey of 800 Americans and taken from a financial service firm for Lutherans in USA.
Ignorance isn’t bliss – it’s costly!Let me save you money and headaches – I’ll uncover any ‘hidden pitfalls’ in your financial future before they cost you money.
Call me today with any questions you have.
Phone 459-2224 TODAY or email FinancialPlan@GordonHughes.ca
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Website www.GordonHughes.ca Email FinancialPlan@GordonHughes.ca Phone 459-2224
Survey Says: 63% have no idea what a financial planner does –
Survey Also Says: 97% of people who had a financial plan done for them found it beneficial!
Source of first six statistics are from a survey done by Financial Planning Standards Council of CanadaSource of the last statistic is from a survey of 800 Americans and taken from a financial service firm for Lutherans in USA.
Ignorance isn’t bliss – it’s costly!Let me save you money and headaches – I’ll uncover any ‘hidden pitfalls’ in your financial future before they cost you money.
Call me today with any questions you have.
Phone 459-2224 TODAY or email FinancialPlan@GordonHughes.ca
This coupon is worth $100.00 toward your financial plan. (‘till Dec 31/08)Depending on your income this $100.00 might cover the whole cost. Promo Code 621QThere are ways to get a FREE PLAN. Ask us about our standing FREE PLAN OFFER.
Website www.GordonHughes.ca Email FinancialPlan@GordonHughes.ca Phone 459-2224
Low Income Seniors Need Your Help
Please help! Email the Minister of Finance and the Prime Minister to stop this outrage.(see below) Click here to get the content for the email. You can cut and past into body of your email and send it as is or add your own comments if you wish.
WHY?: Low income workers buy an RRSP and get 50% tax refund. When they withdraw the RRSP they pay back the 50% taxes (so far that’s fair). That RRSP withdrawal is classed as ‘income’ on their tax return. The following year those low income seniors have their GIS reduced by 50 cents for every dollar of ‘income’ from their Guaranteed Income Supplement. (Guaranteed Income Supplement is assistance for the lowest income people over age 65 to help provide a minimum standard of living.) Click here to see Government’s own tables. For every $24.00 increase in annual income they deduct $1.00 a month ($12.00 a year) form their Guaranteed Income Supplement.
RRSPs shouldn’t be used to rob seniors of their meager savings, especially when those who by-pass RRSPs are not trapped this way!
This “bait” and “trap” policy used by Canada on the most defenceless in our society is a shame! This only impacts people who have only a few hundred or a few thousand dollars saved. Seniors with large savings wouldn’t qualify for low income assistance anyway. THIS ERROR IN LEGISLATION MAY NOT HAVE BEEN INTENTIONAL BUT IT'S A SHAME TO LET IT CONTINUE.
NOTE: This is not politically motivated as Governments and Opposition Parties of all stripes have allowed this gouging of low income seniors savings for decades. Please help stop it now.
PLEASE FORWARD THIS EMAIL TO EVERYONE YOU KNOW. THIS IS SO UNFAIR.
WHY?: Low income workers buy an RRSP and get 50% tax refund. When they withdraw the RRSP they pay back the 50% taxes (so far that’s fair). That RRSP withdrawal is classed as ‘income’ on their tax return. The following year those low income seniors have their GIS reduced by 50 cents for every dollar of ‘income’ from their Guaranteed Income Supplement. (Guaranteed Income Supplement is assistance for the lowest income people over age 65 to help provide a minimum standard of living.) Click here to see Government’s own tables. For every $24.00 increase in annual income they deduct $1.00 a month ($12.00 a year) form their Guaranteed Income Supplement.
RRSPs shouldn’t be used to rob seniors of their meager savings, especially when those who by-pass RRSPs are not trapped this way!
This “bait” and “trap” policy used by Canada on the most defenceless in our society is a shame! This only impacts people who have only a few hundred or a few thousand dollars saved. Seniors with large savings wouldn’t qualify for low income assistance anyway. THIS ERROR IN LEGISLATION MAY NOT HAVE BEEN INTENTIONAL BUT IT'S A SHAME TO LET IT CONTINUE.
NOTE: This is not politically motivated as Governments and Opposition Parties of all stripes have allowed this gouging of low income seniors savings for decades. Please help stop it now.
PLEASE FORWARD THIS EMAIL TO EVERYONE YOU KNOW. THIS IS SO UNFAIR.
Use irrevocable beneficiary for funding education
The beneficiary of a segregated fund contract receives the funds upon death of the annuitant. Here is a way to retain indirect control over the investments by using an irrevocable beneficiary designation. A parent could set up a segregated fund contract with their child as the owner/annuitant and him/herself as the irrevocable beneficiary.
This could help parents with children entering post-secondary education. With the parent as the irrevocable beneficiary he/she would be required to sign for withdrawals; transfers of ownership; and beneficiary changes, ensuring that they remain involved in what happens to the money.
TAX ADVANTAGE: School expenses will likely offset the child’s income from the investment, there would be no attribution of income and the parent can control how much money the child gets. Please ask for our Investor Opportunities Guide for more information about irrevocable beneficiaries at ghughes@nb.aibn.com
The “IF” in “RRIF
Concerns we hear from seniors who see assets shrinking are very real. We frequently encounter people who have to reduce income to make sure their money lasts as long as they live.
GICs are risky. If you get 3% interest deposited each year and withdraw the minimum RRIF withdrawal which at age 71 is nearly 6% increasing annually to 20% how long will your money last? Actually the minimum income will decrease to less than half what you started with if you keep taking the allowable minimum. That,s no fun at all.
Mutual Funds and Seg. Funds offer some protection against interest rates but are very risky also. If you have a major market decline in the few years before or after you retire your regular income withdrawal can reduce the balance excessively when markets decline. Segregated funds have special advantages, like creditor protection, a death benefit and maturity guarantees. However when you draw income the guaranteed balance is reduced proportional to your withdrawal. Your money can run out quickly and that is no fun either.
There is a better solution available since October 2006 There is a special Seg. fund that not only protect your money like a traditional Seg. fund but they also guarantee an income for life that starts at 5% or your RRIF minimum which ever is higher. This applies if your money is in a RRSP/RRIF. Your income never decreases and will probably increase. Once it is increased according to the guarantee it will never decrease again.
Should you have money that is not in an RRSP or RRIF the tax treatment of these withdrawals make this special type of Seg. fund even more attractive.
Contact us for more detailed information or just click on the “Income Plus” ad at the top right of this page and listen to the videos. They call or email us to show you how simple it is to eliminate all worry about outliving your money or having to reduce your income as you get older. You chose the investment funds in this portfolio. Call for more info.
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