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Article Archive: 2003

Mutual fund portfolio contagion
12/31/03   Funds
"hey are both consistent with the idea that information about stocks diffuses gradually across the investing population, and that this "epidemic effect" leads to momentum effects in stock ownership and trading."

A Christmas letdown
12/31/03   Economy
"Retailers overall may have fared better than expected this holiday season, but it still looks like Santa Claus couldn't make all the merchants merry this year."

Keep more in 2004
12/31/03   Thrift
"Here are 8 resolutions: pick one or two and stick with them to bolster your finances next year."

Milking lessons
12/29/03   Stocks
"On the face of it, a financial-holding company seems to have been used to grab cash from the operating company, before losing that money through the silly use of derivatives and other speculative financial dealings. As the losses mounted, instead of coming clean, it seems that the stakes were raised in a desperate and ultimately futile effort to keep the scam going. If such a picture is broadly accurate, then Parmalat will look much like other corporate scandals. Until then, the worry is that fresh horrors may yet emerge."

Make more mistakes
12/27/03   Management
"Would you like me to give you a formula for success? It's quite simple, really. Double your rate of failure. You are thinking of failure as the enemy of success. But it isn't as all. You can be discouraged by failure or you can learn from it. So go ahead and make mistakes. Make all you can. Because, remember that's where you will find success."

Nightmare after Christmas
12/26/03   Markets
"Christmas Day may be about ripping open gifts, but the day after Christmas is about returning the reindeer sweater, the second digital camera, or the DVDs and CDs that you won't watch or listen to -- ever."

Losing by instinct
12/24/03   Markets
"The late Benjamin Graham -- erudite classicist, mentor to Warren Buffett, highly successful investor and probably the greatest financial mind of the 20th century -- said it best: "The investor's chief problem -- and even his worst enemy -- is likely to be himself.""

Playing in a closed game
12/24/03   Funds
"Unscrupulous mutual funds, as investors have learned to their chagrin, have found plenty of ways to cheat. There are, however, sound alternatives with many of the benefits of mutual funds but without the drawbacks. I discussed one such investment -- exchange-traded funds (ETFs) -- a few weeks ago. Now, consider closed-end funds"

Self-Destruction, mother of invention
12/24/03   Stocks
"But what does the joy of destruction mean for investors? A lot. Peters cites a study by Richard Foster and Sarah Kaplan of McKinsey & Co., who examined the first list of the biggest U.S. companies published by a magazine, the Forbes 100 of 1917, and compared it with a similar list 70 years later. Of the 100, only 39 managed to survive, and only 18 of those were among the top 100 in 1987."

Manulife, John Hancock in fund probe
12/24/03   Funds
"Manulife Financial Corp. and John Hancock Financial Services have been served with subpoenas for information about trading practices as part of ongoing probes into the mutual-fund industry."

Home buying with no money down
12/24/03   Real Estate
"In fact, according to a survey of buyers conducted in early 2003 by the National Association of Realtors, less than half of all buyers put down 20 percent. Among first-time buyers, 33 percent kicked in less than 10 percent of the purchase price, while 28 percent financed the entire price of the home."

Corporate scandals
12/23/03   Stocks
"The near failure of Parmalat is raising questions about how well Europe is reforming its corporate governance."

Parmalat admits $5bn black hole
12/22/03   Stocks
"Many of Italy's biggest banks are exposed to Parmalat, leading to fears of a system-wide meltdown if the company were to collapse."

Out of sight, out of mind
12/21/03   Funds
"We argue that the purchase decisions of mutual fund investors are influenced by salient, attention-grabbing information. Investors are more sensitive to salient in-your-face fees, like loads and commissions, than operating expenses; they are likely to buy funds that attract their attention through exceptional performance, marketing, or advertising. Our empirical analysis of mutual fund flows over the last 30 years yields strong support for our contention. We find consistently negative relations between fund flows and load fees. We also document a negative relation between fund flows and commissions charged by brokerage firms. In contrast, we find no relation (or a perverse positive relation) between operating expenses and fund flows. Additional analyses indicate that mutual fund marketing and advertising, the costs of which are often embedded in a fund's operating expenses, account for this surprising result."

A value investor's secret
12/21/03   Value Investing
"Value investors come in all shapes and sizes. Some invest in real estate, others in bonds (generally distressed ones), still others in stocks. Some specialize in certain industries or countries, while others are generalists. But most value investors have two things in common: (1) They seek to buy at a significant discount to intrinsic value (the proverbial dollar bill for 50 cents); and (2) They generally sell once intrinsic value has been reached."

Tax Act amendments could eliminate interest deduction
12/21/03   Taxes
"Golombek is concerned that if the new legislation is passed, it will be virtually impossible for investors who borrow money to purchase dividend-paying investments to pass the cumulative profit test. For example, Golombek gives the example of an investor who buys a stock yielding a 2% dividend today with borrowed money at a 4% interest rate. Assuming the price of the stock increases each year by 7%, he says, it would take approximately 20 years of holding the investment to make a cumulative profit since this profit does include the ultimate capital gain upon disposition. Most investors make regular changes to their portfolio and do not want to hold on to particular investments for so many years. Therefore, he says, any losses investors attempt to write off as a result of interest deductibility could be disallowed by the CCRA."

Is the party over for income trusts?
12/21/03   Trusts
"A little over a week ago, mutual fund manager Ben Cheng addressed an audience of 40 or 50 investors who gave him a startling insight into how retail investors view income trusts. "I asked how many of them had an income trust in their portfolio, and all their hands go up," Mr. Cheng recalls. "And then I said, how many people in this room have more than 50 per cent of their investable assets in income trusts? More than half of the hands go up. "That scares the hell out of me," says Mr. Cheng, who manages an income trust fund -- CI Signature High Income. "At the end of the day, it looks like retail investors have jumped again with both feet into an asset class thinking that it's invulnerable and it goes up forever. I don't think that's the case.""

Snowbirds should understand tax rules
12/21/03   Taxes
"You should be aware that you may have filing requirements in the United States even if you have no tax to pay south of the border. Certainly if you're a U.S. citizen you're required to file a tax return in the United States each year. But even those who are residents of Canada and non-citizens of the United States (known as non-resident aliens) may have filing requirements in the United States depending on the number of days spent there each year."

Scrooge defended
12/21/03   Christmas
"It's Christmas again, time to celebrate the transformation of Ebenezer Scrooge. You know the ritual: boo the curmudgeon initially encountered in Charles Dickens's A Christmas Carol, then cheer the sweetie pie he becomes in the end. It's too bad no one notices that the curmudgeon had a point"

Is Christmas inefficient?
12/19/03   Christmas
"Yale University's Joel Waldfogel, writing in the American Economic Review, condemns what he calls "The Deadweight Loss of Christmas." Once you cut through the calculus and graphs, his conclusion is clear: though Christmas generates a $50 billion gift-giving industry, a tenth to a third of that is sheer loss. Why? Because the recipient doesn't always get what he wants. Given the chance, the recipient would have purchased something else."

Humbled
12/18/03   Management
"Now chief executives are regarded by the public with the sort of disdain and distrust usually reserved for politicians, lawyers and journalists."

Vanishing jobs
12/18/03   Economy
"Structural change in the economy means many jobs are never going to come back."

Sadly, lawsuits are best remedy for investors
12/17/03   Brokers
"In Canada today, protections for individuals preyed on by the investing industry are as feeble and inadequate as I've seen in five years of writing this column."

The King Lear syndrome
12/15/03   Management
"For the board, drawing up a succession plan is a good way to spot future problems. Mr Couchman describes one company that found to its dismay that it had only ten possible successors for 30 top jobs. But there are advantages for the boss, too. After all, one way to secure a sort of immortality is to pick one's own successor."

Warren, show me the money
12/15/03   Buffett
"Microsoft's fairly recent decision to pay a dividend demonstrates the dawning reality that this company has changed. But, they're not the only one. Market-dominator Berkshire Hathaway generates massive amounts of cash, and the Oracle should also share the wealth."

Avoid the home equity hangover
12/15/03   Debt
"Debt in lines of credit has jumped 31 percent this year. Don't let equity become a license to spend."

Giving is still sound tax policy
12/14/03   Taxes
"The recent death of gift-in-kind tax shelters doesn't mean the end of charitable giving in Canada. It's just no longer possible for donors to make a profit on the deal."

Scrooge of the investing world
12/13/03   Thrift
"A a time of year when most people are beingurged to spend, Norman Rothery is going about his business of urging people to be thrifty in how they invest their savings. Examining the menu over a Diet Pepsi at Pangaea, in the heart of the fashionable Bloor Street shopping district in downtown Toronto, the founder of StingyInvestor.com and FrugalFunds.com and publisher of two quarterly newsletters is an unlikely Scrooge -- more of a happy warrior of the value investing world."

The virtue of ETFs
12/12/03   Indexing
"But I think it's much easier and ultimately a better strategy simply to stick to ETFs that track the broad market -- for example, the iShares Dow Jones Total Stock Market Index (or Vanguard's Total Stock Market VIPER) for the stock market and the iShares Lehman Aggregate Bond fund for bonds."

The new indexing
12/11/03   Indexing
"In the presence of more than one risk factor, the goal of indexing switches from diversification across the available stocks to diversification across the available risk-return dimensions. This might seem like "sector betting" to traditional indexers like Vanguard founder John Bogle, who still believe that market risk primarily determines performance and that small stocks and value stocks aren't separate sources of risk and return. The academic community is arriving at a different consensus, one that recognizes multiple independent risks. Investors might even have natural combinations of the different risk exposures that best suit their individual time horizons and preferences. As long as the portfolios they use to gain these exposures are index funds, and as long as the exposures are consistent and not timed to predict markets, this sort of portfolio structuring is not a "sector bet"it's the new face of indexing."

Is there still value in the book-to-market ratio?
12/11/03   Value Investing
"There is one advantage of BtM relative to its peers that should be mentioned. Since book value is a "stock" variable, while earnings, cash flow and sales are "flow" variables, there is a tendency for BtM rankings to be somewhat more stable over time than the rankings based on the other three variables. This reduces portfolio turnover for strategies that are based on BtM rankings. So, in addition to providing at least as much return dispersion as its competitors, BtM may also reduce the number of transactions that are triggered by stocks moving in and out of the portfolio's buy range. This can be especially important for taxable investors."

The second largest tax investors pay
12/11/03   Funds
"Well, let's face it -- nothing is worse than inflation. The Voluntary Graduated Financial Services Tax, however, can be a lot worse than the highest income tax rate. By my calculation, accepting an annual expense ratio of 1.39 percent on an equity mutual fund is the equivalent of accepting a 40 percent tax rate from the financial services industry. The amount you accumulate in 40 years will be only 60 percent of what you could accumulate if there were no financial service expense."

SEC action on high-yield funds near
12/11/03   Funds
"U.S. regulators are expected to bring an enforcement action as soon as today in their probe of mispricing of shares in high-yield bond mutual funds, people familiar with the matter said Thursday."

Patenting air or protecting property?
12/11/03   Law
"Universities, corporations and tens of thousands of Web site providers across the country probably never imagined they would be rooting for the pornography industry."

Mutual funds or hole in the ground?
12/11/03   Funds
"How times change. Today, mutual funds are the biggest financial scandal since Martha Stewart phoned her broker. What Martha did was entertaining, but not serious. This is serious. The only reason this scandal hasn't generated more popular outrage is that nobody can understand it."

SEC to act against MFS
12/08/03   Funds
"Sun Life Financial Inc. said Monday its U.S. mutual funds unit may face enforcement action by the Securities and Exchange Commission."

A faded green
12/07/03   World
"How much further might the dollar fall? Predicting the future price of a currency is a mug's game. But there are good reasons to believe that over the medium term the dollar could drop a lot lower, especially against the euro. Whether that will have the desired effects, in reducing America's imbalances, or in causing the expected chaos in Europe's economies, is a different question."

Rip-off room revisited
12/07/03   Thrift
"Extended warranties, rust-proofing, Scotchgard: Is this stuff ever worth it?"

Scrapped
12/07/03   World
"George Bush has announced the dismantling of America's tariffs on imported steel, while promising to shield domestic companies from dumping. The tariffs have done their job, he says. Have they?"

12 tax tips to munch on
12/07/03   Taxes
"Why do we call money dough? Everyone knows that dough tends to stick to your fingers, while money tends to slip through them. Good tax tips, on the other hand, can be a lot like doughnuts. If you try one, it could make life a lot sweeter. TIM CESTNICK serves up a dozen tasty year-end tax-planning ideas that could keep investors' wallets a little fatter and a little happier in 2004."

The child molester next door
12/07/03   Real Estate
"From the start we had vowed not to skip the inspection, despite prodding from our realtor. Yet by the time this house came on the market, we had already lost out to rival bidders on two other homes. In the first case we were outbid because another couple's escalation clause a stipulation in an offer that a buyer is willing to pay a certain amount above the highest bid up to a specified maximum beat ours by a few hundred dollars. We lost the second house because another buyer waived the home inspection outright. After that experience, we were tempted to throw caution to the wind. Thankfully we didn't."

Big trouble for Big Pharma
12/05/03   Stocks
"The industry's bloated overheads appear to be driving its decisions on the sort of drugs it seeks to develop. Like a supermodel who will not get out of bed for less than $10,000 a day, Big Pharma has decided that it is simply not worth investing in anything but a blockbuster. This means that lesser, albeit interesting, compounds fall by the wayside. An oft-quoted figure from the Tufts Centre for the Study of Drug Development puts the average cost of bringing a new drug to market at $897m. But as F.M. Scherer, an economist, points out, this is an average cost for big firms producing drugs for chronic diseases. Other firms can bring drugs for other complaintsinfectious diseases or rare conditions, sayto the market for around $100m-200m."

In defense of bank failures
12/05/03   Government
"The American people have not seen widespread bank runs since 1933. In that object at least, the Federal Deposit Insurance Corporation has succeeded. But at what cost? To insure deposits is to invite bad bankingand worse; it is to foster reckless speculation and unsound investments, help make inflation permanent instead of intermittent, obstruct the curative powers of economic contractions, and divorce freedom from responsibility."

Risks in 'buy low, donate high'
12/05/03   Taxes
"Taxpayers prepared to gamble should brace for an audit. The history of tax shelters in Canada is always the same: loopholes are discovered by lawyers and accountants, and the early exploiters are their wealthy clients. By the time small investors get wind of the massive tax savings and government coffers are threatened, the department of Finance closes the loophole."

A new charge called 'Oops'
12/04/03   Thrift
"Every few years, economists identify another mutant variation of inflation to keep them awake at night. In the 1980's, it was stagflation. Three years ago, it was deflation. And now, meet the economic specter of the new millennium: stealth inflation."

Ripples from a Japanese bank collapse
12/04/03   World
"The Japanese government's November 30 decision to nationalize the insolvent Ashikaga banking group has surprised investors who had expected a Resona-style bailout - in which shareholders weren't forced to take a haircut for the mess. The move means that Ashikaga shareholders' capital will be wiped out, leaving them with nothing, and the government will take 100 percent of the equity in the regional lender."

How fund scandals will serve fund owners
12/03/03   Bogle
"It is the myriad conflicts between the interests of fund managers and the interests of fund owners that exist in this industry that bear so much of the responsibility for this staggering gap between the stock market's return and the returns earned by fund investors, and even the returns earned by the funds themselves. While the unacceptable, and partly illegal, market timing scandal has gained a great deal of well-deserved attention, it pales in significance when compared with the powerful impact of high costs on reducing fund returns, on the force of fund size in diminishing fund returns, and on the marketing focus that tempted too many investors to purchase funds that they now wish they had never bought."

Tax cuts may prove a mirage for AMT payers
12/03/03   Taxes
"The tax cuts of 2003 may be a boon to the economy and provide welcome padding to some taxpayers' wallets, but for others those cuts will prove to be a mirage. That's because lower tax rates will push more people into paying the Alternative Minimum Tax, rendering some of those much-heralded breaks moot."

The value view
12/02/03   Value Investing
"Value managers come in many shapes and sizes. Some are more price focussed and are often drawn to cheap but troubled companies. While a notably larger camp, the GARP managers, conduct an ongoing search for the less typical combination of quality and price. This week is a summary of the opinions and views of what I feel are some of Canada's most skilled money managers."

CIBC unit may face class action
12/01/03   Funds
"The asset management arm of Canadian Imperial Bank of Commerce is the target of a proposed class action after it allegedly failed to disclose a change to a mutual fund that left investors exposed to the falling U.S. dollar."

I'd buy that for a dollar (and two dimes)
12/01/03   World
"The euro is worth $1.20 for the first time in its history. That may hurt Europe. Will it help America?"

Trustmark, Walgreens join 'clean stocks' list
11/30/03   Stocks
"The bad guys get all the headlines, but don't let them scare you into putting your money in the mattress. So far, the "Clean Stocks" project I launched last July has identified six stocks that are clean enough for investors who worry about the never-ending round of financial scandals, yet know they must stay in the markets to stand any chance of reaching their own financial goals."

IRS revamps RRSP reporting
11/30/03   Taxes
"The U.S. Internal Revenue Service has spared about 750,000 people in Canada and the United States from a tax-filing headache involving their Canadian registered retirement plans."

A year-end registered plan checklist
11/30/03   Taxes
"You don't have to make your 2003 contribution until March 1, 2004, but why wait? Avoid the rush in the new year, contribute today and get your money working."

The seven deadly sins
11/29/03   Real Estate
"In 1929 John D. Rockefeller decided it was time to sell shares when even a shoe-shine boy offered him a share tip. During the past week The Economist's economics editor has been advised by a taxi driver, a plumber and a hairdresser that "you can't go wrong" investing in housingthe more you own the better. Is this a sign that it is time to get out? At the very least, as house prices around the world climb to ever loftier heights, and more and more people jump on to the buy-to-let ladder, it is time to expose some of the fallacies regularly trotted out by so many self-appointed housing experts."

Honoring Benjamin Graham
11/27/03   Graham
"We celebrate Benjamin Graham's 100th birthday--and the 60th anniversary of the publication of Security Analysis--by examining his investment philosophy. For this purpose, we rely heavily on The Intelligent Investor, which he considered more useful than Security Analysis to a young security analyst."

Market prices right
11/27/03   Value Investing
"So does Miller. His turnover is about 4% a year, meaning that his average holding period is 25 years. For an undervalued stock, the sweet spot is typically three to five years, and that period can include some scary corrections, Miller suggests. Meanwhile, the average mutual fund is turning over its portfolios entirely in 11 months, because, citing a lesson from behavioural economics, "people overwhelmingly overvalue current information," or what the analysts are saying now. Analysts rarely put a stock on their recommended list before it has shown signs of resurrection, by which time most investors have missed a significant portion of the rebound."

Research looks much as it used to
11/26/03   Brokers
"Analysts obviously believe there's good potential for some energy and gold, which is sort of a contrarian call when you look at what these sectors have done lately. Then again, it's possible that these sectors are likely to generate lots of investment banking and underwriting business."

Pensions: Still a problem
11/26/03   Accounting
"With the stock market's big recovery this year, worries about faltering corporate pension plans have all but faded away. But the pension mess is still very much with us."

To sell or not to sell
11/25/03   Value Investing
"Ah, but all other things aren't always equal. Companies and industries change. New information surfaces. Assumptions can prove to be inaccurate. Stocks often decline for very good reasons, and you might be correct in concluding that there are better places for your capital, even though the stock has become cheaper. The key is figuring out which stocks are mistakes and which represent opportunity. That's not easy, but it is certainly much easier if you can overcome the natural human tendency to irrationality cling to losing stocks."

Munger on human misjudgments
11/25/03   Value Investing
"Behavioral finance -- which examines how people's emotions, biases, and misjudgments affect their investment decisions -- is one of the least discussed and understood areas of investing."

Avoiding value traps
11/25/03   Value Investing
"Companies and their stocks fall on hard times for any number of reasons. Sometimes hard times spell buying opportunities, other times you're better off keeping your distance. The hard part is telling the difference. Whitney Tilson shares some tricks of the trade."

CCRA tax shelter donation arrangements
11/25/03   Taxes
"As tax filing season approaches, you may see a growing number of advertisements for tax shelter donation arrangements. While donating various items to a charity (such as art, computers, and prescription drugs) is a legitimate way of making a charitable donation, you should be aware of the risks associated with certain donation arrangements."

The greed disease
11/25/03   Brokers
"The crux of his book was that work on Wall Street -- and more broadly in the financial services industry -- was different from other work because it was only about money. There was no product, no goal. There was nothing but the production of endless amounts of money. It tended to make a mess of people's lives."

The invention of inflation-indexed bonds
11/25/03   Bonds
"The world's first known inflation-indexed bonds were issued by the Commonwealth of Massachusetts in 1780 during the Revolutionary War. These bonds were invented to deal with severe wartime inflation and with angry discontent among soldiers in the U.S. Army with the decline in purchasing power of their pay. Although the bonds were successful, the concept of indexed bonds was abandoned after the immediate extreme inflationary environment passed, and largely forgotten until the twentieth century. In 1780, the bonds were viewed as at best only an irregular expedient, since there was no formulated economic theory to justify indexation."

Putnam: The greed machine
11/25/03   Funds
"If you're like most investors, you probably think that the insider trading scandal at Putnam Investments, the nation's fifth-largest fund company, is a sordid but simple tale of portfolio managers picking investors' pockets."

Ottawa eyes charitable tax shelter
11/25/03   Taxes
"10,000 donors audited or reassessed in crackdown. As the year-end tax shelter season goes into overdrive, Ottawa's tax collectors are about to issue a stern warning to investors considering arrangements based on charitable donations or "gifting.""

Mutual fund abuses found in Canada
11/24/03   Funds
"A U.S. economist who tracked mutual fund abuses in the United States says there is evidence of similar trading problems occurring in Canada."

Bearish Merrill strategist under fire
11/23/03   Brokers
"Amid a rising tide of complaints, Merrill Lynch & Co.'s chief U.S. strategist, Richard Bernstein, is seeking to defend his bearish view of the stock market from investors who believe he is hopelessly wrong."

The real costs of turnover
11/23/03   Funds
"Not surprisingly, the most active group trailed the least active group by an average of 5.5% per year. And this doesn't even consider the effect of taxes, which were surely significant. For individual investors and mutual funds alike, the message is clear -- low turnover equals better performance."

Break the poverty mentality for a good cause
11/23/03   Taxes
"When it comes to charitable giving, many of us tend to fall short. Some of the numbers published by the Canada Customs and Revenue Agency may surprise you. Of those who reported between $50,000 and $70,000 of income on their tax returns in 2000, 49.7 per cent claimed charitable donations, and they gave an average of 0.67 per cent of income to charity. Between $70,000 and $100,000, 59.5 per cent claimed donations, and gave an average of 0.76 per cent of income. Finally, 69.3 per cent of those earning more than $100,000 claimed donations in 2000, and gave an average of 1.4 per cent of income to charity."

In the long run we are all broke
11/22/03   Bonds
"Investors have good reason to worry about states defaulting on their loans: Argentina and Russia provide chastening recent reminders. But both were dysfunctional economies with troubled political pasts. Surely, there is no need to worry about the indebtedness of the governments of stable, advanced countries?"

Fed up with protectionism
11/22/03   World
"The current-account deficit is benign, says Alan Greenspan, but protectionism is dangerous. America's garment makers do not agree. Its European creditors may be having second thoughts too"

Tell it like it is
11/22/03   Accounting
"The time has come to change the way we design corporate pension plans, and here are seven concrete suggestions to help employers reduce their risk If you don't have a pension plan, don't start one"

The value of a fee-based advisory relationship
11/21/03   Brokers
"Instinctively, well-heeled people are far more favourably inclined to work on a fee basis because they understand the business model and how it both aligns interests and embeds transparency. Quite apart from the ethical perspective, there are sound tax reasons for working on a fee basis, too."

The dragon binges
11/21/03   World
"Companies around the world, it seems, have caught China fever. When the fever breaks, there could be hell to pay."

The horse is dead
11/21/03   Accounting
"I have spent most of my professional life trying to make defined benefit pension plans work -- for members as well as for shareholders. But as time passes and the pension system matures, the risks become harder to manage and the complexities harder to endure. And I wonder: Is there not a better way?"

Wall St. Journal 'Buffetted'
11/21/03   Buffett
"The article focused on the difference between the mere $2,264 in taxes Buffett pays on a $4 million house he bought in Laguna Beach, California, in the early 1970s, and the $14,401 taxes he pays on his home in Omaha, Nebraska, which Buffett believes is worth $500,000."

The hard sell for reverse mortgages
11/20/03   Debt
"Mandatory mortgage insurance ensures that you (or your heirs) don't end up owing more than the house is worth. But it's entirely possible to drain all or most of your home's equity."

Joined at the hip
11/19/03   Indexing
"A few years ago Barclays Global Investors did the unthinkable when it released a wide array of U.S. stock ETFs that actually undercut the expense ratios of several comparable Vanguard index funds. Ever since, Vanguard, BGI, State Street Global Advisors, and other ETF providers have waged a public relations battle for the 'hearts and minds' of investors and advisors who use funds tied to popular benchmarks."

Fund scandals for dummies
11/18/03   Funds
"There's some reason for confidence. Late trading is less likely in Canada because of FundServ, an intermediary that has been executing fund purchases or sales since 1993. If you buy fund units after markets close at 4 p.m., they are priced at the 4 p.m. close the following day, says FundServ CEO Alan Hutton. That stops investors from profiting from "stale" prices: buying after the market has closed, as has occurred in the U.S."

How we take from rich and give to poor
11/17/03   Government
"It's time for that annual bit of nasty business -- the who-pays-who-gets update on the financial workings of Confederation. Once a year, after Statistics Canada produces its provincial economic accounts, we tally the manner in which Ottawa takes from the rich provinces and gives to the poor. The data tell residents of each province and territory whether they are a net contributor to the national public purse or a net beneficiary."

Bigger fund ripoffs exist than illegal trading
11/16/03   Funds
"It's fascinating to watch the regulators tie themselves in knots to investigate the fund sector. As usual, they're getting only part of the picture. Illegal late trading is a scandal, sure -- but so are many of the things fund companies do every day that are perfectly legal."

A closer look at investment fees
11/16/03   Funds
"Only time will tell whether or not index products out-perform actively managed products. They areuseful tools for certain types of investors who seek alternatives to active management. Yet, it is not unreasonable to conclude that above-average, low-fee, actively managed products stand a strong chance of providing superior returns."

Sparks fly over steel
11/14/03   World
"The looming trade war over America's steel tariffs may yet be averted thanks largely to an expected surge in global steel prices"

Some mutual fund firms just don't get it
11/13/03   Funds
"The thing about scandals is they usually blow over. So the Canadian mutual fund companies that have been hiding from the U.S. mutual fund industry scandal will probably make out fine. Odds are pretty good that the sort of trading abuses that several U.S. fund companies have allowed will turn out to be rare or non-existent in Canada. Any risk of an investor backlash will melt away. Or not."

Beat it boss, I'm playing a game
11/12/03   Fun
"Rejoice, my fellow corporate drones, you need no longer hide behind your monitor at work as you sneak in a game of solitaire!"

What's Buffett up to?
11/12/03   Buffett
"Warren Buffett's Berkshire Hathaway sells everything from Blizzards to long underwear. But Buffett has also been trying his hand at peddling something else entirely: influence."

I quit!
11/11/03   Management
"Overworked employees are fed up: a survey finds 8 out of 10 Americans want a new job."

The battle for Buffett's picks
11/10/03   Buffett
"I have noticed that Warren Buffett does not buy stock of companies listed on the Nasdaq. What are the differences between the exchanges, and why might Buffett prefer companies listed on the New York Stock Exchange over Nasdaq-listed firms?"

Your home: Worst-case scenario
11/10/03   Real Estate
"Will rising interest rates unravel all of the gains of the recent housing boom?"

The bull is back!
11/10/03   Value Investing
"It's true. Just ask your local broker. Listen to the cheery business commentators on the television and radio. Better still ask your boy genius fund manager; he too believes that it's true. Listen closely ... all you will hear is bull."

Big 3 seek pension relief
11/10/03   Government
"The proposal stunned a crowd of automotive executives gathered for a recent conference in West Virginia. Conservative David Stockman, the former Reagan administration budget czar and now head of a Metro Detroit auto parts maker, suggested the federal government take over the under-funded pension plans of U.S. automakers and auto parts suppliers."

Nobody sues in a bull market
11/10/03   Brokers
"'Rogue clients' try to blame their advisor for their losses "People don't sue when they're making money." That's a direct quote from a lawyer who specializes in defending investment advisors from "rogue clients.""

Inexcusable
11/10/03   Indexing
"Founder and former CEO of The Vanguard Group John Bogle has been speaking out for the past several years against bad trading practices in his industry. Suddenly, a lot of people are listening"

Playing different games
11/10/03   World
"Central bankers in Sydney and London share similar hopes and fears. On the one hand, their interest-rate decisions represent two votes of confidence in the world economy. America, an important trading partner for both countries, is growing strongly. Japan, the most important trading partner for Australia, is also showing signs of a durable recovery. With growth robust, the motivation for low interest rates is less obvious, and their disquieting consequences more apparent. When you make borrowing cheap, people do more of it. In Australia, consumer debt is growing by more than 20% per year. In Britain, total lending to individuals was 14% higher in September than it had been the year before."

Graham Stocks in Short Supply
11/10/03   Stingy Investing
Over the past three years, I've used Benjamin Graham's time-tested strategy for defensive investors to uncover undervalued stocks. So far, the results have been extraordinary with significant gains each year.

Investor Behavior = Returns
11/04/03   Funds
"What has the largest impact on the returns individual investors get? Is it the actual investments they own, or their own behavior?"

Buffett, screaming value and the DCF
11/03/03   Buffett
"The lack of precision around valuation makes a lot of people uncomfortable. To deal with this discomfort, some people wrap themselves in the security blanket of complex discounted cash flow analyses. My view of these things is best summarized by this brief exchange at the 1996 Berkshire Hathaway annual meeting: Charlie Munger (Berkshire Hathaway's vice chairman) said, "Warren talks about these discounted cash flows. I've never seen him do one." "It's true," replied Buffett. "If (the value of a company) doesn't just scream out at you, it's too close.""

The contradictions Of Warren Buffett
11/03/03   Buffett
"Warren Buffett is not Warren Buffett. In recent editions of Barron's and Fortune, the legendary US investor contradicts three viewpoints long associated with his long-term stock market approach. Here's a rundown of what Buffett has declared in the past, and what he's now saying"

Job-creation schemes don't work
11/03/03   Taxes
"Free-market economists like myself attack government tax-and-spend policies as being damaging to prosperity, accusing the government of "sucking money" or "leeching resources" out of the economy. We claim that taxes damage not only the welfare of the person from whom they are taken, but the whole country."

Perigee changes name to Legg Mason Canada Inc.
10/31/03   Funds
"Perigee Investment Counsel Inc. is changing its name to Legg Mason Canada Inc. to reflect the money manager's purchase three years ago by Baltimore-based Legg Mason Inc."

Substantial savings result when tax planning's a family affair
10/31/03   Taxes
"If your family is like mine, they'll drive you crazy from time to time. But cut them some slack. Without their help, you could be paying a lot more tax. That's right, when a family works together to reduce each member's tax burden, the result can be significant dollars saved."

Sceptre rushes to reassure jittery clients over Putnam
10/31/03   Funds
"Sceptre Investment Counsel Ltd. is scrambling to reassure jittery clients after news that two of four portfolio managers fired by U.S.-based Putnam Investments for allegedly profiting from improper trading helped to run two pooled funds for institutional clients in Canada."

Vlad the impaler
10/31/03   World
"This is not, however, George Bush's America; it is Vladimir Putin's Russia. The businessman, Russia's richest, is Mikhail Khodorkovsky, the chief executive and biggest shareholder of Yukos, Russia's largest oil company, who was spectacularly seized on October 25th aboard his own aircraft in Siberia. President Putin insisted that the arrest was a normal function of the country's judicial system, in which he neither could nor should interfere. But everybody knows that, in Mr Putin's Russia, the taking of such a big fish has nothing to do with business misdeeds, still less with justice, and everything to do with politics and the Kremlin's control. And that is why Mr Khodorkovsky's arrest, along with the rumoured departure of the Kremlin's chief of staff, Alexander Voloshin, one of Mr Khodorkovsky's sympathisers, are so ominous."

The big candyman
10/31/03   Stocks
"'Trick or treat?', once an American question, is now a feature of Halloween celebrations everywhere. As a result, October 31st has become the global high point of the confectionery year, as millions of children dress up as ghosts, goblins or Britney Spears to be rewarded with vast amounts of teeth-rotting goodies. This year, confectioners expect to generate Halloween sales of $2 billion in America alone. Last year, the country's total confectionery sales were $24 billion - the highest anywhere."

Worst drivers: Teens, doctors, lawyers
10/30/03   Insurance
"It shouldn't surprise you that students get in more car wrecks than those in any other occupation. They're inexperienced and lack a healthy dose of fear. Lucky for them that a doctor is likely to be at the scene. Medical doctors rank second in accident rates."

Clients can be greedy too
10/30/03   Brokers
"Some clients may deliberately misrepresent their investment experience and risk tolerance to make aggressive gambles on the market. If the bet doesn't go their way, they sue the advisor. More often than not, advisors find it cheaper to settle, since errors and omission insurance will pay most of the bill."

SEC cracks down on Putnam for self-dealing
10/29/03   Funds
"The U.S. Securities and Exchange Commission has announced civil actions against Putnam Investment Management LLC and two former Putnam managing directors and portfolio managers, Justin Scott and Omid Kamshad, in connection with their personal trading in Putnam mutual funds."

Counterfeit new $20s debut
10/29/03   Crime
"Less than a month after the release of new $20 bills with features designed to deter forgeries, counterfeiters are already at work."

Warren Buffett speaks his mind
10/29/03   Buffett
"The man who as a boy collected and sold used golf balls, started a pinball machine business in high school, and later stepped in as the interim chairman and chief executive of Salomon Brothers for an annual salary of one dollar, rolled into town last week full of the honesty, insightfulness and good humor for which he is known and revered."

Buffett's major currency investment
10/28/03   Buffett
"Fortune magazine said in a press release Monday that in an article to be published in the Nov. 10 issue of the magazine, Buffett writes, 'To hold other currencies is to believe that the dollar will decline. Both as an American and an investor, I actually hope these commitments prove to be a mistake.'"

The 2003 Nobel Prize in economics
10/28/03   Economics
"Two economists who have developed statistical techniques to track economic trends and to measure investment risk Clive Granger and Robert Engle were this year awarded the Nobel Prize in economics. In this article I will be focusing on the contribution of Clive Granger to economics. According to the Nobel committee Granger's important contribution to economic science is his discovery of a phenomenon called cointegration. This discovery, so it is held, enables economists to accurately validate relationships among various economic data. So what is it all about?"

Gold gives boost to small-cap sector
10/28/03   Funds
"Of the outperformance of junior mining companies and other more speculative stocks, Ferguson says: "Investors in the small-cap area have been focusing on companies that do well in environments of strong economic growth. They seem to be, he says, downplaying the possibility of other scenarios such as slower economic growth, he says."

Still waiting for lower fund fees
10/28/03   Funds
"Investors losing patience as cuts fail to materialize. Canada's sky-high mutual fund fees are again under the microscope. As reported in yesterday's Financial Post, management expense ratios (MERs) have soared the last three years."

Pass the Coke!
10/27/03   Buffett
"Buffett said that Berkshire has paid, on average, about seven times pretax earnings for its acquisitions, an attractive price given current stock-market valuations. The Standard & Poor's 500 index trades for nearly 20 times projected 2003 operating profits and for 13 to 14 times pretax earnings. The company's notable acquisitions have included Shaw Industries, the leading U.S. carpet manufacturer; Benjamin Moore, the paint producer; Johns Manville, which makes insulation, roofing and other materials; and 80% of Mid-American Energy, an Iowa-based utility with large interests in the U.K."

Shadow on the funds
10/27/03   Funds
"Widening probes into the practices of U.S. mutual funds are uncovering a surprisingly large number of abuses, conflicts of interest and other irregularities, many of which have benefited wealthy clients at the expense of small ones."

Nanopower
10/26/03   Academia
"converting gravity into electricity has involved building huge dams to tame vast rivers at great expense and no little environmental cost. But a group of researchers at the University of Alberta, in Canada, thinks the whole process can be scaled down to something that will fit on a table."

Time to chuck commissions?
10/26/03   Brokers
" A growing trend toward fee-based financial advice has both benefits and pitfalls for investors"

Mutual funds weather scandals
10/26/03   Funds
"We at the Fool have also reported on these developing scandals. In fact, we've been warning investors for many years about various problems inherent in mutual fund investing. We've railed against such problems as their outlandish fees, overdiversification, below-average performance, and counter-productive, short-term thinking."

Notes from Berkshire Hathaway & Wesco meetings
10/26/03   Buffett
Columns and notes from 2000 to 2003

The end of the Oil Age
10/24/03   World
"Ways to break the tyranny of oil are coming into view. Governments need to promote them."

The bad apple data base
10/24/03   Brokers
"IDA's online search helps investors, deters violators. It just got easier for investors to check out whether their financial advisors or their firms are 'bad apples.'"

Triumph of the pygmy state
10/23/03   Law
"Despite the many business scandals in America, Delaware's amazing grip on corporate law is set to endure"

Industry muzzles its victims
10/23/03   Brokers
"Gag orders keep bad advisors' names out of the press. One of the frustrations with this job is some of the most potentially instructive stories can't be made public. Since the stock bubble of 1999 burst, many tales of investor abuse involving leveraged loans have come to my attention."

Choose beneficiary carefully to save tax
10/22/03   Taxes
"Naming your estate as beneficiary of your RRSP can make sense where you have capital losses and expect to have insufficient income in your year of death to use up those losses."

Income trusts are not created equal
10/22/03   Trusts
"Ask any investment dealer -- income trusts have been the only game in town in the past couple of years. That's not surprising, given their generous distributions, the steady price appreciation in the group as a whole and some pretty impressive tax breaks to boot. But don't walk away thinking all income trusts offer juicy tax-efficient cash flow. They don't."

Dividend policy and market movements
10/22/03   Value Investing
"Using S&P 500 monthly returns as a proxy for market conditions, we investigate whether investors prefer dividend-paying stocks to non-dividend-paying stocks in declining markets. We find that dividend-paying firms have higher returns than non-dividend-paying firms, especially in declining markets. These results are robust for adjustments for risk using CAPM adjusted deciles, CAPM excess returns, the Fama-French three-factor model, and dividing the sample into size and book-to-market quartiles. Furthermore, we find that the simple payment of dividends, and not the level of the dividend yield, drives returns' asymmetric behavior relative to market movements, consistent with the signaling hypothesis of dividends."

The Superinvestors of Graham and Doddsville
10/21/03   Buffett
"'Superinvestor' Warren E Buffett, who got an A+ from Ben Graham at Columbia in 1951, never stopped making the grade. He made his fortune using the principles of Graham & Dodd's Security Analysis. Here, in celebration of the fiftieth anniversary of that classic text, he tracks the records of investors who stick to the 'value approach' and have gotten rish going by the book."

College costs take another leap
10/21/03   Academia
"College costs once again have increased far faster than inflation, with tuition at state schools posting the biggest increase in 30 years, the College Board reported Tuesday."

Sharing his wealth
10/20/03   Buffett
"The world's second-richest man came to the University of Tennessee and gave students degrees, stock and advice Tuesday."

Mutual recriminations
10/20/03   Funds
"A former fund manager has admitted to obstructing an investigation into improper mutual-fund trading, making him the first executive to face a criminal charge in the rapidly widening probe into the industry's practices"

Templeton feeling bearish
10/19/03   Markets
"The legendary investor predicts the U.S. dollar will lose 40 percent of its value."

Still counting the cost
10/17/03   Accounting
"The lack of competition poses vexing problems. Chief among these, perhaps, is that the Big Four may all be too big to be allowed to fail. The point is not merely theoretical. In Britain, where auditors' liability is uncapped, a colossal lawsuit hangs over Ernst & Young, in relation to Equitable Life, a mutual insurer. In America Adelphia, a bust cable company whose former bosses are due to stand trial in January, is suing Deloitte & Touche."

Fee rise says watch out for hidden RRSP costs
10/16/03   Brokers
"You're not just buying an investment when you put Royal Bank of Canada GICs and mutual funds into your registered retirement savings plan. You're also buying a relationship that you can't get out of without paying $50."

The forgotten payroll tax
10/16/03   Taxes
"According to Boston University economist Laurence J. Kotlitoff, 18-year old workers who earn average incomes over their lifetimes will "contribute" $723,591 in taxes (in present value dollars). They will receive about $140,000 in benefits! What private sector retirement program has an egregious record such as that? And even when it does, one can always withdraw from it or transfer to another program. Try withdrawing from Social Security and see what happens!"

Hard money
10/15/03   Government
"Money used to be backed by gold. Now it is backed by the promises of central bankers. Are these worth less than they were?"

The poverty of poverty statistics
10/14/03   Economics
"Finally, the official poverty statistics take no account of the goods people own or the assets they have accumulated. Which means that a person who has accumulated a million dollars worth of goods and assets but whose income, for whatever reason, falls below the income threshold for the year will be classified as poor. An extreme case? Not so extreme. Researchers have discovered that almost one million people classified as poor own homes worth more than $150,000, while upwards of 200,000 people classified as poor own homes worth more than $300,000."

Herding psychology and financial markets
10/13/03   Academia
"Despite giving all the participants the same perfect knowledge of coming dividend prospects and then an actual declared dividend at the end of the simulated trading day, which could vary more or less randomly but which would average a certain amount, the subjects in these experiments repeatedly created a boom-and-bust market profile."

The professional financial advisor
10/12/03   Brokers
"Perhaps the biggest sacred cow in the industry right now is the notion of independence. Since virtually all advisors receive their compensation through some form of embedded compensation, it could be argued that virtually no one in the industry (please don't call it a profession yet) is truly independent. Arguments about proprietary vs. non-proprietary funds are just plain silly. The more meaningful distinction is between embedded compensation and unbundled compensation. It is only through the latter that consumers can feel confident that the recommendations being made are truly in their own best interests. This means that commissions and trailing commissions have to go- and the sooner the better."

SEC unveils plans to combat late trading of funds
10/12/03   Funds
"The regulator is considering new rules and rule amendments designed to prevent late trading abuses. It is examining the feasibility of requiring that the fund (rather than an intermediary such as a broker-dealer or other unregulated third party) must receive the order prior to the time the fund prices its shares for an investor to receive that day's price."

Time to unhitch that trailer
10/12/03   Brokers
"Leemhuis's inspiration was to replace the floating expense of $1,000 per annum with the fixed $360/year subscription fee. In the above example, the $1,000 trailer fee is rebated to the client. On a net basis, the client is ahead $640. Since the average portfolio at ASL is $250,000, the savings are often more than that."

Where's the stick?
10/09/03   Management
"The highest-profile cases of excessive pay, unfortunately, are not isolated exceptions. Bosses' pay has moved inexorably upwards, especially in America. In 1980, the average pay for the CEOs of America's biggest companies was about 40 times that of the average production worker. In 1990, it was about 85 times. Now this ratio is thought to be about 400. Profits of big firms fell last year and shares are still well down on their record high, but the average remuneration of the heads of America's companies rose by over 6%."

Newsletter publishers get their day
10/09/03   Newsletters
"Lowry's victory in $20 million copyright lawsuit likely to help protect all newsletter publishers."

David Dreman, Maharajah of the multiples
10/07/03   Dreman
"From 1970 through 1996 the market returned 14.9 percent. But high relative dividend stocks provided a return of 17.0 percent; low relative price to book value stocks returned 17.8 percent; low relative price/earnings stocks returned 17.7 percent; and low relative price to cash flow stocks returned 18.4 percent. (In each case the stocks were ranked relative to their specific industry.)"

Payday Loans = Costly Cash
10/06/03   Debt
"The ads are on the radio, television, the Internet, even in the mail. They refer to payday loans - which come at a very high price."

MIT's OpenCourseWare
10/06/03   Academia
"With the publication of 500 courses, MIT OCW offers educational materials from 33 academic disciplines and all five of MIT's schools"

Is your fund firm earning its keep?
10/05/03   Funds
"Wanted: Frugal, industrious mutual funds for long-term relationship. No fee-hogs need apply."

Engine trouble
10/04/03   World
"As Californians go to the polls, we investigate the condition of America's most dynamic and most troubled state"

Funds grapple with growing scandal
10/04/03   Funds
"The list of big-name companies engulfed in a scandal involving mutual fund trading abuses lengthened Friday, leaving a burning question for the $7 trillion fund industry: How much worse will it get?"

Canadians in the dark?
10/03/03   Brokers
"Financial consumers have a very weak understanding of the function of planners, their qualifications and how they are regulated, a survey for the Financial Planners Standards Council reveals."

Smart money
10/03/03   Graham
"In a series of results that suggest Benjamin Graham was right all along, researchers have found that over the long term cheap stocks do better than expensive stocks. Companies with low stock prices relative to their earnings outperform stocks with high price-to-earnings (P/E) ratios; companies with low stock prices relative to the accounting value of their assets outperform stocks with high 'price-to-book' ratios; and stocks with high dividend yields outperform stocks with low dividend yields."

Spending our way to disaster
10/03/03   Economy
"The consumer debt bubble in the United States could make the stock bubble seem like nothing."

Investors should see where cash goes
10/02/03   Funds
"One mutual fund industry executive's take on the idea of showing investors exactly how much they're paying in fund fees: Good idea in theory, but not for us."

Wall Street's dirty secret?
10/02/03   Markets
"If we shape our expectations based on past returns, we are counting on rising P/E ratios and falling yields, almost exclusively, for our presumed "risk premium" for equities in the decades ahead."

Mutual fund tax efficiency
10/01/03   Funds
"Is there a list that shows the tax efficiency of individual mutual funds? If so, how do I get it?"

Make your advisor squirm
10/01/03   Brokers
"For investors and the salespeople who [self-] serve them, the book is the biggest expos of Canada's mutual fund industry since Daniel Stoffman's The Money Machine. It's the book Glorianne Stromberg might have written if she'd been an advisor instead of a lawyer and regulator."

Look to the big picture to avoid history's pitfalls
09/30/03   Markets
"A recent study, based on data produced by the North American Venture Capital Association, paints a more interesting and complex picture. It shows that while private equity is capable of producing some hugely impressive returns, the returns are asymmetric. For instance, while one in five of surviving private equity funds produced a remarkable average return of 722 per cent over the period 1985 to 2002, the average annual rate of return on these funds was just 10 per cent. Two out of five funds lost investors money, and one in five lost an average of 85 per cent of the investors' starting capital."

Big business
09/29/03   Health
"The obvious conclusion: a growing herd of fat people will provide lots of demand for firms supplying everything from bigger towels to bigger beds and, alas, bigger coffins. Demand for adult-sized electric tricycles may grow as some of the obese find it hard to walk. In health care, much will change. Some hospitals, for instance, are finding some obese people cannot be squeezed into MRI machines for scans."

Buffett's company to sell $1.5B in debt
09/29/03   Buffett
"Berkshire Hathaway unit plans to sell 5-year and 10-year notes in an unsecured debt offering."

Barrage of takeovers marks start of new era
09/27/03   Brokers
"When the banks bought brokerage houses, the bargains came to those who bought first; the last ones in paid the highest prices. However, this next round of convergence in the financial services industry will probably be driven by the desperation of the sellers. Patience, in this game, may well be rewarded."

New ETFs give access to emerging markets
09/27/03   Indexing
"ETFs have always done an excellent job of providing avenues for investing in North America, but the selection of global funds used to be disappointing. The iShares and BLDRS emerging market funds, both less than a year old, are symbolic of how times have changed for ETF investors."

The envelopes, please...
09/26/03   Indexing
"The logic that underpins the advice put forward by many so-called "professional" financial advisors can be quite amusing. Perhaps the most amusing of all the truisms of financial advice proffered by virtually all advisors is that investors should choose actively managed mutual funds over passively managed index funds or exchange traded funds."

The misery of manufacturing
09/26/03   Economy
"One minor obstacle, then as now, is the awkwardness of facts. Manufacturing has only recently, and with unusual lethargy, emerged from a global recession. (From a peak in June 2000 to a trough in December 2001, manufacturing output shrank by 7.6% in America.) But, on a longer view, rich-world manufacturing is in terrific shape (see chart). Amicus may have a point that Britain under-performs its peers in manufacturing. But that is only because Britain's competitorsparticularly Americahave done so well. Since 1970, America's manufacturing output has more than doubled. Even after the recession, American manufacturing output is almost 50% higher than in 1992."

No reason for Nasdaq exuberance
09/26/03   Markets
"So, while the fundamental outlook isn't getting any worse, it's not getting much better. But you wouldn't know that to look at the valuations of most tech stocks. Using Wall Street consensus estimates for 2003, the average price/earnings ratio of the tech stocks in the Nasdaq 100 is 45. (Interestingly, only about half the Nasdaq 100 is tech and telecom.) That's not a stratospheric level, but it's hardly one that screams "bargain" to me. Moreover, it's been proven over and over again in academic studies that Wall Street estimates are consistently too optimistic, which means that P/E of 45 could be closer to 50 or 60 if the "E" comes down."

G7 household finances
09/25/03   Economy
"Two questions are posed in this brief paper. The first one speaks to short-term sensitivities by asking whether household finances and consumer spending in some countries are more affected, positively or negatively, by expectations for rising bond yields, possible future monetary tightening, strengthening stock markets and a slowing pace of property market gains than others. The second question speaks to longer-term sensitivities by asking what longterm risks aging populations pose to aggregate household finances and financial markets going forward."

It's time for mutual funds to stop burying fees in muddy MERs
09/25/03   Funds
"I'd like to know how much my mutual funds are costing me in fees. Sure, I've got the management expense ratio (MER) to give me an idea of how much I'm paying, but that's not good enough. I want a dollars-and-cents breakdown."

The era that wasn't
09/25/03   Taxes
"In truth, government tax collection and spending rarely missed a growth beat over the last 10 years. In real constant dollars, undistorted by inflation, all levels of government -- Ottawa, the provinces and cities and towns -- spent $15,082 per person in 2002. For every family of four, that adds up to $60,328. Total government revenues for the same family, if its members were living in, say, 1967, would have been $22,720. The growth path in government revenues, plotted in the graph, offers no evidence of tax reduction. Whatever blips occurred can be traced to general economic trends."

The New Dividend
09/24/03   Stingy Investing
"The once mighty dividend isn't what it used to be. Although dividends have regained some popularity, they remain largely supplanted by share buybacks with nearly half of all corporate distributions going to repurchase shares. Like dividends, buybacks represent a return of shareholders' equity but they have their own unique characteristics."

Isabel blew fallacy ashore
09/23/03   Economy
"Hurricane Isabel roared onto eastern North Carolina shores in mid-day, September 18, 2003, continuing on into Virginia and north from there. While Isabel was no Hurricane Hugo, the monster storm that demolished Charleston, S.C. back in 1989, it washed up the usual economic fallacies."

Voters can be such a nuisance
09/22/03   World
"Sweden's rejection of the euro will sustain anti-euro opinion in Denmark and Britain (the union's other non-euro members) and makes it unlikely that any of the three will soon fall into line: the EU will therefore remain a multi-currency area for the foreseeable future. That is significant, but far more important is the fact that forthcoming referendums on the constitution now seem increasingly unlikely to go as governments would wish. It will take only one Sweden to block plans for a new constitution, and two or three might kill them."

The great fund ripoff
09/22/03   Funds
"Like Joshua shattering the walls of Jericho, in early September New York State Attorney General Eliot Spitzer shook the mutual fund industry to its very foundations."

Fund scandal may run deeper
09/22/03   Funds
"Mutual fund companies repeatedly allowed Wilshire Associates, the investment consulting firm, to engage in a rapid-fire trading strategy that netted the firm huge returns -- and came at a cost to the mutual funds' long-term investors, according to a report in the October issue of Money Magazine."

How safe is your identity?
09/21/03   Crime
"Identity theft is the latest trend in consumer fraud. PhoneBusters, an anti-fraud group set up by the Ontario Provincial Police, says there have been about 8,817 reporter incidents of identity theft across the country this year, up from 8,178 for all of 2002. The value of these thefts has risen to $14.1-million so far this year from $8.8-million last year."

Parts and labour sold separately
09/19/03   Funds
"With unbundled investment products, advisors could set a certain (perhaps sliding scale) fee schedule and then ask clients what "building blocks" they would like to use in constructing their portfolios. Products like exchange traded funds and true no load funds (PH&N, Mawer, Perigee, etc.) are often as good as or better than conventional products like A Class or "embedded compensation" mutual funds, yet substantially cheaper."

Domestic stock funds in red again
09/19/03   Funds
"Canadians pulled nearly $200-million from domestic stock funds in August, the Investment Fund Institute of Canada reported yesterday, extending their losing streak to 15 months and suggesting that investors are not yet convinced that a six-month rally in equity markets has staying power."

Ratings agencies see danger in yuan float
09/17/03   World
"Credit-rating companies on Monday issued strong warnings that China should not let its currency appreciate or relax controls on the movement of large sums of money in and out of the country soon, as the United States has asked, saying that the Chinese banking system was not ready for the changes."

That Alabama tax vote
09/16/03   Taxes
"Last Week, voters in Alabama resoundingly rejected Gov. Bob Riley's tax plan by a margin of more than 2 to 1. The plan would have resulted in the largest tax increase in state history."

10 ways you mindlessly waste money
09/16/03   Thrift
"Silently, secretly, your money disappears under some hideous voodoo spell, right? No way. Take a look at some ways you're flushing your cash down the loo -- and what you can do about it."

Tequila sunset in Cancun
09/15/03   World
"The world trade summit in Cancun, Mexico, has collapsed without agreement. Its fate may have been sealed seven years ago in Singapore"

The cost of the good life
09/15/03   Thrift
"Spending on stuff seems a never-ending spiral in America; there's always something new to buy."

Illegal trading appears rampant
09/14/03   Funds
"The alleged illegal trading that prosecutors are investigating at a few mutual fund firms might be more widespread and costly to investors than thought. Illegal trading occurs in at least one out of every six mutual fund families and costs investors about $400 million a year, according to an academic study released Thursday."

Drawing down an RESP is no simple task
09/14/03   Taxes
"If you thought it was struggle to make regular contributions to a registered education savings plan, just wait until you're ready to take the money out. You won't believe the process. If you had any ideas about calling your RESP administrator and asking for a cheque, just forget it."

Morningstar rips suspect funds
09/14/03   Funds
"Fund-rating firm Morningstar issued an unusually critical report Friday recommending that investors consider selling their stakes in the mutual funds run by Janus, Strong, Bank of America, and Banc One."

Fame vs fortune: micropayments and free content
09/14/03   Markets
"The people pushing micropayments believe that the dollar cost of goods is the thing most responsible for deflecting readers from buying content, and that a reduction in price to micropayment levels will allow creators to begin charging for their work without deflecting readers. This strategy doesn't work, because the act of buying anything, even if the price is very small, creates what Nick Szabo calls mental transaction costs, the energy required to decide whether something is worth buying or not, regardless of price."

Are you worse off than Mom and Dad?
09/12/03   Economy
"If you feel like it's harder to provide the kind of middle class upbringing for your kids that your parents gave you, you may be right."

Wait! Think before selling
09/12/03   Funds
"Some quality names have turned up on a list of funds that investors are fleeing in large numbers. Templeton Growth, Fidelity International Portfolio, AIC Diversified Canada_ these funds are all among those with the worst net sales at mid-year. In simple terms, investors were selling these funds at a much faster rate than they were buying in. The question here is why? Why, with the markets finally showing some life, are investors selling out of funds that are proven long-term winners?"

Second solid month for fund industry
09/11/03   Funds
""Slowing net redemptions for some firms (Mackenzie, CI) and a return to net sales for others (Franklin Templeton) may be indicative of a slowdown in equity fund net redemptions, or rather a pickup in gross purchases," said Dan Hallett, president of Windsor-basded Dan Hallett & Associates. "This doesn't exactly scream investor optimism, but it looks like a gradual improvement.""

Wall St.'s memorial day
09/11/03   Disaster
"The markets will open and close at the usual times, but activity will be halted at 8:46 a.m., 9:03 a.m., 9:59 a.m., and 10:29 a.m. ET for a minute of silence to mark the moments airplanes crashed into each of the World Trade Center's twin towers and the times when the buildings fell. Many market participants in New York will join in the ceremony commemorating the attack at Ground Zero, blocks away from the New York Stock Exchange."

Health costs skyrocket
09/09/03   Management
"Faced with the largest price hike since 1990, firms pass more insurance costs on to their employees."

The case of the double agent
09/09/03   Real Estate
"How can you make sure your real estate agent isn't working for the enemy?"

High court hears from Buffett
09/09/03   Buffett
"Billionaire investor Warren Buffett was among those whose opinions were being weighed by the nine U.S. Supreme Court justices as they heard arguments Monday regarding the McCain-Feingold campaign finance reform act."

Hot stocks
09/07/03   Dreman
"The economy is picking up, but investors' anticipation of a rapid improvement is a little too aggressive, said David Dreman, fund manager for Scutter Dreman High Return Equity Fund. Companies are boosting their earnings, but they aren't seeing fast enough improvement, Dreman said. He cited the strong rise in the Nasdaq, which he dubbed "bubble junior.""

Haggling
09/06/03   Stocks
"During a three-year investigation by America's Department of Justice into Executive Life, a Californian insurer that collapsed in 1991 and was bought by Cr dit Lyonnais, a big French bank, it sometimes seemed that the affair was about little more than transatlantic regulatory nit-picking. This week proved how much bigger the scandal really is."

Insurance trusts can accomplish plenty
09/06/03   Taxes
"If I could add some financial advice to the list, I'd suggest buying life insurance -- and consider a trust for that life insurance to boot. You see, there are several situations where an insurance trust can make sense. Let me explain."

Enemy of the states
09/05/03   Law
"Companies are increasingly worried by the growing power, and desire, of America's state attorneys-general to regulate and punish them"

Sumner's forgotten classic
09/05/03   Government
"Many of these problems are foisted on the Forgotten Man. Look at the healthcare debate, where various proposals are put forth for the government to pay or subsidize medical costs. The politicians and policy wonks get all the attention, as do the alleged beneficiaries of their programs, but no attention is paid to the folks who have to pay for it all.Sumner's Forgotten Men. As Sumner writes, "In all the discussions attention is concentrated on A and B, the noble social reformers, and on D, the 'poor man'. I call C the Forgotten Man, because I have never seen that any notice was taken of him in any of these discussions.""

Income trusts can dabble in chicanery
09/04/03   Trusts
"A more direct approach to polishing the numbers is needed. And so investors must thank Atlas Cold Storage Income Trust for reminding us that shoddy accounting and anemic governance aren't restricted to ordinary common stock companies."

A mortality warning for motorists
09/04/03   Government
"The impact of mispricing risk in public insurance systems is to shift collision costs to other drivers.primarily female, safer and older drivers.and to encourage too many risky drivers to take to the road."

What, WE Worry?
09/03/03   Gross
"Well, maybe I.m just pessimistic because I.m a Californian and the not so Golden State currently resembles the pulp not the juice of its once famous oranges. But California is 15% of the nation and it is the trendsetter in more ways than fashion, Hollywood, and tongue rings. We have a huge deficit based on overspending which was in turn based on the anticipation that financial markets and their capital gains would continue indefinitely. Our schools are a mess. Businesses are departing daily to points unknown. But this Outlook will not be a California diatribe. I use it only to suggest that as California goes so goes the nation and at the moment its prospects are not good, Terminator or no Terminator."

The hidden costs of offshore outsourcing
09/03/03   Management
"Moving jobs overseas can be a much more expensive proposition than you may think."

Mutual funds under investigation
09/03/03   Funds
"Specifically, Canary was accused of "late-day trading," the term for buying mutual fund shares at their closing price after the close of trading in U.S. stock markets at 4:00 p.m. ET, allowing the firm to profit from corporate news released after the closing bell. The law requires mutual-fund trades made after the close to be processed at the next day's share value, to keep late traders from having an advantage over others."

Pious Buffett should heed own counsel
09/02/03   Buffett
"Buffett, estimated to be the world's second-richest man, has gained prophet status in the world of business by calling on corporate America to become cleaner, better governed and more transparent. Because of this towering reputation, people sit up and listen when he preaches on things like financial disclosure and corporate governance. Problem is, his own actions at Berkshire Hathaway do not match his words."

Retail investors swim against the market tide
09/02/03   Funds
"The contrarian theory of investing is based on the premise that certain investors (usually small retail investors) generally do the wrong thing at important turning points in markets. Case in point: the year 2003."

Ask not what telemarketers can do to you
09/02/03   Fun
"So what does the public care about right now? Telemarketers. The public hates them. It hates them even more than it hates France, low-flow toilets or ''customer service.''"

This job market would depress optimists
09/01/03   Economy
"Thousands of good-paying jobs are moving overseas. Nearly 5 million workers who are working part time need full-time hours to make ends meet. Another half-million have dropped out of the job market due to lack of prospects. Wages have fallen by 1 percent in the past year for both low- and high-wage earners. And despite a limited extension of federal benefits starting in May, more than two-thirds of the long-term unemployed have run out of unemployment insurance benefits."

Is your boss an idiot?
08/31/03   Management
"You can't live with 'em. And you can't shoot 'em. This, of course, is the dilemma when you work for an idiotic boss."

Whistleblower says he just wanted Coke to listen
08/30/03   Stocks
"Eleven years after getting his dream job, Whitley is just drinking water. His wife sold the Coke plates, glasses and memorabilia at a garage sale. He is out of his $140,000-a-year job after accusing officials of the world's largest soft drink maker of shady accounting and fraudulent marketing practices."

Tax-saving tips make cost of education easier to bear
08/30/03   Taxes
"Chances are pretty good that your kids will also need an education if they hope to succeed in the future. And if your kids are going to get an education, you might as well take advantage of as many tax breaks as possible along the way. Here are a few to consider."

Unfunded pensions a problem
08/29/03   Accounting
"What's the single biggest cost in the making of a Chevrolet? Is it steel, technology, electronics, design or what? I bet that most of us don't know that the biggest cost component is medical care for retired workers."

The world's most honest money manager tells all
08/29/03   Funds
"Of course, mutual fund managers aren't a dishonest lot in general -- most seem like fairly straightforward, conscientious people. But you won't find many skippers who readily concede that the industry is riddled with problems that make index funds look most appealing."

Apple picking
08/29/03   Stocks
"Wall Street analysts have missed the boat on Apple's big stock move. So why listen to them now?"

To have and to hold
08/28/03   Markets
"Some recent work should at least help. It explores the .endowment effect., one of the chief tenets of prospect theory. Put simply, this means that people place an extra value on things they already own. Think of a favourite sweater, or your house: would you swap either for something of equal market value? Over the past decade, prospect theorists have found support for the endowment effect in scores of experiments."

Auditing an Oracle
08/28/03   Buffett
"Shareholders nearly deify Warren Buffett for the way he manages his diverse holding company, Berkshire Hathaway of Omaha. There's little doubt that he's squeaky clean in how he operates. But that doesn't necessarily mean that other companies can or should follow the way the avuncular champion of business ethics conducts his own affairs. His approach: handshake deals on billion-dollar acquisitions and near-complete avoidance of technology in combating fraud."

Refinancing choke jolts homeowners
08/27/03   Real Estate
"Many homeowners who tried to refinance their mortgages at lower interest rates this summer are seeing the volume of applications choking the process, a report said Tuesday."

Five undiscovered picks from small-cap managers
08/26/03   Stocks
"By and large, small-cap stocks aren't household names. There are exceptions, of course. Home decorators, party planners, and cooks (not to mention followers of the criminal justice system) are no doubt familiar with small-cap Martha Stewart Living Omnimedia. But few small caps get anywhere near as much analyst coverage or ink in The Wall Street Journal as giant companies like General Electric and Microsoft. With fewer analysts and investors closely following smaller companies, the odds are better that you'll find stocks whose virtues aren't appreciated by Wall Street in small-cap land than in large-cap territory."

For the love of the fund salesman
08/26/03   Funds
"Loaded word is independent. In the business of providing financial advice, the word is as important as "fresh" is to a butcher. There is a pretty limited market for old meat, and there is no demand for biased financial advice."

Living in a state of disrepair: California
08/25/03   Fun
"To make matters worse, Gray lost the state budget surplus. California had this gigantic surplus, billions and billions of dollars, and now it's gone. They've looked everywhere, but nobody can find it. It is the Weapon of Mass Destruction of budget surpluses. So now Gray is spectacularly unpopular. Everybody despises him. When he tries to get into the governor's house, his own dog attacks him. When he calls for his security personnel, they side with the dog."

WTO entry helps China pull it off
08/24/03   World
"Beijing can certainly teach the world how to swim with the sharks in Cancun without being eaten alive. Instead of buying more from American and European farms after joining the WTO, China has actually become an even larger net exporter of agricultural products in its very first year as WTO member."

Equity strategy can save on taxes
08/23/03   Taxes
"Picture this. You're the proud owner of a stock that has appreciated in value and you've got too much tied up in this one security. That's right, you've got too many eggs in one basket. The problem? If you sell all or a portion of your holdings in the stock in order to diversify, you're going to trigger a tax liability large enough to wipe out the national debt, give or take. Not to worry. An equity monetization strategy can help."

All about California
08/23/03   Buffett
"With Arnold Schwarzenegger, Gary Coleman, a porn star and a partridge in a pear tree scrambling to become governor of California, a troubling question emerges."

Different this time, maybe
08/23/03   World
"Japan's economy has had everything in the past 15 years except a sustainable boom. Now, at least, Japanese stocks are enjoying a rally. The Nikkei 225 closed the week just below 10,300. The last time it spent a week above 10,000 was July of 2002. Of course, "Nikkei 10,000" is not much of a rallying cry for a stockmarket that once topped 38,000, but the index is still up about a third since April."

Asia starts to gasp for energy
08/21/03   World
"Across all of Asia, from India to China and south to Australia, a severe energy crunch is developing as construction of energy plants and transmission facilities lags behind growing industrial capacity and burgeoning private consumption, according to energy and market analysts."

Cash is king in an unplugged society
08/19/03   Banks
"Dreams of a cashless society died last Thursday afternoon at the same moment the power went out in Ontario and points south. In a world unplugged, cash is king."

Sex and violence don't sell?
08/19/03   Media
"Sex and violence don't necessarily sell, according to a University of Michigan professor who says studies show that viewers remember the commercials on more racy programs far less often then they do on more neutral fare."

The failure of the social market
08/19/03   Government
"In a January, 2003 commentary appearing in the Financial Times of London, professor Norman Barry opined, "the social market advocates were too relaxed; they believed the new order would produce enlightened people who would not need market incentives to behave responsibly. How wrong they were. Germans are normal, rational people. They will not work unless they have to. Now it often pays not to get a job and it is rational to stay in education until you are 30." Unless chained to reality by the forces of the market, the people and politicians have been free to bloat and expand the welfare state of Germany."

Lion cubs on a wire
08/18/03   World
"Economic growth in Africa was dismal last year. At 3.2%, down from 4.3% in 2001, it barely kept pace with a swelling population. The culprits, according to a new report* by the United Nations, were a weaker global economy, drought and AIDS in southern and eastern Africa, fresh armed conflicts in the Central African Republic, Ctte d'Ivoire and Madagascar, and yet more madness in Zimbabwe."

The poor are the solution, not the problem
08/18/03   World
"Take the case of Egypt. My research team and I were invited to Egypt by the government to make an inventory of the poor's assets versus all the other sectors of the economy. We found that since the end of the Second World War the poor accumulated some $245 billion worth of assets, including real estate and small enterprises. How big is $245 billion? Fifty-five times bigger than all foreign investment in Egypt over the last two hundred years, including the Suez Canal and the Aswan Dam. Fifty times greater than all foreign aid received by Egypt. Thirty times greater than the Cairo Stock Exchange. So the poor are the solution. The problem is that they do not have a legal system that allows them to bring together capital, create new enterprises, leverage their assets, and cooperate on a global scale. The poor certainly were the solution in the United States, which was built by poor, entrepreneurial pioneers. And the formula has not changed in the last two hundred years."

Bonds' thrills and spills
08/17/03   Bonds
"It's summer, the stock markets are thriving and the most recent statements for your investment account show you're finally making money again. With all that good karma in the air, do you really need to worry about that shocking rout in the bond market in the past month?"

The Atkins economy
08/17/03   Health
"Competition among diets is fierce. It certainly helps if diets are enjoyable and easy to follow. The once portly Banting, who lived at 27 St James's Street, London (next door to what is now The Economist building) understood that even better than alcohol-sceptic Dr Atkins. In Banting's pamphlet, "Letter on Corpulence", he suggests for supper three or four ounces of meat or fish, and a glass or two of claret. And, if so inclined, a tumbler of gin, whisky or brandy as a nightcap. Some bright publisher should reprint his advice as the "Banting Plan"-which would surely trounce Atkins in the best-seller lists."

Catch me if you can
08/16/03   Crime
"The hunt for an eBay scammer. Jay Nelson ripped off buyers on eBay and Yahoo until the Feds put him behind bars. We catch up with him in prison, where he'll be until 2007."

Did price controls work?
08/15/03   Government
"More than two decades ago, many of these same critics were claiming that oil was too important a commodity to be left to the market. The 1981 removal of price and allocation controls thoroughly discredited that belief. Likewise, given the awful government failures we have witnessed in creating energy policies, we can state unequivocally that electricity is so important that it must be left to the free market to produce and distribute it."

Will conservation save us?
08/15/03   Government
"With the disappearance of the "energy crisis" in the early 1980s-an event that coincided with the ending of price and allocation controls on the oil industry-many of us had hoped that the voices of "conservation" and "alternative energy" would have been stilled. Unfortunately, we have had no such luck, and in the wake of yet more government-caused energy problems, the political classes and their media allies are once again beating the drums of government-enforced "conservation." Their words are as fraudulent today as they were two decades ago."

The day the lights went out
08/15/03   Disaster
"President George Bush has ordered an inquiry into a massive power failure affecting up to 60m North Americans. Whatever the immediate cause, an overloaded transmission system and poor regulation may be the real culprits."

What caused the blackouts?
08/15/03   Disaster
"Years of under-investment by power companies have left behind a US electricity grid that is woefully inadequate to meet increased demand."

What college doesn't teach you
08/15/03   Thrift
"The irony is that there's a whole world of math that would have been useful to learn. I'm talking here about the math of personal finance -- borrowing, budgeting, banking and such."

Power returns to most areas hit by blackout
08/15/03   Disaster
"U.S.-Canadian task force charged with investigating outage"

What's working, what's not in Ontario
08/15/03   Disaster
S.I. is back but we'll probably go down again due to rolling blackouts. Help your neighbors if you can.

The world's greatest trader
08/13/03   Buffett
"Berkshire Hathaway just released a bombshell. The company sold virtually its entire government bond portfolio -- $9 billion worth -- in the first half of 2003, just before the bond market crashed. This isn't the first time the poster child for buy-and-hold has scalped a billion or two from dumb old Mr. Market."

Schwarzenegger campaign taps Buffett as adviser
08/13/03   Buffett
"Arnold Schwarzenegger's campaign said Wednesday that Warren Buffett, the legendary investor and chairman of Berkshire Hathaway will serve as the senior financial and economic adviser to the film star on his bid for the governorship of California."

Don't buy these 10 stocks!
08/13/03   Stocks
"With the S&P 500 up about 12% and the Nasdaq up more than 23% this year, many investors have decided it's safe to jump back into the pool. Human nature being what it is, the majority of investors naturally will sell stocks when the market is going down, and do the opposite when the market is going up. Although this is a recipe for poor long-term returns, it's also a fact of life."

Making the leap
08/13/03   Brokers
"Although no longer a new concept, the merits of going fee-based are still being hotly debated within the financial advisory business. One thing is clear though: the transition can be a challenge and not every advisor is going to have what it takes to make the leap."

The new diamond age
08/12/03   Science
"Starting in the 1950s, engineers managed to produce tiny crystals for industrial purposes - to coat saws, drill bits, and grinding wheels. But this summer, the first wave of gem-quality manufactured diamonds began to hit the market. They are grown in a warehouse in Florida by a roomful of Russian-designed machines spitting out 3-carat roughs 24 hours a day, seven days a week. A second company, in Boston, has perfected a completely different process for making near-flawless diamonds and plans to begin marketing them by year's end. This sudden arrival of mass-produced gems threatens to alter the public's perception of diamonds - and to transform the $7 billion industry. More intriguing, it opens the door to the development of diamond-based semiconductors."

Why doesn't CIBC ban coffee too?
08/12/03   Brokers
"CIBC World Markets is banning e-mail between its analysts and investment bankers, and other brokerage firms are said to be considering similar moves to shore up the "Chinese wall" between the two departments. But why stop there? Why not give analysts their own washrooms, so they don't run into bankers accidentally? Better yet, segregate the two in separate buildings, monitor their telephone calls, and comb the in-house baseball league for any illicit relationships."

More economic sophisms
08/12/03   Fun
"Special-interest-group pleading often tries to hide behind supposedly economic arguments. It is important to debunk such arguments as they arise, so that the interest-group politics can be seen for what it is."

Sharp jolt for index of fund managers' renown
08/11/03   Indexing
"The academic evidence, however, suggests that this is an overrated skill. The latest study by the Vanguard group shows that the bulk of returns comes, not from stock picking, but from humble asset allocation. Deciding on a 70/30 equity/bond split is the key to portfolio performance, not the ability to find the next Microsoft."

Net worth steady despite stock fall
08/11/03   Markets
"A peculiar thing happened during the latest slowdown in the economy: The net worth of Canadians -- on average -- remained unchanged through a big decline in the stock market and two years of weak growth. And for some, notably homeowners, financial conditions actually improved, though they may not notice the difference in their bank accounts."

Chasing the dream
08/11/03   Management
"A second and more important reason why more money does not automatically make everybody happier is that people tend to compare their lot with that of others. In one striking example, students at Harvard University were asked whether they would prefer (a) $50,000 a year while others got half that or (b) $100,000 a year while others got twice as much. A majority chose (a). They were happy with less, as long as they were better off than others."

The promise of a blue revolution
08/10/03   World
"Fish farming has a bad reputation. Its supporters argue that it promises to meet the growing shortfall as the world's wild fisheries become more and more exhausted. But its critics have the louder voice. They argue that farmed fish is fatty, dyed, polluting and stuffed with antibiotics. Moreover, they say that it is unsustainable. When a carnivorous fish-such as the salmon-is reared on a farm, it too must be fed with fish. And these fish must be caught in the wild, thus putting even more pressure on marine life, not less."

Nothing like public humiliation
08/10/03   Fun
"This month's 8-K was a show stopper. Edward Wolfe, a Bear Stearns analyst who has a sell rating on Expeditors stock ("underperform," whatever), managed to get himself into a bit of a snit over Expeditors' failure to respond to his emails and requests for a visit. The entire response absolutely has to be read to believed. And keep in mind, this is in a federal filing, not some company press release."

Proper landscaping design could save you tax
08/10/03   Taxes
"There are certain restrictions that could jeopardize your ability to claim the principal residence exemption in some situations. One of those restrictions is the half-hectare rule. You see, our tax law restricts the amount of land that qualifies as part of your principal residence to half a hectare (about 1.25 acres). The good news? There's an exception to this rule where you can demonstrate that the land in excess of half a hectare is necessary for the use and enjoyment of the property as a residence."

Gillette nicked by Schick
08/09/03   Stocks
"Tensions escalate in the shaving wars as the world awaits the arrival of the four-blade razor."

Who is your broker working for?
08/09/03   Brokers
"When your stockbroker recommends a mutual fund for you to buy, does he or she have a vested interest in that advice? One of the dirty little secrets of the business is that brokers do indeed. Some mutual funds pay them higher commissions than others do for selling their products."

Your home: Worst-case scenario
08/09/03   Real Estate
"John R. Talbott, a visiting scholar at UCLA's Anderson School of Business and author of "The Coming Crash in the Housing Markets," has a thesis that will leave you quaking from behind your picket fence."

MER heretic fires opening salvo
08/09/03   Funds
"DeGoey sounds like an indexing heretic practising in the high-fee Vatican of Winnipeg, but the analogy is not that offbase. His subsequent essay, "MERs as Indulgences," evokes Martin Luther to call for a mutual fund reformation in Canada."

Tough sell for Noranda
08/09/03   Stocks
"Noranda's decision to slash its quarterly dividend rate to 12 cents a share from 20 cents was a surprise as most analysts were caught looking for a cyclical recovery."

Pensions 'black hole' doubles
08/09/03   Markets
"Some of the companies are starting to look like giant investment trusts which just happens to make a few engines on the side - or own aircraft or whatever the business is."

3 insurers quietly end a brokerage policy
08/09/03   Brokers
"So, for the insurance companies, it has been a long free ride. Yet suddenly they have concluded that the ride is too risky, in part because the worst-case outcome, though unlikely, would be catastrophic."

The S&P is lousy at make-or-break bingo
07/25/03   Indexing
"Despite its sizable rally in 2003, over the past three years the S&P 500 has lost more than one-third of its value. That's a drop twice as deep as the Dow Jones Industrial Average and 25% worse than the Wilshire 5000 Index. One key reason could be its managers' singular misadventures with what some traders call "binary" events."

Be a smart lender
07/25/03   Debt
"Lending money can be risky at the best of times, but lending it to family members gets downright personal. Yet with the economy and job situation so rocky, family handouts are sometimes the only option. Lending wisely can lessen the angst if you're hoping to see that money -- and a continuation of the relationships -- again."

Issues with pensions
07/25/03   Accounting
"The pension issue for defined benefit pension plans is a problem in only some industries (such as manufacturing) but generally is being overemphasized as an issue in credit ratings"

Stocks are cheap!
07/24/03   Markets
"Professional investors think stocks are a great buy now. How worrisome."

MERs as Indulgences
07/23/03   Indexing
"My advice to consumers is simple. If your advisor recommends a fund to you that either does not have a ten-year track record or has a track record that lags its benchmark, just say no. Ask to buy the benchmark instead."

Deadline for U.S. beneficiaries of RRSPs
07/23/03   Taxes
""However, as the Internal Revenue Service has not yet made a ruling on this issue and the deadline for filing the requisite materials is August 15, the association reminds members and their clients to contact their tax advisors regarding the requirement that forms reporting these transactions be filed, and the procedure for filing such forms," it counsels."

Denmark: A Case Study in Social Democracy
07/22/03   Government
"In conclusion, we can say that neither on crime, education nor health do we see the favorable results we would have expected. Quite to the contrary. The prospects for being able to rely on government or family for social security are also rapidly diminishing. These are not very bright prospects indeed for a country where each working citizen are forced to sacrifice such a large share of his personal earnings to the common good."

Lehman cash woes
07/22/03   Management
"Lehman Brothers' carefree use of restricted stock has come back to haunt the Wall Street giant, costing the company virtually all of its 2002 cash flow, a shocking report by a leading Wall Street analyst claims."

Europe's population implosion
07/21/03   World
"Europe's population is shrinking and greying-with grim consequences."

Transferring a family cottage to the kids can save tax
07/20/03   Taxes
"Let's talk about your cottage. There are a number of ways to minimize the income tax hit on a cottage, but I'd like to focus on one specific strategy: Providing your kids with ownership."

Inflation and the American Revolution
07/18/03   Government
"How odd that the tax bills of many American families would fall during a period of exorbitant increases in federal spending due mainly to war. But once we discover the record levels of government debt accumulation, perhaps it is not so odd. It's the shell game of government finance at work."

Bequeathing your assets to your broker
07/18/03   Brokers
"A hoary peice of stockbroker lore has a young broker asking a senior partner at the firm about his proudest accomplishment. The reply: 'Over the years I've gradually transferred the assets of my clients to my own name.'"

Of manias, panics and crashes
07/18/03   Markets
"Mr Kindleberger believed that "markets work well on the whole", but occasionally "will be overwhelmed and need help" from a lender of last resort. He understood both the danger of inaction by such a lender and the "moral hazard" that its mere existence can create, by encouraging investors to be reckless in the belief that they will be bailed out if all goes wrong. Thus, he argued, a "lender of last resort should exist, but its presence should be doubted." It should always come to the rescue, but "always leave it uncertain whether the rescue will arrive in time or at all, so as to instil caution." Pulling this off is, he noted, a "neat trick"."

Darkness falls on Tokyo
07/18/03   World
"The ministry, which oversees the electricity industry, is gearing up for a power shortage that could leave Tokyo facing unprecedented blackouts this summer, when demand for electricity reaches its peak. The reason: Tokyo Electric Power (Tepco), the world's largest private electricity company, had to close its 17 nuclear reactors after it was caught last September falsifying safety records to hide cracks at some of its power plants. Three have now restarted, but it is unclear when the local authorities will allow others to do so."

Slim and trim beats the bear
07/17/03   Funds
"It sure helps a mutual fund to be slim and trim when fighting the bear. That's slim as in having a low management expense ratio, or MER. A strong majority of the top-performing funds in the bear market of the past three years share this attribute."

Want to refinance your mortgage? Do it now
07/17/03   Debt
"If you're thinking about refinancing your mortgage, do it now. Even if borrowing costs edge lower in the months ahead, you won't regret locking in at today's rates."

The great stock market swindle
07/17/03   Markets
"History teaches that virtually every major multi-year advance during the last two centuries ended with a lengthy period of under-performance."

Get rich slowly
07/17/03   Graham
"The Intelligent Investor (1949), by financial giant Benjamin Graham, is more relevant than ever, in a new edition updated with analysis by Jason Zweig"

Government protects potential killers
07/16/03   Government
"But anyone who looked at the law closely knew what was going on. The definition of disability was so vague that it clearly represented yet another massive encroachment of the government and its courts into the workplace. It made the disabled more expensive and more risky to hire. It made them more difficult to fire, and hence less likely to be hired. If anything, workplace discrimination against them has increased rather than decreased. Employers would rather find sneaky ways to keep them at bay than to risk unending lawsuits."

More pension troubles seen
07/15/03   Accounting
"While pension results continue to decline, the UBS study highlights that not all companies will share this pain in equal measure. A handful of companies, it notes, account for the lion's share of the funding shortfall. Just eight companies in its sample account for 70 per cent of the total pension shortfall -- $11.6-billion out of the $16.6-billion. The pension deficit at these eight companies also is greater than 10 per cent of their market capitalization as of July 7 of this year."

Should pensions invest in equities?
07/15/03   Markets
"The pension industry's fascination with the idea that the stock market is a sure thing over the long term remains intact, even as financial economics suggests the contrary. The stock market, say financial economists such as Nobelist Robert C. Merton, is not less risky over the long run. It is, in fact, riskier. However, backed by the belief that the markets will generate higher returns over the long-term, pension managers continue to pour billions into the markets every year."

'Active' managers are closet indexers
07/15/03   Indexing
"Several Canadian funds charge high fees to track indexes."

Attack of the zombie stocks
07/15/03   Markets
"Some of the best performers in the recent bull market are stocks no one wanted just 3 months ago."

Fear of floating
07/13/03   World
"Indeed, from this point of view, the Asian economies are supporting America's profligate habits. By buying American government securities they help finance America's large external deficit, hold down interest rates, and so sustain the boom in consumer spending and mortgage borrowing. This may benefit America in the short term, but it allows even bigger imbalances, in the shape of consumer debt and foreign liabilities, to continue to build. The eventual consequences for America-and the world economy-could be more painful."

10 Questions: Is Your Fund Family the Enemy?
07/12/03   Indexing
"William Bernstein has a message for fund investors: The interests of mutual fund companies are highly divergent from yours."

Faster is not always better
07/11/03   Government
"This Concorde was not just the proud enterprise of government, but even the product of a consortium of governments! Accounting being the imponderable, not to say fraud-ridden, sort of activity it is, we will of course never know just how much this grand project took both from the taxpayers supporting it and from the private aircraft manufacturers and airlines competing against it."

How hidden risks fostered a crash
07/11/03   Markets
"As Bader-Gold put it: "Financial economics does not recognize equity risk premiums not yet earned for risk not yet weathered." But that is exactly what pension plans, both corporate and public sector operations such as the Ontario Teachers' Pension Plan, have been doing. The result has been a devastating crash in pension values, with fund after fund reporting losses and warning that either contributions will have to increase or benefits will have to be cut. They counted on long-run equity returns that are not guaranteed."

How actuaries missed stock risks
07/10/03   Markets
"Their models for long-run pension performance assume, wrongly, that over the long run investments in the stock market will rise fast enough to overcome essentially underfunded pension structures. For years, pension funds operated under the assumption that equities are on a long-term growth track that can be counted on to cover pension liabilities. The market meltdown of the last two years blew the model away, leaving pension plans and corporations facing massive losses that wiped out billions in pension assets across the world."

Buffett bids: $80,000 and rising
07/10/03   Buffett
"How much would you pay to slurp Coca-Cola with Warren Buffett, the world's second-richest man and arguably its most famous investor?"

Canada's fund fees called 'criminal'
07/10/03   Indexing
"Truth number one is that active investing is a loser's game. "It must be so," Swedroe says. Simple math shows that in aggregate, active managers must lose. In aggregate active and passive managers must generate the same gross returns but once various expenses and tax effects are included, active managers do worse. MERs are the biggest expense but active managers also must bear four other costs, including trading commissions, the bid/ask spread and the drag on performance created by holding cash."

How to avoid another risk trap
07/10/03   Markets
"Over the long run, the risks in the stock market are not lower. The longer the time horizon, in fact, the higher the risk. This startling conclusion is not new. Some economists, including Nobelist Robert Merton and Paul A. Samuelson, raised the issue years ago. More recently, financial economist Zvi Bodie, of Boston University, among others, has written numerous papers warning long-term dependence on the stock market is a high-risk strategy that could go wrong."

You're footing the bill for fund trailer fees
07/10/03   Brokers
"Hope you're getting great service from the financial adviser or dealer that sold you your mutual funds. After all, you're paying for it."

Cost matters
07/10/03   Funds
"Financial products are perverse creatures. Virtually every other product in the world features higher costs for higher quality. BMWs cost more than Chevrolets for a reason- they're better cars. Investments are generally just the opposite: the more they cost, the worse they are. This is where the economics professor in me feels the need to disclaim the previous statement with the Latin axiom ceteris paribus- all else being equal. Of course, all else is not equal, and some managers do very well in spite of high fees, while others do rather poorly in spite of low fees, but as a general rule, the axiom holds."

High MERs can be justified
07/10/03   Funds
"If you're not demanding a whole suite of services and you have a decent amount of a portfolio you should be able to negotiate a fee quite a bit lower, whereas, if you're really asking for comprehensive planning and regular follow-up meetings, the price is going to be higher, and frankly, whether somebody is paying a lot, or not on their portfolio truly can only be assessed on a case-by-case basis, based on those factors."

Mutual fund scandal? Enough of the blame-game
07/10/03   Funds
"Mutual fund managers are, in aggregate, a reasonably large slice of the overall stock market. Depending on whose measure you use and which market you are talking about, mutual funds amount to 50% or more of the money in the market. That being the case, by definition the industry must offer the market's performance, less the industry's average management fees -- and that is exactly what we see. While you or I might think that 3.5% average management fees are inordinately high, consumers are freely choosing funds with such high fees; no one is hiding such fees from them." But it's still best to switch to low fee funds!

Patent bending
07/08/03   Law
"As Benjamin Day, Henry Ford, and Sam Walton might attest, American corporations have thrived on innovative ideas and new business methods, without owning them, for two centuries. In the past decade, the balance has been upset. The scope of patents has been expanded, copyrights have been extended, trademarks have been subjected to bizarre interpretations."

U.S. targets big names in fighting abuse of tax shelters
07/07/03   Taxes
"The U.S. government is pressing a broad assault on the flourishing tax-shelter business with an array of high-profile summonses and civil suits aimed at stopping cheats who are getting away without paying many billions of dollars in taxes."

There are escapes from deferred sales charges
07/06/03   Funds
"You may blissfully own a DSC fund and never once think of having to get out. But what if your investing needs change, or what if the fund's brilliant manager finds a better gig somewhere else, or what if the fund's performance turns consistently rancid?"

Succeeding as investors in spite of ourselves
07/05/03   Indexing
"Human beings are wonderfully suited for many things. We've developed language, conquered gravity and made the most of our opposable thumbs and infinite imaginations. What we're not terribly good at, though, is overcoming our own worst impulses - particularly as investors."

The extraordinary lightness of banking
07/05/03   Banks
"Times are tough, right? Try telling America's big banks, which are raking in record profits. Luck has played a big part."

Malls: Death of an American icon
07/04/03   Real Estate
"If you spent your formative years at the local shopping mall sipping Orange Julius and hanging out near the ubiquitous water fountain, you might be sad to learn that the mall as you know it is headed toward extinction."

The blame game
07/04/03   Funds
"A little-noticed guilty party in the stockmarket's boom and bust"

No golden days
07/03/03   Government
"Most American states have now closed the books on fiscal 2003, after a year of slashing spending and raising taxes. But their financial woes will not go away in 2004, especially in budget-less California, which is $38 billion in the red."

Another take on wrap accounts
07/03/03   Brokers
"Dan Hallett, president of Windsor-based Dan Hallett & Associates Inc., says assessing the worthiness of wrap programs depends on how much is invested, advisor flexibility on fees, and the program sponsor's co-operation in allowing such flexibility."

Margin of safety in the asset-class era
07/02/03   Graham
"No concept is more associated with Graham than the "margin of safety": that extra cushion of value which minimizes the probability of underperforming the default option of the prudent, risk-averse investor-the high-grade corporate bond."

The policy portfolio's role in an era Of subdued returns
07/02/03   Indexing
"If I have learned anything in my 52 years in this marvelous field, it is that, for a given individual or institution, the emotions of investing have destroyed far more potential investment returns than the economics of investing have ever dreamed of destroying."

Hunting Goodwill
06/30/03   Stingy Investing
"Watered stock is an old fashioned term that describes shares of companies with drastically overvalued assets. Reportedly, the term originates with the practice of ranchers feeding their cattle large amounts of water before going to market where the water-induced weight would fetch a higher price. Naturally, the buyer is not happy with this process. The crafty promoter can't take a stock to the pond for a fill up, but there are a variety of ways to mark up assets. A potential source of asset inflation is goodwill, which can be uncovered by investors who are willing to do a little work."

Quite the Contrarians
06/27/03   Dreman
"You can see why it's cool to be contrarian: Fund manager David Dreman tracked market opinions of experts going back to 1929, and found that the consensus was wrong 77% of the time."

The psychology of human misjudgment
06/25/03   Munger
"And I came here because behavioral economics. How could economics not be behavioral? If it isn't behavioral, what the hell is it? And I think it's fairly clear that all reality has to respect all other reality. If you come to inconsistencies, they have to be resolved, and so if there's anything valid in psychology, economics has to recognize it, and vice versa. So I think the people that are working on this fringe between economics and psychology are absolutely right to be there, and I think there's been plenty wrong over the years."

Management fees an eye-opener
06/25/03   Trusts
"With compensation out of line, trusts will find it hard to gain credibility."

Bring back the guild system?
06/25/03   Government
"All of these examples of genuine exploitation amount to one of many reasons that free-market economists hold the beliefs that they do. The greater the scope of state activity, the greater the potential for each pressure group to use the state apparatus for its own enrichment, at the expense of the rest of society. Since the benefits that accrue to such pressure groups from their political agitation are sizable and concentrated, while their costs are dispersed and hidden, the tendency over time is for more and more of this kind of activity to go on at the expense of the ordinary person."

Here's 77,000 reasons to pay GST
06/24/03   Taxes
"One of Mr. Ingram's clients was hit two months ago with a notice from Canada Customs and Revenue Agency, saying he owes $77,000 in unpaid GST going back 12 years to 1991 including interest and hefty penalties."

New quizzes enhance investor know-how
06/24/03   Education
"InvestorED.ca's Interactive Centre now offers a series of new quizzes designed to help investors protect themselves from fraud."

Longtime bear not changing his negative attitude
06/24/03   Markets
"Bubbles disappear completely. Showing graphs of different bubbles versus their trend lines, Grantham points out that every bubble is symmetrical. If prices rise 100 percent, 200 percent or 300 percent over their trend, bursting the bubble ends with a retreat that goes back to the trend line. Then it continues and goes below the trend line."

Canadians use home equity to take out $22-billion
06/23/03   Debt
"Canadians are using the rising value of their homes and the plunging cost of loans to take on debt at an unprecedented rate, according to a new report by economists at CIBC World Markets."

A matter of trust
06/23/03   Trusts
"The Globe and Mail's extensive investigation of income funds reveals a shaky world of investments, where companies tap their bank credit lines to maintain distributions, external managers continue to reap great rewards from lucrative contracts, business structures can be best described as inscrutable and the tight focus of single-industry trusts is proving to be their downfall."

Consider an Alberta trust even if you don't live there
06/22/03   Taxes
"The key to taking advantage of Alberta tax rates, short of moving to Alberta, is to establish a trust that is resident in Alberta. You can then transfer certain income-producing assets to this trust. Since the trust will be resident in Alberta, income earned in the trust will be taxed at Alberta tax rates."

Blue food blues
06/19/03   Fun
"'Simply put, they're not what a potato is supposed to be.' This is how H.J. Heinz pitched Funky Fries -- the weird chocolate-flavored and blue-colored fries -- to the world last year."

'Non-competition' payments may be tax-free
06/19/03   Taxes
"The moral of the story? You may want to build a non-competition payment into a deal if you're thinking of selling shares soon. The Manrell decision may be appealed to the Supreme Court of Canada, so this tax-free treatment may not last forever. By the way, the same tax-free treatment will not extend to employees who receive a non-competition payment on leaving an employer. Those payments will be considered employment income."

Germany's euro test
06/19/03   World
"Whatever the economic arguments for Britain's joining the euro, the case for Germany's quitting looks stronger. The idea that Germany will do it is, of course, the stuff of fairy tales. However, the country's present predicament also has a fairy-tale feel, with the ECB in the role of the wicked witch who lured Hansel and Gretel into her gingerbread home with the aim of eating them. In the story by the Brothers Grimm, Gretel pushes the witch into the oven. In the real world, Germany is being roasted, and risks living unhappily ever after."

What would Graham buy now?
06/16/03   Graham
"Benjamin Graham would understand how investors feel today. He was the victim of an earlier bubble. After producing stellar investment returns in the 1920s, Graham's portfolio lost 70 percent of its value in the three-year market slump that followed the crash of 1929."

Short memories, deep pockets
06/15/03   Bonds
"If the American economy falls back into recession, corporate spreads and defaults will obviously rise. The really troubling question for investors is whether they will do so if the economy picks up and interest rates rise to more normal levels. Either way, corporate bonds at current spreads look expensive. And so does Russia."

S&P study shows cheaper funds outperform
06/14/03   Funds
"S&P reported that, on average, funds with lower expense ratios have outperformed their more expensive peers in eight out of the nine domestic fund style categories over a one, three, five, and ten-year annualized basis."

Mutual fund study 'misleading'
06/12/03   Funds
"A recent study that suggests management fees on Canadian mutual funds have risen sharply over the past eight years is "highly misleading," the Investment Funds Institute of Canada said yesterday."

Fund industry isn't reasonable when it comes to fees
06/12/03   Funds
"One thing you have to admire about the mutual fund industry is the way it flouts the natural laws of economics and business."

What Canadians pay for fund management
06/12/03   Funds
"See what the data show in the Morningstar Survey of Canadian Fund Industry Management Expenses."

Fees top $10-billion last year
06/12/03   Funds
"Fund investors paid more than $10-billion in management fees last year, more than 3.5 times the amount paid in 1995, according to a report from Morningstar Research Inc."

Asset base decline erases good old days in fundland
06/10/03   Funds
"This is how far the mighty in the mutual fund industry have fallen: Right now, the largest fund in the country is a plain old money market fund."

A new breed of planner evolving
06/08/03   Brokers
"Although planners have seen the assets on their books dwindle in the past few years, the number of clients they serve in order to maintain that shrinking revenue has remained the same. Despite the drop in assets, the average client base is more or less unchanged from last year at slightly more than 300. This also contrasts sharply with 2000, when the average planner had only 223 clients, reflecting the influx of newcomers to the business."

You still need bonds, but they've had a good run
06/08/03   Bonds
"This "bond bubble" thing is very confusing. You know you're supposed to have fixed income in your portfolio, and yet you keep reading about how bonds are dangerously overvalued."

Insider selling hits 2-year high
06/04/03   Markets
"Stock sales by corporate officers hit a 24-month high in May, according to Thomson Financial, during a month when the U.S. stock market rose to its best level in nearly a year."

Getting stretched
06/03/03   Markets
"If you look at earnings under generally accepted accounting principles, the S&P 500 is trading a price-to-earnings (P/E) ratio of 31.4, up from 27.5 at the end of March. Before 1998, it had never been above 30. If you are a kind and forgiving person, you can use pro forma earnings -- the numbers that companies post before charges for stuff like plant closings, layoffs, and the like. On that basis, the S&P's P/E is 19.7, a level rarely seen before the gaga years of the late 1990s."

Shun deferred sales charge funds
06/01/03   Funds
"How to describe deferred sales charge mutual funds... Dumb? Stupid? Crazy? DSC funds are all of these and more."

Most brokerage stock picks underperform S&P500
06/01/03   Brokers
"The study, which analyzed data from quarterly surveys prepared by Zacks Investment Research and published in The Wall Street Journal, found that the average compounded quarterly return for recommended stocks was 2.17%, with the S&P 500 performing marginally better at 2.26%. The study also found that the variability of recommended stock returns is greater than the S&P 500."

US states face long-term budget shortfalls
05/29/03   Bonds
"Concern over the worsening cash crunch and growing unease over the long-term outlook has driven the spread between yields on state and local municipal bonds and US Treasuries to seven-year highs and helped to put downward pressure on most state credit ratings. But another finding of the analysis is that credit ratings bear little or no statistical relationship with long-term imbalances."

Is the tax cut for real?
05/29/03   Government
"Polls suggest that only 45 percent of the public backs the tax bill signed by President Bush, which means that a majority are against it, indifferent, or confused. Now, we can dismiss the idea that people don't want tax cuts. After all, if people wanted to pay taxes, we could just make them voluntary and be done with it. They are called taxes because people are being forced to pay for something they would otherwise not pay for. Asking people if they want a tax cut should be like asking if they want less mugging."

Manana economics
05/29/03   Economics
"'The principal forecast has been the maqana forecast,' said former Federal Reserve economist Lacy Hunt, now chief economist with Hoisington Investment Management in Austin, Tex. Maqana is the Spanish word for 'tomorrow,' which is when forecasters have consistently said the U.S. economy would get back to full strength."

The perils of a weak dollar
05/28/03   World
"Yes, there could be a big upside. But it risks economic warfare and `beggar thy neighbor' policies. That's political trade, not free trade."

Corporate Babble
05/26/03   Fun
"The first was a recall notice released by Ford, which informed the world of potential steering problems with some of its pick-up trucks and Expeditions. How's this for a diagnosis? "In the small number of these vehicles in which the intermediate steering shaft yoke was not properly installed, the result ultimately may be a disconnection of the intermediate steering shaft from the steering gear." The Babbler assumes that means the steering wheel has all the responsiveness of the free-spinning ones mounted on those little kiddie cars outside of grocery stores. But don't worry; it's only a "high-mileage durability issue.""

Are you a refi junkie?
05/26/03   Debt
"Refinancing is all the rage. But when does this savvy financial move become a short-sighted mistake?"

Pension plans face $225-billion shortfall
05/24/03   Stocks
"Canada's public and private pen-sion plans are facing a collective funding shortfall of $225-billion - an amount roughly equal to 20 per cent of the nation's gross domestic product - new estimates com-piled by three major benefit con-sulting firms show. Closing that funding gap will require billions of additional dollars from plan sponsors and perhaps employees, the research warns. It puts the extra funding demands at 2 per cent of GDP annually over the next 15 years, provided there are no further gains or losses."

Exchange-traded funds are suddenly looking good again
05/23/03   Funds
"Before we get into a more detailed look at how ETFs and fund returns compare, it's worth a quick look at what ETFs have going for them. First, they simply strive to match the same returns as a target stock index, whereas equity funds employ a fund manager to actively pick stocks. Some fund managers can beat their benchmark stock indexes over a long period, but many can't. A major reason for this is that fund expenses reduce the net return to investors. Whereas the average large-cap Canadian equity fund management expense ratio is 2.51 per cent, the i60 charges just 0.17 per cent."

It pays to inspect annual reports
05/23/03   Stocks
"Next, we come to the real guts of the annual report -- the consolidated balance sheet, statement of earnings and cash flows, plus the all-important notes to the financial statements. Here's a brief explanation of each"

Tweedy, Browne Annual
05/23/03   Value Investing
"Favorable or unfavorable historical investment results in comparison to an index are not necessarily predictive of future comparative investment results. In Are Short-Term Performance and Value Investing Mutually Exclusive?, Eugene Shahan analyzed the investment performance of seven money managers, about whom Warren Buffett wrote in his article, The Superinvestors of Graham and Doddsville. Over long periods of time, the seven managers significantly outperformed the market as measured by the Dow Jones Industrial Average (the "DJIA") or the Standard & Poor's 500 Stock Index (the "S&P 500") by between 7.7% and 16.5% annually. (The goal of most institutional money managers is to outperform the market by 2% to 3%.) However, for periods ranging from 13 years to 28 years, this group of managers underperformed the market between 7.7% and 42% of the years. Six of the seven investment managers underperformed the market between 28% and 42% of the years. In today's environment, they would have lost many of their clients during their periods of underperformance. Longer term, it would have been the wrong decision to fire any of those money managers."

Patient Capital Management Q1
05/22/03   Value Investing
"Our long-term focus leads to low transaction costs and is tax efficient. These benefits are very tangible and go directly to your portfolio's bottom line return. A very low turnover strategy such as ours is beneficial in many other ways. We do not spend much time on the phone executing transactions. This allows us to focus on analyzing companies and searching for value instead of monitoring the minute-by-minute movement of stock prices. Our investment philosophy allows us to run Patient Capital very efficiently."

What is wealth inequality?
05/22/03   Economy
"Nowhere is this convergence more apparent than at the grocery store and in restaurants. For virtually every high-end item, be it a fine cut of meat, specialty spaghetti sauce, whole-grain bread, fresh-ground coffee, or fine liquor, there is invariably a cheaper substitute with almost identical physical, temporal, and spatial characteristics. The list of high-end goods for which we can find cheaper substitutes of virtually identical quality is endless; and the common man of today enjoys fineries of which the most powerful kings of yesteryear couldn't dream."

Cundill fund successful with unloved firms
05/22/03   Funds
"James Morton, value investor and lead manager of the Mackenzie Cundill Recovery Fund, which has sailed comfortably through the bear market, says he's happy to be known as a "bottom-fishing contrarian." The term bottom fisher fits because he buys companies when their stock prices are "bombed out." Contrarian is also apt because his choices tend to be unloved market orphans."

Tobacco stocks live to fight again
05/21/03   Stocks
"Shares of "Big Mo" surged from January 2000 through mid-2002, while the rest of the market was tanking. On Wednesday they were back in the limelight, leaping almost 10 percent to $38.30 after a Florida appeals court threw out a record $145 billion punitive damages award against the industry."

How to avoid fees
05/21/03   Funds
"I think Canada's largest fund company by assets has done something useful by raising fees at this time of dismally bad returns. Buying funds with a deferred sales charge is a bad move, and the Investor Group fee grab underscores this point nicely."

Only the weak survive
05/20/03   World
"Despite various protestations that the strong dollar policy is the same as it ever was, it's pretty clear that the Bush administration and the Federal Reserve are happy to see the greenback's decline."

After-tax returns are what matter to fund investors
05/20/03   Funds
"The study examined more than 340 Canadian-managed equity and balanced mutual funds that had a track record over the period 1991 to 2001. The average rate of return on those funds over that time was 9.01 per cent compounded annually, before taxes. But you've got to realize that many of those funds made taxable distributions over that 10-year period. In fact, the average fund lost a full 1.35 per cent, compounded annually, to income tax on distributions alone (assuming the highest tax bracket), with the result that the true rate of return, after taxes, was just 7.66 per cent when investing outside of a registered plan."

A taxing truth
05/18/03   Funds
"Reading the latest report from Lipper on the effect of taxes on mutual fund returns is not unlike studying those tables that list the amount of heat produced by various kinds of chili peppers: We knew those suckers hurt, and now we know just how much. Over the 10 years through 2002, the typical equity fund returned an annual average of 6.8%, after accounting for sales charges and management fees. Factoring in taxes owed on that fund's yearly distributions, however, plus capital-gains taxes owed when fund shares are sold, knocks that return to just over 5% a year for investors in the highest tax bracket. (Fixed-income funds show similar results.) Bottom line: We've given the government about 25% of our gains, which weren't great to begin with."

Financial advice: the sacred trust
05/17/03   Brokers
"It should go without saying that the advice dispensed should be in the best interests of the client. After all, if a customer is paying for advice through stock commissions or mutual fund trailer fees, he should at least be receiving top notch, truly independent advice.Sadly, however, this utopian state of affairs is a pipe dream in Canada. Too often, financial advice is seen as the ticket to building the retirement of the advisors rather than the retirement of his or her clients. Worse, with many products and services available today, what pays the advisor best is often not the optimum product for the customer."

Sales pitch disguised as good advice
05/14/03   Brokers
"You don't pay financial advisors for their advice, you pay for the execution of their advice. Watch for these red flags that may really be a sales pitch disguised as advice"

Funds score dramatic turnaround in April
05/14/03   Funds
"Battered mutual fund investors received good news in the wake of April markets. Nine out of every 10 funds and 26 of 32 Morningstar Canada Fund Indices gained ground for the month. This is a big change from the first quarter, when 91% of funds and 26 of the indices were in the red."

Better be sure you can pay the bill
05/14/03   Debt
"Welcome to the great Canadian debt pigout. Mortgages, lines of credit, loans, credit cards -- you name it, people are using it to take on debt.Does debt Armageddon await? Some people are definitely going to struggle if interest rates move higher, but Canadians are in surprisingly good shape over all."

Buffett hits back at Greenspan
05/13/03   Buffett
"Warren Buffett, the billionaire investor, has unleashed a further blistering attack on the use of derivatives by banks, arguing that the complex financial instruments could pose significant risks for the health of the global economy."

$20 bill gets a facelift
05/13/03   Government
"The $20 bill got a facelift Tuesday, complete with new colors, a new number arrangement and a new background, in the government's latest effort to thwart counterfeiters."

Bogle in exile
05/09/03   Bogle
"Jack Bogle, who turned 74 yesterday, is the Warren Buffett of the mutual fund industry, the People's Choice, the most trusted man in the fund business at a time when trust is at a low ebb. If investors still adore this man who invented the index fund and has championed low-cost investing for decades, the industry has turned its back on him."

Buffett: Do as I say, not as I did
05/08/03   Buffett
"When Warren Buffett launched his latest campaign against excessive CEO pay, he first anticipated an inevitable question: how has Buffett's own record been on this issue? "Not so good," was his answer."

Fees turning us into the Luddites of bank machines
05/06/03   Banks
"This nation of pacifist consumers is staging a quiet revolt against rising bank machine service fees. Not only are people complaining about having to pay these fees, they're making unprecedented cutbacks in their use of bank machines."

WorldCom's bankrupt argument
05/05/03   Bonds
"Moravus, 29, who bought 1,000 shares at face value after the WorldCom acquisition, noted that WorldCom repeatedly said that the MCI QUIPS had a prior claim on MCI assets relative to other WorldCom debt. Because much of what is valuable at WorldCom appears to be at MCI, that promise would seem to indicate that the MCI debtors would be relatively secure even in a bankruptcy reorganization. But that isn't how it worked out after WorldCom collapsed in a wave of accounting fraud."

Putting the Pump in 'Pump and Dump'
05/05/03   Brokers
"Here's a chart showing the 35 stocks that regulators allege were the subject of deceptive research, and the firms that peddled the research on those stocks to unsuspecting investors. Also included is an example of the kind of emails regulators used to build their case against each firm. These and other emails are expected to provide ammunition for disgruntled investors in arbitration claims and class-action lawsuits."

Make the most of your income tax refund this year
05/05/03   Taxes
"It's often been said that, next to being shot at and missed, there's nothing quite as satisfying as a tax refund. And we Canadians love our tax refunds. The average refund to date for the 2002 tax year is $1,102.69, according to the Canada Customs and Revenue Agency"

Warren Buffett's profits soar
05/04/03   Buffett
"Investment guru Warren Buffett has confirmed his legendary ability to back the right businesses by doubling his company's profits."

Buffett says CEOs overpaid
05/04/03   Buffett
"'It's always invigorating,' Mr. Eisner said. 'They make things sound very clear and very simple, which, of course, it is not.'" Humm, how much does Eisner make?

Be aware of the role Of Wall Street's middleman
05/04/03   Brokers
"There are no factories on Wall Street. But you will find a whole bunch of overeager middlemen."

Painful side-effects
05/02/03   World
"While the SARS outbreak seems to have peaked outside China, its economic effects continue to ripple across Asia and beyond."

Cleanup costs can take the shine off oil trusts
05/01/03   Trusts
"Income trust investors are a sensitive lot, objecting frequently and loudly to bad press about their investments. To escape their ire, let's preface this look at the oil trusts with the good."

Fraud quiz launched
04/30/03   Government
"'Billions are lost to investment fraud every year,' Christine Bruenn, president of NASAA, added. 'From the Yukon Territory to Miami, con artists don't discriminate - they target men, women, the elderly and minorities. Investors need to be aware of the warning signs for fraud, where to turn for information and what protections they have.'"

Readers cheer honest advisor
04/29/03   Brokers
"Last week's column on Stan, the advisor who quit a big bank in disgust, sparked dozens of queries from readers wanting to use his services or those of someone similar."

Working retirement
04/29/03   Retirement
"New research shows many of tomorrow's retirees will be returning to work."

Strong selling point
04/27/03   Value Investing
"A company's P/S ratio is simply its market value divided by total annual revenue. A company with a low P/S ratio is experiencing one of two types of selling: the good kind, when it moves more product to pump up the "S," or the other kind, when investors dump its stock, driving down the "P." Either way, if the ratio gets low enough the stock may be a bargain, or at least worth a look."

Clampdown needed
04/27/03   Brokers
"Oh poor investor, beware: If the taxman doesn't take your money and run, unscrupulous financial advisers will."

The myths of tax preparation and planning
04/26/03   Taxes
"Aggressive tax preparation is one way to save tax. But proper tax planning is a better idea. Let me dispel a few myths about tax preparation and planning."

New poverty traps
04/25/03   Government
"Millions of Canadians accept the homogenous advice of governments and the financial community and put billions into RRSPs. However, for many lower-income Canadians RRSPs are a terrible investment. They are victims of a fraud, however unintentional. Only when more Canadians are aware of the perverse treatment of lower-income citizens' savings will Ottawa be forced to develop measures that reward, rather than punish, their savings efforts."

Advisor quits big bank in disgust
04/25/03   Brokers
"But increasingly the firm is sending the message that making money for clients comes second to making money from clients..."

Canadian government debt stands at $2.5 trillion
04/24/03   Debt
"Each Canadian Taxpayer is on the Hook for $172,416 According to Fraser Institute Study."

Horse sense
04/23/03   Trusts
"In today's low interest rate environment, income trusts are being sold to risk-averse investors who are shying away from low-yielding GICs. Many of the recent issues have been of volatile businesses that are unsuited to the income trust structure. So once again there is a mismatch between the risk preferences of the investing public and the innate characteristics of many income trust investments."

The 'safe investments' that backfired
04/21/03   Bonds
"Some savers are about to lose all of their original investment because of an apparently safe saving scheme - the so-called high income bonds."

Anyone can be fooler of the world
04/21/03   Fun
"HG Wells came up with the idea first: invent a fancy machine, step inside, press a few buttons and before you ask what the time is, you're drinking tea with the ancestors."

We're (still) in the money
04/20/03   Management
"Corporate scandals and falling share prices have forced companies to rethink their executive-compensation schemes. And yet, bosses are still being paid sums that many shareholders consider indefensible: in America, top-level compensation actually rose last year."

Seriously, why buy stocks?
04/20/03   Markets
"After years of wall-to-wall, solid-red stock returns, why do financial advisers still tout stocks?"

Calculating your adjusted cost base
04/19/03   Taxes
"When you sell a capital property, your capital gain or loss for income tax purposes is calculated as your proceeds of disposition less your adjusted cost base (ACB) and any outlays or expenses relating to the disposition. In the case of shares acquired on the open market, your ACB is normally the cost of the shares plus any brokerage fees relating to the acquisition. However, there are other instances where the calculation is not so simple."

Director finds no road map on route to disclosure
04/19/03   Law
"Ms. Urquhart had every intention of being an active director. Her unsuccessful efforts to get fellow directors to address what she considered a hornet's nest of problems at the Aldergrove, B.C., company took her on an odyssey well beyond the boardroom. She has spent the past two years writing innumerable letters, making phone calls and travelling back and forth from her home in Mississauga to British Columbia, navigating her way through the courts and Canada's patchwork securities regulatory system. It seems that just about everyone wanted her to go away."

The suits inside the battledress
04/18/03   Government
"Is collusion between government and big business increasing in America?"

Fake bank site part of Nigerian scam
04/18/03   Crime
"They're certainly persistent. Another flavor of the well-known Nigerian scam has popped up, this one even more elaborate than the familiar e-mail solicitation. The scam appears to target former recipients who were initially drawn in by an e-mail offer, but abandoned the scheme half-way through. To ease potential victims' fears, scam artists have set up a fake online bank, and even deposited funds into a bogus account there."

'Time-Traveler' busted for insider trading
04/18/03   Fun
"But the fact is, with an initial investment of only $800, in two weeks' time he had a portfolio valued at over $350 million. Every trade he made capitalized on unexpected business developments, which simply can't be pure luck."

Redemption fees will soar at Investors Group
04/15/03   Funds
"Redemption fees are going up-way up-for Investors Group clients. Effective May 5, Canada's largest sponsor of mutual funds is extending its redemption-fee schedule to seven years for its deferred-sales-charge funds, and doubling to tripling the fees for most periods of six years or less."

Glamour gone for fund managers
04/15/03   Funds
"So how do fund managers play the game? Most will claim they use a bottom-up approach, that is, they hunt out and buy value. Between the destroyed and overvalued names, though, that's a daunting exercise. So they turn into closet top-down managers, where they buy the best names in the sector and gamble that exterior forces, such as falling interest rates or rising commodity prices, will take them to the promised land."

Insurance sector should emulate Fairfax
04/15/03   Stocks
"Not as many people know Prem Watsa, which is just fine with the publicity-shy CEO at Fairfax Financial. But those who have heard of Mr. Watsa would also think of him as a pretty darned good stock picker."

Cathy's story of life insurance
04/13/03   Insurance
"For $120 per month, Cathy is paying for a Universal Life insurance plan. As long as Cathy keeps paying the $120 per month, she will never outlive life insurance. Her premiums will never go up. The issue is that at some point in time (ten years), when the kids grow to independence, Cathy may not need life insurance. The issue is that she is currently uninsured and may be over insured in the future."

SEDI to improve access to insider trades
04/12/03   Markets
"Starting June 9, insider trade reports to all Canadian securities jurisdictions will be made via the System for Electronic Disclosure by Insiders, eliminating paper-based reporting systems for virtually all insider trades."

Want a little something EGTRRA?
04/11/03   Fun
"It's tax time. I know this because I'm staring at documents that make no sense to me, no matter how many beers I drink."

AIC calls for after-tax disclosure
04/10/03   Funds
"Mutual fund companies are good at letting investors know how their performance stacks up before taxes are taken out, but AIC Ltd. is calling for its rivals to post their after-tax returns as well."

Convict leasing in Alabama
04/09/03   Government
"In the early decades of the 20th century, tens of thousands of convicts -- most of them, like Mr. Cottenham, indigent black men -- were snared in a largely forgotten justice system rooted in racism and nurtured by economic expedience. Until nearly 1930, decades after most other Southern states had abolished similar programs, Alabama was providing convicts to businesses hungry for hands to work in farm fields, lumber camps, railroad construction gangs and, especially in later years, mines. For state and local officials, the incentive was money; many years, convict leasing was one of Alabama's largest sources of funding."

From scrap to Slinky
04/09/03   Stocks
"The making of an old-fashioned toy from scrap metal offers a lesson in how technological advances have helped revolutionize business. It also illustrates some shortcomings."

Diversification's fine, but only up to a point
04/09/03   Funds
"Besides diversification, mutual fund investors also know that the median equity manager doesn't beat the index after all the fees. That's usually held up as a good reason not to buy a mutual fund; it should be held up as a good reason not to buy a fund run by an average manager."

Landlordship has its privileges
04/08/03   Real Estate
"Ann-Marie Williamson turned a $6,000 investment in foreclosed property into a six-figure nest egg."

Good money after bad
04/08/03   Government
"America's Congress has voted to give the beleaguered airline industry more than $3 billion in aid, ostensibly to help it through the war in Iraq. But the airlines' problems predate the conflict and will continue long after the fighting stops."

Firms pay taxes on fraudulent earnings
04/05/03   Management
"It is unclear what real or perceived benefits managers of these firms believed were generated by overstating earnings. Our estimates of taxes paid on overstated earnings suggest that at least some managers believe the value---to the firm or perhaps mainly to them personally---of overstating earnings is substantial."

The limits of bankruptcy
04/02/03   Stocks
"Some say the most efficient way to bring down capacity is to allow the industry to consolidate. With two or three giant airlines competing to fly just about everywhere, each might be able to make a consistent profit, they say." Humm, see Air Canada...

McDonald's: Back to basics?
03/28/03   Stocks
"The fast-food giant may go back to burgers and fries -- why didn't it think of that before?"

Clipped
03/28/03   Funds
"Regulators fret that hedge funds' superior performance is not all it appears, and that investors do not fully understand all the risks. For a start, the raw performance numbers may flatter hedge funds. Those funds that have collapsed are not included in the averages. Moreover, because hedge funds are so lightly regulated and often highly leveraged, their apparently superior returns are due, at least in part, to their taking on much more risk."

Fund disclosure proposals flawed
03/28/03   Funds
"The resulting information that ends up in these documents is so watered down that anybody that looks at it and says well, why am I reading this? It isn't really telling me anything."

Fee'd me
03/28/03   Funds
"Most Canadian mutual fund fees are fat. The ones for managing cash are positively gluttonous."

Too much info
03/28/03   Funds
"History suggests there are two ways to keep the masses in the dark: One is to deprive them of information; the other is to drown them in it. The mutual fund industry has adopted the latter technique, perhaps to distract us from the bloodbath."

Halterm Income Fund provides a cautionary tale
03/27/03   Trusts
"Finally, there's a bogeyman to scare some common sense into the people who have flocked to income funds. As in, be careful which income funds you buy, eager investors, or you may end up with a Halterm Income Fund."

Reverse stock splits
03/25/03   Markets
"Consolidations are being done by legitimate companies, but there are still people who quote you chapter and verse that "consolidations never work, they are usually companies that were bad companies in the first place"."

Your mutual fund is telling you to stay put
03/25/03   Funds
"What's laughable is suggesting people take it for granted that their advisers spent much time researching their investments, and that advisers continue to monitor these investments. Some advisers do this, others just sell mutual funds in the same way that others sell aluminum siding or cars. That is, hype the product, close the sale and move on."

Battling the fog of finance
03/25/03   Grant
"But it isn't the fog of war that has shortened the vision of our monetary policymakers. It's rather the fog of finance, particularly the long legacy of America's greatest stock-market bubble. The truth about the three-year decline in stock prices and the hot-and-cold-running economy is that they have their roots in prosperity, not in war."

In search of those elusive returns
03/24/03   Markets
"Despite this week's stockmarket rally, tumbling equity prices and bond yields have sparked a fierce debate over asset allocation."

Use cash in your company smartly
03/22/03   Taxes
"I spoke about the benefits of earning active business income in a corporation, and leaving some of those earnings in the company to defer tax. Today I want to talk about what to do with those dollars you've retained in your firm."

Buffett now worth about $32.8 billion
03/22/03   Buffett
"Warren Buffett may be ranked by Forbes magazine as the world's second-richest man, but he has received the same $100,000 annual salary since 1980."

Fund firms in survival mode
03/20/03   Funds
"With mutual funds having a rough ride, fund firms are looking for ways to keep clients invested." Humm, how about low fees?

Pension funds hedging on hedge funds
03/20/03   Funds
"Who is investing in hedge funds anyway?"

Fair compensation, yes, but for what advice?
03/18/03   Brokers
"My view, shared by many experts who don't have a financial stake in the issue, is that there's a good no-load alternative to any load fund. Why pay the load if you can go directly to a fund company and invest without it?"

Horror stories
03/15/03   World
"If the world economy does stumble, policymakers will have to act quickly. Starting from a position of ample global excess capacity, further sluggish growth, let alone a recession, could raise the risk of deflation in some countries. There is clearly a big chance of further falls in share prices: in its latest quarterly review, the Bank for International Settlements argued that, despite the war premium, America's stockmarket still looks overvalued relative to historical norms. After previous bubbles share prices have always become significantly undervalued before recovering. The economic and financial headlines could get worse before they get better."

It's time to shed light on insider equity monetization
03/13/03   Stocks
"When members of the Bombardier family quietly monetized some of their stock five years ago, they did so by issuing exchangeable debt. And who bought $52.4-million of the $327.5-million issue? Teachers of Ontario. Like every other buyer, the pension plan would have learned of the deal through the banks hired to handle the sale, in this case Midland Walwyn (now owned by Merrill Lynch) and RBC Dominion, Royal Bank's investment bank. The first paragraph of the Bombardier offering memorandum says: "Under no circumstances are its contents to be reproduced or distributed to the public or the press. Securities legislation in all provinces prohibits such distribution." The minimum investment is $150,000. Do you get the feeling that small investors are out of the loop?"

What went wrong in corporate America?
03/12/03   Bogle
"Tonight, I'd like to talk to you about what went wrong in our capitalistic system, about what's now beginning to go right, and about what you can do as a part-owner of corporate America. Whether you own a common stock or a share in a mutual fund, or participate in a private retirement plan, you have a personal interest in bringing about reform. Both as shareholders and as citizens, each of us must accept the responsibility to build a better corporate world."

Income trusts may soon get the respect they deserve
03/11/03   Trusts
"Part of the problem for trusts, more correctly known as income funds, is the unlimited liability issue. Many people in the income fund sector dismiss the risk of unlimited liability, but institutional investors have shied away from these securities because of a technical possibility they could be held liable should a trust go bankrupt or be involved in a costly lawsuit. Both the Ontario and Alberta governments have been asked to introduce legislation that would limit unitholder liability in a way that would put income funds on the same level as common shares of a publicly traded corporation. An Ontario Finance Ministry spokeswoman said that if Ontario makes the move, it will be in the budget that provincial Finance Minister Janet Ecker is to deliver by the end of this month."

Overtaxed? Don't move to the U.S.
03/11/03   Taxes
"But a new study by economist Andrew Jackson of the Canadian Labour Congress suggests that Canadian and U.S. taxes converged substantially in the 1990s and that Canadian workers -- both average wage earners and higher-paid employees -- are already on a par with their American counterparts."

Fund critics applaud Buffett's comments
03/11/03   Funds
"A number of critics of the U.S. mutual fund industry said on Monday they agree with billionaire investor Warren Buffett's assessment that "zombie-like" fund directors have fallen down on the job."

The idiot's guide to derivatives
03/09/03   Fun
"Ismail is a successful mule trader in Peshawar. Every year Ismail delivers 30 mules to the Kabul Mule Market and gets $40 per mule. This year however, the Khyber Pass is full of warlord militias, so Ismail is not sure he can drive his mules to market without losing a mule here and there. Also, the demand for mules in Kabul seems to be dropping. Maybe he'll only be able to sell 20 mules, or, God forbid, 15, and then be forced to feed and water the rest of them on a money-losing trek back home. In other words, it's a scary market and Ismail is worried about feeding his family. What Ismail needs is to limit his risk with an Enron derivatives package."

Supreme court sets six-year limit on tax collection
03/09/03   Taxes
"The Supreme Court of Canada has set a six-year limitation period on the Canada Customs and Revenue Agency for collecting back-taxes."

Warren's 2002 Report
03/09/03   Buffett
"We've yet to see a pro-forma presentation disclosing that audited earnings were somewhat high. So let's make a little history: Last year, on a pro-forma basis, Berkshire had lower earnings than those we actually reported."

Five good reasons to hate surcharges
03/06/03   Banks
"There are any number of reasons to condemn the new service fees on bank machine withdrawals, but let's focus on the five best."

Too many funds, says IFIC President
03/06/03   Funds
"Well, I guess the president of IFIC shouldn't say that, but I do think there probably are too many funds and I think some of the specialized funds are so specialized that they're almost like a stock pick, which is really quite contrary to the whole message of why you're in a mutual fund in the first place. You want diversification and some funds can be so narrow, they're not. In a proper asset allocation plan they're okay. But that is a concern. I think there are too many funds and compared to the United States per capita, we have about four times more than the Americans do per capita"

Business owners should applaud the budget
03/03/03   Taxes
"How the did the 2003 federal budget make it even easier to defer tax? Simple. The budget proposes to increase the dollars in a company that will qualify for the low rate of tax."

Comeback Crusader
03/03/03   Buffett
"Investing legend Warren Buffett has regained his golden touch, and his call for reform has CEOs running scared - or taking notes."

Striking the right balance
03/02/03   Funds
"Balanced funds combine both equity and fixed-income securities in one convenient package, but what is a fair price for this convenience? Cost-conscious investors should keep this question in mind when considering an investment in a balanced fund. This month I take a look at balanced funds from the frugal perspective and I focus on the Leith Wheeler Balanced fund in particular."

Don't shoot the messenger
03/02/03   Stocks
"Although it is under fire, short-selling should be encouraged."

SPPs for 2003
02/28/03   Stingy Investing
"The long-term, risk-adverse investor should consider three factors when selecting stocks with a Share Purchase Plan (SPP). First, they should demand a low price. Second, earnings stability is desirable because most investors sleep better at night when they own stock of steady companies. Finally, investors should look for modest, but not necessarily spectacular, earnings growth."

CDIC's $60,000 limit doesn't cut it any more
02/26/03   Government
"Canada Deposit Insurance Corp., meet the nasty but unavoidable economic phenomenon called inflation. Inflation, say hello to CDIC."

Mutual fund fees may rise
02/25/03   Funds
"The three-year bear market is taking its toll on mutual fund company earnings, which could spell higher fees and minimum investments."

New view says 'debt deflation' to delay recovery
02/24/03   Bonds
"He pointed out that all three periods had great excesses, corruption and misinvestment, and that all had ended with excess capacity, enormous debt and financial strain."

Lessons to be learned from shuttered funds
02/24/03   Funds
"So when the market heats up again - and it will - remember this: It pays to be at least as anxious about a new offering as you are excited to get in on the ground floor. You know what's in it for the fund family to start something new - the chance to suck up assets that would have gone elsewhere - but ask what's in it for you. It could be a quiet closing and a big disappointment."

Lawmakers question mutual fund fees
02/24/03   Funds
"As investors endure painful losses on their mutual funds, two lawmakers are asking whether fund companies might be charging unnecessary fees to maintain their profit margins."

What are Hedge Funds hedging?
02/22/03   Funds
"Not only are hedge funds serving as the marginal buyer and seller, thus setting price, they often make decisions not entirely based on equity valuations or the underlying fundamentals of companies. Instead, decisions are based on the spread to another security, whether a convertible bond, a stock of a company within the same industry or a sector ETF."

A conversation with Marty Whitman
02/21/03   Value Investing
"In the final analysis, value investing means being price conscious rather than outlook conscious. You buy what is cheap and safe. Most everybody else is outlook conscious, or price unconscious. But growth investing is a misnomer. When people talk about growth investing, they mean generally recognized growth. We do real growth investing in value, but we don't pay for it. You can't do generally recognized growth without paying for it. Growth investing entails a willingness to pay up front. If you concentrate on growth investing, you concentrate on the outlook, rather than the price. Most people want to buy a stock that will go up; they don't care if it's cheap or not."

New player enters tax software market
02/20/03   Taxes
"New computer software for completing your tax return has hit the market just as Ottawa's competition watchdog looks at whether the dominant player in the business has too much power."

Patient Capital Q4
02/19/03   Value Investing
"What we do advocate is that the practice of providing quarterly earnings forecasts and guidance be stopped. This would eliminate the pressure to match or exceed quarterly estimates. The pressure of meeting expectations can lead to short term business decisions at the expense of important strategic considerations."

Real return bond funds laugh at inflation
02/19/03   Funds
"Real return bonds offer inflation protection that ordinary bonds cannot provide. And for investors who seek that kind of security blanket, there are really only two fund offerings available in Canada." One could also just buy the bonds ...

The perfect storm
02/18/03   Markets
"British financial advisers have never had it so bad. Nothing is selling and commissions are scarce. Mark Dampier, fund analyst with Hargreaves Lansdown, a brokerage firm, wonders how much longer he will have a job."

Canadian mutual funds hit
02/18/03   Funds
"The Canadian mutual fund industry saw a dismal kickoff to the crucial registered retirement savings plan season last month as frustrated Canadians drained $469-million from their funds, according to final January numbers released yesterday."

Intuit: Only in Canada, Eh!
02/16/03   Taxes
"Intuit Canada does not collect any personal information about its customers without their prior consent. Contrary to several media reports, Intuit Canada does not use SafeCast/Macrovision/C-Dilla or any "Spyware" technology in any of its QuickTax or ImpttRapide products." - Only U.S. customers have to suffer from C-Dilla...

TurboTax: Sector 33 Naughtiness
02/16/03   Taxes
"In Part 1, we laid out some of the reasons why we suspected problems with Intuit's implementation of digital rights management in Turbotax, and explored some of the issues that surfaced during installation. Now let's look closely at what happens when you actually try to use the product."

Financial advisers need to take a little advice
02/13/03   Brokers
"After all that's gone on in the financial services industry recently, it sometimes seems that the best course of action would be to declare ethical bankruptcy and start over. Too extreme? Well, there's one small corner of the industry that is thinking somewhat along these lines."

Investors are main cause of high fund fees
02/12/03   Funds
"The fund companies typically bear the brunt of the resentment, and there are plenty of people wondering when management expense ratios (MERs) are going to fall. It's a good question but it should be directed at financial planners more than mutual fund companies. Contrary to conventional wisdom, planners have a big say in pricing, even if they don't get any heat over it."

Labour funds' greatest risks aren't what you think
02/11/03   Funds
"Labour-sponsored funds are no strangers to criticism, but the nay-sayers don't always shine their spotlights in the right places."

Look at trust's quality before swapping units
02/11/03   Trusts
"Do you want to pay for Sentry Select's managerial expertise (this firm is a serious player, so no worries there), or do you want to continue to go it alone?"

BMO InvestorLine top pick among on-line RRSP brokers
02/10/03   Brokers
" The on-line brokerage world has become decidedly less friendly to the smallest of small investors this RRSP season. With less than $5,000 in your account, some brokers don't want you for a customer. With less than $15,000, you'll pay annual administration fees of as much as $100 at five of the 12 firms surveyed in this year's Globe and Mail ranking of on-line brokers for RRSP investing."

Retail investors unwelcome?
02/07/03   Government
"Financial advisors are the gate through which most retail investors pass on their way into the markets, but industry and regulatory trends may be minimizing the advisor's role. Increasingly retail clients are being bundled into managed money products and are being discouraged from investing directly in the rough-and-tumble equity markets - for better or worse."

CIBC World Markets' dealings a cautionary tale
02/07/03   Brokers
"If you're a retail investor doing business with a big Bay Street firm, pay close attention to CIBC World Markets'troubles with the Ontario Securities Commission. There are unseen perils in dealing with the bank-owned brokerages and they're pretty much all accounted for in this sorry chapter."

Pension threat to blue chip credit ratings
02/07/03   Bonds
"Ten of Europe's biggest companies have been threatened with credit rating downgrades because of shortfalls in their pension funds"

Funds in for the really long haul
02/05/03   Funds
"When you run the same mutual fund for more than 50 straight years, you learn to relax and enjoy a bear market."

Debt levels could leave us with hangover
02/03/03   Economy
"When central banks have attempted to regulate the supply of money, they have all too often failed."

Higher price is biggest change in tax software
02/03/03   Taxes
"It's tougher than ever to choose between the two dominant software programs for completing your income tax return, QuickTax and TaxWiz. QuickTax is the perennial top-seller and the clear winner in usability, but it's always been the most expensive. Guess what? For the 2002 tax year, prices are going up."

Buying the wrong stock for the right reason
02/03/03   Value Investing
"We explore whether the Wall Street adage, 'Never catch a falling knife' is advice to be followed under all circumstances."

It's RRSP season, but don't panic
02/01/03   Stingy Investing
There is no reason to make rushed decisions when it comes to your RRSP. To avoid last minute RRSP pressure simply follow the RRSP three step; buy short-term debt, consult your investment policy, and wait to buy the right securities for your portfolio. You may have to hurry to make this year's RRSP contribution but you should take the time to find great investments.

America For Less Than 2% a Year
02/01/03   Funds
I focus on the McLean Budden American Equity fund, which presents a good combination of sustained performance and low cost.

Global Century Investments
02/01/03   Fun
"Thank you. At Global Century, we like to be completely upfront with our clients. That's why, in our prospectus, we clearly state that our investment advice is often self-interested or deceitful, and may work to our client's disadvantage. We think.. you deserve to know that."

FSA acts to halt stock sell-off
01/31/03   Government
"The UK's financial watchdog is to relax solvency rules for life insurers to help them cope with falling stock markets."

To RRSP or not: six issues to weigh
01/31/03   Taxes
"I can't think of a more debated issue today than whether or not to use an RRSP in saving for retirement. Perhaps the "which came first, the chicken or the egg" issue ranks high on the list, but that debate will never be resolved. As for your retirement savings, I believe the answer is clearer."

Words from the Wise
01/30/03   Buffett
"Cover Article in the Inaugural Issue of CFA, a new publication of the Association of Investment Management & Research"

Good riddance to guidance?
01/29/03   Management
"What do Coca-Cola, McDonald's, AT&T and Sun Microsystems have in common...besides being well-known brand names that have recently fallen on hard times? The four companies all recently told investors they are no longer going to provide earnings guidance. And that's created a maelstrom of controversy on Wall Street."

The Wisdom of John Bogle - Part 2
01/29/03   Indexing
"I worry a little bit about America being a financial capital counting everything rather than a production capital making things."

The Wisdom of John Bogle - Part 1
01/29/03   Indexing
"People are very unaware that this industry has changed its mandate from stewardship in the old days to salesmanship in the present era."

A sign of the times
01/28/03   Brokers
"The basic marriage of proprietary manufacturing firms with objective, independent distribution arms - the dominant model in the business - is troubling at first glance. How are clients to know if they're receiving purely independent advice? Even if the in-house fund is a legitimate choice for a given client, how can he or she trust the recommendation when there is a powerful incentive for the advisor to push the house funds?"

U.S. pension agency is sinking
01/27/03   Retirement
"The U.S. federal agency that insures the pensions of about 44 million Americans has been pounded by a succession of big corporate bankruptcies and has burned through its entire $8 billion surplus in one year."

Index funds not a bear market disaster
01/26/03   Indexing
"The book on index funds is that they're a hell of a way to invest in a bear market. As go the indexes, so go your index investments. Better to be in a mutual fund, where the manager can soften the market's fall by picking safe stocks or holding some cash. There's no doubt that having a conservative equity fund in your portfolio has been a godsend these past few years, but let's get real about indexing. Much as the mutual fund industry and some financial advisers will try to convince you otherwise, indexing is not the down-market disaster that some make it out to be."

How would you benefit from boost to the RRSP limit?
01/23/03   Retirement
"If your income is below $75,000 a year, then it means little to you that the federal government is looking at raising the contribution limit for registered retirement savings plans."

TurboTax customers upset by DRM
01/22/03   Taxes
"Product activation has now made its way into one of the most popular software programs ever created, TurboTax. And, as an extra bonus, the latest release of TurboTax comes with Macrovisions's obnoxious C-Dilla malware. C-Dilla prevents you from copying the CD by disabling your CD-RW drive. That means it's monitoring your CD writing activities all the time. As if you needed more processes running on your machine. Early reports from some users indicate that C-Dilla has caused interference with other software and that it is inordinately difficult to get rid of, perhaps requiring a low-level hard disk format. And to make things even dicier, Intuit apparently did not overtly inform purchasers of the new TurboTax that C-Dilla was included and would be installed on their systems."

RRSPs at a glance
01/22/03   Retirement
Lots of quick points on RRSPs

Is international diversification good?
01/20/03   Retirement
"The results of the simulations of fixed monthly withdrawals and inflation-adjusted monthly withdrawals suggest that retirees who prefer portfolios of at least 50 percent equities benefit modestly from including EAFE stocks as 25 percent of the market value of their portfolios in spite of the inferior performance of the EAFE Index in the 1990s. It is clear from our analysis and from previous literature that international diversification has not been a panacea that can be relied on to offset U.S. bear markets. Nevertheless, the low correlation of EAFE returns with those of U.S. stocks, and EAFE's occasional superior returns, imply merit in international diversification for longer payout periods."

Small Caps: A size too big?
01/20/03   Funds
"In 2001, when small-capitalization stocks outperformed large caps, investors poured $28 billion into small-cap mutual funds, but the deluge caused a problem for many small-cap fund managers, writes Virginia Kahn in today's New York Times. As their funds swelled in size, managers found it more difficult to invest profitably in a market of relatively modest size. Many of the most popular funds closed their doors to new investors"

When you can't sell the goods, sell the shop
01/18/03   Stocks
"But experience shows that retail mergers are tough to pull off and frequently end up destroying value-partly because local customs and tastes still vary greatly, and partly because global synergies in purchasing and the sharing of best business practice have been slow to materialise. Ahold of the Netherlands, for example, has come spectacularly unstuck after a three-year buying spree, and Carrefour is still licking its wounds after difficulties in integrating Promodes, which it bought in 1999. Strategic deals, like the bid for Safeway, are often the biggest failures of all."

The implications of cancelling credit cards
01/17/03   Debt
"There are a lot of people out there that are carrying a stack of credit cards. What is the downside of carrying so many of them?"

The bear facts about pensions
01/17/03   Stocks
"The three-year bear market has left many companies with big pension shortfalls, which may weigh heavily on share prices for years to come."

The Foresight saga, continued
01/17/03   Markets
"Whatever happens this year, Felicity will strike lucky again. But sooner or later her run of double-digit returns may come to an end. In a world of near-zero inflation, where stockmarkets in different countries are moving ever closer in step and where risk and uncertainty are on the rise, the returns that Felicity is accustomed to will be elusive. She would be wise to recall 1931, when the best performing asset was cash, offering 1% interest."

Find out more about ETFs
01/16/03   Indexing
"So why bother with ETFs? For one thing, aggressive investors can trade in and out of ETFs to capitalize on market surges like we've seen lately. ETFs can also be shorted to make money in a falling market. More important, if you can hold on to your ETFs for 10 or, better, 20 years, then the cost- and tax-efficiency of these products really shines. ETFs charge much less than traditional funds in management expenses, which means there are more returns left over for investors after a fund pays itself. ETFs also trade less than most equity funds, which means there are fewer taxable distributions for people investing outside registered accounts. Now, you're probably wondering, where do I go to find out more about ETFs? For the basics on how ETFs work, try these Web sites."

Buy, Sell and Hold On!
01/15/03   Stocks
"If you thought stock research was simple and transparent in the wake of Eliot Spitzer's crusade, you haven't looked closely at Wall Street's new rating systems."

Hi, I'm SoloTrek -- fly me!
01/13/03   Fun
"Strap-on personal helicopter hits the auction block, but buyer must promise not to use it." Who said companies 'for carrying on an undertaking of great advantage, but nobody to know what it is' went out of style in the 1700s...

Fellowship of the Zing
01/13/03   Fun
"The SEC's new accounting board would never cut it in Middle Earth."

Do the little things right to save tax
01/13/03   Taxes
"What are those simple things you should be doing to pay less tax? I couldn't possibly mention them all today. In fact, I've been writing about many of those ideas in this space over the past six years, and I'll continue to write about others in days to come. I will say this, however: Regardless of the specific tax strategy, it's going to fall under one of the five pillars of tax planning (these come from my book, The Tax Freedom Zone)"

Are top investors' brains wired for wealth?
01/13/03   Markets
"You've done your market research and listened to the financial experts. But why isn't your portfolio growing? According to some neuroscientists, the brain and its affinity for patterns may reveal how people handle investments more so than other factors."

Tax cuts for the rich are what's necessary
01/13/03   Taxes
"Let's remember, taxes are a moral issue. If you believe that tax cuts should go to the people who actually pay the taxes, why then, you happen to be for tax cuts for the so-called wealthy. The president is talking about income taxes and a minority of working Americans now shoulder nearly all of the federal income tax burden."

The probability of success
01/11/03   Indexing
"A decade ago, I really did believe that the average investor could do it himself. After all, the flesh was willing, the vehicles were available, and the math wasn't that hard. I was wrong. Having emailed and spoken to thousands of investors over the years, I've come to the sad conclusion that only a tiny minority, at most one percent, are capable of pulling it off."

Pension managers ask Ottawa to end limit
01/10/03   Retirement
"Canada's pension managers are calling for the federal government to scrap the 30-per-cent foreign content limit on retirement savings plans in its new budget, saying the move would benefit ordinary Canadians and would not hurt the dollar or the stock market. The Association of Canadian Pension Management and the Pension Investment Association of Canada say a new study indicates that eliminating the limit would be equivalent to giving Canadians a tax cut worth between $1.5-billion and $3-billion a year."

The ABC perspective
01/09/03   Value Investing
Buying Toonies for Loonies from Irwin Michael

S&P analysts see trouble ahead for some trusts
01/09/03   Trusts
"Analysts at Standard & Poor's Corp. have issued a warning to investors who buy lower-quality income trusts. We're talking here about trusts offering yields in the low to mid-teens or more, which are spectacularly high if you've looked recently at the annual interest payouts available from bonds and guaranteed investment certificates."

Social security shortchange?
01/09/03   Government
"So Marti, a teacher's aide for 6 years, a job that gives her a small state pension, will get less than half of her social security - which she's paid into for 35 years. Instead of the projected $629 a month, she'll only get $252 a month when she retires."

Interview with John Bogle
01/08/03   Indexing
"However, a fund's management changes every five years, according to Morningstar. Think about how many fund managers you'll have as a young person that invests in several funds! Is there any chance that you'll beat the market over long periods with that kind of manager turnover? You've got costs to overcome, tax inefficiency, fees, stock turnover, cash drag, sales charges - the list goes on."

Brace yourself for a wave of mutual fund mergers
01/07/03   Funds
"Sifting through the numbers provided by the Investment Funds Institute of Canada, we find that there were 160 or so fund mergers in the first 11 months of last year. That set a torrid pace of increase, since there were all of eight the year before. The latest four months of numbers showed what mutual fund marketers might call "aggressive growth," with the monthly tally rising steadily from 14 to 37."

RSPs losing favour: survey
01/07/03   Retirement
"Investors seem shell-shocked, Prof. Milevsky said, after opening one monthly statement after another showing that their retirement savings are shrinking. In the 1990s, people became accustomed to market downturns that seemed to reverse course by the time they received their next statement, he said. Prof. Milevsky was most surprised to see people rein in -- based on the short-term performance of the market -- their expectations for the amount they will need to live comfortably after retirement."

Only at the right price
01/07/03   Markets
"What investors have to decide, today and into 2003, is this: After the turbulence of the past 20 years, are stock prices now low? Or are they still high?"

Is MPT the solution -- or the problem?
01/07/03   Academia
"Modern Portfolio Theory bestrides the investment world today like the legendary Colossus. Its precepts dominate the education and training of every professional investment manager; its key terms -- risk-return tradeoff, diversification, expected stock returns -- frame virtually all advice offered to non-professional investors. Indeed, so complete is MPT's domination that we may forget how recent it is. While the set of concepts itself is a product of many years' labor by many individuals -- the seminal paper by Harry Markowitz was published exactly 50 years ago -- widespread adoption of MPT principles by the professional investment community is barely 20 years old. Our thesis is that exclusive and uncritical devotion to investment ideas that can hardly be said to have stood the test of time is dangerous in itself -- but especially so today."

New year's resolutions for fund investors
01/06/03   Funds
"Forget about those last five pounds and the work that needs to be done on the house -- it's time for some New Year's resolutions that you really need to make."

Rob Kyle's lonely battle
01/03/03   Government
"The OSC's latest hearing on the matter was held in October - scheduled for three days, it ran into a fourth - as Kyle's lawyer, Mary Biggar, raised a host of fundamental questions about the nature and authority of the IDA. Is it a private association or an extension of government? If it's private, how can it be charged with defending the public interest, and does it have the power to levy fines? If it's public, does it have to observe statutory limits to its investigative powers and follow rules on how evidence is handled at a disciplinary hearing?"

Econ 101: supply, demand and prayer
01/01/03   Fun
"The U.S. economy is in trouble, as evidenced by the new Merrill Lynch slogan: 'Please Buy Stocks Or Our Children Will Starve.'"

Getting to the bottom of 2002
01/01/03   Fun
"We were also wary of the stock market. One day it was up; the next day it was down; the next day it was way down. And as we watched our 401K plans decline from a retirement villa in France to a refrigerator carton in an alley, we heard the uncea sing babble of the financial ''experts,'' the ones who have never yet failed to be wrong, speculating endlessly on whether the market had bottomed out"

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