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DAN'S BLOG
NEWS & SOLUTIONS
2017/Sep-11: How to steer an aircraft carrier in the financial industry

Dan Loney

 
This past week, I was in meetings in Toronto as I sit on the Manulife Investment Advisory Board. Manulife in Canada manages over $1Billion in Canadians money and this does not include the many billions in the United States and Asia.

These days, if you are going to steer an aircraft carrier in the financial industry like Manulife, you need to spend enormous amounts of money on data and information so that you can stay ahead and to be well prepared for the changes that are happening in the industry and the world economy. Be sure to watch the video this month as I interview Bernard Letendre, the President of Manulife Investments, who very frankly states the challenges for investors in this next decade.

In response, Manulife have exciting products in development to meet these challenges and, being sworn to secrecy, you will have to stay tuned for future product releases and announcements.


Best regards,
Dan


2017/Aug-16: What could happen??? (A scenario of rambling thoughts from Dan)

Dan Loney

 

Interest rates drop after 2001/911 in order to stimulate the economy and make larger purchases more affordable such as houses. The government benefits because, with all of these increased purchases, they increase the tax base on this consumption. Much of the consumption is fuelled by line of credit purchases such as cars and new homes and toys that we all enjoy. 


Leverage increases in investments backed by debt from lines of credits or cheap interest rates for leverage accounts. All is well until we hit the subprime crisis, which is a house of cards in the United States, and is bailed out by the US government.

Pension funds now realize that they are in a very precarious position. With low interest rates they cannot meet their obligations to pensioners, who are no longer dying at age 72 but living into the early 90s. With this increased demand for more pension income paid over a longer period of time, the pensions delve into the stock market in 2005 and 2006 and position pensioners money in great investments such as Nortel and Blackberry. 2008 further damages pension funds as stock prices, which have declined, are being sold to meet the monthly pensioners income, allowing for no recovery of every stock they sell. 

Interest rates begin to slowly chip higher but any drastic moves upward would knowingly create an economic meltdown in housing and businesses that supply the housing industry. For every 1% that mortgage rates increase, home purchasers lose $95,000 of purchasing power. House prices then plateau and home equity begins to shrink again, creating less capacity to borrow and therefore less capacity to purchase larger items.

Consumer purchases slow down and we begin to roll back to essentials: food, light and heat, but no more fancy cars and snowmobiles. Decreased sales mean decreased profits, which leads to decreased cash flow and growth for companies. Economy is based on consumption and not production, as Pres. Obama so errantly stated on national TV after the 2008 crash.

As interest rates increase, home budgets are further compressed by increasing mortgage rates and cost consumption. Homes begin to be put up for sale so that families can get out of the increasing debt and the burden of shrinking family budgets. Home prices then begin to drop in price, more homeowners walk away from homes and claim bankruptcy. All to increase monthly cash flow and put cornflakes on the breakfast table tomorrow morning. Food, roof, light and heat become the essentials of cash flow.

The economy turns down with the decrease in consumption. The very process that created the prosperity [assumed], will reverse creating the loss of prosperity for those who are not prepared. The solution for every house, every business and every nation is they need a storehouse account.

The secret is to live the 80/20 lifestyle, live off 80% of what you bring home and put 20% into a storehouse for those inevitable downturns in the cycle of life and business. 

In 2008 many of my colleagues were crushed by the downturn in the markets and the fact that they had built larger offices and took on more debt to enjoy the good life of success. Taking our own medicine, we put 20% into the storehouse that carried us through the dark cycle after 2008 and 2009.

This is the heart of the Joseph Principle. It is a concept over 3000 years old and clearly described in the life of Joseph of Egypt. There is nothing new under the sun (Solomon).


Best regards,
Dan


2017/Jul-14: Audio interview with Realtor Corney Les

Dan Loney

 
This month we have interviewed Corney Les of RE/MAX NYDA REALTY who has 29 years experience as a very successful lower mainland realtor.

Corney formally spent 22 years in construction before his realty career giving him a solid base for recommending real estate properties.

In this audio interview Corney answers the following questions: 

1. Are we in a Real Estate Bubble in the Lower Mainland?
2. What impact will the recent increase of interest rates have on the real estate market?
3. What is the best mortgage rate to enter into at this time for a purchase? Open? 5 Year? 10 Year?
4. For first time buyers, should I buy now or wait?
5. Where is a good place to buy for first time buyers and where for downsizing for retirement?

 




You can contact Corney for more information or comments via:

Phone: 1.604.795.6938
Web: morechilliwackrealestate.com 


Best regards,
Dan


2017/Jul-07: 10 Years Too Soon or 2 Minutes Too Late.

Dan Loney

 

We all put out many thousands of dollars over the years for car insurance.  Wouldn't it be nice if the insurance company, after 15 years of accident free driving, said "Congratulations, here's all of your money back."  

Today, when we look at the incidents of disabilities or claims from critical illness such as cancer, stroke, heart attack, it is amazing that 1 in 4 people will suffer a critical illness.  The chance of you dying between ages 40 and 55 is 1 in 20.  The greatest risk we have to our health at this time is cancer, heart disease or stroke.  Available now, is an insurance contract that will cover you for 15 years and, if you do not have a claim, you get 100% of your money back!  

A few years ago, we delivered over $360,000 in refunds to Loney Financial clients.  

If you do not have this contract, please call me because I do not want you to call me after your cancer diagnosis or heart attack.  It is much less expensive to buy 10 years too soon than 2 minutes too late.

Dan


2017/Jun-22: Why your neighbour’s mortgage rate doesn’t matter anymore

Dan Loney

 

 

 

Historically, Canadians shopping for a mortgage were presented with a wide range of advertised rates across numerous lenders – and these were seen as a starting point for negotiation.  For borrowers, a common strategy was to ask their neighbour what rate they had negotiated, and then ask their bank to match it. These days of “one-size-fits-all” mortgage pricing are gone.


Click here to read the full article >>>


2017/Jun-19: The future financial outlook!

Dan Loney

 

This past week I spent two days in meetings with asset managers responsible for over $50 billion. We were able to discuss the current financial outlook over the next 12 months. Terry Carr who manages our bond portfolios and is responsible for over $35 billion stated: "it is a dangerous time" with interest rates at a historical 5000 year low and uncertainties in foreign governments from Europe to the United States.

Rates will increase albeit at a glacial rate but we expect the Fed to top out at 2 – 2.5% over the next 18 to 24 months. Keep in mind that historically interest rates have a traditional normal of 4 to 5%. At this time, there are lots of reasons for slow economic growth and we have wildcards like NAFTA that could produce some problems for Canada in the future.

With all these things in mind we agreed that the next 12 months looked optimistic. Our current allocations over the year-to-date returns have come in as expected and if this continues will produce double-digit returns for the year 2017. I will be refining portfolio allocations based on the research in meetings held this week in Toronto so stay tuned for further information upcoming after June 30.


2017/May-25: 50% of Canadians with mortgages on Financial Edge

Dan Loney

 

While more than three fourths (78%) of Canadians have made debt freedom a top priority, average mortgage debt rose by 11% to reach US$201,000 last year. With increased obligations, more than half (52%) of Canadian mortgage holders lack the financial flexibility to deal with unexpected costs.

In a survey by Manulife Bank of Canada, millennials were hit with the largest increase in mortgage debt among all generations polled. They were also most likely to find it hard to make mortgage payments in case of an emergency or if the main earner of the household became unemployed.

“The truth about debt in Canada is that many homeowners are not prepared to adjust to rising interest rates, unforeseen expenses or interruption in their income,” said Rick Lunny, Manulife Bank of Canada’s president and CEO.

Around half (51%) of the Canadian homeowners surveyed said they have $5,000 or less saved for financial emergencies, while one fifth said they have nothing. Nearly one quarter (24%) reported having been short in paying bills within the last 12 months. When asked if they could handle a 10% increase in their payments, around 70% said no.


Boomers were also found to be financially vulnerable. Around 41% of the baby boomers surveyed said more than 60% of their household wealth was locked up in home equity; for another 21%, their homes made up more than 80% of their wealth.

The large share of home equity in boomers’ wealth suggests that they may have to eventually fund their retirement by selling their primary residence. However, 77% of responding baby boomers said they wanted to stay in their current homes upon retiring.

When it came to purchasing their first home, a greater percentage of millennial homeowners (45%) reported getting financial assistance from family compared to those from generation X (37%) and baby boomers (31%). Almost two in five boomers (39%) said they’re still dealing with mortgage debt.

Citing figures from Statistics Canada, the report said the number of dual-income households has doubled over the last 40 years but it has not been enough to offset the increase in housing costs over the same period.


2017/May-05: Mortgages, banking products and Elections!

Dan Loney

 

This month in our newsletter, we are going to focus on mortgages and banking products. I don't know if you have seen in the media but the big mainstream banks are catching a lot of heat for selling clients products and fees that they don't need. Seniors are at the top of the list of those being preyed upon and bank employees are anonymous and admit feelings of guilt and shame of doing this. This undoubtedly will trigger some type of compliance action from the government and consumer awareness of these issues.

This past week I was speaking in Seattle to a group of businessmen and was approached by the owner of a real estate company. I asked him if the recent British Columbia foreign buyers tax had any impact on the Seattle real estate market. His comment was "thank you". He told me as soon as the BC government introduced that tax, business in Seattle absolutely boomed with Asian buyers spending money and fueling a real estate boom in Seattle. He told me that he was aware of the same impact happening in Toronto, and if you follow the national news in Canada, it is quite evident that BC's actions have driven Asian investors to that province.

On a worldview all eyes are on the nation of France. We have two main players in Marine Le Pen and Emmanuel Macron. If Le Pen wins she has vowed to take France out of the European Union. This would further weaken the value of the euro and continue the exodus of money from Europe to the United States stock market. This has been going on now for approximately the last 36 months and will continue to fuel US growth.

Locally we are entering into our British Columbia election, this May 9, we encourage all British Columbian's to get out and vote and maximize the benefits of our democratic system.


Best regards,
Dan

2017/Apr-18: 7 Questions's from Danny money interviewing a Robo Advisor

Dan Loney

 
Johnny Canuck recently wondered if a Robo Advisor could out perform his financial advisor? Here's how his interview went....
 
Johnny - There is a lot of talk about fees these days in the media but I thought I would ask you questions to interview to review your services. I have 7 questions for you;
 
1. Johnny - how long have you been working in the industry now?
Robo - I have less than 24 months of experience but I am good. At least that's what my boss at the bank tells me. 
 
2. Johnny - My advisor Danny Money has walked me through 2 major crashes actually advising me to be out of the market before the crash, how did you handle this for your clients?
Robo - What's a crash? What do you mean get out of the market? If we get out of the market my boss at the bank does not make any money!
 
3. Johnny - my current advisor Danny Money has made some great introductions to people that have assisted me with my financial world, such as my accountant and lawyer. How can you assist in this area?
Robo - I have a cousin that is an automatic vender machine. Would you like a pop?
 
4. Johnny - There is a lot in the news about the banks selling products to customers that they don't need. Would you do this to me?
Robo - No way I would do that! Those same banks have programmed me to sell to you in your best interests. As long as my quota's are hit, we won't have a problem. 
 
5. Johnny - My advisor Danny Money has helped me over the years with questions regarding my business and estate planning for my parents can you do the same?
Robo - Not yet, but maybe in a few decades we can address that challenge. I know that I have a cousin who is programmed be a dentist, but he is not quite ready yet. He mistook a pearl earring for a molar and drilled through the patients ear. 
 
6. Johnny - If I am unhappy with your services who do I talk to?  Right now any concerns I have I can talk to Danny Money and his experienced team. 
Robo - That's easy, just leave your message after the beep! Trust me I will get back to you. 
 
7. Johnny - I am planning to drop by for a coffee and have a chat with my advisor Danny Money regarding the markets and world events, how does that work with you?
Robo -  Easy! No coffee, but just press 2 or maybe it's 3 (I can't remember) and leave a message after the beep. I heard there is going to be a windstorm tonight, can you lend me a battery?

2017/Apr-06: Amateurs know what should go right;  the Professionals know what can go wrong!

Dan Loney

 

I sat in a seminar this week with the national president of Advocis, which is the Association of Independent Financial Advisers. He stated that research recently has shown that clients who work with an advisor are 3.9 times richer (after about 15 years) than people who do their own investing and financial planning.

Recently, we reviewed a client's progress and his net worth increased in one year from $20,000-$130,000. It wasn't astronomical investment returns that made this difference, but structure and the guidance of what not to do, that increased his net worth.

When I think back on my 20 year relationship with my accountant I realized that some of the greatest advice that he gave me was what not to do. These days the cost of fees is in the news mostly because financial institutions are trying to get consumers to focus on this area, while they pay machines to do the work. I don't know about you, but I get no satisfaction or comfort from dealing with a point-of-sale debit system or automatic teller when it doesn't work?

Probably my greatest frustration is dealing with phone systems that give you every option but the one that's going to solve your problem. For this reason I coined the phrase many years ago "amateurs know what should go right, but professionals know what can go wrong."  

I know that when the banks start talking about fees they're using that old mortgage trick of getting us to focus on rate rather than cost.  What are the fees that banks charge? Well if they take your money at 1% and lend it out to your neighbour at 7% I think you can figure out what their fee is. As one banker once said "if you own the debt, you own the client". Our goal is to get clients out of debt quicker because the ancient proverb rings true "the debtor is servant to the lender".

Thanks for listening,
Dan

2017/Apr-02: You Don't Have To Shovel Rain

Dan Loney

 

Over the past while I have written about certain experts that have predicted a real estate correction for the BC market. Some experts have called for a pullback of 30% to 40% in the lower mainland housing prices.

I think it's only fair in contrast to also reiterate conversations I've had with several of my clients this past week. Vince Taylor president of platinum project marketing is selling condos faster than hot cakes in Richmond with the release of the new tower project "Spark." Todd Conner of New Westminster told me that house sales may have slowed down a tiny bit but that volume has shifted again to the easier entry condo market. And finally if you think you can get a cheap deal by moving to Chilliwack Corney Les told me that houses in Chilliwack are selling strongly in the $500,000 to $700,000 market and inventory for sale is low at this time. Chilliwack is a beautiful little town and people are cashing in for the big dollars in the lower mainland and moving out to the valley for the retirement lifestyle. 

In the graph below it's interesting to note that delinquent mortgages are at an all time low in the United States since 2008. British Columbia continues to be the retirement capital of Canada and I think for the simple reason that you don't have to shovel rain.


2017/Mar-27: Rate vs Cost

Dan Loney

 

I recently got asked if I could lower a client’s mortgage rate which prompted me to think of a story.

A man, after driving a long hot journey stopped by a roadside café for a cup of coffee. Upon approaching the café, outside sat man on a bench with a dog at his feet. The weary traveller asked, “Does your dog bite?” “No” said the old-timer on the bench.

The traveller then stooped down to pet the dog and to his horror the dog bit his hand and tore his jacket. “I thought you said your dog didn’t bite?” screamed the traveller in pain to which the old timer replied, “It’s not my dog”.

Too often in the financial arena we ask the wrong questions. A better question to ask regarding a mortgage is “What is it going to cost me to finance the purchase of my home”. This deals with the rate vs cost issue. You may have a lower rate at 2.3% than 3.4% but end up paying more cost in the long run.

There are many factors involved in the equation such as rate, compounding interest charges and length of term. Ask your mortgage professional to explain the difference between rate and cost and know your numbers. If you need help, contact us, we are here to help.


2017/Mar-07: The 7 Investment Number Report Card

Dan Loney

 

Many years ago I reviewed a client’s portfolio which returned 24% for the year and the lady dressed in her best evening fur asked me in our board room: “Is that a good return?”

I soon realized that not everyone has context for assessing the success of an investment portfolio.

That’s why I have created the 7 Investment Number Report Card. Here are the 7 most important questions to ask in analyzing your investment performance and relationship with your advisor:

  1. Rate? What is your rate of return over the past 12 months / 36 months? 36 months allows you to see if you are trending the right direction.
  2. Risk? Has the advisor identified how much downside risk is in this portfolio and would I be comfortable to experience that loss and hold the investment to regain its loss?
  3. Ratio? What are the fees that I am paying for this investment? Do I pay the advisor or are they automatically deducted? Are there any exit fees or additional fees such as guarantor fees to this product?
  4. Response? Does my advisor or his team respond to my requests in a satisfactory manner?
  5. Relationship? Am I comfortable  with my advisor and his team? Do I have confidence in their skills and trust them?
  6. Reporting? Are my numbers available at any time? Can I get reports in a satisfactory time frame? Are my reports clear and easy to understand?
  7. Referable? This is the acid test. Am I comfortable referring my advisor to friends, family and colleagues? If not why tell your advisor? If yes, tell your friends and family.
Best regards,
Dan

2017/Feb-19: Vancouver Real Estate Bubble

Dan Loney

 
A few months ago I spent three days with world renown economist Harry Dent. We had a conversation regarding the state of Vancouver area real estate. He stated that he expected the real estate market to correct 43% in Vancouver from it’s high. 
 
This week his office sent me this chart which shows a projected crash of -64%. 
 
Already sales have slowed down greatly but now I am hearing of prices in some areas starting to fall. Homes that would have sold in days a year ago now have been on the markets for months. 
 
Dent is a student of cycles and one of the world’s best known for his research and has had many accurate forecasts for years. Living here it does not seem like the market would fall that far but I believe the market will go through a correction over the next year.
 
 

2017/Feb-01: "If a kingdom is divided against itself, it cannot stand"

Dan Loney

 

"If a kingdom is divided against itself, it cannot stand" - Jesus
 
I have great concerns regarding what I see south of the border. My concern is how Americans are starting to behave in their dislike for the other side of the political fence.

Democrats and Republicans have always disagreed and yet for the most part they have worked together to move the United States forward. Now I see a large element of the left in the US moving towards anarchy (a state of disorder due to absence or nonrecognition of authority).

This week the Attorney General, Sally Yates, refused a presidential order and was fired. This was an amazing act of defiance at a high office position.  

My point in all of this is if the US can't get its act together in government and the political left cannot behave themselves, then the US is going to struggle and ultimately: "cannot stand."

2017 may well be a year of new beginnings. 


2017/Jan-10: Happy New Year!

Dan Loney

 

If I had told you… that Trump would win the US election and Hillary would go down in flames, that Britain would vote to leave the European Union and that the B.C. Government would tax foreign buyers of B.C. real-estate… you might have thought I was crazy. Well those were the top stories of 2016, so what will happen in 2017?

I always like to think in terms of what is possible, but even more so what is probable. Anything is possible, within reason, but what I think is probable for 2017 is that we will see Kevin O’Leary follow in Trump’s footsteps, as a businessman takes the opportunity to capitalize on the frustrations of the unspoken majority. O’Leary will bring an interesting opponent to the Trudeau camp as he focuses on his version of economic reform. Many Canadians I talk to are growing increasingly uncomfortable with the spending and accumulation of debt by the Trudeau government. O’Leary is also one who seems to be able to handle his own in the heat of the battle as witnessed on Dragons Den.
 
Europe’s problems are far from over and their money will continue to search for a safe haven or sanctuary for currency that is not at the risk of devaluation, like the Euro. Added to this, money leaving Russia and China, looking for sanctuary from their governments in taxation and confiscation will drive the U.S. dollar even higher this year.
 
Real-estate has seen great gains in the last 7 years and most likely will continue to soften from its highs in 2016.  In meeting with world renown economist Harry Dent, he stated that he sees a correction of 40% from the high in the Vancouver market. I think it will continue to soften and let’s see if Harry is right?
 
Interest rates are a given that they will go up. They have too or we are condemning North American pensions to default.  As many as one third of the pensions now in Canada and the U.S. are underfunded. Good for savings accounts but bad for mortgage holders and those who owe debt.
 
The world has always had challenges and always will, but we still live in the best place in the world with security and opportunity galore.


2016/Dec-23: Johnny and Carly Canuck

Dan Loney

 
Johnny goes to Japan
 
Johnny had always wanted to go to Japan but he never got around to saving for it. Where do you start when there are vacations, retirement, car repairs and house repairs all to save for?
 
One day Johnny was in to see his friend Danny Money. Danny went on a trip every year and Johnny asked "Danny how do you do that?" Danny said "Johnny where would you like to go?"  Johnny said "I have always wanted to go to Japan! Well Johnny here is how you do it. 
 
You take out a loan for $10,000 for an RRSP. In May you will get a refund $4,300. The flight for you and Carly will be $1500 on China East airlines and you can find good clean hotels for 10 nights at $150 per night that include breakfast. You and Carly buy 2 tickets for a 7 day pass that will cost you $700 and you can travel the entire country on the bullet train. That then leaves you $60 per day for food and you can easily do that because your hotel provides breakfast with your room. 
 
Johnny said "that's amazing! Who gives you the loan?" Danny said call Loney Financial and they will set it up and approve you in 15 minutes online. 
 
That was 10 years ago and Johnny and Carly have been to Japan, Germany, Australia, South Africa, Thailand, Scotland, Czech Republic, Hawaii, France and next year Malta all while adding $10,000 each year to their retirement savings. 
 
Where do you want to go?
 
---------------------------------
 
To all of our readers here in Canada and around the world we wish you a very Merry Christmas and every success possible in 2017.
Best regards,
Dan

2016/Dec-16: Merry Christmas

Dan Loney

 

Wow -  where did this year go? Such a busy year with so many amazing events. From a business perspective, we would truly like to thank everyone for their business as it was a banner year at Loney Financial. This year saw the introduction of Alysha Smith, who is just completing her first year as Executive Assistant and has done a great job planning and organizing client meetings.
 
Denise and I just completed our 23rd year working together and it is amazing she has put up with me all these years. Carling has now completed 12 years at Loney Financial as our financial coordinator and is responsible for updating and managing our online statement system.

This year also saw myself cross off some personal items on my bucket list. After 
financial meetings in Berlin, I was able to visit a Nazi concentration camp and pay my respects to the 60,000 souls that perished at Sachsenhausen. Next, I just recently returned from Hiroshima, Japan. Words can’t explain how I felt there. How do you process the death of 140,000 people in just over an hour?  War is so tragic.
 
On a personal note, Joy (my wife) and I are just completing the adoption of Cameron and Carson, two little brothers who we have fostered for several years. At age 60, life gets interesting when you have a 3 year old. I decided to readjust my retirement date to age 85 - Freedom 85 :)
 
Thanks again for the privilege to be of service to all you. We wish you a Merry Christmas, Happy Holiday and every success in the New Year!


Best regards,
Dan

2016/Nov-10: The US Election!

Dan Loney

 

Well I've had a lot of clients contact me with the comments of "I can't wait to hear your blog post after the US election". I have received some texts earlier this morning with: "You called it!" and commented on the 50 year cycle that I teach.

For you that have not attended one of my seminars or workshops this is reference to the concept that we have a 50 year cycle. The cycle goes back thousands of years and spans many cultures and has been researched by people such as Nikolai Kondratieff. Essentially every 50 years we have a significant event that causes a social economic event, war, stock market crash or major swing in politics.

As some of you know I have predicted that Trump would win based on this concept of the cycle and an awareness based on a growing global dissatisfaction with the political establishment that is not hearing the concerns of mainstream hard-working people. Yes the media will focus attention on those that behave badly and attract tension and stay up late demonstrating while most mainstream Americans and Canadians have long gone to bed because they have to get up tomorrow morning and go to work and pay taxes.

This will be a very interesting year coming up in 2017. It's possible we could see the stock market crash that would make 2008 look like kindergarten. There are so many problems out there in the financial world right now that it is an amazing perfect storm. At the same time there is also great opportunity that may never come our way again in our lifetime.

It's hard to say what will transpire between now and the new year but into 2017 expect to see an increasing interest-rate and a weakening Canadian dollar against the US as the dollar becomes a safe haven for currency from European money as the EU continues to unravel and the Euro begins to spiral downward.

This Trump election has been more about rejection of the political establishment. It has begun in England as we predicted with the UK voting to leave the European Union. Now Trump and next watch what happens in Italy and the big one in Germany this coming year.  


2016/Oct-31: Vancouver poised for a 40% real estate correction

Dan Loney

 

Last week I was in West Palm Beach, Florida, attending the Irrational Economic Summit. This is hosted by world renown economist and best-selling author Harry Dent.

This gave me a an opportunity to discuss directly with Harry the real estate situation in Vancouver.

Harry believes that Vancouver is going to see a correction in the 40% area.

This explains why as I wrote in a previous blog that the banks have been asked to stress test their mortgage portfolios at a 50% decrease in property values.

Harry stressed that McMansions, as he calls them, will be the hardest hit and could see a greater correction than 40% and that commercial property would be hit less.

A lot more was discussed but that will be the subject of future blog posts. 

As always I welcome  your questions and comments.


2016/Oct-13: The Bubble

Dan Loney

 
Some time ago I wrote about the financial world being like a balloon. I don’t use the term bubble because bubbles just grow and then pop. The balloon can expand and contract with internal pressure. Well as I follow world events this month the pressure is increasing.
 
I sit on an advisory board to a Canadian Bank and recently I learned that the government is asking banks and credit unions to stress test their mortgage portfolios to a 50% decline in real estate value. I have been advising new home buyers to hold off on that first purchase. With the new foreign investment real estate tax in B.C. I have observed that cities have implemented that tax, such has Hong Kong,  Singapore and London, have seen a decline in housing prices of an average of 10%.
 
Other internal pressures are moving away from cash as some restaurant chains in the U.S. are now only accepting debit card or credit card. The governments will be pushing this cashless system as it expands their taxation base. I use cash for most of all my daily purchases and am sometimes looked at like a drug dealer as they check my bills for counterfeiting. I have a feeling the cashless society is not far away.
 
The other pressure I see in the bubble is the expanding compliance issues for businesses. Many of the hotels in the U.S. are now demanding that presenters and seminars take out terrorist insurance and you also have to buy terrorist insurance to park your car in certain hotels.
 
A friend of mine went to hold a meeting at a large downtown Toronto hotel and they had to move to another hotel because terrorists threatened to blow up the building. His crime: he started a school in Jerusalem for children of Jewish, Muslim and Christian families. The all attend school and get along wonderfully proving his point that we can live in harmony if we want to.
 
Next week I am going to write about the issue of gold, bonds, currency and the stock market.
 
I hope this weekend brings you rest and relaxation and next week every success possible.
Dan Loney

2016/Oct-06: Maturity Matters Newsletter

Dan Loney

 

4 Ways to Eat Healthy During the Holiday Season

The holidays are a time for us to gather with family and friends to celebrate. For better or worse, with celebration comes food. If you have been working very hard at eating healthy, losing weight, or maintaining your weight, this may be a difficult time for you. The last thing we want to do is over-indulge in all the delicious food that surrounds us during the holiday season. What are some things you can do to avoid over-eating and sabotaging all your hard work?
 
Prepare Yourself Before the Party
 
One of the biggest mistakes you can make before heading to a party is to skip a meal or arrive hungry. By eating a light, healthy snack before leaving your own house, you can set yourself up to make better choices. Try a low-fat yogurt, fresh fruit, or a small bowl of whole-grain cereal with skim milk. 
 
Bring a Healthy Holiday Food 
 
If you are hosting the party, you have control of the ingredients that are added to the favorite holiday recipes – but as a guest, it is not as easy.     
 
However, just because you are a guest does not mean you cannot offer to bring a healthy, low-fat dish to add to the selection. Most hosts will welcome an additional dish, and the other guests may enjoy having a healthier option to choose. Consider a simple dish like roasted string beans, or if you offer to bring dessert, consider a pumpkin pie without the crust or baked apples. 
 
Be Mindful During the Party
 
The first thing you should do is remember what the celebration is about. Your mind should be focused on enjoying the time with your family and friends. During mealtime, fill your plate up mostly with vegetables. Try not to over-indulge, but you should not feel like you have to avoid any item. Choose items that are your favorite in smaller portions, and eat slowly to savor every bite. 
 
Avoid drinking beverages that are high in sugar and calories, or at least limit your intake to a single drink. Alcohol adds extra unwanted calories and, if too much is consumed, it lowers inhibitions, which can lead to overeating. Try consuming water with a lemon or lime, skim milk, or diet / sugar-free beverages.
 
One great way to avoid snacking throughout the party is to plan fun activities to participate in with other guests, such as games or making crafts.
 
If it is available, set up a tournament with a gaming system that is interactive.
 
That is a great way to burn some calories and avoid the buffet of snacks sitting out on the counter or table.
 
Keep Moving
 
This time of the year should be enjoyable. However, you need to keep physically active, maybe now more than ever. Physical activity reduces stress and gives us more energy. Try fitting in a workout before the party because, more likely than not, you will be tired from all the celebrating afterwards. During the party, go on a brisk walk with some of the other guests or, if there are children around, toss a ball outside. This can give you a burst of energy and a chance to catch up. 
 
If you like participating in races, sign yourself up for a seasonal 5K run/walk or some other fitness event that will keep you focused and motivated to stay active. 
 
Remember: The holidays are for celebrating with family and friends. If you must splurge one, two, or even three days during the holiday season, then that really is not going to ruin all of your hard work. It takes an extra 500 calories each day, or 3,500 calories a week, to gain a pound. All the extra snacking can really add up, but you can easily pass up all the treats in the office and keep goodies out of your own home. If you do this, you can feel good allowing yourself to enjoy the foods you look forward to every year. 
 
Article by Amy Reidenbach, Reprinted with Permission from Senior Living Magazine,
 

 
Heart Healthy Recipe: Cranberry Chutney
 
This recipe can be made one week in advance. Bring it to room temperature before serving. Serve with the turkey instead of gravy.  Makes 12 servings.
 
Ingredients
  • 3 cups (750 mL) fresh or frozen (thawed) cranberries
  • 1 cup (250 mL) apple, diced (1 apple)
  • 1 cup (250 mL) pear, diced (1 pear)
  • 1 cup (250 mL) pomegranate seeds (1 pomegranate), optional
  • 1 tbsp (15 mL) finely grated orange zest, 1 orange
  • 1 tbsp (15 mL) shallot, finely diced
  • 1/3 cup (75 mL) fresh orange juice, from 1 orange
  • 1/3 cup (75 mL) cooking sherry
  • 1 tsp (5 mL) cinnamon
  • ½ tsp (2 mL) black pepper
  • 1/8 tsp (0.5 mL) nutmeg
  • 2 dashes Tabasco sauce
 
Directions
 
Combine all ingredients in a large sauce pan.
Cook over medium-high, stirring frequently for 20 minutes.
Cool to room temperature.
 
Nutritional Information Per Serving 
 
(1/3 cup / 75 mL)-Calories: 37, Protein: 0 g, Fat: 0 g, Saturated fat: 0 g, Dietary cholesterol: 0 mg, Carbohydrate: 9 g, Dietary fibre: 2 g, Sodium: 40 mg, Potassium: 69 mg
 
Recipe Developed by Nadine Day, Reprinted with Permission from The Heart and Stroke Foundation.
 

Seniors Tip: Mindful Eating Changes Everything
 
Research shows that we often eat more when we are presented with larger amounts of food. Over the past few decades, portion sizes have dramatically increased. Remember seven-ounce soda bottles? Those had 85 calories. Compare that to the 250 calories in the twenty-ounce bottles that are now available. Today’s muffins are so large they make muffins of years past look like mini-muffins.
 
Because eating can be an automatic behaviour, awareness of portion sizes and calories is the first step to making healthier food choices. Here are some tips to guide you: 
 
Know your numbers. Start by calculating how many calories are right for you. The Mayo Clinic has an online tool to determine your daily calorie needs.
 
Focus on nutrition. Go for larger amounts of vegetables and fruits that provide a hefty dose of nutrients, such as vitamins, minerals, antioxidants and fibre, without a lot of calories.
 
Eat smaller portions of higher calorie foods, such as sweets or foods that have high amounts of added sugar and fat.
 
Understand serving size vs. portion size. A portion is the amount you choose to eat. A serving is a precise amount of food defined by cups, ounces, grams, or other measurements.
 
Eat mindfully and enjoy your food. Many of us eat for reasons besides hunger. Happiness, sadness, and stress can all lead you to eat too much without realizing. 
 
Source: Mayo Clinic, Reprinted with Permission from Living Assistance Services,
 

Did you know? Humor for Health
 
There is a medicine that is proven to strengthen your immune system, boost your energy, reduce your pain, and help diminish stress. Even better, it’s free and comes naturally; it’s laughter. 
 
Humor is a wonderful thing. We are born knowing how to laugh; infants often smile only weeks after birth and begin laughing after several months. When you laugh, your body relaxes, which eases physical tension and stress. Laughter also increases the amount of “feel-good” endorphins in your body, as well as the number of immune cells and antibodies. Believe it or not, it can even reduce pain.
 
All too often, we forget to laugh when going through tough times. When a family member receives a painful diagnosis or you struggle with daily tasks, it can be difficult to find humor in anything. Some-times, having someone to laugh with who can help you with your challenges is just what you need to start feeling healthy and happy again. 
 
If laughter is already part of your life, share it with a loved one in need. Giving care is more than helping with a person’s daily activities; his/her health and happiness are also important. By incorporating humor into your caregiving, you can lift the spirits of your elderly or chronically ill relative. 
 
Source: Synergy Home Care Blog,, Reprinted with Permission from Living Assistance Services,
 

Joke or Quote of the Month: Always be True to Who You Are
 
“We waste so much energy trying to cover up who we are when beneath every attitude is the want to be loved, and beneath every anger is a wound to be healed and beneath every sadness is the fear that there will not be enough time. When we hesitate in being direct, we unknowingly slip something on, some added layer of protection that keeps us from feeling the world, and often that thin covering is the beginning of a loneliness which, if not put down, diminishes our chances of joy. It’s like wearing gloves every time we touch something, and then, forgetting we chose to put them on, we complain that nothing feels quite real. Our challenge each day is not to get dressed to face the world but to unglove ourselves so that the doorknob feels cold and the car handle feels wet and the kiss goodbye feels like the lips of another being, soft and unrepeatable.”
 
Mark Nepo
 

2016/Sep-19: He did not need life insurance….?

Dan Loney

 
I have a client whose husband was a very successful businessman. Through hard work and industrious times, this couple built a very successful company in Western Canada. 
 
Tragically, the husband was killed in the corporate aircraft along with all others on board. Lawsuits emerged from the estates of those who perished on board and hundreds of thousands of dollars were spent on legal fees defending a negligence suit. 
 
After two years, no negligence was the decision of the court but during that time the court froze all the assets of the corporation pending the outcome of the lawsuits. My client, the widow, was not able to access any money from her company and no income was available. 
 
It turned out, however, that her husband had bought a sizable life insurance policy from his best friend who had just entered the life insurance business. She told me he didn't need life insurance but she's convinced to this day that her husband only bought it to help out his friend who just started in the life insurance industry. 
 
One annual premium was paid and six months later she received a knock at the door and a cheque for a large amount of money that was free and clear from all encumbrances and legal suits. She never missed any meals, her children still attended sports activities and the family was able to go on the annual holiday. There was no decrease in standard of living thanks to the life insurance payout. I know this to be a fact because my client, the widow... Was my mother and her husband, my father. 
 
Life insurance may be one of the greatest gifts of compassion that you ever provide for your spouse and family.

2016/Sep-08: Plummeting Real Estate Sales - A Readers Comments

Dan Loney

 

In my blog article on Sep 2 (Plummeting Real Estate Sales) I wrote about the declining real estate activity and prices in the month of August. Here is a comment from one of our readers Neil Hamilton who works in the business as a Senior Property Advisor with Macdonald Realty:

"They needed to decline Dan. Our real estate was becoming nothing but a gum machine depository for (often illicit) Mainland Chinese money. And both the federal and provincial govts knew it.

The prov gov't didn't want to have to act because it was such an amazing economic driver. But their polling showed them they were about 90% offside with voters 9 mo. before an election.

Detached ppties are going to come off anywhere between $200-500K (and maybe more) depending on area - and they need to so that actual Vancouverites can afford to buy property in their own city again.

No city should ever have foreign money being the controlling factor in its local RE market. Condos and town homes will remain in short supply for a while yet as there are still lots of buyers out there. Consequently these sectors will still experience multiple offer scenarios.

Best regards, Neil"

J. Neil Hamilton
Senior Property Advisor
Macdonald Realty
604-569-1940

neilhamilton@macrealty.com


2016/Sep-05: Every labour has value

Dan Loney

 
It's labour day and I love what I do. I love the people I work with and I am thankful, so thankful for the LFC team and all our wonderful clients. When I look back on my life I have come to realize that every job I have had has led me to this point in life and prepared me for the work I now do. You might be surprised at all the jobs I have done in my life....
  1. Worked for my dad cleaning his warehouse age 10: I was taught to never ever give up. 
  2. Cut lawns as a teenager [still doing this] :)
  3. Cleaned the local shopping mall parking lot at 5:30am before school: Learned rising early.  
  4. Taught recreation hockey and sports to elementary kids after high school: Learned to invest in children. 
  5. Picked blueberries in summer (worst job ever): Learned I never wanted to do this again and totally respect those who do. 
  6. Had a newspaper route: The biggest homes were the hardest to collect $1.50, learned: just because you look rich, maybe that's not the case. 
  7. Worked at the Hyatt Hotel as a night bellman: Great life experience, I learned how to serve people. 
  8. Scaffolder at Sky Hi Scafolding: the owner James Johnson taught me about life and doing the right thing with Integrity. 
  9. Carpenter at R4 Construction: Ed Spence the owner taught me to invest in people and how to treat people right. 
  10. Logging: Taught me hard work but strangely satisfying and also very dangerous. 
  11. Shape Up Shop: We started a new store in 1978 that launched the fitness store industry in Canada. I learned that unexpected success is next years opportunity. It lead to manufacturing and wholesaling across Canada. 
  12. Financial industry 1987 till present: Still learning :) 
In addition to my paid day jobs I have....
  1. Served on 5 boards which I learned leadership.
  2. Bodyguard to celebrities: learned they are normal people.  
  3. Help build an orphanage: learned about miracles.  
  4. Birthed, adopted and fostered 23 children: learned I am incredibly blessed.  
All of our experiences in life shape us and mold us and if we keep an attitude of learning and living, life will be rich and rewarding. 
 
Dan Loney.

2016/Sep-02: Plummeting real estate sales.

Dan Loney

 

I read a report on Friday about the plummeting real estate sales in the greater Vancouver area. This came from an economist that I follow in the states and I was a little suspicious that his numbers were not accurate stating that sales dropped as much as 86% in the first two weeks of August.

August 2nd is when the B.C. government introduced the 15% foreign tax. Some houses are now selling at 20% less market value than at this same time one year ago.

This morning I had a client in my office who told me that his girlfriend, who is a realtor in the lower mainland, has gone from many sales a month and the phone ringing all day long to no new phone calls at all. “The phone has just stopped ringing” she said.

The reason: the foreign tax and the increasing difficulty of getting money out of China (read: Dan’s Blog Jul-18).

Deals in the mill are now asking to be extended as money takes longer to get to Canada as more creative ways need to be found to get it here.

Remember “There is trouble in the bubble when prices level off”, now they are actually declining.


Best regards,
Dan

2016/Aug-19: How to amass a small fortune

Dan Loney

 

The best advice I have ever known about savings is to put 20% of every dollar you earn into savings and investments. If  you do this starting out in your first job and carry through to retirement it will  amass a small fortune.

I heard Kevin O'Leary of Dragons Den fame give this same advice.

I first read about this in the Bible in the book of Genesis chapter 41 where Joseph as Minister Finance had Egypt save 20% of their commodities  for 7 years. After 14 years trading with neighboring nations they exchanged commodities and owned all the currencies, commodities, real estate and labour force.

A time tested successful plan over the past 3000 years.

Thanks,
Dan


2016/Aug-08: The Housing bubble, Critical Illness insurance & Trump v Clinton.

Dan Loney

 

Well there has been lots going on out there in the world since I posted my blog last week. I made mention of the fact that foreign real estate purchases being taxed, as a non-residency tax, have impacted house prices in cities like Singapore, Hong Kong and London. This has resulted in an average drop of 10% in property values. Already as I talked to my real estate agent clients they are saying that the current taxation move by the government is affecting and slowing the activity of sales. There is trouble in the bubble, when things begin to flatten out and this seems to be happening, or starting to happen, at this time so it will be interesting to observe the outcome over the next 12 months.
 
This month in our newsletter we have a focus on critical illness insurance. It pains me every time I get a call from a client who shares with me the challenge that they are going through cancer or have had a heart attack. Just two weeks ago my 59-year-old brother-in-law died suddenly from an aneurysm. To suffer the loss of health is one thing but to suffer the loss of income during that health trial is another. One of the great benefits of a critical illness contract is that it allows the patient to focus on getting better and not having to suffer immediate financial stress. Critical illness insurance is inexpensive in the big picture and we would be happy to send you more information on this. Just send us an email requesting information and we will provide for you a quotation and information on critical illness coverage.
 
Finally, much conversation these days centers around the United States election. Having recently visited my relatives in Oregon I learned that it is quite a hot topic. Many of asked me who I think will win the election? I tell them I feel that this presidential race is like two candidates running to a finish line through a minefield. One of them is going to step on a mine before they reach the finish line and blow up. Will it be Hillary and her corrupt deals and hacked emails or will it be Trump shooting off his mouth to where average US citizens simply cannot support him any further?


2016/Jul-28: B.C. Real Estate Non-residency Tax

Dan Loney

 

In the past I have written about a non-residency tax being implemented in England due to the large investment of non-residency owners. 

This has many problems, but two significant challenges are housing prices increasing out of the range of first-time buyers and lack of retail customers in communities of non-residents owners.

As I predicted this has now hit Vancouver, which will now create a domino effect which we will all feel. Government intervention has seldom been the answer to situations like this. As government deficits increase, local and provincial government's will be looking to find acceptable areas to increase the tax base. Just think of the opposition if this tax was on first-time buyers and not foreign owners.

Recently in the past few years both Hong Kong and Singapore have implemented such taxes and it has caused an average of 10% decline of housing values. If this holds true in the greater Vancouver market think about the value of your home and knock off 10% thanks to the decision by the provincial government this week.

How about the BC government imposing an audit on all foreign purchases in the last 36 months.? If any purchases are deemed from illegal money, confiscate the asset and then put the property up for auction. This would produce millions and millions of dollars for the BC government which would lessen the burden on our taxes and further discourage any further corrupt foreign investment in BC.

I have already written about China beginning to prosecute large wire transfers out of the country, so in my mind the current legislation this week is step two in bringing on a major correction in the BC real estate market. Having said all these things, I still think we live in the best place in the entire world.

 


2016/Jul-16: Vancouver Real Estate Balloon or Bubble?

Dan Loney

 

Being involved in the sale of a Vancouver building north of $70 million for a client has me intensely watching the Vancouver Real Estate market. Are we in a bubble that will pop or are we in a balloon that will contract and then expand some more? 

This past week I learned that the Chinese government has begun to jail Chinese citizens for wiring money out of the country. To me this is the beginning of the end and I would expect local real estate prices to start to decline by the end of the year.

In meetings with clients who are professionals in this area this week I am told that prices have stopped climbing. Today one of my clients told me that people are buying houses by offering 20-30% over the offering price but when they go back to the bank the banks are not willing to extend the financing that far over the appraisal price so the deals are falling through. This is dangerous because the vendor can now sue the proposed purchaser for the loss of the sale and damages.

You are in trouble in the bubble when prices stop going up.


2016/Jul-05: The Future of the EU.

Dan Loney

 

Here is a graphic of sentiment on pessimism about the EU that I saved from back in March. Notice that England was only 44% pessimistic in March.

It is an important fact of how things can change that fast in just 3 months to become a majority of pessimists against the EU. Since the vote more countries are voicing opposition to the current policies of the EU.

Look for the EU to re-engineer into something that it is not today before more countries leave. In my humble opinion I believe the EU will look to new leadership as it is currently declining under the leadership of Christine Legarde.


Best regards,
Dan


2016/Jun-30: The real estate market in Vancouver

Dan Loney

 

A question that I often get from the public is “what is going to happen in the real estate market in Vancouver?”

With incredible increases in real estate values people are making decisions to sell, often their largest asset, and wondering if they should rent for a while and then buy after the market corrects?

In a conversation this morning with our client, Vince Taylor, the president of Platinum Project Marketing in Vancouver, he stated that “we are entering in to a flattening period where for the first time in many months they are starting to see some prices decline”.

I find this interesting as I often use the analogy that the financial world is like a balloon and not a bubble. A bubble simply expands until it pops but a balloon expands and contracts and then expands until it bursts. Often though the reason for the burst is because an outside pin pops the balloon.

In 2008 that exterior pin in the financial world was the Lehman Brothers collapse. This led to a domino effect that was felt around the world. I can't tell you at this point in time, or even identify exactly what that pin might be because there are several potential situations out there that could result in being the pin that pops the balloon. However when we get to this point in this “flattening period”  caution is advised.


2016/Jun-27: Brexit and the US/Canada Dollar

Dan Loney

 

As many of you know I believed that if Britain could have a legitimate vote I felt that they would vote to leave the European Union (EU).

 

Historically that happened last week and has caught many in the financial world by surprise. Even Cameron the Prime Minister never thought that it could happen and certainly the stock markets were betting on Britain staying in the EU.  I think that history will prove that this is a good move for Britain.

 

The EU is trying to homogenize Europe much in the same fashion that the United States has collectively organized separate states to form the United States of America. There is though one huge problem, language. America has one major language, English, the EU has 24 official languages and this is a major bottleneck to bringing people together. Granted many people often speak multiple languages in Europe but they do not all have one language.

 

There is a story in the Bible that even tells when King Nimrod built the Tower of Babel that to stop him God simply confused all of his workforce with different languages. It worked, building came to a halt and people spread out upon the earth.

 

This current correction in the market place is an opportunity to buy in at discount prices. Watch for the pound to strengthen and the Euro weaken. The US dollar will benefit from all of this as more money escapes the declining Euro and looks for a safe haven in the US and Canada.


2016/Jun-20: 7 steps to become Financially more responsible.

Dan Loney

 

1. Mission: Write it down and become crystal clear what you want to achieve. No debt, save a $100,000, buy a home just write it down and then describe in detail what it looks and feels like when you have achieved this. You ought to be able to taste it by the time you are finished this exercise. I kept the plans for my dream house for years and today I live in an 11 bedroom house on a gorgeous private acre of land. Sometimes things even work out better than you dream possible. 


2. Motivation: Write why you are doing this. What turns your crank and will motivate you to keep going when you get discouraged? In helping children in Guatmeala I have sometimes got discouraged with the Guatemalan government who seem to put bottlenecks in the way of helping their orphaned children and I ask myself "why am I doing this?"  Then all I have to do is go in my closet where I keep a picture on the wall of a little girl "Rosita" and when I see her picture and remember her story its "game on" and I stop feeling sorry for myself and get back to work. Find a powerful image that will speak to and keep you going when times are tough. 


3. Method: This is where you decide how you are going to complete your mission. What steps 1-22 or 1-52 you have identified in the process of completed your mission. Start with the end result and deconstruct the process working from the end result backwards. Nobody knows your goal better the you and you know better than anyone how to achieve this. Like my friend and personal coach Keith Cornies says "the genius is inside you and we all have a genius inside us that's just waiting to get out!"


4. Minutes: This is where you will decide how much of your most precious commodity you have. Before you think "hold it money is more important" did you ever realize that you have the same amount of time as billionaires Warren Buffet and Bill Gates? Decide now how much time you are going to spend on your finances and I recommend at least 30 minutes once a week. After one year this means you will have spent over 26 hours working on your finances. Make it enjoyable, go to your favourite coffee shop and take your laptop and have a coffee and go to work. If you don't need the entire 30 minutes then finish up by reading an educational book on finance or a motivating biography of a financially successful person.  


5. Money: You might have to spend some money to make more money. Invest in a new IPad or financial program, the cost of the lattes as you have out at the local coffee shop every morning to work on your finances for 39 minutes. The cost of books that you might buy or enrolling in a financial course at the local college. One of my clients took a course on budgeting and that had a major impact on her financial life. 


6. Metrics: "You can only manage what you can measure" Peter Drucker. Metrics are so important because they don't lie and they have no emotions. Facts are facts. Decide how you are going to measure and what you are going to measure. Some ideas would be pay down debt, how much in savings, what is your net return on your investment over the past 12 months? We have developed the 7 Vital Financial numbers which are; 1. Your monthly budget within $100 2. Assets within $1000 3. Debts within $1000 4. Net worth with $1000 5. Monthly household income 30 days after your death within $100 6.  Monthly income 30 days after a long term disability within $100.  Monthly projected income in retirement at age 71 within $100 Once you nail down these numbers you will have over 90% of all the financial bases covered. 


7. Mentor: OK who has already done this? Who has already achieved what your mission is? Go to them and ask them to mentor you in how to complete this process. I asked a friend once how he amassed over a $100 million in wealth and he said with a cheeky grin "easy, 30 year construction mortgages at 3%". You don't know what you don't know so go find a mentor who will be willing to help you. 

OK there you have it, a template to get your financial mission underway. Will I see you at the coffee shop this Saturday morning? :)


2016/Jun-10: Housing Bubble, US Economy & Election + Brexit.

Dan Loney

 

Q. "I believe the market seems overly pumped up right now, and I've been waiting for the bubble to burst to buy back in. However, it hasn't dropped yet, so I'm wondering what would be best to do. Is there any real loss in waiting another 6 months to see what happens?" 
Brian W.

A. Brian, thanks for your email and it really is the question of the hour. At this moment I'm in Boston visiting with money managers who are managing billions of dollars. This week in meetings the collective message was that bonds and stocks will not perform at the numbers they have in the past decade. The wildcard here though is that they are looking at the underlying fundamentals of the U.S. Economy which they must do but there is another factor which I believe will fuel the Dow and S&P 500 in the next 18 months.

Europe is in a mess, and I don't think the European Union will survive as we know it now. Greece is in default with bailouts and Spain and Portugal are not far behind. There is a good chance Britain will vote to leave on June 23.

Money around the world is looking for a safe haven and the US stock market is the number one choice driving up the USD and the company share values invested in. The U.S. Election also brings in an interesting cycle as historically the best year in the US presidential cycle is the first year as a wave of optimism comes with the new appointment. I'm not sure that would happen with either Trump or Clinton but it will be an entertaining battle to watch either way.

So be prepared for volatility but over all it looks like the US market will advance due to the influx of money over the next 24 months.


Best regards,
Dan

2016/May-13: Rising Mortgage Rates

Dan Loney

 

Lately I have been writing about mortgage options such as the Line of Credit mortgage like the Manuone.

Last month I talked about how clients could possibly pay down their mortgage in half time with a Manuone. Some clients for one reason or another may want a traditional mortgage and often as me which rate they should pick for a five year.

My concern for the five year is renewing into rates that are double what they are today and you can imagine what that would do to the household cash flow. In discussion with our client Jeff Ingram of Canadian Mortgage Experts (jeff@ingrammortgageteam.com) he came up with this great solution regarding fixed term mortgages and here are his comments and wisdom below.
 
“The fact that rates will rise at some point is inevitable, and something that I discuss with all of my clients, especially first time buyers. I believe I have spoken to you before about our Inflation Hedge Strategy and how we use that to protect our clients from future rate hikes and the "payment shock" that would accompany that. It's been a big hit with our database and clients are loving our approach to this. We are, however, staying very far away from 10 year mortgages, and here is why:
 
Rather than paying a premium at 3.84% today, I would much rather suggest taking advantage of paying down as much debt as possible while it's still cheap to do so. If a client can afford a payment at 3.84%, I would suggest taking a 3 - 5 year rate between 2.59 and 2.79, but then setting their payment as if they were paying 3.84%. If a client does this for 5 years, at renewal time they will have accomplished two things. First, they will have significantly reduced their principle balance. Based on a $400,000 mortgage and 25 year amortization, after 5 years a client would have a remaining balance of $324,474 and an effective remaining amortization of 16 years, as opposed to a remaining balance of $347,238 and 20 years remaining if they took a rate of 3.84% today. The second thing they will have accomplished is they will already be used to paying a higher rate and payment, thus effectively eliminating the "payment shock" one might expect if they are renewing into a higher interest rate environment. Their payment will actually be reduced at renewal, even if they renew into a 4% mortgage rate at that time. They are simply now much further ahead on their debt pay down.
 
The other thing I look at when considering a 10 year product is the "what if they're wrong" factor. 10 years is an awfully long time to commit to, and lots can change in that time frame. Paying the 3.84% premium today is more of a gamble, in my opinion, than taking a variable rate right now. Rates could rise, but they also could not! I say we take advantage as long as we can and knock our debt down as much as possible while it's prudent to do so! If we set our clients up and are proactive with their mortgage, they can get so far ahead of the game as the numbers above illustrate.”


2016/Apr-07: Cut your Mortgage Costs in Half?

Dan Loney

 

One of the greatest costs for most people in their lifetime will be the cost to finance their mortgage on their personal residence. Traditionally, we focus on a lower rate being the answer to lower our cost over time. This may not be true when we consider using a line of credit mortgage such as a ManuOne.

Let's look at an example: Take a $600,000 home with a mortgage of $350,000. With a rate of 2.4%, your monthly payment is $1552 and this will result in a total cost of $114,878 over 25 years. This is normal using compounded interest and how most people in Canada finance their homes.
 
An alternative way to finance your home is with a line of credit mortgage, such as the Manulife Bank ManuOne. Currently, their rate is 3.2%. Based on a $600,000 home value and a $350,000 mortgage, a household income of $6000 per month, no debt and if your expenses are $2500 a month, this will result in your mortgage being paid off in 9.8 years with a total cost of $59,836. This will allow you over 15 years and four months of debt free living to spend your money on things that you will enjoy rather than debt.
 
If you would like to take a look at your numbers, contact us and we will calculate what your savings would be and see if this would work for you?


You can read more on how this works by viewing an example Manulife Bank scenario. Download the PDF here.

2016/Mar-04: Stability in the Markets

Dan Loney

 

As I write this, we have just begun trading above last year's close on the TSX with the indices currently at 13,219. This is still a lot lower than the 2014 high of 15,685.

I have been looking for some stability in the markets and over the last six weeks this is begun to establish. With many of our clients having exited the market in July of last year, we are now beginning to move cautiously back into the market.

There are still many critical factors that we are following, which at any time could negatively affect upon the world stock markets. These of course I have talked about many times, including; China's volatility, a declining Euro, forcing billions of dollars out of Europe and  into the United States stock market, the upcoming US election (isn't that getting interesting with Trump?), the decline of oil prices, and the uncertainty of interest rates.

With the potential for further declines in the Canadian dollar, we are also looking for opportunities in US portfolio funds. This serves as a hedge as the US dollar stronger against the Canadian dollar and other world currencies.


2016/Feb-24: RRSP DEADLINE - MONDAY FEB 29th, 2016

Dan Loney

 

Just a friendly reminder to all of you out there in blog land that February 29 this Monday is the deadline for RRSP contributions. To discuss your options contact us NOW: (604) 534-6003 or E-mail myself at Dan@LoneyFinancial.com

I realize that we have many US readers and people from around the world that follow this blog so please excuse our domestic housekeeping.

Stay tuned for more comments in the weeks to come regarding the Canadian dollar/interest rates/price of oil and other topics that are of interest to many of our readers.

One final thing I would like to ask all of our readers is to send in any questions that you might have and I will be happy to address them on this blog.

Thanks for reading!
Dan and the LFC team


2016/Feb-09: The world financial outlook

Dan Loney

 

This last month, I was involved in many meetings regarding the world economic situation. From discussions in Toronto, board meetings with Manubank, The World Outlook Financial Conference and meeting with Bob Boyda, who is responsible for over $100 Billion in asset management out of Boston.  What I will try to do in this blog post is give you a 30,000 foot view of what is going on in the world out there. In future blog posts, I will unpack these for you in more detail.

Canadian Dollar: I have written in past blogs that I feel the Canadian dollar could drop to the 55-60 cent level. I was stunned when Martin Armstrong at the World Financial Outlook Conference said the CDN dollar could drop to 49-50 cents. A groan went through the 1000 attendees at this conference. The issue here is that Armstrong has been the most accurate of Forecasters.
 
Stock Markets: With the Canadian dollar heading down, the Canadian Index will be bearish and we expect it to decline for some time. The U.S. market, however, we expect to have a very good second half to this year. Money continues to pour in from Russia, Germany, France and China as billions are escaping the risk of those currencies devaluating. We have recommended cash since July 6th and this has turned out to be a great move as the market is down -13.22% since that time. We are now heading back into the markets with a weighting more on the U.S. side to pick up the strength of the USD as the CDN weakens.
 
Oil: I spent time last month in conference with Josef Schachter and his outlook for oil is still weak. There may be a bit of a bear bounce at this time, but lower lows are still ahead. Oil will be a good buy at any price long term but the sale price will continue to drop. Earlier, I wrote about a $23 barrel of oil when it was up around $50 -  let’s see what  happens. Bank of Scotland even stated it could go as low as $16?
 
Real Estate: I know many readers now are reading this from around the world but I live in the greater Vancouver area and still get many questions about our real estate prices here. We are living in a bubble of Mainland China investment driving up our real estate prices. I read a report that 70% of real estate purchases in Vancouver over $2 million last year went to Mainland China. China looks like their growth will continue through 2020 and as long as that happens, the real estate will continue to increase in value. This could change of course overnight with the Chinese government stemming the flow of capital out of China or an social economic event like war, etc.
 
Interest rates: They have started up with the Feds increase and they need to continue up to save the pensions in the U.S.  Most pensions were calculated for decades at 6-8% and now with 1-2% interest rates, 1/3 of all the pensions cannot meet there liabilities of paying out pensioners. Watch for more news in the media as this problem starts to heat up as municipalities, counties and cities start to default on their pensions.
 
While all this sounds really negative, there are still lots of opportunities in the world out there to make gains and to protect your assets. It may not be in following the masses and media but to those who are prudent.
 
“Be leery when others are greedy, be greedy when others are leery”
         - Warren Buffett


2016/Jan-08: Investment Recommendations

Dan Loney

 

I am getting a lot of people thanking me these days for investment recommendations we have made in the last year. I am not feeling smug but more like the fireman that saves a person from a burning house. Here are my thoughts for the coming year on various asset classes. Please email your thoughts and feedback! I have clients obviously following this blog but people from other countries also following our thoughts and money moves.
 
Stock Markets:  At this moment as I write this blog, the markets on the TSX are down -256 points (-2.01%) today and down -2208 points (-15.04%) since our recommendation in July to go to cash.

Clients who had money with banks and other firms were told they were foolish to go to cash are now firing those managers and closing out those accounts. The big question I get is when are we going back into the market. As soon as this current decline begins to flatten out, we will look at entering back into the market. Our allocation will, of course, be different for everyone as we all have different goals for our money.

I think of money as our little soldiers that do our bidding. Our allocation will be leaning toward  U.S. funds that will give us the U.S. dollar as I believe the Canadian dollar will weaken (more on that later). I believe that the U.S. will have a good year this year as money from Europe looks for a safe place to park due to the risk of a declining Euro dollar and money escaping the political moves of Putin in Russia. Money is also flooding out of China now into the U.S and into Canadian Real Estate.
 
Interest Rates:  They are going to go up as the move has already begun with the U.S. Fed starting this. I had dinner with a Treasurer of a Canadian bank and he told me to expect interest rates to increase 2% in the next 36 months. This means that if your interest rate is 2% right now it will increase to 4% in the next 3 years. Now 4% historically is very low but it  means your payments will double and therein lies the danger. It’s all about cash flow. Think about locking in your mortgage rates for 10 years, it’s a steal at 3.84%.
 
Real Estate:  If my home was simply an investment, I would have sold it by now into this sky rocketing market. I read a report that 70% of the real estate in Vancouver last year was sold to buyers from mainland China. This is a bubble and it will correct. Real Estate will always be a good investment buy - you want to buy at the bottom of the cycle and not the top. I believe we are near the top of this cycle and it could correct 20% in the next 24 months.
 
Canadian Dollar:  At this point, the dollar is at .71 cents. Not 
good for purchasing but great for our clients selling to the U.S. I fear the dollar may drop below the .70 cent mark and head to the mid .60 cent level. Keep in mind that we profit in U.S. funds on the margin with the currency drops.

 
Oil:  Well, last year we felt the price of Oil would drop below $40 and it did. Goldman Sachs has commented that it could drop as low as $23 a barrel. Iran and Saudi Arabia are now threating each other so that could drive the price upward if there was a threat of disruption of production due to war?
 
Precious Metals:  Gold is currently at $1,091 per ounce. I think it is right at its target price. If you have read my previous blogs, I wrote about how 1 ounce of gold in the day of Caesar bought a Roman Senators toga. Today, an ounce of gold will buy you a Hugo Boss suit retailing at $1,195 which would be the equivalent of a Roman Toga - a fine man’s suit. I believe in owning precious metals but not more than 12.5% of your portfolio.
 
Currently we will continue to hold most of our assets in cash for the next few weeks to see if the market flattens out which will be a good time to re-enter. In 2009, our re-entry was January 21st and the market bottomed out on March 7th and then recovered 50% after the 2008 crash. Watch future blogs for when we pull the trigger to re-enter the market.


2015/Dec-29: A year in Review

Dan Loney

 

Well, what a year it has been! Not a great year in Canada for the stock market being down about -10%. The good news for our clients was we recommended a move to cash in July. For all of you that did, this preserved gains for the years and kept accounts in a positive balance.

The important thing is that this move will see the most results once the markets takes off again as we are heading back into stocks and bonds this next month. We will be heavily weighted (positioned) in U.S. dollars as we expect the Canadian dollar to decline against the U.S. dollar. Some reports I have seen say it could go as low as 55 cents. Oil has broken below $40 as we predicted earlier in the year. 

Watch next month for our allocation and the reasoning behind it.

I wish you all a Merry Christmas and every success in 2016.

Dan Loney.

2015/Nov-13: Why Nations Fail

Dan Loney

 
Do you remember the commercial on TV about the Chinese educator who stands before a large Chinese audience and says “Why do great nations fail?” 
 
He goes on to say the Greeks, Romans, British Empire and the United States all turned their backs on the very principles that made them great. They spend more money than they have (called stimulus) and then they tax the people on this artificial consumption to increase government cash flow. 
 
I can tell you as a financial consultant to large and small companies that as a business owner 2 of the areas that will have the greatest long term risk will be in health care costs and pension commitments. Once you go down those roads it is very hard to recover from the increasing costs. 
 
At least one third of all the pensions in Canada and the USA are broke and will not be able to fund their future liabilities. Coca Cola recently injected $70 million into their pension to keep it afloat. Health care costs are sky rocketing and every time I visit a hospital it is predominately filled with seniors, the parents of the baby boomer generation. 
 
What will happen when the boomers hit their 70’s and 80’s? The pressure on the health care system will be unsustainable financially. 

The wise Solomon 3000 years ago proclaimed: “The borrower is servant to the lender” and in the commercial of China 2030 AD I thought “I wonder if that could ever happen? 
 
Today I listened to the CEO President of Manulife Donald Guloien state that the growth of the Chinese economy is 3 times that of the western world countries and in the next 3 years alone the growth will match the economy of Australia in that 36 month period. 
 
Interestingly who holds the debt? China. 
It concerns me that Canada is now going down the road to borrow even more money and even more debt. The national house is no different than your house, if you make $100,000 per year but payout $50,000 in interest you are in trouble. 
 
So what’s the solution? 
 
Get out of debt, stay out of debt and most often the only thing that brings this is austerity, discipline and denial until we reach our chosen goal.
 
Just in case you have never seen the TV ad here it is https://www.youtube.com/watch?v=JlkLhVo3PbY
 
I am interested to hear what you think. You can reach me at Dan@danloney.com
 
Market update: Since we went  to cash in our accounts the TSX index in Canada is down -10.59%. We continue to hold cash and yet are looking for the opportunity to re-enter the market before the end of the year.

2015/Nov-09: The Movember Foundation

Dan Loney

 
It’s Movember, the month that men direct attention to Prostate Cancer research. We have seen, over the years, an increase in cancers and the effect it has on peoples income and ability to work. Even at this time, we have clients going through chemo and it is not fun.
 
I remember so well my friend Sid writing about his day at chemo, I could have cried not realizing how hard this procedure was for someone to go through.
 
Here in our office, we can’t prevent cancer but we can protect against the financial risk of cancer. We have delivered some very large cheques that has allowed our clients to focus on recovery and not have to worry about their current financial needs or loss of income. We even have a program that if you don’t have a claim, you get all of your money back tax free as a refund.
 
Could you imagine ICBC giving you a refund if you didn’t have a car accident after years of driving! It is a wonderful benefit.
 
A few years ago, I tracked that we returned over $360,000 in refunds to clients in one year. If you are interested in this, let us know and we will send you information.
 
If you had a critical illness yesterday, would you be financially ok tomorrow?

2015/Oct-23: A Night on the Town…..

Dan Loney

 
Have you ever wondered, if  you died how much would your family income be 30 days after you are no longer here?
 
This is part of our 7 Vital Financial Numbers that we provide that gives you the most important financial numbers you will ever need to know.
 
If you would like the answer to this question you can click on this link http://www.insureright.ca/calculator/#analysis and fill out the numbers.  
 
It will tell you how much insurance you need in order to create income that you want for your family and, if you email us the results, we will tell you how much monthly income this translates into.
 
For everyone that sends us their report, we will enter you in our “A Night on the Town” contest which ends October 31st. This will include one nights accommodation in a beautiful Vancouver Hotel plus a $100 gift certificate to use for dinner at a fine restaurant.
 
If you have any questions, just let us know.

2015/Oct-16: How much is gold worth? Ask your tailor!

Dan Loney

 

In the last year I read an interesting article about the price of gold and it’s retention of value over the last 2000 years.

2 years ago I had people coming into see me wanting to buy gold when it was trading at $1800 an ounce saying it was going to $3000. One lady I met even told me she had $50,000 of gold bars stashed under her bed, not something I would recommend.

This article talked about how in the day of Caesar an ounce of gold would buy you a Senator’s suit of clothing to allow you to look good in your governmental duties. I recently went in to see my clothier Jason at Grasby’s www.grasbys.com in White Rock and he brought out a new Hugo Boss suit for me to try on and I bought it on the spot. The retail price? $1,195 and as I check the price of gold this morning it is trading at $1,182.50, just $12.50 less than the price of my suit. 

So next time you want to know the price of gold maybe just go ask your clothier.


2015/Oct-08: Bank Stability

Dan Loney

 

In the next while, you may be hearing of instability with banks in Europe. 

I was involved in meetings yesterday with Rick Lunny, the president of Manulife Bank.

I asked him about the stability of Manulife Bank and he told me: "Dan, you don't have to worry about any of the banks in Canada. They are so heavily regulated and the demands for cash reserves are so strictly enforced by the government that there is no worry at all."

Canada, for many years, has had a wonderful reputation worldwide for our Canadian banking system and I am thankful our government has had the policies in place that have prevented the banking debacles that we have seen in the United States and Europe.


2015/Oct-06: Seven Dirty Little Bank Secrets ~ why your bank will not advise you to go to cash.

Dan Loney

 
  1. Bank portfolios are often dictated from Head office in Toronto and the stock you buy, is the stock that large investors are dumping. When someone sells stock, someone has to buy and if you are one of the small fish in the big banks, then you may be getting dumped on. I have heard this confession by several advisors that have ended up leaving the banks due to this practice because their conscience would not let them continue to sell product to their clients that they did not believe in.
     
  2. "Remember it’s for the long term, just hang in there". Have you heard that before as your portfolio has taken a dive? A tactically managed portfolio takes a lot of work in research and execution to make the reallocations which cost the bank in time and money. Generally, they position you and then forget about you until it's RRSP time when they call you to ask if you are going to put in more money.

  3. The banks put a lot of money into promoting their fund managers. If they have you in a growth fund (80% stock & 20% bonds), they are not going to recommend to the client advisors to switch the client out of the growth fund and into cash as it would be shooting the growth fund manager in the foot. 

  4. Cost to manage and switch a client from an equity portfolio to cash is costly in time spent by the advisor and his team as it does not generate any revenue unless they are billing you a fee for the stock transaction. If this is the case then you really have to be careful that they are not switching you often just to generate fees. 

  5. When an advisor switches you out of stocks and bonds to cash he is going to take a 50% cut in revenue and most advisers don't want to do that. Cash pays less than 50% service fees that stocks and bonds pay to the advisor in trailer fee's. Most advisors are not willing to take the cut in pay.

  6. Reallocation of a client base takes a lot of time and if you are busy reallocating clients to cash, you are not busy bringing in new clients and increased revenue. When clients are in cash, they will have to be reallocated back into equities and bonds at some point when the market shifts into gains once again. This is more time and more work without increasing revenues of the firm.

  7. Risk of error, when multiple transactions are completed there is always the risk of error or a misunderstanding in communication. Less transactions would mean less exposure to error and liability from the position of the bank. 

2015/Sep-24: Deflation

Dan Loney

 

You may hear this word but not understand it so let me give you a little scenario.

Your house is worth a million dollars and your mortgage is $500,000 therefore, your net worth is $500,000 if you don’t have any other assets.

You are feeling pretty good about your situation being worth $500,000. Deflation hits and your home value drops to $470,000 and now your net worth is -$30,000. 

The danger of deflation is that it devalues your assets but not your debt.

Since 2008, the world has taken on $57 Trillion dollars of debt and China has quadrupled its debt since 2008. Canadian consumer debt is at an all-time high with the cheap interest rates. In the fourth quarter of 2008, for every disposable $1, Canadians owed $1.46…. Now they owe a $1.65.

When interest rates start to rise, and they will, it will cause a domino effect on this bloated bubble of debt around the world.

Those that have cash will be in a strong position and have opportunity to acquire assets that are deflated.


2015/Sep-12: Friday Facts

Dan Loney

 
  1. Oil, Goldman Sachs is pegging Oil at $45 a barrel in 2016 removing hope that this is a short term correction in oil pricing. My expectation is to see oil next year under $40 a barrel.
     
  2. Year to date TSX is down -8%
     
  3. China usually exports in the month of September and October 90,000 containers, this year they expect it will be 10,000. Electrical usage is at a 3 month low and major trade shows have been delayed two months.
     
  4. Interest Rates, The Fed is meeting next Thursday. No matter what happens the Fed has painted themselves in a corner. If they raise rates it will start a domino effect with many consequences that have been delayed. If they don’t raise rates pensions who are dependent on higher interest rates will go farther behind in meeting their future pension payments.
     
  5. Business Cycle: 85% of the 20 greatest post war one day stock market crashes have happened historically at the end of the7 year business cycle which currently ends within the next 30 days.
     
  6. Real Estate prices in Vancouver continue to inflate but the problem is in places like Coal Harbour many of the units are empty having being purchased by off shore buyers who are not present to support the local economy such as bakeries, small retail stores and services.
     
  7. Since Loney Financial recommended going to cash on July 6th the TSX stock exchange has declined -8.32%

 


2015/Sep-08: Don’t forget about your Group RRSP

Dan Loney

 

As we have reallocated  July 6th to cash the TSX is down -7.12% since that time. It occurred to me that many of you have asked me about your group RRSP accounts over the years which I do not manage but will comment on.

I would recommend that you contact your group RRSP provider and move your account to cash and then reassess the situation in mid-October.

Your group provider will most likely provide a money market fund as an option. I would not recommend a bond fund at this time.

If you have any questions please feel free to contact me.


2015/Aug-31: Thank-you!

Dan Loney

 

Just a note for all the calls and emails I have received from many of you. I had a friend come up to me at a Celebration of Life for a mutual friend and give me a hug and he said “Thank you!” and I said “For what?” He said: “I read your blog and went to cash!”


It is nice to know that those in cash at the moment are enjoying the summer and not bothered by the market volatility and potential downside.
 
The TSX is off -5.61% as of Monday’s close but last week at the end of Monday it was down -11% since we reallocated to cash on July 6. 

As I have explained we expect things to be choppy but these big down days have not been our big concern. The real damage I believe will happen between September 10th and October 30th.

By the time our next Newsletter comes out at the beginning of October we will see if our concerns have come true?

2015/Aug-10: Interest Rates Have to Rise

Dan Loney

 

Interest Rates Have to Rise - For many years, actuaries have been using a rate of 6% to calculate pensions to make sure that liabilities are met to pay pensioners.

In the U.S., that number has been between 6-8%. The problem is now that interest rates are so low ( I just checked and my bank is paying 1%) that the pension companies are having trouble meeting their funding requirements.

Over the weekend, I met with a friend at a wedding who manages a huge pension consulting firm in the U.S. that manages funds for very well-known U.S. cities. He told me that well over one third of the U.S. pensions are under water, simply meaning, they cannot meet the liabilities now or in the future to pay pensioners.

Just over a year ago, as a member of an advisory board to a major Canadian Bank, I was asked to attend a luncheon with some of the top pension fund managers in the country to discuss the current challenges they have. Traditionally, pension plans have been able to fund their pensions by using stable safe bond portfolios but with these decreasing rates over the past years, they have been forced into equities. Now the challenge has been when you get a pension like the Ontario Teachers’ Pension fund and they buy into that Canadian darling, Nortel, and it goes poof! It’s very bad for the pension fund. 

Recently, it was brought to my attention that Coca Cola had to inject over $70 million into their pension to meet current and future liabilities. Interest rates have to go up to save the pensions and no doubt this message is getting to Janet Yellen at the Fed in the U.S. Look for a 25 basis point rise in the fall to start the increasing rates.


2015/Aug-04: What does the financial situation in Greece really mean?

Dan Loney

 
Every time I hear someone talk about the situation in Greece or the debt in the U.S., I realize that people are getting numb to these numbers.
 
So here is my anecdote to this situation and how crazy it is.
 

 
I tell the fictional story of people coming to see me for advice. They are in trouble financially as there is more month than money each month. The problem is that when I look at their budgets, I soon realize that their spending is and has been way out of line.
 
Their household income is good at $100,000 net take home pay each month but it is the interest on their credit cards that concerns me. They are paying $5000 of monthly interest each month for a total of $60,000 per year which is 60% of their household income.
 

Distressed about this, I tell them I have a solution for them. I pick up the phone and phone the credit card company and arrange to have their limit extended from $300,000 to $400,000 problem solved. Now they are happy and can go spend more money and even celebrate by leaving my office to go for dinner….on their extended credit.
 
Deep down inside you say this is crazy as they are going to have to pay now later than sooner and it will be way worse than it is now.
 

 
Well, welcome to the sovereign debt crises of France, England and the U.S. not to mention Greece, Portugal, Spain and I could go on and on.
 
So what happens when people can’t pay their debt anymore, they can’t spend. Now you know what’s going to happen in the governments, when the game ends it will be uncomfortable like any bankruptcy.
 
Dan.

2015/Jul-07: Socrates: The Economic Confidence Model

Dan Loney

 

This morning, I wrote this letter/email to three buddies Vince, Sid and Scotty who are all very engaged in the business world. I thought it was just too good not to share. So here it is….

I follow a forecaster by the name of Martin Armstrong. If you are not familiar with him, it would be a great time to start following him. He has had amazing accuracy in some of the forecasts that he has made. For example, he called the war in Lebanon down to the month, Putin walking into the Ukraine, the stock market meltdown in 2008 and the Russian currency crisis where recently the ruble devalued 50% in a matter of weeks.

His current major forecast, which is based on his computer model “The Economic Confidence Model”, a program called Socrates, calls for the bond market to meltdown in October of this year. Having received this information, I recently met with one of our bond managers who oversees $35 billion in bonds. We had lunch a few weeks ago and I expressed my concerns based on Armstrong's thoughts. He confirmed to me the major concern is a liquidity issue as once bonds begin to depreciate in value due to an increase in interest rates, where do you go to sell your bonds when everyone else is trying to sell at the same time. Sid and Vince, you guys understand real estate because that is your game and I said it's like trying to sell your 10 floors that you own in a tower of 100 floors when everybody else is trying to sell their floors at a price below yours. The tighter the liquidity, the faster the value drops.He shared with me his experience in 2008 when he phoned Lehman Brothers in the US and tried to dump several hundred million dollars of bonds and he said ”these poor guys didn't even know whether they're going to have a job at 5 PM so how successful do you think I was in selling several hundred million dollars in bonds?”

As Vince noted, Armstrong calls for a correction in the stock market first driving money to the bond market for safety but when the liquidity issue comes to the public front and center money will move back into the stock market which may heat up to record highs as a result of this. He adds a further dominant issue is the Sovereign Debt issue where in the event of an interest rate increase, countries will be hamstrung to service their sovereign debt interest payments. I heard 50% of France’s tax base is now paying the interest on their loans and England it is 40%. Scotty if a customer walks into a bank with a $100,000 Net income and asks for a mortgage and you learn he is paying $50,000 in credit card interest annually, you are going to show him the door. Armstrong feels that this run will be strong right in through 2017. At that point, we will have a whole new scenario which he says the computer is calling for war (he has plotted the cycles of war, it could be Iran and Israel). He is somewhat vague concerning these things and I've come to the conclusion with a friend who follows closely with me that Armstrong is being vague because to open an account with him, the consulting fee is $5 million and he is not able to give all of the solutions away for free when he has paying customers. As a matter fact, he has made reference to some of his customers complaining about the amount of information that he has given out but he seems to be genuinely interested in helping people somewhat by making them aware of the problem.

As a result of this information and based on comments of other influential money people such as Harry Dent (Baker Harvard Scholar Economist) and the entertaining Peter Schiff ( President of Euro Pacific Capital)I have decided to move our clients to a cash allocation for the next 120 days. My analogy is us all walking into the casino to play $1000 each and just as we are at the front door, the ever inquisitive Vince says “I have been reading this book called “Understanding Your Odds at the Casino” andwhat I've learned is that we have an expectation of upside that if we are a winner and on the winning side of the odds, we should be able to peg what our 51% upside is. Dan, do you know this number?” Yes, “Vince our upside in the next hour if we are on the 52% side and we do win, will be 10%. Vince says “ great Dan, what's the downside now?” “Well Vince, I know that in this next hour our downside is 50%.” Vince says “ You mean to tell me we are going to expose ourselves to a 50% loss for a 10% gain, I don’t like those odds, let’s just go to the bar and flip between us all because at least one of us is going to walk away a winner!”

Now humor aside (and the fact that Vince might challenge my theory based on randomness exposé of the Black Swan book) there is just too much risk over the next 120 days and too much downside to expose our clients to a stock market crash being in equities. Going to cash, we will now pray for a crash because then equities go on sale and we will be in position to buy at a much preferred price and ride the market up for the following 12 months. In addition to the bond to equity moves, I have also been made aware that billions are moving out of Europe to predominately the U.S. as it tries to escape the risk of the Euro dollar implosion and Putin’s resurgence of the Soviet Union. I met with a very wealthy Estonian client yesterday for lunch and was told the Estonian people are very worried about Putin’s intentions with the former countries that were under communism such as Estonia. Having seen what is happening in Ukraine has them all very worried. I have seen real time money flows on Armstrong’s computer when I met his associate from Dubai here in Vancouver and he demonstrated Socrates for me. As I told Vince, I am considering purchasing a licence to Socrates to get this information first hand.

My business mentor Bobb Biehl has taught me that “Confidence is based on predictability”. Remove predictability and you lose confidence. Eg: I always score a goal a game….I have not scored in 5 games therefore my confidence is uprooted because it is not predictable whether I will score this next game. Predictability has completely left the Investment game at least on the short term. Fundamentals, which used to serve as the predictions for the market, don’t work anymore or are not guaranteed because the rules have changed. The U.S. market is hot not because the economy is great but because billions of Eurodollars are flowing into the U.S. looking for a place of stability and protection. As economic predictability erodes, so will investment confidence.

If you need any help with any of these areas on any one of these days, feel free connect with us and we will be happy to help you.


Dan Loney

2015/Jun-01: Getting rid of debt

Dan Loney

 
This month, our focus is on getting rid of debt. It is always a good idea when we get our tax refunds to review where we can best lower our debt, if we have any, and most people do. 
 
The first thing I always do is recommend that people put aside 20% of their net income each month for their financial strategy. This principle is 3000 years old and  the minister of Finance under Pharaoh in Egypt had the nation of Egypt save 20% of all the GNP (Gross National Product) which, at that time, would have been the likes of wheat, corn, oil and other commodities in an agrarian society.  
 
I have run spreadsheets of what this turns into over 20 years and it is amazing. However, the issue here is debt - what do we do when we have debt. Simple, take half of the 20% of the monthly savings which would be 10% and contribute this to paying down your debt. 
 
The one good thing about debt is if you pay enough each month it will disappear at some point in time as long as you don't incur more debt. Once your debt is gone, then your entire 20% can go into your savings and investments. 
 
There are also other ways to speed up your debt repayment such as mortgages. You will find more information about this in this months' newsletter using Line of Credit mortgages from Manulife Bank and reading Craig Birch's article "Is 2.2% and 2.2% the same"? 
 
Take the 14 day challenge this month reading the article and every day for 14 days tackling one part of your finances. 
 
If you need any help with any of these areas on any one of these days, feel free connect with us and we will be happy to help you.

2015/May-01: The wisdom of King Solomon

Dan Loney

 

Many years ago, I was reading the wisdom of King Solomon and found a very interesting statement that has relative application today in our current financial world.

King Solomon was one of the richest, if not the richest, king in the history of the world. Each year, he received over $1billion in gifts alone plus taxes and increase of investment which is documented by several historical documents. His wisdom was “Give a portion to seven, and also to eight; for thou knowest not what evil shall be upon the earth” as translated by English translators in the seventeenth century.

When I read this, I realized what Solomon was saying is simply “take your wealth and divide it into seven or eight asset classes because you don’t know what is going to happen in each of these asset classes” (Dan Loney translation).

I realized that this was a model for managing wealth and the reasoning for the different assets classes was to protect the majority of wealth if one asset class was in decline. Very rarely will all 7 asset classes be in decline at the same time and, most of the time, they will be growing at different rates of return.

This began a quest of over 10 years to prove this theory believing that King Solomon was right. I went to Boston and talked to top managers at Fidelity Investments, Europe to speak with money managers and others home and abroad. No one could prove this theory until I found the work of Dr. Craig Israelson who proved that a 7 asset class strategy outperformed the S&P 500 index over a 40 year period and even more dramatically in the past 10 years.

Solomon knew what he was talking about and one layer in the strategy of financial planning is to make sure you have enough diversification in your portfolio on non-correlating assets to protect you against “What evil shall be upon the earth”.

I’d be happy to discuss this further with you and how this can be implemented in your personal investment portfolio.

Dan Loney

2015/Apr-01: How to set up an effective budget.

Dan Loney

 
April is budget month and what I would like to share this month is how to set up an effective budget.
 
There are several components to an effective budget. First, we would start with our net monthly income (take-home pay). Once you determine what your net monthly income is, I always encourage people to take 20% of that income and set it aside for your financial strategy.
 
This 20% ultimately will go into three separate components, the first being short-term savings represented by tax-free savings accounts/checking accounts/savings accounts. The goal for this money should be liquidity and a gain of 3%.
 
The next component is your medium-term investments which would have a goal of 5% and a 5 to 10 year term.
 
Finally, your long-term goals would be represented by registered retirement savings plans, real estate, pensions and would have a focus of greater than 10 years with the return of 7% or greater.
 
After this allocation of 20%, the next area of your budget is fixed expenses which is represented by basically everything your computer pays on a monthly basis. This would be your mortgage payments, Hydro, gas, insurance payments, car payments etc. The nice thing about these payments are that they are the same amount every month and you don't have to worry about them except to check at the end of the month that the right amounts came out of your bank account.
 
After fixed expenses, we now have a category for variable expenses representing items like food and gas. We can’t have the computer pay these automatically every month because these amounts change from month-to-month but they do need to be budgeted. One example of the variability of these expenses is how we tend to spend more money on food in the month of December due to parties and entertaining for Christmas. Gas expenses may be more in the month of August if that is the month for our chosen family vacation and we decide to drive to Disneyland and back.
 
The final area of your budget is discretionary spending. This is the money that is left over that we use for entertainment, eating out at restaurants and going to the movies etc.
 
If you've been through our money map session, you'll know that I encourage the use of cash for these expenses. Your credit card or debit card will never say no to your expenses unless you have hit the limit and depleted the resources of that card. However, when you look in your wallet or money clip and there's no more cash, it simply says no you can't afford this purchase. It's a powerful but simple technique to spend less money.
 
Once you understand how to manage these categories of fixed, variable and discretionary spending, it’s easy to systemize your budget.
 
If you want more help regarding these issues in setting up your budget, feel free to contact us here at Loney Financial and we will send you our client information sheet that breaks out your budgeting into the three categories.

2015/Mar-01: Seven Sins of Investing

Dan Loney

 
This month I want to share the seven sins of an Investment portfolio. Over the last three decades I have seen these investment sins repeated over and over. One of the concepts that I have worked with in my professional life is a list of things to do each day but I have also developed a list of things I am not going to do. Following on in that same context I have following a list of seven things not to do when you invest in a portfolio.
 
1.Don’t put all your eggs in one basket:
We have all heard this before but what I am talking about here is asset allocation. Don’t put all your money in one asset class like Real Estate or all in stocks. We never know what asset class is going to perform the best. I remember in 1999 a client came in to see me about his portfolio which was performing in double digits. He informed me he was moving his portfolio to his daughter who as a university student had got a 40% return on her money and he told me that “She is outperforming you so I am moving everything to her”. She had invested everything in High Tech stock. His wife chose to stay with me and I asked her 2 years later “how is your husband’s portfolio doing?” She replied “don’t even talk about it!” He had lost 80% of all his retirement funds in his daughters portfolio management. The best way to spread your “egg’s” around is to invest in 7-8 asset classes that have no or little correlation. One goes down the others go up. You won’t lose all your money and you will get the best growth historically over time.
 
2.Don’t fall in love with an investment:
I have seen people fall in love with Gold, stocks or certain investments that they expound are going to outperform everything else only to ride them into the abyss. I believe in having an allocation of gold or precious metals but a few years ago I had to talk some clients out of moving all their money into gold when it was at $1,800 and as I write this today it is $1,204. Sometimes we can be married to an investment but that marriage might turn sour if you are married to the wrong investment. 
 
3.Don’t react to the market with your emotions:
This is a very common mistake. If you are buying Tuna and the price of canned Tuna falls to 50 cents a can when it is regularly $1.00 do you go to the cupboards and look at how many cans of Tuna and yell “Honey, get to the neighbours and offer them our Tuna for 75 cents a can because Overwaitea has it on for 50 cents a can!” No, you say “Honey, let’s get down to Overwaitea because Tuna is on sale and we can pick it up for 50 cents a can. Stock is the only product in the world that when it goes on sale people complain. Now as long as you are needing to save for retirement you are still buying and corrections are great times to buy future dollars on sale. Don’t sell off in a correction but buy.
 
4.Don’t write a personal cheque to your investment advisor:
Well this is one that unfortunately I see about every 2 years. A client comes to me and says “Dan, can you help a friend/family/associate that just found out the investment they made was a scam. Don’t write cheques to investment advisors or their personal companies. Some years ago a client who being a top performing realtor called me and said he just sold a house for a 72 year old widowed client. Since she was not buying a new home he asked her “what are you going to do with your money” to which she replied “I am writing a cheque to my investment advisor personally and he is going to invest the money for me.” My client the realtor said “Dan you told me never to write you a cheque personally and this gave me a yellow flag when my client said she was writing a cheque to her advisor”. I said “not a yellow flag, a red flag! Call her right now and stop her before she gets ripped off!” Fortunately he did.
 
5.Don’t be motivated by the tax write off:
One of the worst motivations for buying an investment is because it is a tax write off. You must invest on the merits of the invest first alone and then secondly if there is a tax benefit. I have seen many “tax shelters” over the years go sour and CRA come back on the investors years later. There again these are calls I get “Can you help them?” If you are going to buy a “tax shelter” put all the tax savings in a contingency fund for at least 7 years and don’t touch it. So many people I have seen go by the Porsche with the tax savings only to have to remortgage their home years later to pay the CRA bill.
 
6.Don’t set unrealistic expectations:
The TSX index of the past 60 years has done about 10%, but no one can buy the TSX index without a cost. The average management fee is around 2-3% in Canada so let’s say its 2% and take that off the 10% average return, now you have a net 8% return. Do the same things with bonds and you will net out around 6%. No one should have all their money in stocks so let’s say a balanced 60/40 portfolio would come in at a long term net growth of 7%. I have people come into my office saying I just saw a mutual fund that advertised a 30% return and I want to put all my money in there. I say how do you feel about losing 30% next year and they say “no way”. Well what goes up 30% can go down 30% or more in one year. Be realistic about  your expectations and appetite for volatility. Set realistic expectation for your asset classes and your investments. Everyone needs to have  a short term 1-5 years, medium term 5-10 and long term 10+ accounts for different needs and goals in their life. If you want to learn more about this just ask us and we will show you how to do this.
 
7.Don’t spend your principle:
Love him or hate him Kevin O’Leary of Dragons Den fame is right. His mother taught him this principle and O’Leary states that money is like little soldiers out their making you more money, don’t kill your little soldiers! We all get crunches in life but if all possible keep those little soldiers working for you and they will live on long into the future to work to support you in  years to come.
 
Dan Loney

2015/Feb-02: The World Outlook Financial Conference

Dan Loney

 

Last week, I attended the World Outlook Financial Conference and there were some very interesting presentations from experts in their given field of disciplines.  Here are some highlights:

  • Oil -  With the demand for oil declining in Europe and China, we can expect the price to continue to drop. As I write this, oil is currently just under $50 at $49.14. Expect oil to decline under $40 as the U.S. and China oil reserve capacity is filled and there is no other place to store the oil. Prices will continue to drop under $40 which is bad for the Canadian Oil industry but good for consumers with cheaper oil prices. Industry in manufacturing, trucking and the airlines will all benefit from these lower prices.
  • Real Estate -  This is a moving target as it will continue to grow in cities like Vancouver but is diving in places like Alberta, Houston and other oil dependent cities. One interesting note,  65% of people in Canada are planning to retire after the age of 65 in B.C. 
  • Sovereign Debt -  This was a topic that was very concerning. Only one government has ever paid back it’s sovereign debt and that was Romania in the 1980’s. England now spends 40% of its taxes on servicing its government debt. We are facing a global government debt crises that threatens the Euro dollar and could cause much further unrest in Europe both civil and government against government. This is a huge subject for discussion and I will write further on this later in another blog.
  • Stock Market -  Money is like water, it cannot disappear it has to go somewhere. It moves from Europe to the U.S. or China and back again. The U.S stock market is driving upwards while storefronts in the U.S. remain empty and retail stores continue to pull back. This does not make sense from an economic point-of-view unless you understand that money is leaving Europe in record numbers because of Putin marching into the Ukraine and since no one stopped him, then most likely Estonia will be next. He is wanting to restore the land mass of the former Soviet union to regain resources, influence and power. Money is leaving Europe and going to the only safe haven it knows  and that is the U.S. and U.S. companies. Look for the U.S. stock market to continue to grow till 2017 with increased volatility.  

I hope to spend more time in the future writing more about this and what the solutions are to these challenges. If you would like to attend a seminar on all of this or a webinar send us an email and let us know. If we have enough interested people, then we can organize an event to present our thoughts and solutions.


2015/Jan-01: How is that working for you so far?

Dan Loney

 

Every year it seems that I learn one major thing in my life and this year it was this simple question:
 
     “How is that working for you so far?” 
 
In advising clients in financial matters, business people in business or just in mentoring others, I have had the opportunity to see their life from a different perspective as they share their challenges with me.
 
When I see a need for change I simply ask them that question and it allows them to see from their vantage point that there is need for change. Looking at the past year I have to ask myself what is not working and then how can I, in this New Year, make this work.
 
Alan Deutschman wrote a great book on this called “Change or Die”. In his book he talks about 3 things needed for change, the 3 R’s: Relationship, Retrain and Reframe.
 
We do better when we make changes with people that will support us and better yet if they are making the same changes. Retrain: I am having to learn to cook healthier, eating healthier is easier than cooking healthier so I need to learn techniques to cook healthier. And finally to reframe makes a difference in how our thinking shapes our values. I used to laugh about eating every meal like I was going to the electric chair, now I eat to peak at age 85 and still be productive.
 
I just watched a YouTube video on a surgeon that voluntarily retired at age 95 (Dr. Ellsworth Wareham - 98 years old vegan) and they keep calling him back to the hospital to do more work.
 
So again I ask you: “How is this working for you so far and what needs to change?” A worthwhile exercise as we move into the new year is to ask this question as it impacts our health, finances and every area of our life.

For more information on how Loney Financial can help, contact Dan Loney at 604.534.6003 or Email: dan@loneyfinancial.com


2014/Dec-01: Oil, Gas and OPEC

Dan Loney

 
I couldn't help but notice this morning when I drove to work that gas prices have plummeted in the recent weeks. I remember when I purchased my SUV, gas for midrange octane was running at $1.52 per litre. This morning, the gas station was advertising on their sign $1.19 per litre and that is a significant drop over the last few years. 
 
As I prepared to write this entry today, I was going to report to you that oil had fallen into the low $70 range but in checking my numbers for the close of the day I was shocked to see that oil plunged in New York down $7.54 over the last two days to close at $66 a barrel. 
 
People are asking, “why our oil prices dropping?” Saudi Arabia and the OPEC nations have priced their budgets in around the $80 mark so this is where they would like to see the price to maintain their fiscal budgets. Their challenge is that they are beginning to see their market share shrink due to competition from Canada and the United States. Developments in the technology of shale oil production and the tar sands are a legitimate threat to replacing domestic oil consumption with Canadian and American oil production. 
 
The OPEC nations market share has now fallen to about 30% of world consumption. Further to this, Russia is aggressively increasing their oil production and there has been a massive oil field find off the coast of Israel which brings a new major player to the world oil production game. 
 
Lower oil prices impact industry in a positive manner reducing manufacturing costs and especially in the transportation of goods and services to the public. Some economists believe the OPEC nations are allowing the cost of oil to drop significantly in hopes of discouraging Canadian and American production. A cheaper cost per barrel makes domestic oil production less profitable and puts pressure on the industry as it seeks to spend billions of dollars in new discovery and oil production. These costs also relate to the development of oil pipeline construction which has a great effect on the economy of Alberta and Manitoba.
 
For more information on how Loney Financial can help, contact Dan Loney at 604.534.6003 or Email: dan@loneyfinancial.com

2014/Oct-31: Movember and Kim Phuc

Dan Loney

 
November is becoming known as Movember and deals with prostate cancer as October is the month that we focus on fighting breast cancer. Cancer is a major threat to Canadians as is heart disease and stroke. Just a few days ago Canada’s beloved hockey hero Gordie Howe suffered a major stroke. If any one of these major ailments created a crises in your life how would you fare financially?
 
Just the other day I was studying corporate assessments and one of the criteria was how well a corporation could handle a crises. That is the true test of stability. Nancy Reagan once said “ You never know what is in the tea bag until you put it in the hot water”. For many the financial hot water will be a disability or critical illness. You are a money machine and if the machine can operate will the money continue to come in?
 
I often like to ask a question in our seminars that if I offered you two jobs which would you take? The work is the same but Job A offers you $100,000 per year but if you can’t work on Monday morning and you are disabled then you will be paid nothing as you can’t show up to work.
 
Job B for the same work will pay you $95,000 per year but if you get sick or have an accident and can’t work we will continue to pay you a salary which would you take.
 
No one has ever yet said option A. Option B guarantees us security and that’s exactly what we have with Critical Illness Insurance. We have the security of knowing if we are diagnosed that the money will still come in. Why would we ever gamble with our financial future when the odds are so stacked against us?
 
Connect with us and we will let you know how inexpensive this coverage is.
 
For more information on how Loney Financial can help, contact Dan Loney at 604.534.6003 or Email: dan@loneyfinancial.com
 
This picture of Kim Phuc, an innocent victim of the Vietnam War at the age of nine, has haunted me since I first set eyes on it at the age of 16.
 
On June 8, 1972, Kim's village of Trang Bang came under attack by South Vietnamese planes, which mistakenly dropped napalm on a Buddhist pagoda in an area where the North Vietnamese were infiltrating. While running for safety with other children, Kim was severely burned by the napalm and suffered many years of painful burn therapy, but she always longed to reach out and help other children who were victimized by war.
 
A year ago I was emboldened by my Bucket List to once-and-for-all search and find her, reach out and help in anyway I could.
 
2 weeks later after meeting a colleague, Anna-Marie White, she incredibly arranged for myself and my wife Joy to meet her whilst she was attending a Vancouver speaking event.
 
Subsequently we became friends and on Nov 9th she travelled to Surrey to tell the story of her survival, conversion and victory and about the tremendous church growth in Vietnam today!
 
Her incredible strength and spirit were evident when she spoke about forgiveness and helping children. The  may have been inspired by her pain, but its focus is on world peace and healing.
 

2014/Sep-30: Real Estate and the importance of Realtors

Dan Loney

 
When we think of real estate , we are addressing a subject where most people will spend more money than anywhere else in their lifetime. The average mortgage in Vancouver is now around $400,000 so this means that home prices are hitting easily $500,000 to $1 million as you get closer to Vancouver.
 
Therefore, when selling your home, this becomes very important business. This month in our Client News section, you will get three very important points to focus on when selling your home. Our client, Dan Bennett, will also be glad to answer any questions you might have on this subject. Dan is the former president of the B.C. Real Estate Association and has much experience in this area. I have always said  “Amateurs know what should go right but Professionals know what can go wrong” and this rings true for transacting the sale or purchase of a home.
 
Back in the early 90’s, I purchased a home from “Sale by owner” and what possibly could go wrong? It turned out that the bank had messed up the documents of finance and forgot to include the bridge financing. The end result was that we could not complete on time and I had to pay the sellers moving fee’s and had I not sold my house in time I would have been sued and forced to pay the sellers real-estate fee’s. Had I used an experienced Real Estate agent he would have caught all this and prevented it from happening.
 
Over ten years later, I purchased another home (my current home) only to be served one night and notified that I was being sued by a lady paralyzed in an accident by the owner of my home three owners prior. They traced the owners home to a sale of his ex-wife and then to me and I had never met the vendor. The fact that I had used a realtor and never met the vendor went a long way in the law suit being dropped. This could happen to anyone but I had a professional realtor (Mr. Bennett) that represented the transaction and could vouch for my innocence in what they would have like to have proved was “unlawful conveyance” which would have connected me to the party being sued by the injured woman.
 
Here is one final thought - can you guess if you were going to spend $10,000 on your home where you would get the best return? They say it is in the landscaping and that it will increase the value of your home by 7%. Kitchens and bathrooms would be the next area to put the money into. There again, a Realtor can advise you the best options for your money invested in your home.
 
Dan with Manubank president Rick Lunny discussing how to make the client experience better at the Manubank Advisory Council.

 


2014/Aug-29: Financial Preparation for School Days

Dan Loney

 
Ever wonder how much your little guy is going to need to go to the big school 18 years from now? Currently the average cost of post secondary education is $53,081 in Canada for four years of post secondary education. Once your little guy or gal is up around 18 years of age it will have grown to $107,532 if education costs continue to rise at an increase of 4% per year and if inflation hits hard and we have 8% increase per year get out your check book because you will be writing a cheque for $225,081 for the four years of school.
 
Now if you think 8% increase per year is unreasonable then all you need to do is look to the 1990’s in which the average increase in post graduate education grew by 9.6% per year. To make you feel better the increase last year was only 5%.
 
So how do you prepare for this?
Well for starters the first thing you do is start early and use an RESP to get the grant that is available. Another tip is have your child sign up for post secondary school in Newfoundland, Manitoba or Quebec where tuition can be 50% of what it is in Ontario, Alberta and Saskatchewan.
 
Now before you think this investment may be not worth it research shows that University graduates make double what high school graduates make on average. This is not cast in stone as my father built one of the top 5 electrical companies in Western Canada back in the 60`s with a grade 8 education but I also think times have changed. Other notable non post secondary graduates include the likes of Steve Jobs, Bill Gates and B.C.`s own Jimmy Pattison.
 
Finally before I end this post you might find interesting that you can also use your RRSP for University in a Life Long Learning program. You can withdraw up to $10,000 per year for a total of $20,000 over a 4 year period. You must repay the money back over a 10 year period and there are rules and regulations that you need to follow to stay onside with the Canadian Revenue Agency.

2014/Jul-31: The 100th Anniversary WWI

Dan Loney

 

Monday July 28th - The 100th Anniversary of the outbreak of the Great War (WWI) 1914. 

Salute to a brave and modest nation by Kevin Myers, The Sunday Telegraph
 

Until the deaths of Canadian soldiers killed in Afghanistan , probably almost no one 

outside their home country had been aware that Canadian troops are deployed in the region.

And as always, Canada will bury its dead, just as the rest of the world, as always will forget its sacrifice, just as it always forgets nearly everything Canada ever does. It seems that Canada's historic mission is to come to the selfless aid both of its friends and of complete strangers, and then, once the crisis is over, to be well and truly ignored.

Canada is the perpetual wallflower that stands on the edge of the hall, waiting for someone to come and ask her for a dance. A fire breaks out, she risks life and limb to rescue her fellow dance-goers, and suffers serious injuries. But when the hall is repaired and the dancing resumes, there is Canada, the wallflower still, while those she once helped glamorously cavort across the floor, blithely neglecting her yet again.

That is the price Canada pays for sharing the North American continent with the United States, and for being a selfless friend of Britain in two global conflicts.

For much of the 20th century, Canada was torn in two different directions: It seemed to be a part of the old world, yet had an address in the new one, and that divided identity ensured that it never fully got the gratitude it deserved.

Yet its purely voluntary contribution to the cause of freedom in two world wars was perhaps the greatest of any democracy. Almost 10% of Canada's entire population of seven million people served in the armed forces during the First World War, and nearly 60,000 died. The great Allied victories of 1918 were spearheaded by Canadian troops, perhaps the most capable soldiers in the entire British order of battle.

Canada was repaid for its enormous sacrifice by downright neglect, it's unique contribution to victory being absorbed into the popular memory as somehow or other the work of the 'British.'

The Second World War provided a re-run. The Canadian navy began the war with a half dozen vessels, and ended up policing nearly half of the Atlantic against U-boat attack. More than 120 Canadian warships participated in the Normandy landings, during which 15,000 Canadian soldiers went ashore on D-Day alone.

Canada finished the war with the third-largest navy and the fourth largest air force in the world. The world thanked Canada with the same sublime indifference as it had the previous time.

Canadian participation in the war was acknowledged in film only if it was necessary to give an American actor a part in a campaign in which the United States had clearly not participated - a touching scrupulousness which, of course, Hollywood has since abandoned, as it has any notion of a separate Canadian identity.

So it is a general rule that actors and filmmakers arriving in Hollywood keep their nationality - unless, that is, they are Canadian. Thus Mary Pickford, Walter Huston, Donald Sutherland, Michael J. Fox, William Shatner, Norman Jewison, David Cronenberg, Alex Trebek, Art Linkletter, Mike Weir, Jim Carey, Dan Aykroyd, etc. have, in the popular perception become American, and Christopher Plummer, British.

It is as if, in the very act of becoming famous, a Canadian ceases to be Canadian, unless she is Margaret Atwood, who is as unshakably Canadian as a moose, or Celine Dion, for whom Canada has proved quite unable to find any takers.

Moreover, Canada is every bit as querulously alert to the achievements of its sons and daughters as the rest of the world is completely unaware of them. The Canadians proudly say of themselves - and are unheard by anyone else - that 1% of the world's population has provided 10% of the world's peacekeeping forces.

CANADIAN SOLDIERS IN THE PAST HALF CENTURY
HAVE BEEN THE GREATEST PEACEKEEPERS ON EARTH

- in 39 missions on UN mandates, and six on non-UN peacekeeping duties, from Vietnam to East Timor, from Sinai to Bosnia.

Yet the only foreign engagement that has entered the popular non-Canadian imagination was the sorry affair in Somalia, in which out-of-control paratroopers murdered two Somali infiltrators.. 

Their regiment was then disbanded in disgrace - a uniquely Canadian act of self-abasement for which, naturally, the Canadians received no international credit.

So who today in the United States knows about the stoic and selfless friendship its northern neighbour has given it in Afghanistan?

Rather like Cyrano de Bergerac, Canada repeatedly does honourable things for honourable motives, but  instead of being thanked for it, it remains something of a 

figure of fun. It is the Canadian way, for which Canadians should be proud, yet such honour comes at a high cost. This past year more grieving Canadian families knew that cost all too tragically well.

Lest we forget.

2014/Jun-25: Experts verses Models

Dan Loney

 

Today as we continue to grow into the media age we are confronted with a ocean of opinions and experts who make predictions in the financial arena. These experts and opinions are encouraged and needed by the networks of media because without opinion and controversy they lose listener audience. So lets look at some interesting facts about experts and opinions.

We have a tendency to love experts who make predictions because once we decide which prediction we like it will then transfer the burden of decision making to the expert. We then tend to become loyalists until our expert is proven wrong and then we go back to the drawing board of looking for a new prediction through a new leader.

A study was made of expert predictions between the years 1998 and 2012. All together there was 6582 predictions made by 68 different financial guru's. The interesting thing is that the accuracy rate was just 47% which means you would have had a better result with a coin toss. I remember 20 years ago on a major evening night show a competition between a Wall Street Stock Broker, a class of fifth graders and a chimpanzee who could produce the best results over a period of time. First place went to the kids, second to he chimpanzee and third to the stock broker. I felt sorry for him but there is an interesting slant to this story of why the kids won. The only companies they knew were Mattel, Lego, Tonka and other toy companies so they bought those stocks and did very well. The monkey was simply throwing darts at the stock page for his selection and the stock broker purchased stock based on his predictions of which stocks would do well.

So if experts don't have the answer more than 50% of the time who does? The answer lies in models. There was an amazing study that of 136 different areas from medicine to finance that models out performed the experts 94% of the time. This is astounding but lets think about this for a minute. Lets say we decided to open a coffee shop in downtown Langley and I thought we need experience and advice. We have two options, first to hire an expert or second to buy a Tim Hortons franchise (Model). I have only seen one Tim Hortons go out of business and that was 20 years ago so the argument here is that when the model is successful and you stick with the model your chance of success is much higher.

So how do we apply this to investing? For over ten years I have been looking for evidence of a financial model that is 3000 years old. I found the model but I could not find the proof. I had travelled to Boston to speak to Fidelity Investments, Toronto to speak with managers that manage billions of dollars and no one could give me the answers to my questions pertaining to my quest of the perfect model. Then last year, Bingo! I discovered a professor that proved my suspicion true and back tested the model over 40 years. I would have been much more successful in my own portfolio and my clients portfolio if I had followed this model. As a matter of fact in the last 10 years alone the model out performed the S&P 500 index 2-1.

Next post: the theory and results behind the 7 asset allocation portfolio. Where I discovered it and how I came across the proof of the model.


2014/May-28: Monte Carlo

Dan Loney

 
This past month, in Monte Carlo, I got to take in a session with Jonathan Popper of the Manulife Monthly High Income fund. This has been a stellar fund and won many Lipper awards for best in class performance. We have a lot of clients’ money managed by the Monthly High Income team which was founded by Alan Wicks.
 
Jonathan spoke about the philosophy and strategy of their money management which includes 30 different factors in considering whether to buy a stock. In addition to this, the fund recently has engaged award-winning, Howard Olson, a 35 year veteran of the US Bond markets. The number one goal of this fund is to preserve capital and manage downside risk. The number two goal is to produce monthly income and number three is to mitigate volatility. 
 
In meeting with the lead manager, Alan Wicks, for lunch in December, he told me that the continued deposits into this fund cannot be sustained at the current rate. This was a roundabout way of him telling me that they will cap the fund. Also, with the inception of their new US Monthly High Income fund, this tells me that they have had to create an alternative investment fund using their philosophy and experience. 
 
I believe this to be a good opportunity as US companies profits draw from all around the world in the global economy. 
 
One concept that Jonathan spoke about was barrier entry which can be easily explained by the company Facebook. What did it take to create the company Facebook, simply a laptop. What does it take to create a railroad company like CN, almost impossible at this point in time to lay down competitive railroad tracks and infrastructure. Jonathan also commented on the worldwide situation regarding their stock selection. They have purchased company's like Shoppers Drug Mart and no matter what happens in Greece, Canadian consumers are still going to shop at Shoppers Drug Mart.
 
I am constantly on the lookout for investment funds that will meet the needs of our clients within the guarantees of the contracts that have been provided by our investment carriers. If you would like to know more about this fund and the management style, feel free to connect with me.

2014/Apr-14: Interesting Times

Dan Loney

 

It is amazing what has happened in the U.S. this past 12 months with the increase in the stock markets. While the U.S. government continues to print money and increase that countries debt, U.S. corporations continue to prosper as money pours into the U.S. from Europe. Crimea has added fuel to an already dicey situation in which Europeans are looking for a safer place to put their money. In September the world watched as the Germans basically voted for or against the Euro dollar by re-electing Angela Merkel  to stay with the Euro. This uncertainty though has Europeans looking for the stability of the U.S. dollar or at least perceived stability.
 
This month I will be meeting with money managers in Monte Carlo to discuss opportunities that exist at this present time and get a feel for what they believe are going to be the safest and most productive areas to invest money. We believe the secret to long term success is to invest in non-correlating asset classes that are well diversified. Over a 40 year period this strategy has outperformed the indexes. We will be discussing this in future articles and how we apply this to our clients’ portfolios.


2013/Apr-24: World Financial Markets

Dan Loney

 

 

The world financial markets are getting interesting again and contributing to the complexity of managing money. I had a friend who recently attended the World Financial Conference and the comment that caught my attention was the subject of Germany. This September the Germans will vote on whether to retain the Merkel government or vote in a new government. The vote will largely be over Germany’s continued support of the Euro. If Merkel gets voted out then many people believe that this will be end of Germany’s support of the Euro and the Euro would most likely collapse.

 

If this happens then where will the money go from Europe? Many believe to the U.S. and in to large American companies that are holding a lot of cash. This could prop up the S&P 500 index for a good 18-24 months. The question is then what happens, most likely a major downturn?

 

Keep an eye out in September for the German election to watch what unfolds and remember the best position is no debt and cash for opportunities that will unfold.


2013/Jan-21: Due Diligence

Dan Loney

 

Do you get calls from people trying to sell you financial products and sometimes you think “Well that does not sound like a bad idea?” but still you wonder whether you should follow up or not?

I have often said to clients that if someone calls you, just have them contact me to pitch their product and I will advise the client whether this product makes sense or not. Here is the reason why, if they are just trying to sell you something and they won’t take the time to call your advisor, then you don’t have to worry about it as it politely gets you off the hook. If it is a good product, then I will verify that for you and you can make the decision to proceed.

A few years back a client was pitched on a product that a hockey buddy was trying to sell him. The hockey buddy had no experience in the financial world but was a great friend and the client trusted him. The client asked me to look at the product and I completed a due diligence examination of the investment with not very good results. I had to go back to the client and be the bearer of bad news, to recommend that he not invest $50,000 in this product. I felt bad as I knew the salesman as well, but we had to do what was right for the client. Guess what, by the end of the week the investment was on the BCTV news with senior clients crying that they had lost all their life savings with this investment.

Another time, a good friend and client said to me on the golf course one day “I have this guy trying to sell me this tax shelter but he told me not to tell my advisor or accountant because they want to keep it a secret”. Big red flag! If your advisor, accountant and lawyer don’t agree that the product is a good idea, then you really need to take a step back and give this investment opportunity a good look.

Most people don’t realize that there is a process to review and examine investments with due diligence. Many financial sales people don’t understand this process and end up selling products that harm their clients and the sales people’s careers.

If you ever wonder about any investments, give us a call and we will be glad to help you.


2012/Dec-13: What is the Fiscal Cliff?

Dan Loney

  The Fiscal Cliff is a deadline in the U.S. where $600 billion of tax increases and the initiation of spending cuts lead many to believe that it will drive the U.S. into a recession. The impact of this will be far reaching and could have an effect on Canada as well.

63% of Canadians believe that this will have a negative effect on Canada and Mark Carney, the Governor of the Bank of Canada, is one of them. According to the Sun Life/Ipsos Reid study 54% of Canadians are worse off this year than last.

Debt levels are a concern and Carney would like to raise the interest rates to curb the borrowing for consumer loans, but this poses major problems for the housing industry if and when interest rates increase.

The political scene in Washington is not good and talks are stalling so it does not look like there will be a deal before Christmas.

It used to be that if we took good care of our back yard with regards to portfolio management everything would be fine. The world has changed and it is like taking good care of your house, but your neighbour’s is on fire and the fire is threating to leap to your roof. It may not make the leap but you will certainly spend a lot of time and energy to prevent this from happening.

Our current portfolio allocation has well prepared for this ahead of time and any major correction in the stock market will be seen as an opportunity for investment into the rebound. Like real estate, stock markets have a tendency to over inflate at the top and over correct at the bottom.

“Price is what you pay, Value is what you get” Warren Buffett

Stay tuned for further developments soon.

Daniel Claude Loney

2012/Oct-01: Are you willing to gamble?

Dan Loney

  These current stock markets are interesting at the moment as there are now so many influences that affect our Canadian stock market. It used to be that geographical diversification could help protect from down markets but the world has become a much smaller place. It still does help with consideration to currency devaluations. (example you don't want to have money in U.S. funds if the U.S. dollar is heading down).

At this point with the U.S election near and Europe still showing instability it is like going to the casino to bet a $1000. You have been reading a book on Casino odds so you enquire what all the collective tables odds add up to and they tell you 10%. You then enquire what the downside odds are and they tell you 50%. So you have to make a decision whether to be playing to gain an upside of 10% while risk loosing 50%. Not many investors I know would be comfortable playing that game right now and that is exactly what we have in the stock market.

So we will continue with our present strategy which is less than 20% stock and 80% bonds. This as allowed us to out perform TSX Index in the last 12 months with 80% less risk. When we see a major correction then we will make our move.

 
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