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Article Archive: 2002

The new vocabulary
12/29/02   Fun
"Here are 33 handy excuses for saving too little or making foolish investments, plus translations for what each excuse really means."

Portfolio risk in dollar cost averaging
12/29/02   Retirement
"In fact, volatility - or risk - is the enemy of any wealth accumulation program. And investors who take excessive risks, in pursuit of illusory gains, may only wind up broke in the long run. Forget that comfortable retirement."

Stingy Selections & Dartboard Dynamos
12/27/02   Stingy Investing
Last year I attempted to achieve success by hand picking twelve value stocks from the S&P500. Well, I managed to avoid the success part. My twelve picks lost an average of 1.92% from December 5, 2001 to December 5, 2002. Mind you, this was much better than the S&P500 which fell by 22.12% over the same period. Normally outperforming the index by 20.20% would be cause for celebration but a loss is still a loss.

Templeton Growth fund may be down but ...
12/26/02   Funds
" Templeton Growth, the country's largest mutual fund, may soon need a new name. Templeton Shrinkage, maybe? Between its losses in the market and fleeing unitholders, this fund has become a lot smaller than it used to be."

Desirable Dividends
12/26/02   Stingy Investing
Dividends are making a big comeback with investors and it's not hard to see why. Many blue-chip stocks are now paying more than GICs, government bonds or high-interest savings accounts. The tax advantages of Canadian dividends makes them even more attractive.

Santa Claus vs. The Marketers
12/25/02   Christmas
"When Santa Claus finds his popularity waning, the directors of Claus Inc. vote to bring in a group of marketers on board to refine his 'brand' and improve his business processes. But the cure can be worse than the problem, and when problems with CRM, privacy issues, and copyright infringement may make Claus Inc. miss the Christmas shipping deadline, Santa launches an undercover project to get the gifts out on time."

Invest in some holiday giving
12/21/02   Gifts
"The fact is, your attitude will dictate how much you're willing to give to charity, and whether you give at all. To those who have asked me in the past about how much they should give, I always respond by saying that there is no answer that's right for everyone. Rather, if your attitude toward giving is governed by three principles, you'll know you're giving the right amount."

Bonds, GICs most common financial presents
12/21/02   Gifts
"Still, if you can live with a reaction ranging from incomprehension to ingratitude, then presents from the financial world are an interesting option for kids whose toy quota has been amply filled by other gift givers."

How fear rules the fund flock
12/19/02   Funds
"At T. Rowe Price's annual investment briefing earlier this month, Growth Stock fund manager Robert W. Smith worried aloud about investor short-sightedness, saying, "Individuals must stop renting stocks and start owning stocks again." Smith said this trader mentality heightened market instability, and his point was well-taken. Then again, so was a question put to Smith by a reporter: "When do you think fund managers will stop renting stocks and start owning them?""

Are enhanced index funds worth the added cost?
12/19/02   Funds
"Indexing is one of the investing world's great bargains, but enhanced indexing is a whole other matter."

Ok, now the end is nigh
12/18/02   Taxes
"Now is the time to take action on taxes. Most people, since we have until the end of February to do RRSPs and we don't actually pay taxes til April, forget the primary chance we have save taxes happens now, before the calendar ends. Here are some quick points to remember and consider acting on before you go out for a New Year's party."

Conseco collapse deals new blow to CEO cult
12/18/02   Management
"Even now, nobody is connecting the dots when it comes to Gary Wendt's role in the demise of Conseco. Most reports about Tuesday's bankruptcy filing by the Carmel, Ind., insurance and lending behemoth have suggested that the former CEO's turnaround plan was more or less doomed from the start. The assumption appears to be that, given the large debt load taken on by previous management, Conseco was too sick to be cured even by Wendt -- who joined the company in June 2000 with one of the most impressive reputations in corporate America. "

Bill & Bill's excellent bull signal
12/18/02   Markets
"The stars of 2002's financial news programs aren't the slick CEOs of the boom years -- they're the more circumspect money managers shepherding their flock away from the bear's grasp."

Fake escrow site scam widens
12/18/02   Crime
"Six months later, the scam has widened considerably, and it now appears to be among the most successful Internet cons ever. By taking advantage of Net auction winners' inherent trust of escrow sites, the con artists are stealing as much as $40,000 at a time from big-ticket auction winners. Their total take may well reach into millions of dollars so far. And while federal authorities, including the Department of Commerce and FBI, are investigating, there seems to be no way to slow down the con artists."

Year of the scandal
12/18/02   Management
"2002: greed, accounting conflicts, book-cooking helped derail Wall Street. Will 2003 be any better?"

Ontario Savings Bonds new variable rate
12/17/02   Bonds
"The new interest rate for Variable-Rate Ontario Savings Bonds (OSBs), series 1997 through 2002, for the next six months will be 2.5%."

Defer income till new year to shave tax bill
12/16/02   Taxes
"Not unlike those postal workers in Virginia, most Canadians would prefer to receive their income as quickly as humanly possible. But what if I were to tell you that delaying the receipt of certain income until the new year can actually make sense -- for two reasons. First, effective tax rates are expected to be lower in 2003, and second, the time value of money can create a lower tax burden itself. Let me explain."

Patient Capital Management Q3
12/14/02   Value Investing
"Ever since the market bubble burst accountants and analysts have been blamed for the huge losses that have been incurred. In our view, investors (particularly institutional investors and mutual fund managers) have nobody to blame but themselves. It is their fiduciary duty to carry out the proper analysis and due diligence before making an investment decision on behalf of the clients who have entrusted their capital to them. To now blame the accounting establishment and brokerage analysts for the losses experienced over the past two and one half years is extremely inappropriate."

Income trusts need all the help they can get
12/12/02   Trusts
"Ontario has been asked to give income trusts a level of legitimacy they've been unable to attain despite three years of stellar returns. While retail investors have embraced trusts, institutional players like pension funds have shunned them out of concern that unit holders could be held liable in case of bankruptcy or a catastrophic lawsuit."

Look out! Insiders are bailing
12/10/02   Markets
"Want one more reason why this rally might not be for real? Insiders sold in droves in November."

Revealing the secrets of fund turnover
12/10/02   Funds
"Despite all the solemn talk about long-term investing, the average stock fund has a 111% turnover rate, according to Morningstar, the mutual fund trackers. So here's the question: Does all that trading do any good? The answer: Sometimes. But not necessarily with the funds you'd expect."

The jewels in Berkshire Hathaway's crown
12/09/02   Buffett
"Robert P. Miles, professional speaker and the author of The Warren Buffett CEO: Secrets From the Berkshire Hathaway Managers, and 101 Reasons to Own the World's Greatest Investment, shares his insights into Warren Buffett's investment strategy and his entry into the jewelry industry."

OSC: lawmaker, judge and executioner
12/08/02   Government
"Does the current regulatory model, which has securities commissions functioning as lawmaker, prosecutor, judge and executioner, work?"

Don't leave family feuds as legacy
12/06/02   Planning
"From the anger of a middle-aged woman, who smashed a coveted crystal vase rather than let her brother sell it, to the anguish of a son cut out of his parents' will during a brief period of teenage misbehaviour who remained excluded when they forgot to put him back in, lawyer Les Kotzer has seen too well what can happen to families when parents don't plan ahead properly for the distribution of their possessions after they die. And, says Mr. Kotzer, it's only going to get worse. He predicts a wave of family feuds and lawsuits by siblings fighting over their parents' assets."

The holiday bonus bait and switch
12/06/02   Management
"Achille says her firm will continue to give bonuses "come hell or high water." Her reason? Achille is determined to retain talented staffers, whom she calls the company's "greatest assets." Every one of her 15 employees can count on getting a yearly check, based on corporate profitability and their own contributions to the cause."

Lots of consumer help on money matters
12/05/02   Funds
"There are so many financial ombudsman services in Canada now that you can't tell them apart without a program. Seriously. With the opening of the Centre for the Financial Services OmbudsNetwork last week, five agencies are now devoted to protecting the interests of consumers in their relations with banks, brokerages, sellers of mutual funds and insurers."

Questions for the genie
12/04/02   Gross
Bill Gross talks about inflation, interest rates and the outlook for bonds.

November sees more fund redemptions
12/04/02   Funds
"The Investment Funds Institute of Canada reported today that, based on a sample of preliminary data from some of its members, net new sales for the month of November are estimated to be between minus $900 million to minus $500 million."

Financial Services Ombudsnetwork running
12/01/02   Funds
"If consumers have concerns or complaints with their providers and are unsure how or where to begin, they can make one call and be put in touch with someone who will guide them through the complaint resolution process."

Tis the season for tax tips
11/30/02   Taxes
"Having trouble prioritizing your to-do list? I've got a simple solution: Procrastinate. Eventually, one of the tasks on your list will become a dire emergency -- like the implementation of year-end tax strategies. Consider these ideas to save tax for 2002"

10 Graham Picks for 2003
11/29/02   Stingy Investing
December is filled with family, friends, and, for investors, the dreams of healthy dividends. In what has become a December tradition, I look at Benjamin Graham's strategy for defensive investors using the stock screener. Long-time Canadian MoneySaver readers will note that this is the third time I've discussed Graham's conservative technique.

Private Capital Management Q3
11/29/02   Value Investing
"The bull market's decline began early in 2000, after the NASDAQ/Internet bubble reached its zenith in March. For some time we had warned of valuation excesses, particularly within the technology sector. Still, the magnitude of the mania seems all the more remarkable in retrospect."

Pick good mutual funds, then commit to long term
11/28/02   Funds
"If you invest in mutual funds, you're bound to notice a disconnect every so often between your actual returns and those reported by your fund company. While your fund company is boasting of excellent long-term gains, your own funds are up only a little, or maybe they're even down. This, unfortunately, is typical."

Two star managers leave Altamira
11/28/02   Funds
"A shakeup at Altamira Investment Services Inc. sent two of its star fund managers out the door, as the mutual fund company seeks to change direction in the wake of lagging fund performance, heavy redemptions by investors and a recent takeover by National Bank of Canada."

Charitable gifting
11/27/02   Taxes
"As current Canadian governments continue to place a greater priority on fiscal responsibility, universities, charities, and other non-profit causes are made to suffer. Yet, our social safety net is one of the very reasons that Canada is considered one of the best places in the world to live. How do we balance social responsibility with fiscal responsibility? I emphasize that we all have responsibilities to our social well being and collective culture."

Royal Bond Fund no refuge from stock crises
11/26/02   Funds
"A bond fund sold by one of the big banks is the type of place an investor goes for refuge from stock market disasters such as WorldCom Inc., Adelphia Communications Corp. and Calpine Corp. But if you owned the $1.8-billion Royal Bond Fund, you'd have been exposed to all of these companies in the past while, not to mention the debt of Latin American countries such as Brazil."

Funds still actively trading
11/24/02   Funds
"On average, trading costs added 18 basis points to the cost of a Canadian equity fund (commissions are calculated outside the management expense ratio). Trading costs were constant over the previous two years. Costs are calculated using commissions as a percentage of average assets for two fiscal yearends."

Markets hurt DP plans
11/22/02   Retirement
"Dismal stock markets have left some companies with future funding shortfalls in their defined-benefit pension plans, but experts say that, in the vast majority of cases, employee pensions are secure."

Hedge your fund picks with good information
11/21/02   Funds
"The hedge fund industry likes to portray itself as the investing big leagues, where only the smartest, most skilled money managers get to play. There's some truth to this, but don't take it for granted. Fact is, there are substandard hedge funds out there, just as there are in the mutual fund business. In the past year, at least seven hedge funds have either been wound down or closed. Some had serious losses, while others failed to attract enough assets to make a go of it."

Probate revenue plunges
11/20/02   Taxes
"Ontario's public coffers suffered a dramatic one-third drop in probate tax revenue this year, which, estate planning experts say, is probably the result of clients' growing use of tax planners."

High dividends are now a predictor of growth
11/19/02   Value Investing
"It may seem too good to be true, but companies that pay the highest dividends are also likely to grow the fastest. For years, many finance professors have taught just the opposite. Reinvesting current earnings back into a company is supposed to promote earnings growth. Higher payout ratios are supposed to be followed by lower earnings growth. But research conducted by Robert D. Arnott of First Quadrant and Clifford S. Asness of AQR Capital Management reveals a very different picture. For the overall stock market between 1871 and 2001, corporate profits grew fastest in the 10 years following the calendar years in which companies had the highest average dividend payout ratio. In contrast, the 10-year real earnings growth rate was the lowest following years with the lowest average payout ratios."

Even stodgy bonds can take nasty bite
11/19/02   Funds
"Things are so twitchy in financial markets these days that even a run-of-the-mill bond fund can rear up and bite you. That's what the $1.8-billion Royal Bond Fund has done to its unitholders recently. The Royal Bank of Canada fund lost 2.9 per cent in the 12 months to Oct. 31, which makes it the third-worst performer among Canada's 118 bond funds over that time period."

Radical fund reforms pitched
11/17/02   Government
"BCSC wants to raise 10% cap on owning firms, make public ask for disclosure data."

Where did everyone go?
11/15/02   Management
"Firms are laying off workers even as business revives. That boosts profits - at the cost of morale."

October another tough month for fund sales
11/15/02   Funds
"Foreign equity funds remained the biggest target for redemptions in October, with more than $299 million pulled from those funds in the month. Another $231 million came out of balanced funds, and Canadian equity funds lost $195.8 million. U.S. equity funds dropped just $21.5 million. However, investors showed some signs of faith by plowing $110.8 million into dividend and income funds."

Patient Capital 1st Quarter
11/14/02   Value Investing
"The figures provided in the following table show the valuation of the Dow Jones Industrial Average at market lows. Today's valuations are substantially above the average and those of every individual bear market bottom. Just as interestingly, valuations have been far lower than they are today at even lower levels of interest rates."

Hedge funds: Complex animals that bear special scrutiny
11/14/02   Funds
"Hedge funds can beat a bear market, but sometimes the bear wins, too. At least seven hedge funds in Canada have been closed or wound up in this most difficult year for stocks, some of them with heavy losses. Hedge funds were the hot investment of early 2002 because of their potential to not only protect investor capital in a down market, but also to make money. In fact, many of the 100 to 150 hedge funds available in this country have done just that."

Was the IPO frenzy rigged?
11/14/02   Crime
"Remember those high-flying stocks sold for the first time in the 1990s, the ones that soared from $20 a share to $100 a share in hours? Some insiders now say the great price leaps for these "initial public offerings" - IPOs - were the result of insider agreements designed to force prices artificially high. The scam is called "laddering.""

Casino research
11/14/02   Fun
"It was an odd roulette wheel. Labeled "S&P," it had 500 slots. There were others nearby that were even larger. It was a strange casino I was in. But, hey, here to play, right? I moved my chip toward Red 19 -- an old favorite play of mine."

Unlock locked-in dollars for more flexibility
11/13/02   Taxes
"There's another familiar, yet true, story in which the good guy loses. It might even be your story. It's about a person who has saved for retirement for years only to find that he's not able to withdraw all that he wants from his registered plan. It's a locked-in plan. But his story has a good ending after all. He's discovered a way to unlock some of those locked-in dollars. Let me explain."

Pestering millions offers path to profit
11/13/02   Marketing
"Ms. Betterly's messages joined the roughly two billion other unsolicited commercial e-mails that hit in-boxes around the world every day. The company she runs from her home, Data Resource Consulting Inc., sends out as many as 60 million such messages a month. That puts the 41-year-old single mother in the most hated breed on the Internet. She sends spam."

Initial confusion
11/13/02   Brokers
"The financial planning profession is a puzzling sea of acronyms with a deluge of designations contending for the public's attention. And there's no solution in sight."

Dividend funds show long-term strength
11/08/02   Funds
"In the waning years of the last millennium, dividend and bond fund managers might as well have been fossils wallowing in a primordial ooze for many investors. One bear market later, however, and those same managers look more like the action heroes of mutual-fund investing."

U.S. seizes Tri-West assets
11/08/02   Crime
"Approximately 400 Manitobans invested in Tri-West. The club required investors to invest in units of US$1,000 for a period of one year with a return of 10% per month. A referral program was also part of the scam, whereby investors could make more money if they referred people to the club."

The paradox of corporate democracy
11/08/02   Stocks
"Here's a job for an aspiring philosophy student: Give us a pithy thesis on the tyranny of corporate democracy. It sounds ambitious but you won't have to look far for a case study. The tale of a little ice cream shop called CoolBrands International is perfect."

The long shadow of Big Blue
11/08/02   Stocks
"Can Microsoft now hold on to its dominant position-or might it go the way of IBM in the 1980s?"

Advisers' critiques take aim at their less-involved peers
11/07/02   Brokers
"Ms. Gaudreault is a 34-year-old business owner who is unhappy with the level of service she gets from her financial adviser. Though her portfolio and income are measured in six figures, her adviser has shown no apparent interest in her beyond setting up a portfolio of stocks and mutual funds. Her case, featured recently in this column, prompted numerous e-mails from financial advisers."

What a fool believes
11/07/02   Gross
Bill Gross continues to be negative on stocks and takes a swing at proforma P/Es

Running with the 'Dogs of the Dow'
11/07/02   Value Investing
"Just as a contrarian would have predicted, the strategy started working just as disillusionment with it peaked. The formula beat the Dow in both 2000 and 2001. While the jury is still out on this year for the strategy, it is running neck and neck with the blue-chip index itself through the end of this third quarter."

Income trusts still enjoying the ride
11/06/02   Trusts
"The trust phenomenon goes back to the mid-1990s, when a few large and innovative initial public offerings came to market from the mining and energy sectors. The concept caught fire, and the number of deals spread across the business landscape."

MFDA launch of investor complaint service
11/06/02   Funds
"The Mutual Fund Dealers Association of Canada announced today that its Investor Complaints Service is now fully operational. Clients of MFDA firms can now complain to the new self-regulator for fund dealers by calling 1-888-466-MFDA (6332) from anywhere in North America. Toronto-based clients can call 416-361-MFDA. Complaints may also be filed over the web site at under Enforcement or by sending a written complaint."

Buffett emerges as major Lloyd's insurance backer
11/06/02   Buffett
"Recent investments by firms in Warren Buffett's empire have made the Omaha-based billionaire one of the biggest backers of the prestigious, but cash-strapped, Lloyd's of London insurance market."

Growth Eh?
11/05/02   Stingy Investing
Growth is what it's all about for investors. Every investor wants to see their portfolio grow and many attempt to generate wealth by buying growth companies. At first glance, it seems to be a simple matter to buy companies that have grown the most and, therefore, are likely to continue growing. Regrettably, as with many simple investment concepts, selecting growth stocks is fraught with difficulty.

Want higher yield and lower taxes? Consider a REIT
11/05/02   Trusts
" To buy or not to buy: That is the question a lot of investors are asking about real estate investment trusts right now. The debate has mainly concerned the investment outlook for REITs after several strong years, but there's another factor to consider as well. It's taxation, an area where there's no doubt at all about the benefits of this type of investment."

Boys will be boys
11/02/02   Academia
"Theoretical models predict that overcon.dent investors trade excessively. We test this prediction by partitioning investors on gender. Psychological research demonstrates that, in areas such as .nance, men are more overcon.dent than women. Thus, theory predicts that men will trade more excessively than women. Using account data for over 35,000 households from a large discount brokerage, we analyze the common stock investments of men and women from February 1991 through January 1997. We document that men trade 45 percent more than women. Trading reduces men's net returns by 2.65 percentage points a year as opposed to 1.72 percentage points for women."

Goodbye REOP, hello "pursuit of profit"
11/01/02   Taxes
"Given the CCRA's periodic propensity to ignore the applicability of court decisions, Canadian tax advisors have been waiting eagerly to find out whether the Stewart v. The Queen decision, released by the Supreme Court of Canada in May, means the dreaded "reasonable expectation of profit" test is dead."

Buffett succeeds at nothing
11/01/02   Buffett
"Warren Buffett is known as being one of the best investors of all time. But it might come as a surprise to many that his investing strategy often encompasses long periods of what he calls "sitting on my butt." There have been periods of years when Berkshire Hathaway has purchased not a single share of stock, interspersed with some enormous activity. Sometimes doing nothing is the best thing you can do."

Cognitive biases in market forecasts
11/01/02   Value Investing
"There is no statistically significant relationship between dividend yields and P/E ratios and returns in the subsequent one or two years. The relationship between P/E ratios and dividend yields and stock returns over 10-year periods is much stronger, but it offers far less than perfect reliability."

Don't get caught in a one-sided deal with your adviser
10/31/02   Brokers
"Annie Gaudreault is 34, owns her own company and has a salary and investment portfolio that run to six figures each. In other words, she's an appealing client for a financial adviser to have. Except her own adviser, that is. Ms. Gaudreault says she doesn't feel appreciated by this guy."

Respect your elders
10/30/02   Funds
"Perhaps a little desperate for a silver lining amid the storm clouds blanketing the stock market, Morningstar gave the 8,169 domestic stock funds it tracks the once-over and found evidence of what most investors should already know: Experience matters."

Handle deceased's home properly
10/29/02   Taxes
"The bottom line? If your heirs expect to sell your home after your death and hope to claim a capital loss in the process to recover tax you paid at the time of your death, be sure that no beneficiary (or someone related to a beneficiary) ordinarily inhabits the place after you're gone."

Canada's top MBAs
10/29/02   Education
"What's an MBA really worth? That's been the question almost every business publication seems to be asking this year-and most have arrived at decidedly negative answers. Well, we beg to differ, and we've got proof-at least as far as Canada's business schools are concerned."

Killing the money vacuum
10/28/02   Debt
"Getting out of debt is a major goal for many people, but most do not have a plan for doing it. Well, if you're in this group - NO MORE! With a few minutes, a piece of paper, ruler, and a pencil, we can create a basic plan that will get you out of debt."

Caveat investor
10/26/02   Crime
"Bad investment decisions, corrupt brokers and tax reassessments can occur whether the investor is a near-retirement schoolteacher or a crusty day-trader."

RRSPs a long-term tax asset for Ottawa
10/25/02   Government
"Part of Canadians' pool of retirement savings represents a $300-billion long-term asset for Ottawa and the provinces because they eventually will tax those savings as they are withdrawn from registered plans, according to a new study by the C.D. Howe Institute."

A patently absurd invention?
10/25/02   Fun
"Inventors have been registering bright ideas with the UK Patent Office for 150 years. While the flush toilet, computer and aspirin have proved invaluable, the same cannot be said of every innovation."

The case against professionalism
10/25/02   Management
"It is easy to forget that professionalism is the enemy of the high-tech startup. If these companies were operated by professionals, they would never have been founded. Nor would a professional tolerate the conditions necessary for startup survival. Michael Eisner never emptied a wastebasket at work, but I'll bet Walt Disney did."

Doors now closing
10/24/02   Bonds
"Yet evidence continues to grow that the supply of capital is being shut off, too. It is a process that started with the riskiest securities-that is, junk bonds and new issues of shares-but is now spreading to the safer parts of the credit markets, including those for bank loans and for high-grade corporate bonds."

Is that a $100 bill lying on the ground?
10/24/02   Academia
"A few days before Kahneman and Smith got their phone calls from the Nobel Prize committee, Wharton hosted a debate that addressed these questions. Called "Two Views of Market Efficiency: A Discussion of Behavioral Finance and Efficient Market Theory," the scrimmage took place between Burton Malkiel and Richard Thaler, and was moderated by Wharton finance professor Jeremy Siegel, author of Stocks for the Long Run."

REITs are appealing, but is it the best time to buy?
10/24/02   Trusts
"There's a new and easy way to invest in real estate investment trusts, a segment of the stock market that has been outstandingly solid over the past year. This sounds like good news for retail investors, but is it? There are those who believe REITs are peaking in terms of their appeal and could head lower as the overall market rises."

Managers get rich while investors lose
10/23/02   Funds
"Rip-off? You bet. Not only do these guys lose a lot of your money, every one lost more than the market! Worse yet, these guys are supposed to be hot-shot active managers, yet they are miserably under-performing the market, and they still have the audacity to paying themselves huge salaries while investors lose huge amounts. You'd have been a lot better off in a simple S&P 500 index fund."

Trading is hazardous to your wealth
10/22/02   Academia
"Individual investors who hold common stocks directly pay a tremendous performance penalty for active trading. Of 66,465 households with accounts at a large discount broker during 1991 to 1996, those that trade most earn an annual return of 11.4 percent, while the market returns 17.9 percent. The average household earns an annual return of 16.4 percent, tilts its common stock investment toward high-beta, small, value stocks, and turns over 75 percent of its portfolio annually. Overconfidence can explain high trading levels and the resulting poor performance of individual investors. Our central message is that trading is hazardous to your wealth."

Making the most of capital losses
10/22/02   Taxes
"As investors, the dark cloud of the market has been hanging over us for some time. Can you see the silver lining? Is there some way we can make lemonade out of the lemons the market has handed us this year? You bet. Just deal with your capital losses properly."

The stupid loan bubble
10/22/02   Stocks
"The case of Motorola and Nokia vs. the Uzans may read like a gangster novel. But it also opens a window onto an unexamined chapter of Internet mania, one with urgent relevance for the ongoing crisis in the telecom industry. Motorola and Nokia agree with the Uzans on only one thing: that the loans looked sensible from the dizzying heights of the bubble, when dozens of telecom start-ups vied to rule the coming Internet world. Many of the world's most famous banks are now in trouble because of bad loans they extended to telecom start-ups. But at least JPMorgan and Commerzbank have some expertise in the business of lending money. The two biggest mobile-phone makers in the world could hardly make the same claim. And it was not only Motorola and Nokia but Lucent, Cisco, Nortel and others that started acting as reckless creditors, vying with one another in a race to extend millions, even billions, in financing to-telecom-bubble start-ups, often after those companies were refused loans by real banks."

Through the past, darkly
10/22/02   Markets
"In fact, markets typically fall five years in a row, and they would have recently, except for those two extenuating circumstances. The S & P (or its reconstructed equivalent) fell five years in a row from 1825-29 (inclusive). It fell seven years in a row from 1836-42, five years in a row from 1853-57, and five years in a row from 1873-77. Look at the charts. The S & P fell four years in a row from 1881-84, five years in a row from 1892-96, and five years in a row from 1910-1914, and every one of these declines was part of a longer bear cycle."

Lights out for Lucent
10/21/02   Stocks
"How all this happened - one of the most damning chronicles of failure in the whole sweep of American enterprise - is not the story of lazy, over-indulged workers (the excuse of the 1970s). Nor is it the story of those scheming Japanese and their unfair trade in the American market a decade later (the excuse of the '80s). At the end of the 1990s, we confront the excuse none dare utter - the total, complete, and abject failure of the one group that plotted and maneuvered to seize the reigns of power for 30 straight years; then, having gotten them, went giddy-up at the gate and in no time at all fell flat on its face: The management class of American business."

Insider Loans
10/20/02   Management
"It isn't just the Enrons and the Tycos of the world that will eat huge losses on insider loans. It turns out that the practice -- now banned -- was common at 75 percent of the country's biggest corporations."

Performance is a thing of the past
10/20/02   Funds
"An academic study shows it's not possible to prove decisively that success is down to skill rather than luck."

A look inside fund returns
10/20/02   Funds
"Expenses take a big bite out of the gains of many mutual funds."

Is Buffett buying?
10/17/02   Buffett
"Rumors abounded Tuesday that the Oracle of Omaha was getting out of bonds, and getting into stocks."

Now's the time to get active, brokerage says
10/17/02   Funds
"Canadian authors like Brian Noble (The Index Investing Revolution), and indexing executives Ted Cadsby and Howard Atkinson have come to similar conclusions in their own books: costs matter."

Treasurys crap game
10/17/02   Grant
"U.S. government bonds are great havens for those suffering from equities. Great, that is, unless yields pop back up to 6%. Don't count on a Japan scenario."

CI merges 33 funds
10/16/02   Funds
""We have reduced duplication within our lineup while maintaining our industry-leading selection of funds," said CI president Peter Anderson, in a news release. "More importantly, the mergers have created larger, more efficient funds, which will lead to savings for unitholders."" -- Oh? Show me the lower MERs!

Five-year losers burn investors
10/16/02   Funds
"Here's a quick test to see if investing in mutual funds is for you. Just ask yourself if you can stand to lose money over a five-year period."

A collection of fine articles
10/14/02   Indexing
"The first four articles are among the best that I have read about investing, and the final three discuss more practical considerations. May these articles help you to gain a better understanding of investment fundamentals."

Math prof tests investing formulas
10/12/02   Academia
"Retired University of Waterloo professor Peter Ponzo, who has found statistics have limits when trying to predict the future."

Of debt, deflation and denial
10/11/02   Economy
"The risk of falling prices is greater than at any time since the 1930s."

Pay up!
10/10/02   Stocks
"Hey Microsoft, Cisco, Oracle and Dell! Give us some money! None of these technology giants offers investors a dividend. But all of them, despite massive drops in their stock prices, are still stable market leaders with healthy balance sheets. As a result, some money managers think it's time for them to suck it up and start doling out some of their earnings to shareholders."

Deadwood advisers: Take heed!
10/09/02   Brokers
"One benefit of a bear market is that it helps clean some of the deadwood from the financial advice profession."

Nobel prize in economics
10/09/02   Academia
"for having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty"

When bull returns, most won't believe it
10/08/02   Markets
"Major bear markets such as the one we're in come along rarely. The current bear market is the worst since 1973-74, and that one was the worst since the great crash of 1929-32. The experience of being through one of these bears helps gauge another."

Timing Disaster
10/05/02   Stingy Investing
"The September issue of the Canadian MoneySaver contained an avalanche of articles that encouraged investors to time the market. These interesting approaches sparked my memory. I recently had the pleasure of reading Charles Ellis' book Classics: An Investor's Anthology which contains Robert Jeffrey's article The Folly of Stock Market Timing. The article included a startling figure showing the impact of market timing based on a simple strategy. I've updated his analysis in order to provide a cautionary tale to potential market timers."

Flood warning
10/05/02   Stocks
"Insurance companies almost everywhere are being squeezed between falling stockmarkets, record claims and worsening economies. Unless share prices stage an unexpected revival, expect an increasing number to merge or fold."

Canada Savings Bonds on sale
10/02/02   Bonds
"Series 78 CSB's, which are on sale for the remainder of the month, will carry a 2% rate as of November 1, 2002. A release from the Department of Finance said the interest rate will be increased "if market conditions warrant." CSB's can be cashed anytime, but pay no interest if cashed in the first 90 days. Even though the Bank of Canada has raised interest rates three times this year, they remain near 40-year lows following nine cuts in 2001." -- ING's bank account pays 2.75% ...

Bracing for October
10/01/02   Markets
"While September wins for worst historical performance overall, October is a scary month."

On the edge of a credibility gap
09/30/02   Retirement
"Three years of falling equity prices have finally taken their toll on the US pensions industry. According to UBS Warburg, the Swiss banking giant, companies in the S&P 500 index are now in cumulative deficit on their pension funds for the first time since 1993. This means that S&P 500 companies will report aggregate pension costs - rather than income - for 2002: a swing that will adversely affect earnings by an average $0.95 per share."

Flying in the face of excess with the Sage of Omaha
09/30/02   Buffett
"Buffett, aged 72, is chairman and chief executive of Berkshire Hathaway, an investment holding company that owns stakes in Coca-Cola, Gillette and The Washington Post. He summed up the present market turmoil in his usual folksy way. "It's only in the rinse cycle that you find out how dirty the laundry's been," he mused. "We're in the rinse cycle now.""

Be prepared to pay tax on your perks
09/28/02   Taxes
"Employees are taxable on the value of benefits and perks that they derive from employment. This simply means that, with few exceptions, employees are taxable not only on their salary, but also on in-kind personal perks -- free housing, low-cost loans, personal vacations, school fees, cosmetic surgery, and clothing -- that are directly attributable to their employment."

Boeing's set to fly solo
09/27/02   Value Investing
"Boeing has decided to go it alone in the flight-training business and will buy out Berkshire Hathaway's 50 percent interest in the 5-year-old FlightSafety Boeing joint venture."

Active mismanagement
09/26/02   Indexing
"It sure would be great if we could rely on active management to provide a little good news in this market. Unfortunately, the value-added that active managers bring -- even in this "stock-picker's" market -- is small to none."

Beware the embittered investor
09/25/02   Government
"At first I felt disillusion, disenchantment and disgust. Next came anger. And in the end I came away with renewed resolve to fight the special interests that for years have ganged up on individual investors in Washington and on Wall Street."

Investors carry power to change
09/25/02   Indexing
"In fact, if you have less than $50,000 to invest, you don't need a broker because the best strategy is simply to buy index funds, Levitt said. If you have more than $50,000 and want advice on picking investments, you don't need a broker either, he said. What you need is an independent adviser, preferably one with the certified financial planner designation who considers your overall financial picture."

BoJ takes gamble to avert financial crisis
09/25/02   World
"Japan's central bank is trying to shock the government and banks into action in a last-ditch gamble to avert a crisis in the country's financial system, a senior Bank of Japan official said on Tuesday."

Learning from the Janus blowup
09/25/02   Funds
"Some great disasters make you want to avert your eyes. The Hindenburg. Ishtar. Janus. If you lost money in a Janus fund, you won't get it back anytime soon. But you can make sure you won't get killed again. Before the market cratered, there were signs that Janus was starting to stumble. Of course, few people saw them back then. But a look back at what happened to this firm and its once-mighty funds produces a handy checklist of signals that should help you avoid a Janus-like catastrophe in the future."

Fund flows prove to be a washout
09/23/02   Funds
"Hmm, seems as though post-outflow periods were pretty much typical of their era. In other words, monthly net outflows give no significant signal either way."

Third Avenue's 3rd Quarter Report
09/23/02   Value Investing
"The title of the Op-Ed article said it all - 'Government Can't Make The Market Fair.' I agree. The solution to this problem for OPMIs is to buy in at prices far, far lower than is usually available in negotiated transactions or in purchasing control."

The King is dead. Long live the King!
09/23/02   Funds
"In the spirit of this century old refrain meant to calm fears of uncertainty by providing continuity, AGF has replaced the world leading Brandes Investment Partners of San Diego as sub advisor to Canada's star mutual fund "International Value""

Telecoms troubles
09/23/02   World
"The crash in the value of telecoms companies has produced corporate scandals in America, raised doubts about the probity of banks and government policies everywhere, and resulted in a collection of top executives abruptly losing their jobs. Now the telecoms fallout in Europe has also entangled the French and German governments into a growing political and financial mess."

When it comes to investing, we're dummies
09/21/02   Markets
"An investment literacy test taken recently by 4,083 people across Canada has found a depressing lack of knowledge about wide-ranging financial matters. How bad? Just one-third of those who took the test answered 50 per cent or more of the questions right, while a single living soul managed a perfect mark."

Japanese government bond auction fails
09/21/02   World
"Investor confidence in Japan suffered another blow on Friday after a Y1,800bn auction of 10-year Japanese government bonds was undersubscribed for the first time in its history."

Surprising number of big funds escape bear
09/18/02   Funds
"One of the nastiest bear markets on record is nearly 2= years old, but many fund investors are coming through unscathed -- or even ahead of the game."

Rising empire
09/18/02   Stocks
"L.A. chef Nancy Silverton sold her ultra-trendy bread-baking business for millions. So how'd she pull that off without selling out?"

As ETF terminated, plan with extreme prejudice
09/17/02   Indexing
"Now's the time to plot an exit strategy if you own the low-cost leader in Canadian exchange-traded funds."

An immigrant's tale
09/17/02   Stocks
"It's the kind of business nobody wants to run: selling PCs to price-conscious customers. But Edy Bedoya has spent a lifetime preparing for it."

Are Value Stocks Riskier than Growth Stocks?
09/13/02   Stocks
"And so, without mangling syllogistic logic, must it not follow that because they have higher returns, a portfolio of value stocks must indeed have higher risk? The problem is that this risk is not readily apparent."

Scoff at bond funds?
09/13/02   Indexing
"Have you considered an index bond fund? You should, because these funds are among the more reliable performers out there in the fixed-income area."

The mystery of the blood red ledger
09/13/02   Management
"Even before he could tour all the restaurants and shake the hands of his managers, the California State Board of Equalization froze the company's bank accounts, seeking $225,000 -- about three months' worth of overdue sales tax. Unable to write checks to suppliers on the frozen accounts, Louise's filed for Chapter 11 bankruptcy protection. It was LeFranc's ninth day on the job."

How to beat 77% of fund investors
09/12/02   Indexing
"Over the 34-year period he examined, out of a grand total of 2,071 stock funds that were ever open for business, 725 disappeared. Put another way: 35% of all stock funds went kaput, for an average annual mortality rate of 3.6%."

The talent myth
09/12/02   Management
"The management of Enron, in other words, did exactly what the consultants at McKinsey said that companies ought to do in order to succeed in the modern economy. It hired and rewarded the very best and the very brightest-and it is now in bankruptcy. The reasons for its collapse are complex, needless to say. But what if Enron failed not in spite of its talent mind-set but because of it? What if smart people are overrated?"

The pitchman
09/12/02   Sales
"The extraordinary story of the Ronco Showtime Rotisserie & BBQ begins with Nathan Morris, the son of the shoemaker and cantor Kidders Morris, who came over from the Old Country in the eighteen-eighties, and settled in Asbury Park, New Jersey. Nathan Morris was a pitchman. He worked the boardwalk and the five-and-dimes and county fairs up and down the Atlantic coast, selling kitchen gadgets made by Acme Metal, out of Newark."

Mutual funds vanishing at record rate
09/11/02   Funds
"A record number of mutual funds are headed in a new direction: oblivion. Since the bear market began in March 2000, 414 stock mutual funds have been liquidated, says Morningstar, the mutual fund tracker. That's half the liquidations in its database, which stretches back dozens of years and covers 4,074 stock funds. An additional 566 stock funds merged into other funds."

Buffett the bargain-hunter returns
09/11/02   Buffett
"Buffett is back. Of course, the billionaire Oracle of Omaha, Nebraska, never went away. But Warren Buffett, the world's second richest man -- and probably the most successful investor this century -- is showing a new generation a thing or two about value."

Unfinished business
09/10/02   Markets
"Certainly we are witnessing bubble deflation in the equity markets. After one of the most incredible equity bull markets in our financial history, set against the backdrop of possibly the greatest credit boom this country has ever seen, a period of significant reconciliation is only to be expected. Where are we in the process?"

The differences between trusts
09/10/02   Trusts
"The problem is, if the in trust account has no terms for the trust, once a child reaches the age of 18, he or she is entitled to the funds. So it's a cheap way to set up an in-trust account, but there are downsides."

A reply to Bill Gross
09/10/02   Markets
"Bill Gross, the brilliant portfolio manager of PIMCO (Pacific Investment Management Co.) just put out an investment outlook entitled, "Dow 5,000" (can be found at In his commentary, he analyzes major works that have been written in the field of stock returns, including my Stocks for the Long Run. His conclusions about stocks are very pessimistic."

'Stay the course' or pay the price
09/10/02   Indexing
"So for those committed to the long-term -- five or more years -- Bogle suggests investors keep on dollar-cost averaging. "The last thing you want to do is stop the averaging program at the bottom when you kept investing while things were near the top.""

Companies act to avert asbestos claims crisis
09/09/02   Law
"Two-hundred and fifty of the world's largest companies will on Monday petition the US Supreme Court in an attempt to halt a new asbestos compensation crisis that will claim a record number of bankruptcies this year."

The firms that can't stop falling
09/08/02   Law
"Mr LoPucki looked at the fortunes of firms that emerged from bankruptcy between 1991 and 1996. Within five years, 29% had gone out of business, with two-thirds of these liquidated or merged in distress. In each of those five years, on average, the typical firm in Mr LoPucki's sample racked up losses equivalent to 2% of its total assets."

Think stocks are great? Think again
09/08/02   Markets
"Mutual funds come with all sorts of warnings, the most prominent being that usually ignored bit about how past performance is no guarantee of future results. But you're not likely to read the following cautionary note in a prospectus: "This fund is precluded from investing in the best companies the economy has to offer.""

Dow 5,000
09/06/02   Markets
"As Warren Buffett has said, in the short run the stock market is a voting machine but in the long run it's a weighing machine. Despite being down nearly 50% from its highs, this market remains overweight."

The new Buffett way
09/05/02   Buffett
"With so many stocks having plummeted, so many companies beset by scandal, so much money fleeing the market, and such a crisis of investor confidence, one might expect that the classic value situations that are Buffett's hallmark would be everywhere. Buffett should be grabbing an underpriced company every few days. The fact that Buffett, who has oodles of cash to put to work, hasn't found many-and has instead been nibbling on distressed properties-shows just how overvalued stocks still are."

Home wrecker
09/05/02   Stocks
"William Aldinger says he built one of the few successful lenders to bad credit risks by managing smarter. People suckered into his mortgages cite other tactics: lies and deceit."

Public Participation
09/02/02   Markets
"The problem now is that public participation in the stock market through investments in equity mutual funds are at the highest levels ever, and that participation has actually increased since the market peak. This solidifies our conviction that the market has not bottomed and that massive capitulation is still ahead."

Mug's game
09/01/02   Indexing
"The average active fund in America has lost over 22% (fund-management fees included) since the end of December 1999, according to Lipper, a company that measures fund performance. In Britain actively managed equity funds have lost 31%. Passive funds, however, have fared even worse, on average. Pure index funds have lost over 27% in America since December 1999, and 32% in Britain."

Dangerous Diversification
08/31/02   Stingy Investing
"Mutual fund diversification can quickly get out of hand and wind up costing investors a lot of money."

Lights, camera, cash burn
08/31/02   Stocks
"The first secret to running a business that does nothing but burn cash is location: You're better off in the Great White North, where the rules are firmly on your side."

Beware 'orphan' exchange-traded funds
08/28/02   Indexing
"Effective Nov. 1, State Street Global Advisors will terminate the SSgA Dow Jones Canada Titans 40 Index Fund. Dow Jones 40s never attracted a following, despite their ultra-low 0.08-per-cent management expense ratio (the average Canadian equity mutual fund has an MER of roughly 2.5 per cent)."

Single financial services ombudsman office established
08/28/02   Government
"A single ombudsman service to deal with customer complaints for financial services has been established by the Canadian banking ombudsman , the Investment Dealers Association of Canada, the Investment Funds Institute of Canada, and the Mutual Fund Dealers Association of Canada."

Buy-and-hold strategy's a keeper
08/26/02   Funds
"Buy-and-hold investing? The thinking right now in some quarters is that this strategy is strictly for sheep or, more precisely, the sort of people who sit back while the bear market shreds their portfolios and the investment industry bleeds them for fees and commissions."

Closed-End funds
08/25/02   Funds
"Closed-end funds are another way for an investor to have exposure to equity or fixed-income markets. They are not very popular or well known, especially when compared to their big brothers, open-end funds, which are more commonly known as mutual funds. There are advantages and disadvantages to the closed-end versions. They are a marriage of an exchange-traded fund and a mutual fund."

My pro forma life
08/25/02   Fun
"On a pro forma basis, I'm having an outstanding year. In calendar 2002 I've gone to the gym on a regular basis and expect this trend to continue and to have a material impact on my health going forward. Year-to-date, my health has improved by a solid 15 percent on an annualized basis."

Dan on hedge funds
08/23/02   Funds
Check out Dan's interesting four part primer on hedge funds
  Hedge Funds: Intro, Fine Points, Returns & In Portfolios.

Special report on scams
08/23/02   Crime
"Too Good To Be True: Stratospheric returns touted by promoters attract investors by the thousands, but along with those big promises come huge risks and potential for big losses."

5 signs you're a chronic spender
08/23/02   Debt
"Even if your debt is under control, you still may be shelling out more than you should."

Beating the high cost of trading-account inactivity
08/22/02   Brokers
"Brokerages have been levying inactivity fees on stagnant accounts with small balances for more than two years now to recoup the cost of managing them. In recent weeks, firms such as Charles Schwab are raising the cost of holding pat, giving individual investors another reason to fear those monthly statements."

Building planning
08/20/02   Funds
"There are basic principles that should be a part of every financial plan. This is the "code" of building a financial plan. Some of these principles change over time as more knowledge is gained."

Presumed guilt puts taxpayers in bind
08/19/02   Taxes
"Do Canadians enjoy taxation more than other nationalities? Probably not, but we acquiesce to oppressive procedures in tax law, most notably the presumption of guilt."

Funds suffer worst 2 months since 1998
08/15/02   Funds
"Eighty-three per cent of Canadian mutual funds reported negative returns in July, with a median return of -4.1%. Although this was marginally better than June's 84% of funds and a median 5% loss, the combined 8.9% loss over the last two months is the worst two-month setback since August 1998."

A strategy for dealing with debt in tough times
08/14/02   Debt
"Here's the strategy: Consider selling some of your non-registered investments that have dropped in value (I'm guessing you've got some), use the cash proceeds to pay down some of your bad debt (credit cards, a line of credit or even your mortgage), then take out a new loan to replace those investments you've liquidated."

Record debt levels leave us vulnerable
08/13/02   Debt
"Apart from destroying equity, vacation plans and families, excessive debt plays a useful role in society: providing fodder for famous last words."

How not to buy high and sell low
08/13/02   Funds
"Mutual funds are bought and sold on a daily basis. My personal belief is that funds are usually sold for the wrong reason - performance. Having watched fund flows for many years, there is over an 80% correlation that investors chase performance. Simply put, this means that investors tend to buy winners and sell losers. Does this make logical sense if you are supposed to buy low and sell high?"

National Bank concludes acquisition of Altamira
08/13/02   Funds
"The final price tag on the deal was $467.3 million, including repayment of $201.6 million in debt. A portion of the payment was made in the form of shares, namely, 271,000 shares or the equivalent of $8.25 million. The transaction has been approved by all the relevant regulatory authorities."

Computer buff follows value faith
08/12/02   Value Investing
The Globe's profile of Buffett follower and creator of The Toronto Investment Club website.

Asset allocation is key for retired chemist
08/12/02   Value Investing
Shakespeare's Globe & Mail profile. Check out his website for more info.

Get your Buffett fix
08/11/02   Buffett
"The rest of the investing world is tiptoeing back into stocks, but Warren Buffett is on a roll. He's shelled out hundreds of millions of dollars in recent weeks to invest in half-dead telecom and energy companies."

Corporate directors see risks climbing
08/11/02   Management
"Sitting on a company's board of directors used to sound like a cushy job - - lavish pay for little time, rides on the corporate jet, rounds of golf at first-class resorts. But now it's getting as perilous as sweeping out a minefield."

Tweedy on the markets
07/25/02   Markets
"The current stream of negative news and declining stock prices will eventually run its course. In the meantime, a lot of good companies are getting to be quite cheap. This is presenting opportunities we have not seen in a long time."

Fraud Inc
07/25/02   Management
A CNN-Money special report on corporations, and CEOs, in trouble.

The power of WorldCom's puff
07/24/02   Stocks
"Internet traffic, went the industry's favourite statistic, doubles every 100 days. The claim assumed unimpeachable status when it appeared in a report published by America's Department of Commerce in April 1998. Unfortunately for the telecoms firms that rushed to build networks to carry the reported surge in traffic, it wasn't true."

SEC charges Adelphia and Rigas family
07/24/02   Government
"The Securities and Exchange Commission today filed charges against Adelphia Communications Corp.; its founder John J. Rigas; his three sons, Timothy J. Rigas, Michael J. Rigas, and James P. Rigas; and two senior executives at Adelphia, James R. Brown, and Michael C. Mulcahey, in one of the most extensive financial frauds ever to take place at a public company."

The SEC's List
07/24/02   Government
"The order requires the principal executive and financial officers of SEC-registered companies to each file with the Commission a sworn written statement in which the officer must personally attest that the company's most recent periodic reports are materially truthful and complete or explain why such a statement would be incorrect." -- Applies to companies with more than $1.2 billion is revenues.

Long live dividend yield
07/23/02   Value Investing
"And at a time when more questions are surfacing about companies' financial procedures, a return to dividend payments and analysis could offer a more accurate portrayal of a company's growth pattern. "

Up against the pension headwind
07/23/02   Retirement
"As corporate earnings attempt to recover in 2002, they face a huge locked-in obstacle from lower pension returns -- no matter how well the market performs."

Buffett's emergency quiz
07/22/02   Value Investing
Before selling your stock funds take Warren's quiz.

Markets in crisis
07/19/02   Markets
"The Dow Jones industrial average plummeted Friday, losing almost 400 points after component Johnson & Johnson said it is the latest company being investigated by U.S. regulators for potential improper record-keeping."

If slacker funds aren't doing their job, fire them
07/19/02   Funds
"It's time to strike a blow against slacker mutual funds. You'll know them by their higher-than-average management fees and their sub-par returns. Dead weight like this is exactly what you don't need in the current investing environment."

Anatomy of a bubble
07/13/02   Markets
Skip the text but take a look at the historical P/E charts. Btw, the S&P500 is now at 921

Bill on Character
07/13/02   Bonds
"Lending is not based primarily upon money or property. No sir. The first thing is character."

Accounts must be brought to book
07/10/02   Accounting
"Bad accounting is an evil. But it's not unique to companies. The decline in standards has affected government accounts as well. There are examples both sides of the Atlantic. WorldCom has been lambasted for reclassifying current expenditure as capital. The same thing has been done in the national accounts of the US."

The tortoise & the hare revisited
07/06/02   Funds
"You really can't blame the financial media for their obsession with U.S. large growth companies. First we had the wild one-dimensional market of the 90's and now we're faced with the realities of the Enron, Worldcom, and Andersen Consulting debacles. So naturally the focus at quarter-end is the horrible performance of the S&P 500 and NASDAQ indexes. Two and a half years of negative returns. But we know the market is multi-dimensional, right? Small company and large value stocks have performed so much better over the past couple of years that those asset classes have actually surpassed the high flyers since 1995. Diversification does work."

Shocked and angry
07/06/02   Economy
"This surely is the hour of John Kenneth Galbraith, grand old man of American economics. But those who travel to the leafy suburbs of Boston in the expectation of a giant and gloating "I told you so" will come away disappointed."

Efficient Frontier: Summer 2002
07/05/02   Indexing
Including the 2% dilution, the big lie, S.W.I.N.E., and more

Double whammy
07/04/02   Value Investing
"The theory goes like this: If the market is dropping, high yielding stocks at least offer high cash flows to offset any decline in value. Nice theory, too bad it doesn't work in real life."

Wealth management in the new era
07/04/02   Indexing
"Perhaps it goes without saying that in recent years these three articles of faith, faith in the stock market, faith in the corporate executives who run our publicly-held enterprises, and faith in the trustees who manage our money-have been tested. And found wanting."

A new personal finance
07/01/02   Retirement
"Outlined in a recent working paper, "Life-Cycle Finance in Theory and in Practice," Bodie proposes that our common measure of personal welfare -- wealth -- is inadequate. Instead, he suggests we measure personal welfare by our lifetime access to goods, services and leisure."

When value isn't really value
06/27/02   Funds
"Many mutual fund managers must be glad there's no law specifying exactly when they can and cannot use the words "growth" and "value" in their names. Some funds regard themselves as value-oriented, even if their portfolios are made up mostly of what other investors classify as growth stocks. And some funds may invest in "value" stocks yet have "growth" in their names because they are aiming to achieve long-term growth of principal."

ABC monthly commentary
06/25/02   Funds
"Other than the extraordinary firmness of gold bullion, gold-related common shares and selective special situations, the overall market has displayed across the board price weakness."

Simple math of wealth creation
06/24/02   Retirement
"The Less You Spend, The More You Have. Write it on the front of your wallet, your cheque book, your conscience. That, and the corollary of The More You Spend, The Less You Have, are elemental economic observations, and ones that we all begin to make for ourselves at an early age."

Hot property
06/23/02   Real Estate
"A fierce debate is raging between economists over whether the authorities should try to let the air out of the market, risking a global property crash and possibly a world recession, or whether they should let the market continue to expand, which risks creating a bubble that would inevitably burst."

National Bank swallows Altamira
06/23/02   Funds
"Less than two weeks ago, a long-rumoured acquisition in the mutual fund industry materialized. National Bank of Canada purchased no-load direct fund marketer Altamira Investor Services. While this deal was no surprise to most industry observers, it's a sober reminder of the preference that Canadian investors have for professional advice."

PH&N Canadian Bond Performs
06/21/02   Funds
"Consider this: the fund has been a top quartile fund in 13 of the past 15 years (and second quartile the other two). It has been a top quartile fund over 1, 3, 5 and 10-year time frames."

An economy singed
06/21/02   Economy
"Almost 1,000 American companies have now restated their earnings since 1997, admitting in effect that they had previously published wrong or misleading numbers. As the Securities and Exchange Commission cracks down on creative corporate accounting, more such admissions lie ahead, even among household names. Phoney accounts mean that much of the profit growth of the late 1990s, the ostensible justification for Wall Street's bubbling up to its ephemeral heights, was equally phoney. It is hardly surprising that investors are so anxious."

Boom-era valuations are creating fake stock bargains
06/21/02   Value Investing
"To the simple price of stocks and (relatively) low price-to-earnings ratios, you can add price-to-book value to the list of metrics that are down from the peak, but shouldn't automatically be assumed to be attractive."

Indexing works better elsewhere
06/18/02   Indexing
"In the encyclopedia of index investing, the Canadian stock market should be listed under F for freak. Indexing works very well for exposure to U.S. stocks, and this applies even to the lamentable past 12 months. There's also a convincing argument for using index funds to invest in international markets. In Canada, the case for indexing just isn't nearly as strong."

Investors sell mutual funds
06/18/02   Funds
"Investment companies have recorded back-to-back net monthly redemptions for the first time in seven years as jittery investors yank their money out of mutual funds."

AGF appoints new managers
06/17/02   Funds
"Whenever such a fundamental change in money managers takes place, it's sometimes a challenge to evaluate the change and make a call. I'm still doing more research on these recent changes announced by AGF, particularly on Harris Associates. However, I feel quite confident in vsaying that unitholders of all of the affected funds should resist the urge to sell. This is particularly true of those invested on a deferred sales charge (DSC) basis; or those sitting on big unrealized gains on these funds in taxable accounts"

More quality needed in mutual funds
06/14/02   Funds
"There's nothing in the National Bank fund menu to suggest the presence of any talent that can parachute into Altamira's weaker funds and get things straightened away. But there is something National Bank can easily do to improve things at Altamira -- get out a machete and start consolidating."

Back to the drawing board
06/13/02   Indexing
"In the ten-year study the low-cost funds demonstrated substantial superiority in all nine of the style boxes."

The Coffee Can Portfolio
06/07/02   Stingy Investing
Robert Kirby thought that investors would be well served by purchasing small amounts of many stocks and then forgetting about them for ten years. While discussing his investment counsel business he related an interesting anecdote...

Revisiting Graham and Dodd
06/07/02   Stocks
"Originally published in 1934, Security Analysis by Benjamin Graham and David Dodd could have been written yesterday. The players have changed but the conceptual framework is as fresh as ever. The introduction and the first chapter of this opus are especially chilling. Intended as an indictment of the excesses of the roaring Twenties, these first 15 pages of a more than 700-page book are equally applicable to our bubble -- and, by inference, to much that is now unfolding in its aftermath."

Putting "dis" in full disclosure
06/06/02   Stocks
"'Most public companies go out of their way to please Wall Street analysts. Then there's Expeditors International of Washington Inc.', writes Robert McGough in today's Wall Street Journal."

Third Avenue's semi-annual report
06/05/02   Value Investing
"Those who think of options as an expense have it wrong, at least from the Company and Creditor points of view. Warren Buffett is quoted as saying, 'If options are not a form of compensation what are they? If compensation isn't an expense, what is it? And if expenses shouldn't go into the calculation of earnings, where in the world should they go?' Frankly, the Buffett statement is an overgeneralization, even though most finance academics, and among others, Alan Greenspan, seem to be wholly in concurrence."

Warren Buffett & his CEO's-A team that works
05/30/02   Buffett
"It's a very limited management role that I have, very, very limited. But I enjoy - if you want to call that managing, I enjoy that more than investing. I mean, I like the managers that I work with. I like thinking about business problems and occasionally being able to do something about them. And I would say that it's just amore interesting. There's more human interaction. And I would - if I had to choose one or the other, I would choose the management role over the investing role at Berkshire."

Men, women don't manage differently
05/27/02   Management
"Women and men don't manage any differently -- they just talk like they do, a new academic study says."

SEC may probe hedge funds
05/27/02   Funds
"The Securities and Exchange Commission is starting an investigation into hedge fund fraud and considering tough regulations for the investment pools for the wealthy"

Is Time Running Out For The S&P 500?
05/26/02   Indexing
"The S&P 500 has defined the U.S. stock market for decades. But more and more institutional investors are swearing off the index, saying it distorts the very market it purports to represent. Academics agree. Is it time for a new benchmark?"

The death of dividends
05/24/02   Dividends
"the demise of dividends over the last 20 years was facilitated by greedy executives who used accounting shenanigans and the bull market to pocket significant stock option gains. Now that the bull market is over and accounting tricks are slowly being purged from financial statements all that remains is the greedy executives"

Selling the downside
05/20/02   Trusts
"As you may have guessed from our opening feature, the prices being paid for some assets via income and royalty trusts have exceeded our wildest expectations, but have exhausted neither the imaginations of the corporate financiers of Bay Street, nor the credulity of the Canadian public. It has truly been a situation where, as Buffett says, those who don't know are buying from those who don't care. How have these price levels been reached?"

Options' costs revealed
05/20/02   Management
"It has taken an awfully long time - not to mention a crucial assist from the debacle known as Enron Corp. - but finally the investment world is inching toward truth in financial reporting where stock options are concerned."

The end of mutual fund dominance
05/20/02   Funds
"Combined with the toll taken by fund costs and the toll taken by market timing, this penalty for adverse selection is the third leg of the unfortunate triumvirate of tolls that has left mutual fund investors in the backwater of the returns earned by the financial markets. If financial advisors do no more than keep your client from paying these unnecessary tolls, you've made a great start on serving them well!"

Rogue waves & standard deviations - part 2
05/20/02   Derivatives
"The companies, funds, investors, and governments best able to withstand a crisis are those who are unleveraged, liquid and have access to cash. Having no debt enables one to ride out a storm. Leverage becomes a ticking time bomb that offers few avenues for escape. In summary, the best protection against adversity is to have minimal debt and plenty of liquidity."

The Enron story is nothing new
05/17/02   Accounting
"Long before Enron and off-balance-sheet accounting became part of the financial lexicon of average American investors, creative accounting was an accepted way of doing business in Silicon Valley. A small, perfectly legal and completely finished piece of financial engineering executed between 1998 and 2000 by Intuit illustrates that technology companies have long been willing to use accounting tactics to tell the stories they want told."

Retirement: Ready or not, hear it comes!
05/15/02   Retirement
"Will you have enough? Study after study shows that Americans aren't saving enough for retirement."

Wasting time on productivity
05/10/02   Economy
"The underlying stability in productivity has been obscured by large year-to-year fluctuations reflecting the economic cycle and other shocks. Such fluctuations have been much less in the last eight or nine years than in earlier periods."

Shakespeare on REITs
05/09/02   Trusts
"Finally, beware of the risk of reaching for yield: purchasing high-yield securities when interest rates are low. At the time of writing (spring 2002), with interest rates at record lows, the number of new trusts appearing is very high. A similar situation occurred in 1997, when again interest rates were low and a large number of new royalty trusts were issued. Unfortunately, as in 1997, many of the new trusts are likely to disappoint investors as Bay Street unloads assets that are unsuitable for income trusts because of variable cash flow or poor quality of the underlying assets."

McDonald's to begin accepting Nortel shares
05/08/02   Fun
"'Sure, my grandchildren's inheritance is still pretty much right out the window, but, at least I'll be able to take them down to the local McDonald's for a quarter-pounder every now and then. That'll be a welcome change from my daily routine of cat food,' said McMorgan, a retired mill worker."

Rich beyond reason
05/08/02   Buffett
"Warren Buffett is to be admired - but his fortune bears no proportion to his social or economic contribution" -- One very wrong comrade analyst.

When Buffett talks, 14,000 people listen
05/06/02   Buffett
"Terrorism, business ethics and wealth in society came up for discussion Saturday by Warren Buffett and his partner Charlie Munger at Berkshire Hathaway Inc.'s annual shareholders meeting in Omaha."

Warren's piece
05/05/02   Buffett
"Both Buffett and Munger left no question they find the pickings slim in the stock market. Asked about the relative weight of equities compared to bonds and cash in Berkshire's portfolio, Munger said dryly, 'Our constraint does not come from structure; it comes from our lack of enthusiasm for stocks, generally.'"

Buffett: 'I can't recall ever having more fun'
05/05/02   Buffett
"Behind that grin is a track record that put a lid on critics who had questioned his ability to keep pace with the New Economy: Berkshire stock is up nearly 35% for the past two years, while the S&P 500 is down nearly 25% for the same period."

CEO's: fallen idols
05/05/02   Management
"The vehemence of today's reaction against business leaders is partly a reflection of how far their companies' shares have fallen, and also of the extent of their personal greed."

The TSE has a new site
05/04/02   Markets
Check out the TSE's slick new website. It's well done and keen data is easy to find.

New cause for caution on stocks
05/04/02   Markets
"Now Dimson's team has created the first full, global picture of how equities performed over the past century. Among the 16 nations the team studied, stocks beat bonds and cash by an average of 4 to 6 points a year. From this, the scholars draw a startling conclusion: putting all your money in stocks is a bad idea. Why? First, most previous research showed stocks beating bonds and cash by a much wider 6 1/2 to 8 1/2 points a year. Second, a big chunk of the rise in stock returns came from the democratization of investing, starting in the 1970s. With mutual funds offering instant diversification, stocks suddenly became safer. "That can't happen again," says Dimson."

E-mail subscriptions useful for stock tips
05/04/02   Newsletters
"Every smart investor needs an idea machine. You know, something to churn out ideas for stocks and mutual funds that can be investigated as possible additions to one's portfolio. A great way to get a flow of ideas going is to subscribe to the free e-mails sent out on a daily or weekly basis by a number of investing Web sites..."

Apple concentrate tariff
05/03/02   Government
"Apples might be a particularly tart example of U.S. anticompetitiveness, but they are hardly the only illustration of U.S. agricultural policies that hurt consumers, inflate prices, and alienate other countries."

The AOL TW black hole
04/30/02   Stocks
"The verdict is finally in: The AOL Time Warner merger should not have happened. That's the message from last week's latest balance sheet convulsion to shake what was once known reverentially in certain parts as the House Of Luce."

Easy money
04/28/02   Debt
"Consumers need credit: From car rentals to airline tickets, credit cards are a necessity. Most of us can't buy property without a mortgage. Add in the payments Canadians are making to car loans, student debt and lines of credit, and debt is clearly a way of life. And with interest rates so low, it's bound to get worse. No one's saying not to borrow, just make sure you're doing it the right way"

Rogue waves & standard deviations
04/28/02   Derivatives
"What we are seeing in the financial system is similar to what we are seeing in the natural world, which is the increasing frequency and magnitude of storms. As seen from the above list and frequency of crises, storms continues to grow and raise the possibility of one too many shocks to the system."

Dividends do matter
04/25/02   Value Investing
"What Modigliani and Miller proved perfectly in the 1960s was the proposition that under perfect market conditions, shareholders should be indifferent as to whether a company pays a dividend or retains the cash, since retaining the cash should just directly translate into future dividends. And of course, we have a perfect market. Everybody translates everything, sees through the way everything's expressed. There isn't any accounting fraud anywhere. There are no problems. The whole thing works beautifully. All is wonderful. Until you meet the real world."

After the binge
04/20/02   Bonds
"The financial condition of US business at the start of the economic recovery was probably worse than at any such juncture since the second world war, says the veteran Wall Street economist Henry Kaufman. From 1995 to 2001, he adds, the equity of non-financial corporations contracted by $423bn (#294bn) while net debt increased by $2,300bn."

Moral hazard psychology expands
04/20/02   Government
"Two weeks ago we noted that the presumptively conservative president of the Bundesbank, Ernst Welteke, proposed that the German central bank sell a portion of its gold reserve and invest the proceeds in European equities."

Warning: Fund stats offer little help
04/20/02   Funds
"So you think all those fancy statistics generated by Morningstar and Lipper for the financial press will help you predict the future performance of a mutual fund? Wrong. Stop kidding yourself, folks."

Wall Street's den of thieves
04/17/02   Accounting
"The first thing you learn on Wall Street: Earnings don't mean anything. Everyone assumes that earnings are financially engineered ( sometimes downward! ) to meet a variety of stakeholder expectations. The key expectation -- the one that stakeholders want companies to meet -- is steady growth. Earnings that spike and swoon set off alarm bells at places like Fidelity. Steady growth makes fund managers feel calm and content."

The blue-chip penny stocks
04/15/02   Stocks
"The reality is that a company's share price tells you absolutely nothing about its valuation or market capitalization. That can be a little hard to remember these days, though, with so many well-known companies sporting stock prices that would seem to be screaming "buy me." The problem is, that isn't what they're really saying."

Optimism has no place in accounting
04/15/02   Accounting
"The fiasco at Enron had two causes: (1) perverted "financial engineering" that portrayed failure as progress and (2) generally accepted accounting principles that practically invited delusion and fraud."

Stock options and common sense
04/14/02   Accounting
"The members of Congress decided to adjudicate the fight -- who, after all, could be better equipped to evaluate accounting standards? -- and then watched as corporate CEOs and their auditors stormed the Capitol. These forces simply blew away the opposition. By an 88-9 vote, U.S. senators made a number of their largest campaign contributors ecstatic by declaring option grants to be expense-free. Darwin could have foreseen this result: It was survival of the fattest."

Third Avenue Funds Q1 Report
04/11/02   Value Investing
"There is plenty of blame to go around for the apparent accounting frauds that led to Enron Corporation filing for relief under Chapter 11 of the U.S. Bankruptcy Code. In assessing blame, though, it would be a shame if conventional security analysts, conventional money managers and conventional finance academics were left out of the mix. Whatever their other talents - and these people tend to have many other talents - analysts, money managers and finance professors seem notoriously unqualified to be intelligent, responsible users of GAAP who actually understand the uses and limitations of financial statements." [PDF]

Loving the unloved
04/11/02   Value Investing
"James generally sticks to the microcap arena - which includes stocks with market caps of $300 million or less - and zeroes in on companies that have been neglected by both analysts and the stock market. He favors firms that were former market favorites but have encountered short-term difficulties. "

Tech stocks: keep your shirt on
04/06/02   Stocks
"Technology changes constantly. That is what makes it so fascinating. Investment speculation in technology, on the other hand, almost never changes - as Templeton, the mutual-fund guru, knew better than most. Whether based on steel, silicon or pulses of light, the great innovations since the start of the Industrial Revolution have lured in the suckers, capturing their imagination and then their money."

Efficient Frontier Spring 2002
04/04/02   Stocks
Articles include: Only Two Centuries of Data, When Risk and Return Become the Same,Efficiency Rationality and Arbitrage, Of Markets Economies and Populations,Links of the Month.

Companies whose boards need a scare
04/03/02   Management
"Don't worry if you lose the actual vote. In the long run, letting management and directors know that shareholders are watching can be just as important as winning the actual count."

Jason Zweig of Money Magazine
04/01/02   Indexing
"The notion that stocks come with some sort of money-back guarantee if you just hold them long enough is preposterous. The idea that the Dow should finally admit that it's risk-free and instantly reprice itself to 36,000 is silly. And the claim that stocks have generated 7% annualized returns after inflation for 200 years is a distortion of the historical record. Accurate, comprehensive data for the 19th century simply do not exist--and it's a terrible mistake to assume that the returns of the few companies that were successful enough to survive can tell us anything about how the average stock performed back when Millard Fillmore and Grover Cleveland were gracing the White House. Even if the long-run data weren't rotten with this "survivorship bias," it's not clear why we should care, in the year 2002, about the stock returns of wooden turnpikes, steamboat manufacturers, trolley lines, pony express firms, mule-powered canals, or importers of Peruvian guano. Once you recognize that the 19th-century data are meaningless, the claim that stocks have never lost money over any 30-year period is utterly underwhelming: We have a grand total of three nonoverlapping 30-year periods to go on, and stocks have gone 3-for-3. Whoopie pickle."

Going through the roof
03/27/02   Real Estate
"Despite the sharp fall in share prices and a worldwide plunge in industrial production, business investment and profits, consumer spending has held up relatively well in America, Britain and several other economies, supported by low interest rates and the wealth-boosting effects of rising house prices. Over the 12 months to February average house prices in America rose by 9%, and those in Britain by 15%. Adjusting for inflation, this is the biggest real increase on record in America and the biggest in Britain since 1988."

Three winning strategies for passive investors
03/27/02   Indexing
"Over the years I've run across three lazy-man's portfolios that beat the market: the Couch Potato Portfolio, the No-Brainer Portfolio, and the Coffeehouse Portfolio. So now you get a chance to vote on the best-of-the-best. All three are published on the Web, so you can check their performance yourself."

Shares do not a shelter make
03/25/02   Stocks
"On one level, popular capitalism has been successful. Socialism has been seen off. Industry has been privatised in the UK and elsewhere in Europe, with a fair proportion of the equity ending up in the hands of the public. Share options and profit-sharing schemes are now widely used to motivate the workforce. But part of this approach has been muddle-headed. Too little consideration has been given to the long-term economic interests of those involved. Investors have been steered in the wrong direction, at great cost to many."

Rukeyser gets the boot
03/22/02   Media
"Louis Rukeyser, the venerable financial commentator who has hosted public television's "Wall Street Week With Louis Rukeyser" for 32 years, said Thursday he has been forced from the program by his partner, Maryland Public Television."

Buffetting corporate America
03/20/02   Buffett
Bill Gross talks about the secret to Buffett's success and highlights GE's precarious position.

MERs offer best guide to funds' future peformance
03/20/02   Funds
"Funds that ranked among cheapest in their category by MER generally had a good chance of outperforming over time frames of one, three and five years, the study found."

Gains from past losses
03/15/02   Taxes
"The bear that mauled stock market investors in 2001 can now help them get back some taxes they shelled out in prior years. Indeed, the bear and the tax man have teamed up to make a limited-time offer that lets your clients recoup capital gains tax paid as far back as 1998, when market values and tax rates were much higher."

Fool me twice, shame on me
03/13/02   Stocks
"On this scale (as of December 31, 2001), the P/E of the S&P 500 is the highest in all of recorded U.S. history back to 1871. Stocks cheap? I think not."

Beating the market, until the expenses pile up
03/12/02   Funds
"Devastating as the conclusions may be for the fund industry, they contain a silver lining for the rest of us. In contrast to previous studies that found that it was impossible to consistently pick stocks that outperform the market, Professor Wermers shows that not only is it possible, but also that it is not particularly unusual. By creating our own portfolios -- and assuming that we can pick stocks as well as the average fund manager -- we stand a good chance of saving the bulk of the 2.3 annual percentage points spent on fund inefficiencies -- and a betting chance of actually outperforming the market."

Down with the dogs
03/11/02   Stingy Investing
"Investors seeking income often buy stocks that pay a healthy dividend. Canadian dividends are taxed more favorably than interest from GICs but dividends may be reduced and the initial investment is not guaranteed. Dividend investors employ a variety of popular approaches to pick stocks including dividend growth, relative dividend yield and the Dogs of the Dow. In this article I focus on the Dogs of the Dow which is wildly popular in both Canada and the U.S. but has its flaws."

Buffett's 2001 letter
03/10/02   Buffett
"Some people disagree with our focus on relative figures, arguing that "you can't eat relative performance." But if you expect - as Charlie Munger, Berkshire's Vice Chairman, and I do - that owning the S&P 500 will produce reasonably satisfactory results over time, it follows that, for long-term investors, gaining small advantages annually over that index must prove rewarding. Just as you can eat well throughout the year if you own a profitable, but highly seasonal, business such as See's (which loses considerable money during the summer months) so, too, can you regularly feast on investment returns that beat the averages,however variable the absolute numbers may be." [PDF]

Buffett on Ga. buying spree
03/05/02   Buffett
"What do a carpet company, a custom picture frame-maker and a real estate firm have in common? All are Georgia companies that have been bought by powerhouse investor Warren Buffett."

Smoking gun
03/03/02   Government
"Nearly two years after the popping of the Great American Asset Bubble, the US economy is still sputtering. Whatever the outcome -- double dip or anemic recovery -- it's far cry from the froth of the Roaring 1990s."

Media should bring back our beloved bubble
03/01/02   Fun
"Do these things, and we're on our way. But don't be discouraged if it doesn't happen all at once. Remember, the Internet Bubble wasn't built in a day. It took, like, a week."

Prescription for disaster
02/28/02   Accounting
"In this post-Enron world, investors understandably want to know if Elan is an isolated case, or if the pharmaceutical industry is potentially as riddled with accounting problems as, say, the energy-trading business."

Study links profit to dividends
02/25/02   Value Investing
"Throughout the booming 1990s, dividends fell out of favour as investors turned their focus to rising stock prices and juicy capital gains. Corporate North America convinced investors that profits were best spent expanding businesses rather than paying out fat dividends, leading to stronger growth in years ahead. But new financial research argues the opposite is true; that low dividend payouts lead directly to poor profit growth."

Microsoft and the great game
02/20/02   Growth Investing
"The world's biggest software firm is pushing into the mobile telephone and computer-games businesses with a series of announcements this week. These are no interesting diversions, but a desperate attempt to stop new consumer products from stealing large parts of Microsoft's market over the coming years"

Confidence lost
02/20/02   Stocks
"Following the go-go era of the late 1960s, after the shares of a group of popular but speculative technology stocks collapsed, investors fled from companies with confusing balance sheets. They shifted their funds to dependable companies such as Xerox, Avon Products, and McDonald's, whose business models were so simple to understand at the time that investors referred to them as "one decision" stocks. The end result: the creation of yet another bubble, this one in the stocks of what would later be dubbed the Nifty Fifty."

The 5 dumbest things on Wall Street this week
02/17/02   Fun
"Remember last week when we said if you want your employees to despise you, the best way to do it is to take away their coffee? Well, we've obviously underestimated the ingenuity of America's executives."

Terrorism insurance: pray as you go
02/12/02   Economy
"In fact, in the past weeks, thousands of companies whose commercial-property, commercial inland marine, farm, crime, and business-owners insurance policies expired on January 1 have received letters stating that the policies will not be renewed as written. While the standard property policy, for example, will still guard against the perils of fire, explosion, smoke, theft, and wind, it will not cover them if terrorism caused the problem."

How enron works
02/05/02   Fun
"Here's how Enron works. It's really quite simple. Ismail is a successful mule trader in Peshawar. Every year Ismail delivers 30 mules to the Kabul Mule Market and gets $40 per mule."

Great expectations
01/31/02   Indexing
"The equity premium (also known as the equity-risk premium) is a measure of the average annual return over and above riskless debt, such as government bonds, that shareholders expect to receive as compensation for holding risky shares. This risk is no illusion: shareholders are always the last to be paid, after other creditors get their cut. The authors conclude that all the world's stockmarkets offer strong evidence that riskier assets, on average, return more to investors"

01/31/02   Brokers
"When the Internet bubble burst in March 2000, unlucky investors watched more than $3 trillion of their money disappear. What spurred the incredible dot-com bull run on Wall Street? Was the public blinded by dreams of small fortunes and easy living or did the nation's investment banks manipulate the IPO market and exploit public trust?"

Enron losses 'off the scale'
01/31/02   Stocks
"And the emerging shape of the Enron scandal was almost identical to one of 70 years ago, which prompted the setting up of the first regulators to govern the way companies report their performance, he said. That regulation has been chipped away to the point where it is no better than it was in the 1920s, Mr McCullough said."

Paying for time
01/30/02   Media
"This story is an inside look into how some TV business shows are charging companies to appear on their programs. It's called "pay for play" and often it allows companies to have editorial input during the filming and scripting process. Good coverage can then raise the company's stock price. It's a win-win situation for everyone - except the viewers, who are not in on the deals."

Pricey stocks risk a fall into the GAAP
01/29/02   Stocks
"The gulf between what corporate America would like people to think it earns and what it has actually been earning, according to the rules of accounting, has never been so wide. Perhaps that's because if investors started looking at actual bottom lines, rather than their jazzed-up ones, stocks might be significantly lower." - Check out the keen P/E graph.

How not to invest in the next Enron
01/28/02   Accounting
"While Wall Street analysts and Big Five auditors were looking the other way on Enron and financial journalists had their heads in the sand, signs of dubious accounting in Houston were there for anyone willing to wade through the company's mind-numbing corporate filings."

The great eight
01/25/02   Value Investing
"The goal was to find companies with sound fundamentals - and not necessarily rapid earnings growth - for investors with long time horizons. According to a study by the Leuthold Group, a Minneapolis research firm, a $10,000 investment in large-company growth stocks in 1974 would be worth $405,500 today. That's impressive, but consider this: If you had put the same amount in large-cap value stocks, you'd have $639,200."

Active fund trading costs remain high
01/24/02   Funds
"Many individual investors believe that professionally managed funds have a trading cost advantage over them, but this is not the case. A recent study suggests that smaller volume traders have gained the most from recently shrinking commissions and smaller bid-ask spreads from regulatory changes."

Ranking the economic forecasters
01/20/02   Economy
"Only lawyers are the butt of more jokes than are economists. A recent report by Sweden's central bank, Sveriges Riskbank, drills down into the dismal track record of the dismal science with what the authors claim is uniquely comprehensive scope."

Shakespeare's preferreds
01/19/02   Stocks
"Nevertheless, because of the attractiveness of dividend investing for those in the bottom tax bracket, and because of inefficiencies in the preferred share market, careful investors can be well rewarded as long as they pay attention to detail."

Show me the earnings!
01/14/02   Stocks
"In this surreal bubble-era in which we curiously find ourselves still languishing in the United States, the average stock investor seems to have totally forgotten that the only ultimate reason to own a given company is earnings!"

Of risk and myopia
01/12/02   Stocks
"To repeat: the risk tolerance of an investor is determined largely by how often he checks his portfolio. This is nothing new. Benjamin Graham commented in The Intelligent Investor that holders of obscure mortgage bonds happily held onto them through the depths of the Depression until they eventually recovered their value because they were highly illiquid and not often quoted. On the other hand, holders of frequently-quoted corporate bonds (far less risky but priced daily in the papers) panicked and sold after their initial drop."

The Top Achievements, Challenges, and Failures of Finance
01/06/02   Academia
"There is much subjectivity in my particular selection of subjects. Still, I would guess that most finance professors would agree that most of my final choices below represent important progress in the development of finance. Alas, I would expect none to agree with my specific rankings. Thus, my hope is that the list below is of interest to many practitioners and academics. " [PDF]

Primer for Canadian Do-It-Yourself Investors
01/04/02   Retirement
"The purpose of this web document is to serve as a primer for Canadian do-it-yourself (DIY) investors who wish to manage their own investment portfolio. It is aimed particularly at individuals who will be using their investment portfolio as the main source of retirement income."

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