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Article Archive: 2004

Free land in the heartland
12/26/04   Thrift
"Small towns in Kansas, North Dakota and other states are rolling out the red carpet for newcomers."

Charitable donation deadline looming
12/26/04   Taxes
"Clients wanting to make a charitable donation are running out of time, if they want to claim it on their 2004 tax filing. Perhaps a gentle reminder is in order, pointing out that New Year's Day will be too late."

Scrooge and your CRA taxman have much in common
12/26/04   Taxes
"If you're looking for some holiday cheer this year, don't ask Canada Revenue Agency (CRA) to provide it. Scrooge might as well have been a tax collector. In Dickens' story, Scrooge acted a lot like CRA today."

Learn the lesson of Poseidon
12/26/04   Markets
"I serve as the chairman of trustees of a medium-sized pension plan and when listening to various investment managers pitching to look after the fund's assets, the phrase "We only invest in things we understand" is repeated often. Legendary investors such as Warren Buffett apparently hold this philosophy. I can see how it might work for him, since Berkshire Hathaway has tended to stick to a few specialist sectors such as insurance and media, but most fund managers diversify their holdings widely across many dozens of industries. Are these professional investors really bright enough to understand so many businesses?"

Keeping in with niche market leaders
12/26/04   World
"One of the reasons why we do better than our peer group is that they think about diversification just in terms of country and sector. I try to think in terms of growth drivers you might have two companies in the same sector of the market that have completely different growth drivers."

Queen's message in full
12/25/04   Christmas
"The Queen has appealed for tolerance and understanding between cultural and religious groups, in her Christmas message."

Pope's Christmas Day message
12/25/04   Christmas
"Christus natus est nobis, venite, adoremus! Christ is born for us: come, let us adore him!"

Intelligent Indexing
12/24/04   Stingy Investing
"Investors hurt by the speculative bubble in internet stocks have turned from high-fee technology funds to lower-fee index funds. The relative advantages of intelligent indexing are super-low fees, broad diversification, and relative simplicity."

What Warren Buffett learnt from Graham
12/21/04   Buffett
"When Buffett graduated with a master's degree from Columbia Business School, he asked for a job at Graham-Newman, offering to work for no salary if necessary. Jokingly, Buffett has said Ben "made his customary calculation of value to price and said no.""

Francis Chou flies quietly under the industry's radar
12/20/04   Chou
"Chou screens about 2,000 names and looks at basic financial metrics, including price/earnings and price/book ratios and strong balance sheets. He may find 20 to 30 names that he deems "worth looking at." He then looks for opportunities in which firms are 40%-50% undervalued."

Man, it's cold -- a great time to discuss the cottage
12/19/04   Taxes
"As I contemplated the gifts of the wise men this week, it occurred to me that wise men and women today will take the time this holiday to look after the family cottage. After all, it's not often that the entire family is in the same place at the same time. So, use your holiday gathering to talk about the cottage. Here are some tips to help that discussion."

Three out-of-favor stocks to consider
12/17/04   Dreman
"I asked Dreman to recommend just one stock from his fund portfolio to hold for the next five to 10 years and tell us why. I got more than I asked for -- a lot more!"

The scuttlebutt advantage
12/17/04   Tilson
"Investing legend Philip Fisher, in his classic book, first published in 1958, Common Stocks and Uncommon Profits, wrote extensively about scuttlebutt and his techniques for collecting it"

Mutual-fund giants pay price of betrayal
12/17/04   Funds
"The settlement spotlights an amoral attitude among certain players on the Street. It's an attitude that says if there's no law forbidding an activity, and that activity earns us a profit, then it must be fine to do it, right? Because the paper trail here is clear. Most money managers resolutely refused to allow the market-timers in the door, on the grounds that their activities would garner higher returns than long-term investors, which just wasn't fair. A few firms left the doors wide open, or took great pains to ensure that such trading could take place."

We are never prepared by what we expect
12/16/04   World
"At the moment, the Japanese market cap is 9% of total market cap in the world. The US is 52% and the rest of Asia is 3.5%. So for 12.5% you get the whole of Asia's 3.6bn people will the fastest growing economies of China, Vietnam and India but for the US you have to pay 52% for a country that is economically doomed."

Firms must expense options
12/16/04   Accounting
"Companies must start expensing employee stock options in earnings statements next year, U.S. accounting rule makers declared on Thursday, a move that could signal the end of a long-standing bookkeeping practice that many argued allowed the masking of a key compensation cost."

Stock repurchases are replacing dividends
12/16/04   Dividends
"A new study by Amy Dittmar and Robert Dittmar of the U-M's Stephen M. Ross School of Business shows that the fraction of earnings paid out in dividends decreased steadily over the course of the 1990s, declining from its peak of 55.6 percent in 1991 to a low of 26.3 percent in 1999. During that same time period, the share of public firms paying dividends reached an all-time low of 24 percent. In 1997, the dollar value of stock repurchases surpassed that of dividends paid for the first time."

Money for nothing
12/15/04   Government
"While it is true there is no actual EI fund (the premiums collected go straight into the government's consolidated revenue fund), the impact of this over-collection is by no means theoretical. Economic studies suggest that for every 1% increase in employer-paid payroll taxes, there is a corresponding 0.32% decrease in employment. If Ottawa followed its own legislation, a case could be made for an EI-premium rate holiday for the next two and a half years. Think of the impact that could have on employment."

Born suckers
12/14/04   Markets
"Human beings, it turns out, are wired to make dumb investing mistakes. What's more, we are wired not to learn from them, but to make them again and again. If there is consolation, it is that it's not our fault. We are born suckers." - Consider the source...

Flimsy foundations
12/12/04   World
"Calculations by The Economist suggest that house prices have hit record levels in relation to incomes in America, Australia, Britain, France, Ireland, the Netherlands, New Zealand and Spain. In other words, ratios of prices to incomes are now above levels that have proved unsustainable in the past. Taking the average ratio of house prices to incomes in 1975-2000 as a baseline, American house prices are now almost 30% overvalued."

CEOs and their Indian rope trick
12/12/04   Management
"The new rules should not, however, deter companies from trying harder to design compensation schemes that more closely align actual pay with actual performance. Huge pay packets for bosses would be much less controversial if there was evidence they had actually earned them."

Getting a fix on broken trusts
12/12/04   Trusts
"Valuations are so high that many of these trusts are likely to get slaughtered once interest rates move up. And rates will go up eventually. What's a trust investor to do?"

Tax schemes can come back to bite you
12/12/04   Taxes
"Now, many people will think they're safe in buying these tax shelters because: (1) the shelter has a CRA identification number, and (2) they actually receive a refund in April. But neither is an endorsement of the tax shelter. The identification number will allow the CRA to track the users of the tax shelter later, and the CRA has three years from the date on your notice of assessment to reassess you."

Corporate culture still self-serving
12/12/04   Management
"It was three years ago that Enron Corp. filed for bankruptcy, ushering in the "post-Enron era" that optimists hoped would curb corporate sin. If only it had. Two recent news stories, following many others in the last 36 months, underscored how much improvement American corporate culture still needs."

Financial time bombs
12/08/04   Buffett
"The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply until some event makes their toxicity clear. Central banks and governments have so far found no effective way to control, or even monitor, the risks posed by these contracts. Derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal."

Fund legend Gabelli shares insights, lessons
12/07/04   Value Investing
"Similar to one of his heroes, Warren Buffet (see below), Gabelli was a disciple of the investment approach taught by Graham and Dodd. He shared a clip of a series of lectures he had recorded from his former Professor at Columbia University in the 1970s discussing the concept of "Private Market Value." "Was private market value merely intrinsic value dressed up to make it more appealing?" The difference was that Private Market Value equaled intrinsic value plus a control premium. Valuation of companies using this concept is now the basis for the way Gabelli researches each stock."

Money for nothing
12/06/04   Indexing
"Should you care about the near-futility of active management? If your time horizon is only a few years, no. Over this period, the cost drag won't amount to much, and you might as well play a few spins of the active-management roulette wheel (some funds do beat the market, and hope springs eternal). If you're investing for the long term, however, you should care a lot. On average, active funds underperform passive funds by about a percentage point a year (or more). Over 20 years, assuming 10 percent annual appreciation, this difference will eat nearly a fifth of your return. Over 40 years, it will gobble almost a third."

S&P index versus active funds scorecard
12/06/04   Indexing
"The Standard & Poor's Index Versus Active (SPIVA) methodology is designed to provide an accurate and objective apples-to-apples comparison of funds' performance versus their appropriate style indices, correcting for factors that have skewed results in previous index-versus-active analyses in the industry. SPIVA scorecards show both asset-weighted and equal-weighted averages, include survivorship bias correction to account for funds that may have merged or been liquidated during the period under study, and show style consistency for each style group across different time horizon"

S&P launches Canadian fund scorecard
12/06/04   Indexing
"Survivorship bias can significantly skew results as funds liquidate or merge. The five-year survivorship is 71.5%, 67.7% and 70.1% for Canadian equity, U.S. equity and Canadian small-cap mutual fund categories, respectively. For example, only 71.5% of the mutual funds offered five years ago in the Canadian equity category in Canada remained at the end of the period- the other 28.5% were either wound up or merged with other funds."

Chou named fund manager of the decade
12/06/04   Chou
"Chou, the manager of several top-performing mutual funds received major recognition at the Awards for the second straight year. Chou RRSP Fund had a 10-year compound annual return of 17.3% at Oct. 31, compared with 7.8% for the Morningstar Canadian Equity Mutual Fund Index."

Bank-sold wrap accounts don't live up to sales pitch
12/05/04   Funds
"The sales pitch for bank-sold wraps is that they're an easier, more intelligent, more personalized approach for investment know-nothings than using individual funds. The reality is quite a bit more mundane, according to Prof. Milevsky. "Finance academics look at these things and they say, 'wrap account, what is this?' It's just another mutual fund.""

Give with a passion and get the best tax relief
12/05/04   Taxes
"It's the time of year when many of us consider giving to charity. This year, I'd like to discuss giving with a passion, and how to gain the most tax relief from giving."

Gaining an investment edge
12/03/04   Tilson
"There are only three ways to beat the market: better stock picking, better market timing, or more portfolio leverage. It seems obvious, to me at least, that the former is the best option. Market timing is a fool's errand -- I challenge you to show me anyone among the wealthiest Americans who made their fortune doing so -- and if you use much leverage, the market will eventually carry you out on a stretcher. But with so many smart people with so much money looking for bargains, even the traditional pockets of inefficiency such as distressed securities, spinoffs and micro caps are increasingly picked over. So how can one pick stocks that will outperform? Only by having an edge. If you don't -- if you're the proverbial sucker at the poker table -- you're going to get creamed."

Students pay homage to Sage of Omaha
12/03/04   Buffett
"On a subsequent question, Mr. Buffett dispelled the seeming contradiction between his preaching about the importance of honest and competent managers and his purchasing businesses after spending just a few minutes with management. The key factor, Mr. Buffett explained, is to determine whether the managers love the money or the business. Characteristically humble, Mr. Buffett admitted that occasionally he makes mistakes."

The new kings of capitalism
12/01/04   Markets
"In two decades, private-equity firms have moved from the outer fringe to the centre of the capitalist system. But, asks Matthew Bishop, can they keep it up?"

Pickings remain slim for FPA's Rodriguez
12/01/04   Value Investing
"Overall, the funds are run with a value orientation, though Rodriguez is the biggest cheapskate of the bunch. And unlike many shops which aim to remain fully invested in the market regardless of the conditions, FPA managers aren't afraid to build big cash stakes if they're unable to find attractive values."

All that glisters
12/01/04   Markets
"Perhaps a better argument can be made for other scarce metals: platinum, say, or silver. Silver, after all, not only spent centuries vying with gold as a form of money, but also has many industrial uses and is not held by central banks; annual demand is much higher than annual production. Along with many other metals, the price of silver fell sharply in April, but unlike gold it has not even regained the ground it lost."

Too much!
11/30/04   Gross
"there's no doubt that the dollar is on the run and that higher U.S. interest rates are the inevitable consequence. Dollar depreciation leads to higher inflation and ultimately forces foreign creditors to question their rationale and indeed their sanity for continuing purchases of U.S. Treasuries."

Value skeptics
11/30/04   Value Investing
"Of course, it's very easy to talk about waiting and having patience, but it's very hard to actually do that. Many feel guilty or unproductive when they're not doing something. Their mind set is geared to change. Buffett tries to soothe the restless anxiety of some by saying that one of the wonderful things about the investment game is that you don't have to be right on everything. You only have to get a good idea every year or two. If you're right on a very few things in your lifetime, you can do very well as long as you never make big mistakes. As he's said many times, you just have to wait for the fat pitch."

The best ways to give to charity
11/29/04   Charity
"'Tis the season for giving. And, for many people that means more than just buying presents for friends and family -- it means giving to charity."

In defense of scrooge
11/28/04   Christmas
"Maligned for his thrift, besieged by home invaders, the old guy gives in to terrorists. This is the message of Christmas?"

Crash landing coming for China
11/28/04   World
"What we have witnessed in China is not about efficient markets, rational investors, or bell curves of the fairy tale land of financial theory. It's about rank speculation on the part of the crowd, with the People's Bank of China and the US Federal Reserve acting in key supporting roles as accomplices."

Make the most out of capital losses
11/28/04   Taxes
"If you're like many investors and have some losers in your portfolio, do your best to make lemonade out of those lemons with the following tips on dealing with capital losses."

Who are the low-cost leaders?
11/28/04   Funds
"None of these companies, Fidelity included, poses any serious competition to no-load companies such as Phillips Hager & North, Saxon, McLean Budden, Beutel Goodman and Mawer. These firms have much cheaper MERs than the big guys, but they don't register with most investment advisers because they pay little or nothing in the way of commissions (that's why their fees are so low)."

Borrowing to invest backfires badly
11/28/04   Debt
"In 2001, she added $50,000 to her $45,000 mortgage in order to buy stocks within mutual funds that she hoped would produce capital gains sufficient to pay off her mortgage and the new loan. She wound up with a $17,000 loss. Today, she doubts it was wise to make bets on the stock market. She wants to recover financially -- pay down her enlarged mortgage, cut her investment risk, and put the losses behind her."

Income trust myopia could be a dangerous thing
11/23/04   Trusts
"An epidemic of self-destructive performance chasing has broken out among mutual fund investors. They're selling equity funds, notably global funds, and moving into income-oriented funds that hold dividend stocks, bonds and, of course, those ever-enticing income trusts."

Doing the math on the have and have-not provinces
11/23/04   Economy
"It's time again for the annual tally of some numbers that Ottawa and many provincial governments love to hate. Who gains and who loses from the federal government's getting and spending? Which provinces send more money to Ottawa than they get back in spending, and which get more from the federal treasury than they chip in?"

The Third Avenue Management investor conference
11/23/04   Value Investing
"We were pleased therefore to have the opportunity to hear from four notable value investors including Marty Whitman, Chris Browne, Jean-Marie Eveillard and Mario Gabelli at a recent event in New York City."

A how-to guide on capital gains
11/22/04   Taxes
"Sometimes investors have to take the bad with the good. The good? Sometimes you make money. The bad? Sometimes you don't. My next two articles will talk about my top dozen year-end strategies for dealing with capital gains and losses. Today, let's start with tips on capital gains."

Fund companies tinker with sales charges
11/22/04   Funds
"The problem is all those fund sales in the nineties are now coming off the DSC schedule. Fund companies keep the details under lock and key but it is safe to say that every month, there's less incentive for billions of investment dollars to stay put. It's created a mess of competing interests."

Anatomy of an ID theft
11/22/04   Crime
"Five months rolled by without incident, but then the red flags popped up in rapid succession. A call from her bank, Wells Fargo, inquiring about her application for a line of credit. The same question from Chase, where she had no accounts. Then a message from a local Ford dealer, who said he hoped to see her later that day with the additional paperwork they had discussed. Harding knew nothing about these transactions. Instead, she realized, she had become a victim of one of the fastest-growing crimes in the U.S.: identity theft."

Gleaning insights from Berkshire
11/21/04   Buffett
"Overall, it was a quiet quarter of trading for Berkshire. It added net shares worth about $150 million -- driven primarily by the addition of $140 million of Comcast shares and ServiceMaster shares worth $72 million. These additions were offset by reductions in its holdings in HCA, Zenith, and Mueller."

New ETF brings you the whole bond universe
11/21/04   Indexing
"Barclays Canada, the company behind the iUnits series of Canadian exchange-traded funds, announced yesterday that it wants to convert its 10-year government bond exchange-traded fund into a new product that tracks the Scotia Capital Universe Bond Index."

Too patient with your funds?
11/21/04   Funds
"You have a money-losing mutual fund on your hands, but you're sticking with it. Are you a sensibly patient investor or a patsy?"

Is Wal-Mart good for America?
11/20/04   Stocks
"I was trying to make the same point that the great economist Joseph Schumpeter made about the Industrial Revolution. In his book, "Capitalism, Socialism and Democracy," he said, "The capitalist achievement does not typically consist in providing more silk stockings for queens, but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort.""

The top givers
11/19/04   Buffett
"Warren Buffett is famous for two things. First, for amassing the second-biggest fortune in the U.S. as one of the most talented investors the world has ever known. Second, for an aversion to spending a dime of that $41 billion on anything but the strictly necessary. That includes declining to provide his kids with fortunes of their own, collecting yachts or racehorses, or giving large chunks of his wealth to worthy causes. Thus it may strike some as the supreme paradox that the man who is one of America's greatest misers in life will probably become one of its greatest philanthropists in death."

The perfect business
11/19/04   Tilson
"Understanding the quality of a business is critical to being a successful investor, as it is a major determinant of what one should be willing to pay for a stock."

Oddball investing
11/18/04   Value Investing
"It all started with Forrest Berwind "Bill" Tweedy in 1920... Bill was a strange fellow. No one really knows where he came from or when he was born. And if you saw him today, you would probably laugh. The man wore suspenders, had a bushy mustache and a good-sized potbelly. He never married or had kids. He ate lunch at the same place at the same time every day. He was an oddball, to put it bluntly. And if you happened to walk past 52 Wall Street, chances are, you would see Tweedy working at his cluttered desk - busy writing letters and looking through company reports."

Origins of the crash still present?
11/18/04   Markets
"Lowenstein places special emphasis on the insidious effects of excessive executive compensation, largely in the form of stock options, which in the end led to massive speculation and widespread corruption of corporate America and the institutions designed to regulate it. Lowenstein clearly doesn't believe that those excesses have been washed away."

Searching for an explanation
11/17/04   Markets
"Once again, investors are rushing to buy internet stocks. Will they never learn?"

Retirees don't have to be so frugal
11/17/04   Thrift
"Maybe you don't have to order the early-bird special after all. Many retirees have trimmed their spending during recent years, and it isn't just because of plunging bond yields and tumbling stock prices. Instead, they have been reacting to dire warnings from Wall Street, cautioning them that their portfolios can't sustain the sort of withdrawal rates that used to be considered safe. Feeling pinched? Don't resign yourself to a lifetime of scrimping and saving just yet."

Buffett fans visit Neb. to learn tips firsthand
11/17/04   Buffett
"Wharton junior Douglas Sherrets went to a Wharton Council function last January and was asked to introduce his club. After listening to other prestigious clubs list their accomplishments, Sherrets got up and simply said, "I am founder of the Warren Buffett Club." Sherrets said he was practically laughed out of the room. However, the Warren Buffett Club began to add accolades to its resume last weekend, after members took a trip to visit its namesake -- a former Wharton student and the second-richest man in the world."

Veteran value manager took a big risk
11/15/04   Value Investing
"In recent years, mutual-fund manager Jean-Marie Eveillard went from being revered, to reviled, then back to being revered againall without changing his self-described "quirky" investment strategy."

Destination disaster
11/14/04   Thrift
"Did I ever feel saddened by the loss of those students who did not return after my depressing lecture? Not at all. If they were sufficiently discouraged in just two hours to abandon their fledgling aspirations, I helped save them time and money and spared them a trip down the road to failure. It's far less costly to abandon a business in the classroom or on paper than in the dog-eat-dog atmosphere of the real world."

P&C industry agrees to full compensation disclosure
11/14/04   Brokers
"Canada's property and casualty (P&C) insurance industry has agreed to provide full disclosure of how brokers are compensated, beginning in the new year. But it's too early to say if the life and health side will take similar steps, according to an industry spokesperson."

Sometimes they do ring a bell
11/13/04   Markets
"Why does this "chasing the hot stock" happen? Dreman and Lufkin tell us it is because investors become overconfident that the trends of the fundamentals in the first 10 years will repeat forever, "thereby carrying the prices of stocks that appear to have the 'best' and 'worst' prospects. Investors are likely to forecast a future not very different from the recent past, i.e., continuing improving fundamentals for favorites and deteriorating fundamentals for out-of-favor issues. Such forecasts result in favorites being overpriced, while out-of-favor issues are priced at a substantial discount to the real worth. The extrapolation of past results well into the future and the high confidence in the precise forecast is one of the most common errors made in finance.""

What's going on behind Nortel's closed doors?
11/12/04   Stocks
"Of all of the accounting tricks in the book, revenue games are probably the sleaziest. The principles of revenue recognition are fairly straightforward. In simple terms: If you've done the work, the customer accepts ownership of your product and is likely to pay the bill, you can count it as revenue. If not, you can't. No points for shipping your products to your own warehouses, or sending out phony invoices, or selling stuff to customers who don't have the money to pay. So let's look at what Nortel did. It booked revenue "before legal title . . . had passed to customers," and before the company had done anything to earn the money (i.e., it hadn't delivered on the contract). It booked revenue when it knew it probably couldn't collect. And the company played these tricks during the go-go years, when people were paying $100 or more for the stock on the basis of -- you guessed it -- unprecedented growth in revenue, while Mr. Roth and other insiders gorged on their stock option gains."

Down at the dog pound
11/11/04   Bonds
"Just how unlikely investors are to get their money back can be gauged by the default statistics that the rating agencies produce. According to Standard & Poor's, another big rating agency, a bit more than 13% of issuers with a rating of B- or less will default within a year, and 39% of them within five years. For those with a rating of CCC (roughly, its equivalent of Caa1, Moody's rating for Mueller) the figures are 30% and 53%. According to Standard & Poor's, 85% of junk bonds issued so far this year have a maturity of more than seven years. Chances are, in other words, that anyone hanging on to such bonds until maturity will not get their money back."

Some shoppers find fewer happy returns
11/10/04   Stocks
"As the holiday shopping season gets into full swing, a number of major retailers -- including KB Toys and Sports Authority, according to store personnel -- are rolling out electronic systems that weigh the number of returns and exchanges a person has made, the dollar value of the items, and the dates of the transactions to decide whether a consumer should be granted another. The systems are designed to catch shoplifters and those who "wardrobe," wearing clothes and then returning them for a full refund."

Best Buy hopes to exorcize devil patrons
11/10/04   Stocks
"As far as the old adage "the customer is always right" goes, Best Buy doesn't buy it. The massive retailer is being vocal about something that at first might sound a little uncouth: frankly, they'd rather not have 20% of their customers as customers. In an age where it seems like everyone casts their nets as wide as possible to bring in more eyes, feet, and wallets, Best Buy is doing the opposite. They believe that a small portion of their customers are bad for business, and they're looking to shut them out."

Unlucky in riches
11/10/04   Thrift
"For a lot of people, winning the lottery is the American dream. But for many lottery winners, the reality is more like a nightmare."

Patient Capital Management Q3
11/09/04   Value Investing
"Many would be surprised to learn that the TSX Composite Index is extremely concentrated in just three sectors. Approximately seventy per cent of the TSX Composite Index is comprised of three industry groups; Energy at 18.5%, Materials at 17.5% and Financials at 33%. For those expecting diversification this index is not it! Canadian investors are unwittingly incurring this "concentration risk" through index funds and active money managers who mimic the index."

Global bond default rate rises slightly
11/08/04   Bonds
"The four corporate bond defaults in October totaled US$2.3 billion, and all were by companies based in the U.S. The largest default last month also was the largest thus far in 2004: US$1.30 billion by Trump Atlantic City Associates. "

The best way to buy dividends
11/07/04   Value Investing
"A stock with a growing dividend is the investment of a lifetime. Own the shares of a company that regularly increases its dividends and you put yourself in a position to receive an ever-growing flow of income and benefit from a rising share price. The total return possibilities over a long period of time are just amazing."

Why your index fund is lagging the market
11/07/04   Indexing
"Why should market cap be the best way to assign G.M.'s weight in an index? The conventional academic response is that investors, in their collective wisdom, determine the company's value. But investors sometimes make spectacular mistakes. During the bubble of the late 1990's, cap-weighted benchmarks assigned far too much weight to Internet stocks. As a general rule, in fact, cap-weighted indexes overweight stocks that have become expensive because of fads, and underweight unfashionable ones. This leads such indexes to under-report the market's true return."

First families, second marriages
11/07/04   Trusts
"If you're in a second marriage and you want your kids from your first marriage to eventually inherit what you leave behind, you had better plan for this to happen."

Getting government money from your RESP
11/07/04   Government
"The Registered Education Savings Plan (RESP) has become the cornerstone vehicle for saving money for children and grandchildren's education."

Don't stretch for performance
11/05/04   Tilson
"How tight are credit spreads today? Here's one example: An index of speculative B-rated credits -- which are well below investment grade, with long-term five-year default rates exceeding 25% -- last week was yielding a mere 6.85%, only 368 basis points above Treasuries, the lowest spread ever. For comparison, only two years ago, for the week ending Oct. 10, 2002, the spread for the same B-rated index was 1088 basis points, an all-time high."

Non-financial reporting
11/05/04   Accounting
"Yet even as NGOs are becoming more cynical about what firms are producing, some investors now think it is (or could be) a valuable source of information, such as about business risks in a swathe of areas not included on standard financial balance sheets. "We are not social activists; we're independent risk assessors," says George Dallas of S&P. The information in non-financial reports "contributes to building up a company's risk profile." And although it has still not been convincingly demonstrated that good environmental and social practices create value for shareholders, it is clear, says Mr Dallas, that bad ones can destroy it. Exxon's cavalier attitude to the oil spillage from the Exxon Valdez drove customers away from its pumps."
11/05/04   Indexing
"When it comes to investing, there's a world of difference between good advice and advice that sounds good. The vast majority of personal finance commentary, both online and in the "dead-tree" world, certainly sounds good enough -- "put all your retirement money in stocks," or "aggressive growth funds are the place to be," or "small stocks return more than large stocks." But there's something odd about this kind of advice: It's always asserted as if it's true, and yet its truth is never proven. Unfortunately, you can't afford to take investing advice on faith. To prosper in the long run, you've got to be able to separate the good advice from the advice that just sounds good. My goal here is to help you do that."

Index funds best way to go for a little Americana
11/05/04   Indexing
"Whether you're rejoicing or retching over the U.S. election results, there is one investing fact that stands out: Accounting for just over half of the global stock market, the United States is a must-have in your portfolio."

Growth and value data
11/05/04   Markets
"Further analysis of the complete set of style indices shows an interesting Sharpe Ratio pattern. It seems that not only do the value series outperform growth series on average, but their Sharpe Ratio is much higher. Sharpe Ratio is a measure of reward to variability. Basically, it measures the level of return per level of risk for an asset class. The specific measure is asset class return minus the risk-free rate (U.S. 30-day T Bills), divided by the standard deviation of the asset class. Every one of the Ibbotson value series has a higher Sharpe Ratio than its corresponding growth series. The traditional risk-return tradeoff does not seem to hold with regard to the split between growth and value. The value indices are offering more return and less risk."

Short haircuts all round
11/03/04   World
"Besides, Argentina is a past master at bilking its creditors. In a recent IMF study, Kenneth Rogoff, Carmen Reinhart and Miguel Savastano estimate that it has spent more than a quarter of its history since 1824 either defaulting on its debt or restructuring it. The default at the end of 2001 followed those of 1989, 1982, 1890 and 1828. Each time investors returned, albeit at a price. Mr Lavagna will hope they display a similarly short memory this time. The world's capital markets can be bitten more than once, it seems, before they turn shy."

Close, but no cigar
11/03/04   World
"A good outcome would be a gentle but sustained fall in the dollar. A bad outcome would be a dollar crisis."

Five key economic challenges for Bush
11/03/04   World
"Bush, who did not veto one spending bill in his first term, campaigned on a pledge to cut the deficit in half over the next five years by growing the economy and limiting discretionary spending. That may not be easy. Many economists say that Bush's spending proposals, combined with his desire to make permanent the tax cuts of recent years, mean that the numbers simply don't add up."

The wolf at the door
11/01/04   World
"In the three years from 1985, the dollar fell by 50% against the other main currencies. Inflation and bond yields rose and, in October 1987, the stockmarket crashed. America's current-account deficit is now almost twice as big as it was then, so the total fall in the dollarand the fall-out in other financial marketscould well be larger. The wolf is licking his lips."

Tipping over
10/31/04   Gross
"one of PIMCO`s new strategic bets based on this hypothesis is to own intermediate TIPS with real yields higher than 0.5%. We`ll be voting with our dollars."

Customer service saved Xerox
10/29/04   Stocks
"Salvation for Xerox Corp. started with a steak dinner in Nebraska four years ago. As Xerox's newly named president and chief operating officer, Anne Mulcahy faced many tasks, including resuscitating a company burdened with debt, a free-falling stock and a dwindling customer base. Who was she gonna call? Famed financier Warren Buffett, who invited her for dinner at one of his favorite restaurants and told her she had been "drafted into a war" she didn't start and to focus on customers."

A watched pot makes me boil
10/28/04   Markets
"I have several bad investing habits. The worst, clearly, is that I sometimes buy stocks that go down. But a close second is my propensity to watch my portfolio a little too closely, occasionally wasting time staring at real-time changes in the fortunes of my 55 stocks. In my defense, I only do so on three occasions: when I'm up a lot on the market, when I'm down considerably or when I'm close to even."

Too many let 'fruitcake' market dictate investments
10/27/04   Graham
"But when it comes to their financial lives, millions of people let the stock market tell them how to feel and what to do, despite the obvious fact that, from time to time it can get nuttier that a fruitcake."

China misconceptions
10/26/04   World
"In the following Ad Hoc comment we review what we believe are some of the more common consensus misunderstandings about China. Granted, we might be very wrong. After all, when looking at China, one is forced to look at either the official government statistics, or the limited market data. And making educated guesses with the above data points are often just that: educated guesses!"

Can active management beat index funds?
10/26/04   Indexing
"The best course may run counter to popular thinking."

The effect of skill on the success of the less skilled
10/26/04   Academia
"This paper uses computer simulations to examine the effect of highly skilled gamblers on the success of moderately skilled gamblers. It shows that skilled players negatively impact the outcome for less skilled players. A player's winnings are not only affected by the house rake or vigorish but also by the skill of other players. It is concluded that less skilled players are often better off playing a game of chance than a game of skill."

A signal of future stock performance
10/26/04   Academia
"our value-stocks research team has studied how balance-sheet data that serve as indicators of the reliability and likely persistence of reported earnings can be used as a signal of future stock performance."

Users' guide to the business media
10/26/04   Media
"Many of us are hooked on the financial press and, as a result, we get most of our investment information from the newspaper, the Internet or the specialty cable TV channels. In light of this dependence, it's useful to pause once in a while and think about how we use it."

Insurers getting dragged out of disclosure stone age
10/26/04   Brokers
"Badger someone in the mutual fund industry about fees and disclosure and you'll often hear muttering along the lines of "yeah, but you should really should take a look at the insurance business." Too true. Compared with insurance, mutual funds have the transparency of freshly Windexed glass."

Still blowing bubbles
10/25/04   Markets
"On this day in 1929, America's stock market was hit by a selling wave of more than 12 million shares. Five days later, on October 29, the daily selling total soared to 16 million shares. The market lost 47% of its value in 26 days, and 89% by the time it finally bottomed on July 8, 1932. Within two years 12 million Americans were out of work, hundreds of banks and 20,000 companies had gone bust. It took 25 years for the market to recover."

Most expensive colleges
10/24/04   Thrift
"Quick: What will $36,750 buy you? Only a year's worth of tuition at the country's most expensive college, not including room and board."

Unorthodox approach builds a winner
10/23/04   Value Investing
"Mr. Michael's investment approach is bottom-up and purely value-driven, with no strictures on company size. "We're an all-cap deep value fund," he says, adding hard work and a focused perspective are keys to the fund's success."

The best idea is to toss those credit card cheques
10/23/04   Debt
"For a glimpse of the big banks at their worst, just open your monthly credit card statement. If you think this is a rant against credit card interest rates, you're only partly right. Card rates are high, but immaterial if you pay your balance off in full every month. What's objectionable is the way some financial institutions try to circumvent this fact. They do it with an odious little device that presents itself as a cheque that you can write to anyone and have the money applied to your monthly credit card bill."

Focus Investing
10/23/04   Tilson
"While there are a handful of exceptions such as Peter Lynch, the overwhelming majority of great investors that I'm aware of practice focus investing. They invest infrequently, only when they're highly confident that the odds are heavily in their favor, and then they bet big."

Searching for rational investors in a perfect storm
10/21/04   Value Investing
"In 1991, I wrote a book, Sense and Nonsense in Corporate Finance, in which I set out several criteria for selecting fund managers. The secrets haven't changed. Funds should (a) hold no more than 20 stocks; (b) hold their stocks on average for at least two years; c) eat their own cooking, i.e., the managers should personally invest in the fund, and of course (d) invest on Graham-and-Dodd principles"

Longleaf Partners Q3
10/21/04   Longleaf
"To summarize, many widely accepted investment assumptions lead to the conclusion that indexing is the best choice for investors. Lowenstein counters that this is wishful thinking, dangerous stuff that has seduced the public to have a lazy confidence that one need not bother with the arduous task of patient, thoughtful selection and has encouraged fund managers to cater to those impulses.Observing patterns during the recent five year boom-crash-rebound' cycle indicates that the market is not particularly efficient. Lowenstein challenges the EMT beliefs of many of his fellow academicians by presenting a group of investors who have beaten the market over the long run by meaningful amounts and in a systematic way."

Market realities can't sustain TransAlta's dividend
10/21/04   Stocks
"We note that the dividend yield, at 6.1 per cent, is only modestly higher than the yield on the company's 2011 bonds (about 5.5 per cent). (The gap is larger than it appears because of the dividend tax credit.) Still, to the conservative investor who's looking for TransAlta for income, what's better to own: a high-yield stock that's likely to cut its payout, or a slightly lower-yielding bond that, by comparison, looks pretty secure?"

Interlopers on the value-stocks turf
10/19/04   Value Investing
"Studies have shown that the most relatively undervalued 10 percent of stocks have outperformed the most expensive 10 percent by more than 10 percentage points annually. The problem is that value stocks can also suffer from long periods of underperformance. Michael Hughes, portfolio manager of the JPMorgan Fleming Europe Strategic Value fund, said that value stocks underperformed the market about 35 percent of the time. "Many investors do not have the patience to live though a long downturn," he said. Also, when value investing is in vogue, it can be more difficult to find genuine value plays."

Why Wall Street hates the "S" word
10/19/04   Brokers
"These realities create what might be described as Pascal's Wager for Brokerage Analysts, a risk/reward equation that, when everyone else is positive, makes it risky to be negative:"

La Grippe of the Trial Lawyers
10/19/04   Health
"If Kerry thinks he can solve the flu vaccine problem, he need look no further than his own running mate, trial lawyer John Edwards. Vaccines are the one area of medicine where trial lawyers are almost completely responsible for the problem. No one can plausibly point a finger at insurance companies, drug companies, or doctors. Lawyers have won the vaccine game so completely that nobody wants to play."

Passing the baton
10/16/04   Management
"What is the best way to replace the boss? A recent study of large, non-diversified publicly traded American manufacturing firms in the Academy of Management Journal suggests that companies perform better under a new leader if that person has been groomed as the heir apparent"

Canadian residents face tax on U.S. rental income
10/16/04   Taxes
"We would like to purchase a condo in Florida to spend our winters down south. In the summer months, we would like to rent out this condo. How will income from this condo be treated from a Canadian and U.S. tax perspective?"

Big Mac's makeover
10/16/04   Stocks
"The world's biggest fast-food company has pulled off a remarkable comeback"

Peter Bernstein interview
10/15/04   Markets
"In 1995 I said, "Dividends don't matter." I've been eating those words ever since. I assumed that reinvestments [the cash that companies put back into the business instead of paying out as dividends] would earn the same rate of return. I was wrong. Managements are more careful when they're not floating in cash."

Money trends
10/15/04   Markets
"The investment business is constantly evolving; one of its eternal questions is how closely today's and the future's patterns will resemble the past. One of the most important developments in recent years is the burgeoning interest in hedge funds and the growing role they're playing in the markets. But innovations continue along a broad front."

Ben Stein's funny money
10/14/04   Fun
"Ben Stein (he of "Win Ben Stein's Money," on Comedy Central) and Phil DeMuth have written Yes, You Can Time the Market! They demonstrate that investors who move in and out of the market based on such simple criteria as price-earnings ratios and dividend yields will do better than the dollar-cost averager who dutifully invests a fixed amount in stocks month after month, year after year. Their numbers make perfect sense. Their advice to you does not."

Discount brokers are good for trading stocks, not bonds
10/14/04   Brokers
"Mr. Brownridge believes spreads are so high at discount brokers that investors are effectively paying a similar cost to the one charged on bond mutual funds through their management expense ratios. Ironically, the type of investors who buy bonds directly are the sort of people who fancy themselves too savvy to buy bond funds."

Grant strategy can provide immediate education cash
10/14/04   Taxes
"I then shared with Gerry a clever strategy using a registered education savings plan (RESP) that can provide a tidy sum of cash, almost immediately, to help pay for Jared's education costs."

Spitzer sues broker, insurers
10/14/04   Crime
"New York Attorney General Eliot Spitzer Thursday sued Marsh & McLennan Cos., the world's No. 1 insurance broker, for steering unsuspecting clients to certain insurers in exchange for lucrative payoffs."

Outsourcing the lawyers
10/14/04   Law
"Contrary to popular perception, Shakespeare didn't really suggest that killing all the lawyers might be a good thing. But that hasn't stopped some people from wishing they would just go away."

The disastrous history of money
10/14/04   Markets
"Charles II was king of England from 1660 - 1685, when wooden sticks were being used as a form of money until the system collapsed. The story has obvious parallels to the modern world."

Con job redux
10/14/04   Gross
"My point, however, was as follows. The CPI inaccurately calculates Americans' cost of living."

Build wealth in any market
10/11/04   Indexing
"So many investors -- maybe even you -- bought into some wild notions about stocks in the headiest days of the bull market. Today, perhaps a bit poorer, you're certainly wiser."

Blue-chip bargains?
10/11/04   Tilson
"I'm often asked how I generate stock ideas. There are many sources, but mostly, I read constantly, regularly talk to a lot of smart investors, and occasionally use stock screens. There are dozens of screening tools -- some free, others very expensive -- and countless criteria that one might use to filter stocks, but I've found that one of the best is to simply search for stocks trading at or near their 52-week lows. This makes sense since I'm looking for 50-cent dollars -- stocks trading for half or less of their intrinsic value -- and such bargains are likely to be severely out of favor."

Value Hunting
10/09/04   Value Investing
"Columbia students bet on ugly ducklings"

Hudson's warmer bay
10/09/04   World
"Global warming means Hudson Bay is now open to shipping an extra week a year. Some scientists predict that as soon as 2010 there could be a regular shipping service during the summer in the Arctic, and that by 2050 there will be a year-round sea passage to Hudson Bay."

The taming of the shrewd
10/09/04   Markets
"With returns at hedge funds falling sharply, it is easy to see why their owners want to sell, but much less clear why big investment banks are so keen to buy"

Direction of distributions creates two classes
10/09/04   Trusts
"It's also a lesson in the new hazards of being a trust investor. Income trusts were originally created as an investment vehicle for nice, stable businesses to pay nice, stable dividends to blue-rinse grannies who wanted monthly income with no headaches. Three years after the boom in business trust IPOs began, a new pattern has emerged. There's a stratification of the market: lots of little winners, and a growing bunch of very big losers. Avoiding the junk has become critical to your portfolio's health."

Buffett's Berkshire could be the right 'fund' for you
10/09/04   Buffett
"In uncertain investing times like these, it's nice to have someone smart looking after your money. How about Warren Buffett? One of this generation's greatest investment minds, Mr. Buffett probably could do wonders for you. He's fully occupied in his current position as chairman of Berkshire Hathaway Inc., but that's no problem. All you have to do is buy shares of Berkshire."

Taking advantage of the terminally stupid
10/04/04   Stocks
"After years of miserable performance, Concord Communications management came up with a novel approach to ensure that the stock options it granted during the bubble didn't expire worthless. In a public filing last week, Concord unveiled a plan to buy back employee options at prices up to $4. The trouble is, with a $9 share price, options granted at $40 are worth basically nothing."

That Taco Bell boycott
10/04/04   Economy
"Staging a boycott against Taco Bell does not change the guided self interest of taco eating teenagers. In the short run it has the exact opposite effect of its intended purpose. Boycotting Taco Bell lowers the demand for tacos, which in turn lowers the demand for the inputs required to make them, which in turn lowers the prices for wages paid to migrant workers needed to pick tomatoes. A more effective method of raising the wages of Immokalee migrant workers would be to stage the exact opposite activist campaign. If college students were to buy more tacos and ask for extra tomatoes on those tacos the demand curve would be moved in the appropriate direction, raising migrant workers wages."

Haute con job
10/04/04   Gross
"The CPI as calculated may not be a conspiracy but it's definitely a con job foisted on an unwitting public by government officials who choose to look the other way or who convince themselves that they are fostering some logical adjustment in a New Age Economy dependent on the markets and not the marketplace for its survival. If the CPI is so low and therefore real wages in the black, tell me why U.S. consumers are resorting to hundreds of billions in home equity takeouts to keep consumption above the line. If real GDP growth is so high, tell me why this economy hasn't created any jobs over the past four years. High productivity? Nonsense, in part s and that real GDP is 1% less."

Gurus want your money
10/04/04   Real Estate
"Among those making money on real estate are the gurus selling (expensive) words of wisdom."

The dragon and the eagle
09/30/04   World
"American consumers and Chinese producers have led a global boom. China is creating genuine wealth, but America's binge is based partly on an illusion, says Pam Woodall, our economics editor"

Kyoto a-go-go
09/30/04   World
"The Russian government has approved the Kyoto protocol. Once approved by the country's parliament too, the global climate-change treaty will come into effect. But what effect will it have?"

Stock options hurt U.S. competitiveness
09/30/04   Tilson
"There are legitimate arguments and difficult issues related to how to go about expensing options. Which formulas or methods to use and how often to update the values are points for debate. There are no credible arguments, however, for ignoring these expenses and thus intentionally overstating the earnings and understating the P/Es of not only companies with large options programs but also the market in general."

From debt to wealth on $10 a day
09/27/04   Thrift
"How would you like to be free of credit card debt? To have a financial cushion to fall back on?"

Costco has its own formula for success
09/26/04   Stocks
"Munger considers Sinegal one of the 10 best retailers of the past century. He'll need all his smarts to keep Sam's at bay. For seven of the first eight months of this year, Costco's U.S. same-store sales, a key measure of retail growth, have outpaced Sam's, says retail consultant Management Ventures."

Dead firms walking
09/24/04   World
"Japan's unproductive service industries are holding back its improving economy from achieving even better performance"

Third Avenue Q3
09/23/04   Whitman
"A radical change in thinking seems needed if GAAP are to be made more sensible, and even more useful as an analytical tool. Given its present direction, GAAP increasingly impose unneeded and counter-productive burdens on American corporations, American management and American capital markets. GAAP, first and foremost, ought to be geared toward meeting the needs and desires of creditors rather than the needs and desires of short-run stock market speculators, who are vitally interested in day-to-day stock market price fluctuations. Currently, GAAP are directed increasingly toward meeting the needs and desires of short-run stock market speculators. This is accomplished by setting up increasingly rigid sets of rules designed to meet an impossible goal: have periodic statements of cash flows from operations, earnings and earnings per share be as accurate (or truthful) as possible."

Canadian fund firms should follow U.S. lead
09/23/04   Indexing
"Fidelity Investments, the largest U.S. fund company, recently took a run at indexing powerhouse Vanguard by slashing the management expense ratios on five index funds to 0.10 per cent from between 0.19 and 0.47 per cent. The on-line broker E*Trade then made things even more interesting by lowering the MER on two in-house index funds to 0.09 per cent. If you follow index funds in Canada, you'll want to weep. The largest Canadian index fund by far, CIBC Canadian Index, has an MER of 0.96 per cent, while second-ranked TD Canadian Index is at 0.85 per cent and third-ranked RBC Canadian Index is at 0.84 per cent. The best bargain available is the "e" version of TD's fund -- it has an MER of 0.31 per cent but is available only over the Internet directly from TD."

OSC can still turn investigation into victory
09/23/04   Funds
"The next stages of fund industry reform should stick to fees as well, specifically additional disclosure of how much investors are paying. Fund companies still don't spell out the sometimes significant amounts they pay in trading fees, even though almost every other fee is accounted for. As well, investors need to be shown in dollar terms exactly how much they've paid in fees each year."

OSC strike against fund industry
09/23/04   Funds
"There have always been people who believed they were smarter than everyone else, could jump in and out of the market, exploit loopholes, make the fast buck. There always will be. That some of these people reside on Bay Street instead of Wall Street, and that Canadian mutual fund companies took their money, is neither a shock nor a grave scandal."

Tax competitiveness
09/22/04   Taxes
"Today, as Canadians look to governments to fund health care, education and infrastructure, it is too easy to lose sight of the important role that taxation can have on competitiveness and growth prospects for a country. Federal and provincial governments now collect $475 billion annually in revenue almost $16,000 for each adult and child by far the biggest hit on a typical family's budget. However, as I hope to make clear, I do not mean that only the level of taxes matters to competitiveness. What is also critical is the structure of taxation the degree to which we rely on inefficient taxes that inhibit economic growth, create unfairness, and cost Canadians dearly by forcing them to comply with onerous rules and regulations."

Homeowners should not think they're bubbleproof
09/19/04   Real Estate
"The Canadian housing market is a bubble-free zone right now, but let's not get complacent about it. With concern about housing bubbles now cropping up in the United States, Britain and Australia, you have to wonder how long homes here can continue to deliver the plus-sized gains of the past few years."

Rich Man, Poor Man
09/19/04   Thrift
"But here's the ironic part of it. If, from the beginning, the little guy had adopted a strict policy of never spending more than he made, if he had taken his extra savings and compounded it in intelligent, income-producing securities, then in due time he'd have money coming in daily, weekly, monthly, just like the rich man. The little guy would have become a financial winner, instead of a pathetic loser."

Bubble trouble
09/19/04   Real Estate
"Forget book clubs and poker nights. America's property craze has spawned a new social network: the real estate investment club."

A smoke ring? That'll cost you $280 billion
09/16/04   Law
"Has Philip Morris caught masochism of the throat? No, say its rivals: it is just trying to lock in its half-share of the American market. Tight marketing rules would hurt lesser brands more than they would Marlboro."

Insuring for the future?
09/16/04   Markets
"Lloyd's is trying to make its business practices as sleek as its building. But will that be at the expense of the characteristics that make the market so distinctive?"

Buffett of the North
09/16/04   Stocks
"Insurer Fairfax Financial has been able to compound its book value at 31% annually since 1986 because of the exceptional investing abilities of its managers. Unfortunately, some recent questionable acquisitions have weakened its balance sheet significantly. Now Fairfax is priced at a huge discount to its sector, making it a high-risk, high-reward investment."

Ethics course has brokers on right track
09/16/04   Brokers
"It's easy to dismiss this initiative as mere cosmetics, but that would be unfair. Applied Ethics in the Securities Industry, as the CPH course module is enticingly titled, has an unambiguous, do-the-right-thing message that the financial sector's rookies would do well to absorb."

Roadblocks to small business curb growth
09/14/04   World
"The report makes a devastating estimate of potential gains from regulatory reform. It split countries studied into four equal groups, ranked according to ease of doing business. In countries where it was least difficult to do business, the economy grew an average of 2.6 per cent a year over the past decade. At that rate, economies can double their size in 27 years. But in countries that make it hardest for entrepreneurs to operate, the growth rate was only 1 per cent, a snail's pace that takes the doubling time to 70 years, roughly three generations."

The way of the calm investor
09/13/04   Zweig
"If getting rich is supposed to make you feel good, why are so many investors so agitated so much of the time -- even when the market goes up?"

Master's class
09/13/04   Munger
"I am more than skeptical of the orthodox view that huge diversification is a must for those wise enough that indexation is not the logical mode for equity investment. I think the orthodox view is grossly mistaken. In the United States, a person or institution with almost all wealth invested long-term in just three fine domestic corporations is securely rich. And why should such an owner care if at any time most other investors are faring somewhat better or worse? And particularly so when he rationally believes, like Berkshire, that his long-term results will be superior by reason of his lower costs, required emphasis on long-term effects, and concentration in his most-preferred choices."

Make student debt more manageable
09/12/04   Debt
"I've got three pieces of advice for those who are considering student loans, or have already borrowed for an education."

Insurance premiums soar 11%
09/09/04   Health
"Health insurance costs are going up, and up, and up. And in some cases, up some more."

The sun also sets
09/09/04   World
"Never before have real house prices been rising so fast in so many countries"

An alternative inflation index
09/09/04   Markets
"Browse the Index components and if you are old enough to remember, ponder how prices have evolved over 36 years."

Corporate governance by the numbers doesn't work
09/08/04   Management
" Warren Buffett is an undesirable board member. He's too old, serves on too many boards and has insider ties to too many of the companies on whose boards he sits. Sounds ridiculous, doesn't it? After all, Buffett has a reputation for being one of the most astute and ethical investors of the last 30 years. Plus, the billionaire stock-picker is a bit of a good-governance guru himself, pushing, among other things, for companies to expense employee stock options to show their true cost."

Of course investors can beat the market
09/08/04   Markets
"EMH also has a great paradox. In order for their scenario to occur then people will have to believe there are profit opportunities, but what EMH in effect says is that there are no profit opportunities! But if people believed there were no profit opportunities then there would be no one who would act to correct the discrepancy between fundamental value and current price. So a necessary -but not sufficient- condition for EMH to be true is if investors believe it is not true. The more people believe in it, the less true it will be. EMH must assume that people are completely irrational."

Apprentice to a hoax
09/08/04   Fun
""A schoolboy's dream... a competitor's challenge. Donald J. Trump is the very definition of the American success story, continually setting the standards of excellence...." It's times like this that I wonder whether the TV-addled American public doesn't deserve every fleecing it gets at the hands of the world's biggest snake-oil peddlers."

Bond fund risks outweigh rewards
09/07/04   Funds
"Bond funds are generally poor investments, with fees that are far too high, wiping out much of their returns and making them not worth the risk for the average investor, according to one prominent mutual fund analyst."

Fund your kid's schooling
09/05/04   Taxes
"I want to talk to those of you who are business owners today. A loan from your corporation to your child can really help to pay for that education."

Stability ratings help spot bad tomatoes
09/05/04   Trusts
"It was Attack of the Killer Tomatoes week in the income trust world. The fun began on Tuesday when Hot House Growers Income Fund announced that an unprecedented drop in tomato prices has forced it to suspend its monthly distribution. In the ensuing carnage, Hot House units lost 43 per cent of their value."

Always on the job, employees pay with health
09/05/04   Management
"The traditional career, progressing step by step through the corridors of one or two institutions, "is finished," said Dr. Richard Sennett, a sociologist at New York University. He has calculated that a young American today with at least two years of college can expect to change jobs at least 11 times before retirement."

The fall of Andersen
09/03/04   Accounting
"Trading his customary dark suit for a pair of jeans, Mike Gagel trudged over pallet after pallet of multicolored bricks in the central Ohio storage yard. The summer heat was stifling as he counted once, then twice. Something was wrong."

Safety matters
09/03/04   World
"First they steal our jobs, then our credit-card numbers. Those seem to be the fears inspired by outsourcing back-office financial-services work to India. In both Europe and America, the argument that outsourcing costs jobs at home still has political resonance. But it is making way for another bogey: that India cannot offer the standards of privacy and data protection that consumers expect at home. Outsourcing is dangerous and perhaps even illegal."

Value will out, but not by a lot
09/03/04   Markets
"Laurence B. Siegel, director of investment policy research at the Ford Foundation, has great investment instincts. But he knows too much to follow them blindly, preferring instead to temper instinct with disciplines developed over a lifetime of experience in delving deeply into the best investment research available."

Vanguard shuts out int'l small-cap investors
09/03/04   Funds
"By closing its International Explorer fund to new investors, Vanguard has thrown another significant roadblock in the path of investors who want their money to work as hard as possible for them."

Chou's straight talk
09/03/04   Chou
"On plain white paper, Mr. Chou gives you straight, unvarnished talk about his results, the markets and the business of running a fund. By comparison, most standard fund industry annual reports have the feel and depth of insight you usually see in new car brochures."

Who gains from trade?
08/30/04   Academia
"After costs, we estimate that the trading of institutional investors adds one percentage point annually to their portfolio performance, while the trading of individuals subtracts over three percentage points annually from their performance."

Flight into the red
08/30/04   Stocks
"It's a basic problem of supply and demand: too many seats and too few passengers willing to pay full-fare prices. During the last downturn a decade ago, carriers lost more than $13-billion. Since the Sept. 11 terrorist attacks, airlines have lost $18-billion and project a loss of $10.7-billion more this year, counting the effects of a war with Iraq. That's enough to wipe out the industry's cumulative profits since commercial aviation took wing at the end of World War II."

Full price
08/30/04   Health
"Dreams of a bright career in a big city lured Rebekah Nix here from the western plains of Texas two years ago. An appendectomy sent her home. But not because she was ill. Ms. Nix, 25 years old, was fleeing the nearly $19,200 in medical bills that had piled up on her bedroom dresser."

How many funds are too many?
08/29/04   Funds
" The reality is that I'm not sure it is about how many funds you have but rather the types of funds that you own. Far too often, I see 5 to 7 funds in a portfolio that do the exact same thing. When one moves up, so do the other six. And when one moves down, so do the other six. In fact, someone has coined the term DIWORSIFICATION."

The 80-cent dollar dilemma
08/27/04   Tilson
"Stocks trading at a 20% discount to intrinsic value will generally follow the market if it takes a tumble. But selling good companies trading at such a discount isn't an acceptable option either. What's an investor to do? Whitney Tilson shares his strategy."

Pop goes the bubble?
08/26/04   Markets
"Other economists aren't so sure. For one thing, the economy's recent health has been supported by a hot housing market. Refinancing put a ton of cash in consumers' pockets, and high home values made people wealthier. And several industries, from construction to furniture to finance, rely heavily on the housing market. And prices don't have to plunge to make a noticeable impact on these sectors of the economy."

The crime wave that wasn't
08/26/04   Government
"One threat in particular stood out. The state prison system had become so crowded that the officials were exporting prisoners to private prisons in nearby Mississippi and Louisiana. The governor and his cronies often warned that failure to pass his tax increase would lead to the early release of many criminals. Voters were told that a cost of rejection would be a crime wave of unprecedented proportions. It was a threat worthy of "The Godfather." But the voters nixed the tax increases, like voters everywhere almost always do when given the chance. And the prison system did give early parole to many of its convicts. But that often mentioned crime wave never happened."

How 51 gorillas can make you seriously rich
08/24/04   Fun
"Given this strong motivation to succeed, it is astonishing how bad most business books are. Many appear to be little more than expanded PowerPoint presentations, with bullet points and sidebars setting out unrelated examples or unconnected thoughts. Some read like an extended paragraph from a consultant's report (and, indeed, many consultancies encourage their stars to write books around a single idea and lots of examples from the clientele). Few business books are written by a single author; lots require a whole support team of researchers. And all too many have meaningless diagrams."

CFP designation is consumer's first line of defence
08/24/04   Brokers
"As absurd as it sounds, anyone outside the province of Quebec can call themselves a financial planner without any qualifications. The Certified Financial Planner designation is your first line of defence against the amateurs out there."

Negotiating a new job? Think outside the tax box
08/24/04   Taxes
"Be creative in asking for non-taxable benefits that can amount to tax-free compensation"

Battling fund myths
08/22/04   Funds
"A recent release by Mackenzie Financial Corporation has sparked all kinds of public and private debate. It rebutted the media's persistent pro-indexing message with performance comparisons aimed to showcase active managers' superiority - which was reported in a recent National Post column. Rebuttals proliferated and it became clear that not only is Mackenzie's comparison flawed, but that even rebuttals had holes."

Consuming passions
08/22/04   World
"As the American consumer tires, can shoppers in Europe, Japan and China take up the burden?"

OT pay: Winners and losers
08/22/04   Government
"Don't know if you're owed overtime pay? You're not alone."

Voting 'No' on shareholder democracy
08/22/04   Management
"Another company with dual classes of stock is Berkshire Hathaway Inc., run by the legendary Warren Buffett. The last thing in the world that even second-class shareholders of Berkshire want is shareholder democracy. They're buying into Buffett's benign dictatorship, not into pro-rata shares of the wisdom of any idiot who buys in too. They're delighted to have no say in the company, as long as they are assured that other shareholders have no say either. That is far from nuts."

Realistic rewards
08/20/04   Markets
"The return on equities over the next decade is likely to be much lower than most investors expect"

The evolution of everyday life
08/18/04   Economy
"The human capacity for calculation allowed this potential to be fully exploited because humans were able to design rules and institutions that, as Mr Seabright puts it, "make reciprocity go a long way". Much of the book is concerned with the trust-enhancing character of economic institutions such as money. Building on humans' inherited instincts, these rules and institutions allow people to treat strangers as "honorary friends"."

Are we saving too much?
08/15/04   Thrift
"I have to admit this isn't a question I get every day. In fact, I've never gotten it before. Given the spendthrift habits of most Americans, it's just not something that's ever come up. Saving too much? It's almost like asking whether someone can be too rich or too smart."

Why the sidelines are looking good to managers
08/15/04   Value Investing
"Anyone who wants insight into the stock market but has no interest in parsing technical trend lines may want to consider this simple fact: Some of the most successful value stock fund managers have moved a large portion of their assets off the playing field. While the average stock fund has just 5 percent or so of its assets in cash, Robert L. Rodriguez, manager of the FPA Capital fund, currently has a 39 percent cash stake, while Mason Hawkins and his co-managers at the Longleaf Partners fund are at 29 percent. James Gipson and his team at the Clipper fund are 27.5 percent in cash."

The sorry saga of KHI
08/15/04   Stocks
"The infamous fiascos at Bre-X Minerals Ltd., YBM Magnex Inc. and Nortel Networks Corp. have some new company. The rise and fall of a little-known Halifax company, Knowledge House Inc., is turning into one the largest, messiest morasses of securities litigation in recent memory."

OSC highlights questionable scholarship plan sales tactics
08/15/04   Brokers
"A recent Ontario Securities Commission report highlighted some very disturbing findings about how scholarship plans are sold in several provinces across Canada."

Homes fall prey to identity thieves
08/15/04   Crime
"With a record, hot real estate market, the scum -- often in organized rings -- have set their sights on our homes."

A primer on stock-market averages and indices
08/13/04   Indexing
"This measure began when Charles Henry Dow, the co-founder of Dow Jones and Company in 1882, devised an average to better see broad-market movements from the daily ups and downs of individual stock prices. The first Dow average appeared July 3, 1884 in the Customer's Afternoon Letter, a two-page market letter first published by Dow Jones in November 1883. At the time, the average was comprised of only 11 stocks, 9 of them railroad-related reflecting the relative importance of the rail industry in the economy at the time."

Identifying franchises
08/13/04   Value Investing
"So I think the answer is that franchises are different now, but I don't think they're any less present. And people aren't as good at managing them. So the irony is that where these franchises are concerned, where you've got a dominant market position, that in a global world -- because it's almost impossible to dominate big global markets (the example people got undermined are the auto companies) -- but in a big global world, you have to think locally. Because the only markets that you're going to be able to dominate are local markets."

Governing in the goldfish bowl
08/12/04   Management
"Many companies are reexamining the way they view investor relations and corporate communications. According to a number of directors, CEOs, and consultants interviewed for this story, some outfits need to do a far better job of understanding and addressing the concerns of institutional shareholders. They have no choice."

A greedy investment advisor may be taking advantage
08/09/04   Brokers
"What are the lessons? First, know enough to trust. In other words, to ensure your parent or you are not being taken advantage of by an unscrupulous broker, you must get yourself educated about investments and learn about the pressures advisors are under to generate commissions."

Fair dealing's advisor committee takes summer break
08/09/04   Government
"Despite his strong beliefs, De Goey concedes that he has lost the argument on outlawing embedded compensation and is now turning his sights on more and better disclosure, suggesting that prospectuses and fund statements contain large warnings about performance and risk, similar in tone to the stark warnings on cigarette packages."

Patient Capital Management Q2
08/09/04   Value Investing
"Although more than four years have passed it seems like nothing has actually changed. Then as now equity returns in the previous year had been in the double digits and stock prices were expected to grow to the sky. Then as now enthusiasm for equities was very high. Investors and advisors were very bullish, mutual fund cash positions were very low and market commentators were touting the promise of long-term equity returns. As well, surprisingly nothing has really changed with respect to the price levels of the major North American indices. They are at essentially the same levels today as in the summer of 2000."

Value Investing 101
08/09/04   Value Investing
"Warren Buffett and Walter Schloss are not the typical guest lecturers at a business school class. Then again, the Columbia University Graduate School of Business isn't just any business school, and professor Bruce Greenwald's class is anything but ordinary. Greenwald teaches Columbia's value investing course and also authored a book on the topic. In part one of this five-part series, Greenwald shares with Fool contributor Matt Logan the three steps of value investing."

Bush's jobs deficit
08/09/04   Economy
"According to the latest figures, American companies added far fewer workers to their payrolls last month than economists had forecast. This comes a week after the equally unexpected news that growth slowed significantly in the second quarter. How worried should George Bush be?"

For richer or for poorer?
08/09/04   World
"this may be politically convenient for Mr Putin: regional governors who cannot keep up with the payments will become unpopular, making it easier for the Kremlin to dislodge them. That is in line with the general trend of Mr Putin's federalism, which has been to put more of the burden for services on to the regions while concentrating more power and supervision at the federal level."

Recovering from identity theft
08/09/04   Crime
"If you suspect your identity has been stolen, act fast as time may not be on your side."

Real estate: What could go wrong?
08/09/04   Real Estate
"I think buying the lot next to my house might be a good investment, but could this be a bad choice?"

Fund mergers bring tax headaches for unitholders
08/08/04   Funds
"The net result of mergers is that losses are being lost to the fund. They are more than the capital gains"

Employee loans creative benefit
08/08/04   Taxes
"If your employer is willing to lend you money, you could be better off than borrowing from the bank."

Mutual fund taxation
08/08/04   Funds
"If investors really understood the bizarre tax issues surrounding actively managed mutual funds they might think twice about investing."

From gluttony to class warfare
08/08/04   Management
"For corporate chief executive officers and hedge fund managers, the good times never stop rolling. Twenty years ago, CEOs made an average of 40 times more than the factory floor worker. Last year it was 400 times more, and is now climbing to a multiple of 500."

The tech stock opportunity
08/08/04   Tilson
"Despite my reservations about the tech sector, I actually think that it is -- or at least should be -- fertile ground for value investors for the simple reason that most of the investors in the sector are irrational, momentum-driven speculators."

An eerie calm
07/23/04   Markets
"Many financial catastrophes have been caused by selling options. The most famous came in 1995, when a rising star at a British bank sold 34,000 options on Japan's Nikkei 225, driving implied volatility on the world's second-biggest stockmarket from 22% to 11%. But share prices plummeted after the Kobe earthquake, volatility soared, and the bank went bust. The man's name was Nick Leeson and the bank was called Barings."

Let's get fund brokerage fees out in the open
07/22/04   Funds
"MERs are a great indicator of fund costs, except for one problem. They don't include the commissions the fund pays every time its manager decides to buy or sell some shares."

Reality vs. politics in accounting
07/22/04   Accounting
"Across the ocean, the House of Representatives voted 312-111 in favor of a bill that Warren Buffett has called "lunacy" but that the sponsors called the "Stock Option Accounting Reform Act." The bill would overrule the Financial Accounting Standards Board and let companies go on ignoring the value of options they give out."

Lots of cash, little to buy
07/22/04   Value Investing
"What sets the cash-heavy funds apart? Many of them, including FPA Capital Value and Longleaf Partners, are value investors that look for good, and even troubled, companies whose share prices have fallen below their actual worth. These funds found a wealth of opportunities during the sharp market downturn in 2001 and 2002, and reaped rich rewards in the strong recovery last year. But cash positions have ballooned this year as investors continue to throw money at the top value performers despite a chorus of warnings from their managers that prices are now too high and that little fits their criteria."

The economics of obesity
07/22/04   Health
"Our findings underscore the idea that social action can have unintended consequences: Oftentimes, there is a tradeoff involved in achieving goals that society favors, such as increased food production, more workforce participation by women, and fewer smokers. Lower real food prices have significantly increased living standards. Expanded labor market opportunities for women have increased families' command of real resources and increased equality of opportunity. Cigarette smoking is still the largest cause of premature death among Americans; pushing smokers to quit will have obvious health benefits. But our results and those of other economists also suggest that these efforts contribute to the rising prevalence of obesity."

419ers morph into Murder Incorporated
07/19/04   Crime
"It's easy to dismiss Nigerian 419 advance fee fraudsters as a bunch of chancers who prey on the gullible and the greedy and occasionally get lucky. After all, a fool and his money are soon parted, and the victims of these scams have brought financial misfortune on themselves, isn't that right?"

The tech stock discount
07/17/04   Tilson
"Whitney Tilson argues that tech stocks should trade at a discount, not a premium, to the earnings multiples of the market averages, and consequently, warns that tech stocks are valued at more than twice their fair value today."

The health of nations
07/16/04   Health
"Health care consumes a large and growing chunk of rich countries' income, but does it provide value for money?"

From alpha to omega
07/16/04   Funds
"Such strategies might make money when there are few players and lots of inefficiencies, but they are much less lucrative when there are many funds doing the same thing. Now that there are, for example, some 600 hedge funds specialising in credit (loans and corporate bonds), the inefficiencies on which they feed are much reduced, leaving the managers scratching around for other strategies or taking more risk. Generally, this means leveraging returns by borrowing more."

Injustice at the Justice Department
07/15/04   Law
"Republicans are criticizing John Kerry's choice for vice president because of John Edwards' trial lawyer background and connections. I'm hoping that maybe someone in the Bush administration will take this criticism to heart and do something about the most egregious trial lawyer operation of all time - the Bush administration's Department of Justice."

Can we trust the mutual fund industry yet?
07/14/04   Funds
"Despite the ongoing investigations, Spitzer and top regulators at the SEC have said in recent interviews that the worst of the fund industry scandals probably are now past."

Who's dumping on American consumers?
07/14/04   Government
"Do you like shrimp but wish it cost more? Need some bedroom furniture but hate getting a good deal on it? If so, you're very different from most Americans. You are, however, one of the few people who can rejoice in our national trade policies."

The 7 myths of highly effective plaintiffs' lawyers
07/14/04   Law
"Frederich Hayek in his opus, The Constitution of Liberty, wrote that "[t]here is probably no single factor which has contributed more to the prosperity of the West than the relative certainty of the law..." In the year 2003, American civil justice promises only the certainty of expense and a strange, relative sense of justice."

The trailer truth
07/13/04   Brokers
"Furthermore, if advisors are allowed to use misleading terminology to describe their services, I wonder what would happen if we were to re-brand trailers in the opposite direction - perhaps as "independence compromising bribes". Imagine having a financial advisor come up to you and say "I run a bribe-based practice". That would not only add to the frankness of the ensuing discussion, it would also explode the myth that most financial advisors are independent. In fact, most advisors fail to recommend many of the best fund companies' products because they can't bear to hand their clients a bill. In spite of this, they sanctimoniously insist they are independent - even though embedded trailers effectively limit the products they recommend. This arrangement allows some advisors to actually suggest that their financial advice is free, which is patently false."

The benefits trap
07/12/04   Stocks
"Workers bear the brunt of it. Bill Luoma, head of the Mahoning Valley Steelworkers Retirees Council, which counts bankrupt LTV retirees among its members, says that with their health insurance gone, many have stopped visiting doctors other than for emergencies. For companies struggling to compete in the global economy, carrying those burdens themselves is like strapping on a 200-pound weight to run a 40-yard dash. But to shed them is to leave decades of workers devastated. In the end, someone will have to pay. The only question is who."

Unbundling Canadian ETFs
07/12/04   Stingy Investing
"Consider two options for the truly long-term index investor. The first option is to purchase an iUnit ETF and the second option is to buy the index's stocks directly. At first glance, the choice between buying a low-cost exchange-traded fund that holds many stocks or buying each of the stocks directly appears to be obvious. The exchange-traded fund is likely to be the better bargain. However, buying the stocks directly may be better for some investors because the Canadian stock market is very small and it is dominated by a few big names. As a result, one might reasonably approximate an index fund by holding only a few stocks."

The economics of water in the West
07/12/04   Government
"The American West faces severe water shortages because of U.S. Government policies of this past century; the solution is not for the government to further assert itself, but rather to end the water socialism that it has imposed. The command system of economics that has led nations like North Korea and Cuba into ruin has also created the crisis in the West."

Biggest leveraged buyout ending as a costly fizzle
07/10/04   Stocks
"The greatest leveraged buyout ever is ending, not with a bang but with a whimper of loss. After 15 years of scrambling and pain, Kohlberg Kravis Roberts is through with its investment in RJR Nabisco and its afterlife of ownership of Borden Chemical."

With this debt, I thee wed
07/10/04   Debt
"Finally, it's worth mentioning that financial problems are one of the main causes of marital trouble. Olivia Mellan, author of "Money Harmony: Resolving Money Conflicts in Your Life and Relationships," has found that most couples have diametrically opposed spending habits, and it's not uncommon that one spouse enters the marriage with a mountain of debt. She offers one piece of advice: Share all your money secrets, but don't share the money."

Buffett lunch fetches $202,100
07/09/04   Buffett
"For about $200,000, you can buy two shares of Berkshire Hathaway Inc.'s stock -- or you can have lunch with its chairman, Warren Buffett."

Emerging markets, emerging risks
07/09/04   World
"Investors are once again buying emerging-market debt. A perilous punt, if ever there was one"

Global credit quality getting better
07/09/04   Bonds
"The rating agency says in a new report that the global speculative-grade default rate slipped to 3.3% in June, down from 3.4% in May and 4.2% at the end of the first quarter 2004. This marks the ninth consecutive quarterly decline in the global speculative-grade default rate since its January 2002 peak. Moody's default rate forecasting model indicates that credit quality is expected to improve into the second quarter 2005."

Bond mutual funds -- here's the best of a bad lot
07/09/04   Funds
"If you're buying bond funds today, a low MER is an absolute must. The manager of your bond fund is in a tough enough battle to make you money without bearing the weight of an overstuffed MER."

Can't banish budgeting? This software's for you
07/07/04   Thrift
"One of the reasons for the success of David Chilton's The Wealthy Barber was that it rejected budgeting on the belief that it doesn't actually work. Instead, he suggested the more commonsensical pay-yourself-first strategy, where you invest with money that you take off the top of your take-home pay rather than using what's left over after expenses are paid."

There's been a huge shift in how consumers spend
07/07/04   Economy
"Yet the shifts can be quite remarkable. In 1961, almost 53 per cent of all consumer spending went to what most of us might consider the necessities of life -- food, clothing and shelter. By 1981, that trio accounted for only 46 per cent of spending and by 2000, its share had dropped to just over 40 per cent."

Fuzzy math and stock options
07/06/04   Buffett
"I have no objection to the granting of options. Companies should use whatever form of compensation best motivates employees -- whether this be cash bonuses, trips to Hawaii, restricted stock grants or stock options. But aside from options, every other item of value given to employees is recorded as an expense. Can you imagine the derision that would be directed at a bill mandating that only five bonuses out of all those given to employees be expensed? Yet that is a true analogy to what the option bill is proposing."

Yield of dreams
07/05/04   Stingy Investing
"From 1970 to 2003 the top-yielding stocks outperformed the average stock by 1.9 percentage points a year. Their superiority was even higher if you looked at just the period between 1984 to 2003, when they showed an average annual advantage of 2.1 percentage points. And it was higher still if you focused on 1994 to 2003, when high-yield stocks beat the average stock by an average 2.2 percentage points a year."

Sensible reforms resisted
07/05/04   Management
"Chances are, you suffered a round of belt tightening at work last year. Well, don't think the boss was sharing the pain."

When funds have to show their hand
07/04/04   Funds
"While fund companies' actual votes are not yet public, their voting guidelines are. And an analysis of the issues that fund companies care about - or do not - is revealing."

Debts on homes rise for elderly
07/04/04   Debt
" As Americans have rushed to borrow at historically low interest rates, an unlikely group has led the charge: the elderly."

Secrets behind a successful media company
07/04/04   Buffett
"The Washington Post Company adopted its 'no quarters' stance under the guidance of Warren Buffett, who bought $10 million of stock in the company during the recession of 1974 and joined the company's board that same year. 'My mother realized that he was the smartest businessman she had ever met,' said Graham. Buffett's input 'has been worth billions to the company.'"

Keep your eye on a few basics
07/03/04   Value Investing
"Although investing is a subtle and complicated endeavor, everyone can benefit from a simple set of rules and principles."

Inflated expectations
07/03/04   Markets
"If money is too cheap, then rates of return will fall, companies will tend to use capital rather than labour, and people will spend money on riskier assets; on things that have little to do with underlying economic growth; and on things that are in short supply. As it happens, this is a decent description of America in the past few years. Companies have been slow to hire workers even as the economy has bounded along; and workers' share of national income is very low. The low cost of capital has, moreover, encouraged speculation in risky assets, such as emerging markets, or - closer to home, as it were - property."

The joy of cash
07/02/04   Tilson
"Value investor Whitney Tilson scours the investment universe regularly, but says he's found few juicy pitches. So he coolly bides his time and holds onto his cash. Should he worry? Not according to Warren Buffett and other superinvestors."

ETF tracking error needs improvement
06/30/04   Indexing
"iShares ETFs have not performed quite as well as Vanguard conventional mutual funds with the same target index, three new studies show. Vanguard's funds have generally beaten the indexes, while iShares have slightly underperformed them."

The fallacies of shrimp protectionism
06/29/04   World
"Why is the U.S. shrimping industry in decline when U.S. shrimp consumption is on the rise? The reason, contend domestic shrimpers, is that foreign shrimp farms are dumping shrimp on the U.S. market."

Buffett on the block
06/29/04   Buffett
"So if you can scrape together the minimum bid of $25,000, you might have a shot a dining with the Oracle of Omaha."

Suits on the lam
06/27/04   Crime
"Corporate chiefs wanted by the law can run, but can they hide?"

Waterloo, Waterloo
06/27/04   Markets
"Why is volatility so low in financial markets?"

In search of greener grass in the U.S.
06/27/04   Taxes
"But this raises the question: Will you always be better off living and working in the United States than in Canada? It's an important question, because more Canadians than you can shake a hockey stick at have considered taking job offers in the United States. The "brain drain" continues. The answer as to whether you'll be better off financially really depends on where you're moving from in Canada, and where your destination is in the United States. You've got to consider both tax rates, and the cost of living when making the comparison."

The search for low-fee investments
06/27/04   Funds
"And it happens in the fund world that low fees and good returns often go hand in hand. Some prime examples: Phillips Hager & North, McLean Budden, Beutel Goodman, Saxon Funds, Chou, Mawer, and Leith Wheeler."

Seg funds
06/25/04   Funds
"The cost of owning segregated funds has escalated so quickly since the late 1990s that they have become a luxury many investors can't afford."

Institutions as the cause of growth
06/24/04   World
"Economic institutions encouraging economic growth emerge when political institutions allocate power to groups with interests in broad-based property rights enforcement, when they create effective constraints on power-holders, and when there are relatively few rents to be captured by power-holders."

1973 Revisited?
06/24/04   Dreman
"Now a number of prominent strategists say the sharp spike in oil prices makes today look eerily like 1973. Are they right?"

PHN's entrepreneurial spirit keeps its costs low
06/23/04   Funds
"It's one of Canada's best-run mutual fund companies -- and one of the most difficult in which to invest."

It's not how it performs, it's about commission
06/23/04   Funds
"When it comes to fees, it's always been thus. Even when its funds boasted red-hot performance, Altamira Investment Services Inc. couldn't catch on with the broker crowd. But when the company struck a deal with Triax Capital Holdings Ltd. that saw advisers earn a 6-per-cent selling fee on a small-cap Altamira-managed fund, it suddenly had a $200-million hit on its hand."

How we probed the churn patterns
06/21/04   Funds
"The aggregate annual profits for the market timers were calculated by attributing all churn in excess of the benchmark standard to rapid in-and-out trading. And finally, we calculated the impact on the funds' assets by applying Mr. Zitzewitz's estimate of 60 to 70 basis points in profit pocketed by the market timers for every round trip."

Select few reap unfair gain
06/21/04   Funds
"Eric Zitzewitz, an assistant professor of economics at Stanford University's business school, whose research has been cited in court documents, estimates that the dilution created by market timers costs average shareholders in international mutual funds 1 to 2 per cent of their assets each year."

Please give me a housing bubble
06/19/04   Markets
"Today, we begin a series on housing. I have found the research to be fascinating and often surprising and contradictory. I trust you will find it useful, and it is almost guaranteed to be debated, as I will depart from the Conventional Wisdom of both housing bull and bears."

CRA interest rate cut means opportunity
06/19/04   Taxes
"You can bet the rate won't stay this low for long. You see, this falling rate presents a great opportunity for thousands of Canadians to save tax on certain loans. I want to discuss spousal loans today."

In the shadows
06/19/04   Government
"The informal economy is neither small nor benign"

Gross exaggeration?
06/18/04   Gross
"When somebody as smart as Bill Gross warns of trouble in the economy, it's usually worth a listen."

So your cottage is worth a fortune?
06/18/04   Taxes
"Cottagers, the taxman is stalking you. Beware if you own a cottage that has soared in value over the past few years."

Investors as pecking pigeons
06/18/04   Tilson
"Whitney Tilson shares some lessons from his trip to Italy, plus two studies that provide insight into investor irrationality."

Pension pain
06/17/04   Government
"Convincing young workers to support a population of retirees steadily growing proportionally as well as numerically is a tough political sell. Labor Department data for defined-benefit pension plans show that the ratio of contributors to recipients, which had exceeded 3 to 1 in 1980, now stands even at 1 to 1, and will dip even lower over the next several years."

Taking your portfolio abroad
06/16/04   Indexing
"Watch those costs. Pay special attention to expenses and fees, which are generally higher in foreign funds than domestic funds."

Link found between candor, share prices
06/15/04   Management
"Honesty is the best policy, if a company's leadership wants a better stock price. That's the conclusion of the Rittenhouse Rankings survey, which claims that there's a positive correlation between candid communication and superior share-price performance. Of the sample 100 Fortune 500 companies surveyed, the top-ranked ones boosted their share prices over a two-year period by 21.5 percent, while bottom-ranked companies saw only a 7.3 percent increase."

A brief history of high yield stocks
06/13/04   Stingy Investing
Stocks that sport a healthy dividend yield are often derisively called 'widow and orphan' stocks to reflect their stable nature. As it turns out, widows and orphans have been onto a good thing.

Understanding downside risk
06/13/04   Funds
"By seeing how they perform during the worst times, we have a better understanding of how these investments will react to future periods of stress. By predicting the worst, the investor gains insight."

Index fund investment is simple, stress-free
06/13/04   Indexing
"The perennial gripe against index funds is that they're just average. Would you want to send your kid to an average pediatrician? Or have your transmission overhauled by an average mechanic? What's ironic about index funds, however, is that investors who settle for average market performance will usually end up richer than the investors who stick with portfolio cowboys who aim for shoot-out-the-lights returns."

Curve balls
06/12/04   Markets
"A year ago, the Federal Reserve was worried about the spectre of deflation. Now it is concerned about the opposite"

The Kings and Queens of mean
06/10/04   Thrift
"Here are 20 more rich and famous people who keep a tight grip on their dosh"

06/07/04   World
"Australia's housing bubble could be the first to burst. It won't be the last"

Joint ownership can lead to problems
06/06/04   Taxes
"Joint tenancy with right of survivorship is different. The survivorship feature means that when an individual joint tenant dies, the deceased person's interest is automatically distributed to the remaining joint tenants. Think of this as a "winner takes all" game. The asset will pass to the surviving owners outside of the probate process. The result? Probate fees are avoided."

Creating sound governance
06/06/04   Bogle
"Yet corporate democracy is currently conspicuous by its absence from the governance scene. As the legendary Benjamin Graham put it, "in legal rights and machinery, the stockholders as a class are king . . . they can hire and fire managements and bend them completely to their will. But the assertion of their rights in practice is almost a complete washout. Unless prodded violently into action, they show neither intelligence nor alertness. They vote in sheep-like fashion for whatever management recommends, no matter how poor the record of accomplishment may be. . . The leading investment funds could contribute mightily to the improvement of corporate managements . . . but have shied away . . . missing a great opportunity for rendering service to the investing public." And so it remains today."

To tilt or not to tilt
06/06/04   Indexing
"At the end of the day, the gap between low-cost open-end index funds and ETFs is a crack in the sidewalk. The gap between either of these and the average actively managed fund is the Grand Canyon."

Two solitudes over disclosure
06/06/04   Brokers
"Why are fund companies and securities dealers so at odds with investors?"

Munger goes mental
06/04/04   Munger
"Charlie Munger, the famed right-hand man of Warren Buffett, gave a brilliant speech last October at the University of California, Santa Barbara. With Munger's permission, Whitney Tilson is publishing a transcript for the first time -- a Motley Fool exclusive! -- and shares the highlights in this column."

Academic economics
06/04/04   Munger
"Mr. Munger's achievements are very great. They are too numerous for me to detail here. He attended Caltech and Harvard, and in addition to being Vice Chair at Berkshire Hathaway, he's the chair of a major legal newspaper corporation and also Wesco Financial Corporation. He's the President of the Alfred C. Munger Foundation, a philanthropic foundation named after his father. He's on the Forbes 400 list - and what makes that achievement remarkable is that he got there the old fashioned way: He earned it."

The march on Moscow
06/02/04   World
"Caveat emptor is a phrase that might have been specifically invented for investors in Russia"

T.O. condos' foundation gets shaky
06/02/04   Markets
"So why do housing prices in Toronto and other parts of the country keep rising at unusually high rates? It's certainly not lack of supply, nor an extraordinary rise in household incomes. Low mortgage rates and the herd mentality are the more likely causes. Buyers seem to be buying because they think the price this month will be cheaper than next month. Speculators have piled in, and are thought to own up to 40 per cent of new condos. We know interest rates are going up. We know the supply of unsold condos is at a near record high. We know herds can reverse direction in an instant. Looks like a bubble ready to burst."

Detour on easy street
05/31/04   Markets
"Random-walk theory is based on a highly sophisticated series of mathematical, statistical, and historical studies, all with a simple conclusion: "No one can consistently beat any investment market if the market is large and allows open entry." This conclusion comforts academic economists, who find in it solace for the fact that they, despite their Ph.D.'s, cannot beat the stock market or the bond market. The unstated corollary of random walk theory is this: "Warren Buffett is a myth.""

Bonds vs. psychics
05/30/04   Bonds
"Bond transactions don't have to be reported publicly, ever. And the fact that the dealer's profit is embedded in the price makes it impossible to figure out if you got a good deal. So I've concluded that the market for psychic advice is more efficient than the one for savings products."

When death and taxes are charitably intertwined
05/29/04   Taxes
"At the time of my death, I want to leave a gift that benefits Carolyn, but benefits a specific charity as well. How? I can give to charity in my will, providing me with a donation credit in my year of death, which will save me tax. At the same time, I can provide Carolyn with the income, during her lifetime, from those same investments that I'm leaving to charity."

Derivatives explosion
05/29/04   Derivatives
"Warren Buffett, the American who has been one of the world's most successful investors for the past 40 years, warned shareholders in his Berkshire Hathaway company last year that derivatives were "time-bombs both for the parties that deal in them and for the economic system". "Large amounts of risk, particularly credit risk, have been concentrated in the hands of relatively few derivative dealers who, in addition, trade extensively with one another. The troubles of one could quickly affect the others," he wrote."

Food for thought
05/28/04   World
"The world economy looks very different once countries' output is adjusted for differences in prices"

Real debate during the campaign? Don't hold your breath
05/27/04   Government
"The problem is that policy debate requires a willingness to engage in honest discussion. How exactly might different policies work? How they might interact? Would some reinforce others, or weaken them? What are their weaknesses as well as their strengths? Smart politicians know these are legitimate questions. When in power, they ask such questions of themselves and their officials. But once a campaign begins, politicians must always present themselves to the public as promoters of policies that are 100-per-cent workable, wise and wonderful for all, even though they know that all policies involve difficult tradeoffs. Hard choices are not to be shared with the public."

One man's quest for redress ends happily
05/27/04   Brokers
"Justice for people who were burned by their investment advisers is such a rare commodity that it's worth celebrating even a single victory. So, let's take a look at the story of Ernest Wotton and the cheque for $52,353 that his onetime brokerage firm wrote him not too long ago."

Empty mansions
05/25/04   Markets
"The Cromer family's mistakes are elementary. You don't finance a long term asset, like a house, with 5 year money. You don't finance an asset with a fixed money yield with floating rate debt. You don't enter into commitments that leave you substantially under water on an operating basis month by month, with the expectation that an ever rising real estate market will bail you out. Investors who make these mistakes on a single property, or on a portfolio of properties that is modest in terms of their overall assets, may survive the downturn by investing more cash, derived from other areas. Investors like the Cromers, who make these mistakes on such a large scale in relation to their finances are bound eventually to find out the hard way what sound financing means."

Profits do not cause high prices
05/24/04   Economy
"To put it another way, the current rise of profitability in the oil industry is temporary. At the same time, the U.S. Government, through environmental and tax policies, is doing all it can to make gasoline artificially scarce. As noted in a previous article, it has been about 30 years since an oil refinery was built in this country. Furthermore, environmental laws both encourage the importation of gasoline into the USA, but also discourage foreign producers from making the products that must comply with a crazy quilt of air quality regulations. That is nothing less than a prescription for very limited supplies of gas, with substantially higher prices becoming the norm."

Oil: Still at its mercy
05/23/04   Economy
"The world economy remains vulnerable to the price of oil"

Fees upon fees
05/21/04   Indexing
"One of things that can be really insidious if left unchecked, however, are the fees on fees associated with a number of so-called 'actively managed' mutual funds."

Buffett continues to sell
05/20/04   Buffett
"In addition, although Berkshire's cash position increased to a staggering $41 billion in the latest quarter, the company did not make any additions to its equity portfolio."

Income trust investors to be sheltered from liability
05/20/04   Trusts
"The Ontario government is moving to make it legally clear that investors in publicly traded income trusts cannot be held liable for the activities of the trusts."

Dig deeper
05/20/04   Funds
"Canadians like to take the moral high ground when it comes to comparisons with the U.S. We wisely stayed out of the invasion of Iraq, and we like to rein in the free market when it comes to health care. That same sense of superiority, however, could be blinding us when it comes to the Canadian mutual fund industry."

CPI doesn't reflect the world we live in
05/18/04   Economy
"In science fiction, the device of the parallel universe is often used to explore fanciful ideas about alternative realities. Something similar seems to be going on these days with Statistics Canada's consumer price index, which is the definitive inflation measure in this country. The CPI is widely quoted by the media, an essential tool for economists, a key factor in establishing annual pay increases and an integral element of sensible financial planning. But these days, the CPI reflects a world that doesn't look much like the one many of us live in."

Ottawa suspends restrictions on income trusts
05/18/04   Trusts
"Minister of Finance Ralph Goodale today announced that the Budget 2004 proposals to limit investment by pension funds in business income trusts will be suspended to allow for further consultations. The measures were originally proposed to take effect January 1, 2005."

Warren and me
05/18/04   Buffett
"Never did I imagine, when I was a little girl growing up in an Illinois village encircled by farms, that I would ever sit in the same space with America's second-richest man and his billionaire buddy. Yet, at the recent Berkshire Hathaway annual meeting in the Omaha Convention center, Chairman Warren Buffett and Vice Chairman Charlie Munger carried on what felt like a personal conversation with me -- amid 19,499 others."

Case expands type of lies prosecutors will pursue
05/18/04   Law
"Until last month, lying to your own company's lawyers was not a crime. Now it is."

Super-duper shares yield super-duper pay
05/16/04   Stocks
"Or maybe I should be thinking of him as a consultant, a very valuable and highly paid consultant whose hourly rate deserves to surpass almost any other professional in Europe. Let's see -- at eight hours a day, seven days a week, 52 weeks a year, what would Mr. Stronach's hourly rate come to? Hmm, I get over $13,000 an hour. And I thought my lawyer was expensive!"

The bonds from Brazil
05/16/04   World
"Though prices subsequently recovered a bit, emerging debt probably has further to fall. The Fed's drip-feed of low interest rates and investors' ravenous appetite for risk enabled many emerging countries and companies in them (notably, Russian firms) to borrow remarkably cheaply in the capital markets, despite a multitude of deep-seated problems."

Stock options can generate a nasty surprise
05/15/04   Taxes
"Today, many former JDS Uniphase employees are feeling the same way. You would, too, if the taxman handed you a tax bill of about $276,000 on income you feel that you never had. There's a tax lesson to be learned here."

Take lid off inside sales before IPOs
05/14/04   Stocks
"But one loophole still remains, and it is being used by, a software company that will soon go public. One indicator that investors look at in initial public offerings is whether the insiders are cashing out. The fact they are selling their shares does not prove the offering is overpriced, but it is not a good sign."

Maverick managers hit on brainwave
05/14/04   Funds
"They're making peanuts, working in a small room in the basement of one of the partners' homes. But they have a point to prove. The mutual fund business is failing, they say, because it places too much emphasis on collecting assets and charging high fees and creating new, flavour-of-the-month funds, and too little on making money for their customers -- mostly middle-class investors who have few other options because they're not rich enough to qualify for higher-end, lower-cost investment counselling services."

A Dynamic Duo
05/13/04   Stingy Investing
Two remarkable value gurus provide free advice in their regular reports. Naturally, these reports should be on every investor's reading list.

U.S. watchdog calls for end to trailer fees
05/13/04   Funds
"Ralph Lambiase, president of the Washington, D.C.-based North American Securities Administrators Association, calls for the changes in comment letters to the U.S. Securities and Exchanges Commission. Lambiase wants the SEC to eliminate mutual fund 12b-1 fees, which are similar to trailer fees in Canada. He also suggests that requiring mutual funds to impose a minimum holding period for fund shares would more effectively curtail market-timing abuses than the imposition of a mandatory 2% redemption fee."

Insights from the monsters of stock
05/13/04   Value Investing
"Whenever value investors get together to talk about stocks, the usual topics come up: margins of safety, intrinsic value, price/book, and economic moats. While those subjects were raised here as well, there were some new insights I gleaned from listening to the masters speak. Here are a few of them."

Why I like Saxon
05/12/04   Funds
"There are several good boutique fund comnpanies in Canada. One of my favorites is Saxon which offers some of the best performers in the industry plus the important advantage of a low cost structure and no load charges."

Presto stays its course
05/12/04   Stocks
"Presto's an interesting story. In the 1960s and 1970s, both Benjamin Graham and Warren Buffett heaped praise on the company and its management, with Buffett calling Melvin Cohen one of his "home run hitters" at a time when Buffett's partnership held Presto stock."

The echoes of history
05/11/04   Markets
"As the Fed prepares to raise interest rates, the financial markets are bracing themselves for a reversal of fortune every bit as painful as the one they suffered ten years ago"

They're called trailing commissions
05/11/04   Funds
"In the more than 10 years I've been a financial advisor, the very vast majority of financial advisors have referred to those ongoing payments made from mutual fund companies to advisors as "trailer fees". The media has gotten in on the act, and they too use this terminology. The trouble is, if you look at any prospectus for any fund where ongoing advisor payment is involved, you will see that these are legally referred to as "trailing commissions". Simply calling them fees doesn't make them fees."

Are DSCs finally on their way out?
05/09/04   Funds
"Clients are beginning to appreciate fully the wiggle room they have in picking products, negotiating fees and choosing their contracts. Advisors, in turn, will probably need to focus more on support, and be willing to negotiate fees."

The sleaziest show on Earth
05/08/04   Funds
"Most investors should steer clear of hedge funds. Lush pay has lured the best and brightest to hedge funds, says Michael Price, a hugely successful money manager. But "unless you've got at least $5 million to invest, hedge funds are not worth the risk and fees. Mutual funds will get you where you want to go, so screw hedge funds." With more polite language, Warren Buffett said the same thing at the Berkshire Hathaway meeting recently. A word from the wise."

Earn a solid return in the slow lane
05/08/04   Funds
"By putting your clients in a dividend fund you'll not only help them beat the market but also minimize their exposure to risk in their portfolios"

Notes from Wesco's 2004 annual meeting
05/07/04   Munger
"Whitney Tilson's lengthy notes [.DOC File]"

Charlie Munger in rare form
05/07/04   Munger
"Charlie Munger, who runs Wesco Financial, is the famed right-hand man of Warren Buffett. He is also a master investor in his own right. At Wesco's annual meeting on Wednesday, he shared his wisdom on keys to investment success, the importance of moral behavior, the outlook for Berkshire, and more."

Arnold's big chance
05/06/04   Economy
"The result is a miracle of private enterprise. In 2002, some 35m Californians generated a gross state product of $1.4 trillion, making theirs the sixth-largest economy in the world. If Los Angeles County, home to 10m people, were a separate country, it would be the 16th-biggest economy in the world, just above Russia (see chart 1). And it is not just a question of size, but of influence."

Warren Buffett and his 20 punches
05/05/04   Buffett
"At the Berkshire Hathaway annual meeting this past week, Charlie Munger dismissed the idea that highly liquid capital markets have been a net benefit to capitalism. This assertion made Bill Mann think back to Warren Buffett's old challenge to investors: Make each transaction as if you only get to invest in 20 companies in your lifetime. Would your portfolio look different?"

Warren Buffett dishes out advice
05/05/04   Buffett
"To watch Warren Buffett and Charlie Munger perform on stage is like witnessing one of the great double acts."

Notes from the 2004 Berkshire Hathaway meeting
05/03/04   Buffett
Whitney Tilson's lengthy notes [.DOC File]

Buffett's wit and wisdom
05/03/04   Buffett
"Berkshire Hathaway's annual meeting is a great place to go for investing wit and wisdom from Warren Buffett and Charlie Munger. Whitney Tilson was there this year, and in this column he shares some of the duo's choice comments on how to become a better investor, the irrationality of financial markets, stock options, executive compensation, Google's owner's manual, and more."

What Warren Buffett wants you to know
05/03/04   Buffett
"How do you learn from a master? Start by listening to what he has to say."

Munger crowd favorite at Berkshire meeting
05/02/04   Buffett
"And while Buffett often tries to qualify some of his criticisms, Munger, Berkshire's vice chairman, pulls no punches. "I would rather stick a viper down my shirt than hire a compensation consultant," Munger said in a discussion about determining management salaries that create proper incentives."

Berkshire Hathaway millionaires gather
05/02/04   Buffett
"This year, as in the past, several business school professors brought their entire classes to the meeting. The scene was strikingly different when Mr. Scargle attended his first meeting in 1979, held in the cafeteria of National Indemnity, Berkshire's first insurance company. About 25 people attended, Mr. Scargle said, most of them employees and relatives of Mr. Buffett."

You have the right to question taxman's assessment
05/02/04   Taxes
"After filing your tax return, you can expect to receive a notice of assessment from the taxman within eight to 12 weeks. If you disagree with Canada Revenue's assessment of your tax return, don't let it go."

Think quality over cost
05/02/04   Growth Investing
"When Philip Fisher died recently at the age of 96, it suddenly struck me that being a wise and patient stock-market guru may be the best route to a long life."

Folksy fun at Buffett meeting
05/01/04   Buffett
"The excitement ran high this morning as more than 16,000 Berkshire Hathaway shareholders converged on the Qwest Center in Omaha for Warren Buffett's annual meeting."

Warren Buffett, rock star
05/01/04   Buffett
"Leave it to Warren Buffett to figure out how to combine America's two greatest passions about money: making it and spending it. Who but Buffett would have the nerve to kick off his annual shareholders' meeting in a jewelry store?"

Warren Buffett ready to hold court
04/30/04   Buffett
"At a time when a $31 billion pile of cash is testing Warren Buffett's investing prowess more than ever, thousands of shareholders head to Omaha this weekend hoping for clues to his next move."

There goes the neighborhood
04/30/04   Markets
"Only in about 20 metro areas, mostly located in eight states, does the relationship of home price to income defy logic. The bad news is that those areas contain roughly half the housing wealth of the country. In California, the price of a home stands at 8.3 times the annual family income of its occupants; in Massachusetts, the ratio is 5.9:1; in Hawaii, a stunning, 10.1:1. To some extent, there are sound and basic economic reasons for this anomaly: supply and demand. Salaries in these areas have been going up faster than in the nation as a whole. The other is supply: These metro areas are "built out," with zoning ordinances that limit the ability of developers to add new homes. But at some point, incomes simply can't sustain the prices. That point has now been reached. In California, a middle-class family with two earners each making $50,000 a year now owns, on average, an $830,000 home. In the late 80s, the last time these eight states saw price-to-income ratios this high, the real estate market collapsed."

Interest-only mortgages gain popularity in U.S.
04/29/04   Markets
"Another risk with IO loans is that a drop in the value of a home during the initial period of interest only payments could prompt some owners to walk away without paying off the mortgage because no equity is at stake."

Canadian GIC RATs
04/28/04   Academia
"More precisely, any Canadian investor whose marginal tax rate exceeded 35.5% earned, on average, a negative RAT return from 1-year GICs which were continuously rolled over during the last 30 years. And, for longer maturity 3-year and 5-year GICs typically greater -- the breakeven tax rate was only slightly higher. We conclude by arguing that for many Canadians, the strategy of rolling over so-called riskfree GICs outside of a tax shelter is a sure way to destroy long-term wealth."

Advisers should stop whining about DIY investing
04/27/04   Brokers
"Do-it-yourself investors are naive, uninformed, overconfident and, above all, a danger to themselves. These are facts. Just ask a financial adviser. We've had some real insight into the thinking of some advisers over the past couple of weeks thanks to a controversy over whether self-directed investors should have access to low-cost mutual funds."

In defence of dividends
04/27/04   Value Investing
"Share buybacks may be easily sold to analysts, but do shareholders really win when money is returned to them as BP is proposing to do?"

Citadels of dead capital
04/26/04   World
"The American experience is very much like what is going on today in the Third World and the formerly communist countries: The official law has not been able to keep up with popular initiative, and government has lost control. Third Worlders are organized in modern-day claim clubs, and their governments have begun to give them preemption rights."

Why investors get it wrong
04/26/04   Dreman
"Investors, even professionals, fall prey to important logical fallacies and psychological failings . . . the bottom line is that these powerful forces lead most people to make the same mistakes time and again"

Define value investor: Dreman gives it a shot
04/25/04   Dreman
"If you buy value stocks, on the whole, they have pretty long histories. If you buy Berkshire Hathaway, you know it's been around for over 30 years, so you know the accounting is not going to be funny. If I buy a bank stock, a company with a long record, there's not going to be too much funny with the accounting. Another good indicator is that it pays a good dividend. They've obviously got a good cash flow. I think the real problem is with companies that are less than a decade old, that had a lot of fancy accounting, like WorldCom, Tyco, Global Crossing. All of these were new market companies, and the accounting was very shoddy to start with. Nobody knew what the real assets were."

A better way to invest
04/25/04   Indexing
"The approach to investing suggested in this guide, equally valuable for mainstream and wealthy investors, has been made possible by exchange-traded funds and the Internet (specifically online brokerages). Exchange-traded funds provide diversification and ease of management at remarkably low cost. The Internet cuts costs, removes intermediaries, and empowers the customer."

Small names are big winners
04/24/04   Funds
"Quiet professionalism speaks loudly in this year's ranking of the best mutual fund families. McLean Budden is No. 1, followed by Phillips Hager & North Investment Management in second place and Mawer Investment Management in a fourth-place tie. Each is a no-load fund family run by a company that gives unitholders the benefit of its expertise in managing money for pension funds, foundations, not-for-profit organizations and high-net-worth types. Haven't heard of them? That's because these companies let money come to them rather than going after it with big marketing budgets and by paying big commissions to financial advisers who sell their products."

Why Las Vegas is a geezer magnet
04/24/04   Economy
"Nevada is still young. Only 11.7% of the population is 65 and over. That's under the national average of 12.7%. Florida tops the list at 18.1%. Arizona clocks in at 13.2%. Are all the new arrivals here young? Some, yes. But Nevada is a geezer magnet. By definition, Las Vegas is as well, since it accounts for three-quarters of the state's population. How big a geezer magnet? The biggest. Nevada topped the list for states with net migration of people 65 and over from 1995 to 2000. Arizona placed second. Florida third."

The rewards of a long view
04/23/04   Growth Investing
"Phil Fisher began managing money in 1931. He was teaching at Stanford University 70 years later. In between, Fisher formulated a clear and sensible investing strategy, wrote one of the best investment books of all time, "Common Stocks and Uncommon Profits," and made a good deal of money for himself and his clients."

The economics of outsourcing
04/21/04   Economy
"For all of the popularity of their arguments at this time ssical fallacy of goods deriving their value from the costs of production. Should they succeed in forcing their views into law, we can be sure that the ultimate outcome will that which befalls any society that gives into protectionism: a lower standard of living and, in the end, even more joblessness."

The investors' advocate
04/21/04   Bogle
"Fifteen percent of the money in equity mutual fundsnearly $600 billionis invested in low-cost index funds. Investors have one man to thank for making that option available to them: Jack Bogle, founder of the Vanguard mutual fund group and creator of the first index fund in 1975."

Thieves don't quit
04/21/04   Crime
"The G-men were all over Terry Dowdell. But their feverish efforts didn't stop him from running a $120 million Ponzi scheme."

Warnings to be ignored
04/20/04   Markets
"American banks continue to make vast profits. Will the good times end when the Fed raises interest rates?"

Why legendary investors are drowning in cash
04/19/04   Value Investing
"By the same token, when several of the very best managers all say they are having an extremely difficult time finding anything to buy at prices that make sense -- not just in the U.S. stock market, but in the bond arena and foreign markets, too -- it's worth paying attention. In fact, it's remarkable how many top-flight managers currently have more than 20% of assets in cash and say they find compelling opportunities scarce to nonexistent."

Do advisors fear F class units?
04/19/04   Brokers
"If pressure from advisors was at least partially to blame for E&P's and AIM-Trimark's withdrawal from E*Trade's initiative, it's likely that those advisors aren't truly confident in the value of their advice - a sad statement for any professional."

Reformers' proxy votes polarize governance debate
04/18/04   Buffett
"By taking aim at American business icons Warren Buffett and Sanford "Sandy" Weill, reformers seeking to prevent fresh scandals from ripping apart corporate America have gone too far, critics say."

True value stocks different from those in value funds
04/18/04   Funds
"The reason value mutual fund managers have not outperformed growth mutual fund managers is that the terms "value" and "growth" as used by almost all mutual funds these days is nothing but marketing spin. Sure, there will be periods when the growth funds outperform the value funds and vice-versa, but over time the returns of the two groups even out. The fact remains that value mutual funds do not own "true" value stocks."

AT&T Wireless self-destructs
04/17/04   Management
"The story of a botched CRM upgrade that cost the telco thousands of new customers and an estimated $100 million in lost revenue. Hard lessons learned."

Enter Berkshire meeting for $2.50
04/17/04   Buffett
"The price of admission to Berkshire Hathaway Inc.'s annual meeting is at least $3,077 for the cheapest share. Billionaire Chairman Warren Buffett just dropped it to $2.50 a pass, shipping included."

Eastward ho!
04/17/04   World
"Japanese consumer demand is picking up, wholesale prices are rising and the stockmarket is buoyant. Is the world's second-largest economy finally coming out of its deflationary spiral?"

Funds' dirty little secrets
04/17/04   Funds
"The more time I spend in the money management industry, the more I learn about the nearly infinite number of ways that investment firms can take advantage of their investors. All sorts of abuses result from the combination of motive -- there's big money at stake -- and opportunity. Even sophisticated investors (of which there are few) aren't aware of or can't detect certain activities."

Can't miss tips for late season filers
04/17/04   Taxes
"Tax season is in full swing, and thousands of Canadians will be filing their returns in the next two weeks. Many have filed already, but procrastinators abound at tax time. Let's face it, the tax preparation task is about as exciting as shopping for snow tires -- so what's the hurry? The good news? Last minute doesn't have to mean lost money. There may still be opportunities to save tax dollars as you file your 2003 tax return. Consider the following list of can't-miss tax-saving measures."

Surprise! Higher Dividends=Higher Earnings Growth
04/16/04   Academia
"We investigate whether dividend policy, as observed in the payout ratio of the U.S. equity market portfolio, forecasts future aggregate earnings growth. The historical evidence strongly suggests that expected future earnings growth is fastest when current payout ratios are high and slowest when payout ratios are low. This relationship is not subsumed by other factors, such as simple mean reversion in earnings. Our evidence thus contradicts the views of many who believe that substantial reinvestment of retained earnings will fuel faster future earnings growth. Rather, it is consistent with anecdotal tales about managers signaling their earnings expectations through dividends or engaging, at times, in inefficient empire building. Our findings offer a challenge to market observers who see the low dividend payouts of recent times as a sign of strong future earnings to come."

How big can it grow?
04/15/04   Stocks
"The world's biggest retailer is defying its critics by continuing to grow vigorously"

Who says inflation is down?
04/14/04   Economy
"The U.S. is supposed to be in a low-inflation environment, but my experience doesn't reflect that. Gas prices are high, home prices are out of sight, medical expenses are rising...I just don't see that inflation is all that low. What gives?"

Even a small interest rate rise will take shine off REITs
04/13/04   Trusts
"It's not that the real estate trusts are doing anything wrong; but neither are they doing as much right as their astounding stock charts would suggest. Their market success has been driven by interest rates, making U.S. Federal Reserve Board chairman Alan Greenspan the hero of the sector. Getting an 8.8 per cent return from Summit looks decent against guaranteed investment certificate returns that you need a microscope to see."

Buffett's Coke role questioned
04/12/04   Buffett
"The problem, according to ISS is that companies controlled by Mr Buffett's Berkshire Hathaway investment firm buys millions of dollars of products from Coca-Cola every year."

Unemployed in '03? Here are some tax tips
04/10/04   Taxes
"Today, I want to share some tax tips with those who may have been unemployed at some point in 2003."

Russell gains are no small thing
04/10/04   Value Investing
"Towle, a deep-value investor who usually does most of his prospecting among small-caps, says he can't find anything to buy."

Be braced for a bust as the bubble bursts
04/10/04   Markets
"The least desirable asset in the world is US dollar cash. The investment community can take everything in stride - even a 70 per cent decline in Nasdaq stocks. But interest rates, as low as they are now, compel people to speculate on everything from commodities to homes and bonds to equities."

Loss of AIM mars E*Trade's cheaper investing bid
04/08/04   Brokers
"A breakthrough in low-cost investing has fizzled because of a mutual fund company's trepidations."

Where to find hot deals when picking a stockbroker
04/07/04   Brokers
"Attention, Kmart investors. Value investing is our theme today. Not the typical value style, which is to find undervalued stocks. Instead, we're searching for the best values in stock-trading commissions. The cheapest of the cheap, if you will."

CEO pay up again
04/07/04   Management
"The rebound in U.S. corporate profits and return of the stock-market bull last year stoked a 16 percent raise in 2003 cash pay for America's top executives, most of the gain coming from a 20 percent rise in CEO bonuses."

McLean Budden chops MERS again
04/06/04   Funds
"McLean Budden Ltd. said it is cutting its management fees on all of its mutual funds, making them among the lowest in the industry."

Snowdrifts of debt
04/06/04   Government
"Debt is an institution in American government, long established and widespread. A cursory glance at debt statistics will quickly show that there has been a lull in the truth about debt, namely, that it cannot grow indefinitely at the rate at which it has been growingat least not without a serious revaluation of the dollar, something we are already in the midst of seeing."

Hard line on 'soft dollars'
04/06/04   Funds
"Critics of the system and they are growing by the day point to the obvious potential for abuse. When the SEC did a study of soft dollars in 1998, it found that some of these credits were used to buy theatre tickets, limousine rides and even interior design services."

Altering of worker time cards
04/04/04   Management
"Experts on compensation say that the illegal doctoring of hourly employees' time records is far more prevalent than most Americans believe. The practice, commonly called shaving time, is easily done and hard to detect a simple matter of computer keystrokes and has spurred a growing number of lawsuits and settlements against a wide range of businesses."

04/04/04   Stocks
"A big brewing merger prompts a rethinking of shareholders' rights"

Strangest taxes
04/04/04   Taxes
"You might pay taxes on illegal drugs, Pepsi, playing cards and being a star. And that's not all."

A rite of spring
04/03/04   Markets
"In the spring of each leap year, we have a predictableif tiresomedog-and-pony show: the candidates for President of the United States denounce the newest gasoline price increases. We lived through this political purgatory four years ago, and it looks as though we will experience it again."

Tax time can put cash in your account
04/03/04   Taxes
"Maybe you've heard this advice before: Don't get excited about a tax refund at this time of year. Why not? A tax refund simply means that you've made a loan of your own money to Canada Revenue throughout the year, at no interest. I can think of better things to do with that money -- and I'm sure you can, too."

All the major players should join F-class parade
04/03/04   Brokers
"Right now, investors who want to buy F-class funds are limited to E*Trade and ASL Direct, a small on-line fund dealer that's been around for about four years. Other on-line brokers are now looking at selling F-class funds and the major fund companies that have F-class funds will have to decide whether to accommodate them. If you want to help things along, contact your on-line broker and any fund companies you deal with to say you'd like to be able to buy F-class funds."

Coalition of the greedy
04/03/04   Management
"Three cheers for the Financial Accounting Standards Board, which recently released its proposal to require companies to expense stock options, and three jeers for the companies -- I call them the Coalition of the Greedy -- that continue to fight this common-sense change."

Anything but rreasuries - and JGBs
04/02/04   Gross
"This month's discussion will center on the durational position of a "reflationary" bond portfolio that might be characterized as thrice damned damned if you shorten, damned if you lengthen, damned if you don't do a thing."

Is there virtue in vice?
04/02/04   Dreman
"For instance, David Dreman, the veteran value investor, says that "tobacco stocks have been a core holding of ours for several years." He added, in a letter to shareholders of his Heritage Value Equity fund (HSTVX), "We believe tobacco litigation will be significantly lower in the future, resulting in these stocks gaining much higher P/E ratios. . . . Our sum-of-the-parts valuation of Altria implies an expected return of 50 percent or more from current prices.""

Index fundamentalism revisited
04/01/04   Indexing
"we find that whether index funds or managed funds are the superior buy depends on the time span in question, but that managed funds almost always have a lower standard deviation of return than index funds."

Buffett buys Krispy Kreme
04/01/04   Fun
"Asked by a passerby what prompted him to make the purchase, Buffett winked and smiled wryly. "A man cannot live on DQ Blizzards alone." Mmmmmm.... donuts."

Size still doesn't matter
03/31/04   Stocks
"Several alert readers argue that our BofA-bashing size-vs-efficiency analysis, posted on Monday, missed an important point. Rather than compare banks' size with their efficiency at a given point in time, they say, it's more relevant to see whether there's a systematic improvement (or erosion) in efficiency over time, as banks gets bigger."

Value stocks become more difficult to find
03/31/04   Value Investing
"it's making life increasingly difficult for veteran value-hunters such as John Spears, who helps manage the Tweedy Browne American Value mutual fund in New York. Asked if he can find cheap stocks in this market, Spears doesn't hesitate. "No. None," he says."

E*TRADE Canada offers access to lower MER mutual funds
03/30/04   Brokers
"Online discount brokerage E*TRADE Canada today announced the launch of the FundPlus Program, a new service that provides investors with access to a special class of mutual funds with lower management expense ratio."

Self-delusion down in Charlotte
03/30/04   Stocks
"Only one problem! In financial services, there's no connection between an institution's size and its efficiency--or its profitability, or growth, or any other number investors care about."

Buffett's investing strategy scrutinized
03/29/04   Buffett
"Berkshire's equity holdings are even more concentrated than is apparent at first glance, said Steven Check, chief investment officer at Check Capital Management, an investment advisory business in Costa Mesa that owns roughly $22.8 million in Berkshire stock. For instance, more than 80 percent of Buffett's holdings were in stocks in just three economic sectors: financial services, consumer goods and energy."

Can you have too many choices?
03/29/04   Academia
"There are even cases, as Schwartz notes, where just one additional choice can produce outright paralysis. Tversky and the young Princeton psychologist Eldar Shafir asked experimental subjects how they would react to a desirable Sony appliance placed in a shopwindow, radically marked down. The offer met with predictable enthusiasm. When a second appliance, similarly marked down, was placed alongside the bargain Sony, enthusiasmand salesdropped. Some hypothetical customers were evidently frozen by indecision."

The herd mentality - and how to avoid it
03/28/04   Value Investing
"It is amazing how stock investors get taken in by the herd mentality. When markets are surging furiously, everyone wants to buy stocks; when the markets begin to plummet, investors flock to sell their holdings with or without any valid reason."

Interest deductions lost under proposed law
03/28/04   Taxes
"Our government has said that it intends to allow the deductibility of interest costs related to borrowed money invested in common shares and the like (Finance explicitly said this in the Oct. 31 press release, and CCRA said the same in IT-533, paragraph 31), but has worded the proposed law to deny or restrict interest deductions. In other words, our government is saying "we're going to reserve the right to deny interest deductions, but don't worry, we won't enforce the new law.""

Clipper annual: amnesia in action
03/26/04   Value Investing
"Four years ago the stock market really divided into two groups - technology and dotcom startups versus everything else. We actually found more cheap stocks then than we find now. Today's rising tide of stock prices has lifted all boats, leaky pirate vessels included."

Spring training for value investors
03/26/04   Value Investing
"The Berkshire Hathaway annual letter is a unique resource for students of value investing. However, this time of year also features annual letters from many other great value investors, providing the opportunity to learn from the market's heaviest hitters."

Do you cheat on your taxes?
03/26/04   Taxes
"Most taxpayers say they don't. But more admit to doing so than in previous years."

Banks' use of client cash probed
03/26/04   Stocks
"Banks are deliberately hanging on to overpayments worth hundreds of millions of dollars made by customers, the Financial Times has found. In one case, the Financial Services Authority, the financial watchdog, launched a probe into Royal Bank of Canada after warnings that managers were withholding money from customers that had overpaid on foreign exchange transactions."

Statistics and sport
03/25/04   Fun
"Statistics changed baseball. It may change other sports too"

Bummed out? Bad time to shop
03/25/04   Thrift
"Think you paid too much for a little gift you bought yourself after a tough day at the office? A new study suggests your emotions may have pushed you to a bad decision."

Hoodwinking innocent investors
03/24/04   Indexing
Norbert Schlenker, president of Libra Investment Management, had the following things to say in response to Kevin Cork's March 24th column at The Fund Library entitled The Tragic Perils of Passive Investing.

The tragic perils of passive investing
03/24/04   Indexing
"Now, it seems to be the attitude of the media that regardless of the performance numbers, most Canadians are going to be better off in the iUnits fund than in the 'high cost, low performance' funds their advisor is going to put them in."

A fresh start: Bankruptcy is no dead end
03/24/04   Debt
"With a bankruptcy, all of the individual's assets -- including real estate, cars and boats -- vest with the trustee and are then liquidated on behalf of the creditors, with some exceptions depending on the province. A person living in Ontario, for example, can keep $5,000 of personal belongings, $10,000 of household goods, $5,000 of vehicles and $10,000 of tools of the trade."

Ottawa's trust moves are slick and subtle
03/24/04   Trusts
"Income trusts have been saved from the taxman's clutches, but at a subtle price that investors will pay without even knowing it. After needlessly spinning investors with ambiguous signals about its intentions toward trusts, the Finance Department said yesterday that it will drastically limit the ability of pension funds to participate in a big portion of the trust market."

Crude arguments
03/23/04   Markets
"Goldman Sachs now thinks the American economy will grow by only 2.75% (on an annual basis) in the second half of this year and the first half of nexta forecast it has revised down by three-quarters of a percentage point. It might, Buttonwood thinks, even turn out lower than that. Slower economic growth in turn bodes ill for stockmarkets and corporate-bond markets. And if markets tumble, consumer confidence will surely follow. The rise in the oil price, in other words, may leave nerves not so much frayed as in tatters."

The disgrace of soft dollars
03/23/04   Funds
"Investment funds are secretly lining their pockets by inappropriately charging billions of dollars' worth of expenses to investors. These "soft-dollar" arrangements allow managers to overpay in brokerage commissions in exchange for research, office space, magazine subscriptions, etc. -- with shareholders unwittingly footing the bill."

Mr. Rogers goes to Wall St.
03/23/04   Indexing
"The late "Mister Rogers" of children's television came to mind as I read a book by Charles E. Ellis called "Winning the Loser's Game -- Timeless Strategies for Successful Investing." Why Mister Rogers? It wasn't a book-jacket picture of the author in a cardigan sweater. Instead, it was the simple way Ellis explained some elegant investment concepts. More important, I felt that I could trust the guy. I found his jaundiced view of my industry to be especially endearing."

Creative mortgages fuel home sales
03/22/04   Markets
"With home prices surging, lenders are coming up with increasingly creative mortgages aimed at homeowners whose budgets are stretched thin."

Death, taxes, airline food
03/21/04   Fun
"April 15 is lurking around the corner, so if you haven't yet filed your federal tax return, it's time to set aside a few hours, gather together your financial records, and flee the country."

'Warning shot' on trusts set for budget
03/20/04   Trusts
"Ottawa will include "a warning shot" to investors on budget day next week, signalling that the federal government is concerned about the tax treatment of the hot income trust market and is seriously contemplating changes in the future, federal sources say."

7 funds with high fees, low returns
03/20/04   Funds
"The mutual fund industry's piggies are eating your bacon."

I'd like to buy the world a Coke
03/20/04   Stocks
"Rome, a hamlet an hour up the road from Coca-Cola's Atlanta headquarters, is known -- at least among Coca-Cola executives -- as the place that consumes more Coke per capita than anyplace else on earth"

Putting water in your wine
03/19/04   Funds
"Imagine if the funds used to construct these portfolios were in fact, impure. In short, imagine if advisors were figuratively putting a little water in their wine by using (for instance) a Canadian Equity fund that had 20% of its holdings in U.S. equities. It would come as no surprise to most readers that most Canadian equity funds have significant non-Canadian holdings."

Behind the mask
03/19/04   World
"Hailed as the business opportunity of the century, China is bound to disappoint. Sameena Ahmad examines the mismatch between excitable perception and sober reality"

Running out of options
03/18/04   Management
"Some tech investors are starting to show that they're sick and tired of companies not having to include the expense of stock options programs on their income statements."

A question of perspective
03/18/04   Markets
"A storm in a teacup, or a prelude of worse to come? By historic measures few equity or corporate-bond markets are cheap; many are very expensive indeed. This makes it all the more possible that a virtuous cycle of rising growth and appetite for risk can turn into a vicious cycle of falling growth and aversion to riskwhatever the Fed does."

Haier's purpose
03/18/04   World
"This attitude is widespread in China. Rather than focusing on a core business or dominating a few markets, as western, Japanese and South Korean managers have slowly learned to do, their Chinese counterparts quit any market where competition is rising, as so many other profitable opportunities beckon. Lack of accountabilitynot even Mr Zhang can say who really owns Haierand cheap loans from state banks encourage this trend. The result is firms that are broad but shallow, thinly-spread and managerially stretched. Sadly for Haier, that is the very opposite of a focused, global brand."

Some fund managers seek 'deep value'
03/17/04   Value Investing
"A company with great prospects hits hard times, a top executive winds up in court and the stock starts to tank. That's when smart investors run, right?"

The case against the prosecution
03/17/04   Law
"The danger is that, by throwing a few bosses to the lions, the government will satisfy the public's thirst for blood and thus ease pressure for deeper, system-wide reform. Indeed, some critics argue that this was the government's intention all along, orif that seems a bit too conspiratorialat least explains its instinct to come down so hard on corporate crooks."

A walk on the wild side
03/16/04   Value Investing
"Over the past few years, we at Contra the Heard have tweaked our methodology to emphasize a corporation's margin of safety in the selection process and avoid the crash-and-burn stories. After all, sometimes out-of-favour stocks deserve to be neglected. They are, as described by our friend Norman Rothery, who edits and the Rothery Report, "cigarette-butt" stocks: cheap, easy to pick up, but only okay for a puff or two."

Exit strategies
03/15/04   Taxes
"Whoever invented wills had a sick sense of humour. Only a sadist would combine the three things people dread most -- death, taxes and lawyers -- under one roof."

Third Avenue Funds shareholder letters
03/14/04   Value Investing
"the most idiosyncratic letters still come from the fund industry's boutiques. Perhaps the most sophisticated writer is Third Avenue Value's Martin Whitman."

Commandments for the individual investor
03/13/04   Graham
"In greatly simplified terms, here are the 14 points Graham most consistently delivered in his writing and speaking."

This year's tax software offers unprecedented choice
03/13/04   Taxes
"There's something new in tax software this year -- choice. For the 2003 tax year, Canadians suddenly have an unprecedented number of software options for completing their tax returns."

Once again, Nortel is covered in question marks
03/12/04   Stocks
"In cases like this, perhaps it's better to take the advice of Dr. Elitzur, who teaches accounting at the Rotman School of Management, and look at the cash flow. But at Nortel, you won't find much. The company used $347-million in cash in its operations last year, and you have to go back to 1999 to find a year when it actually produced free cash flow."

Patient Capital Management Q4
03/11/04   Value Investing
"We are not convinced that the strong growth registered in the latter stages of 2003 and expected to continue into the current year is sustainable. We remain concerned about weak employment growth in the U.S., low capacity utilization rates and unprecedented amounts of debt at all levels of the economy. The very large trade and current account deficits that have led to a rapid decline in the value of the U.S dollar also pose a serious risk. More importantly, our analysis of many companies gives rise to concerns over the quality of earnings, capital structures and valuation levels. Indeed, valuation levels during the previous market bottom did not approach those of earlier bear markets and today's valuations are still considerably above long-term historical averages."

Federal deficit: Meet the other white meat
03/11/04   Fun
"They're being total slime-weasels. They're spending MORE. They're pandering their brains out. The Republicans just added a hugely expensive new drug benefit for senior citizens, which the Democrats have bitterly criticized because it isn't expensive ENOUGH."

High-interest accounts have value in low-rate times
03/11/04   Banks
"Check out the posted GIC rates at the big banks -- three-year rates are just below 2 per cent and five-year rates are in the range of 2.5 per cent. Even if your bank likes you and tacks on an extra half a point of interest, you're still not getting anywhere near the value of a high-interest account."

Herb lore from the Sage of Omaha
03/11/04   Buffett
"The heady prices that investors are willing to pay for less-than-fragrant credits can be seen in the weediest of the lot: those awarded a rating of CCC by the rating agencies (the lowest rating is D, which does not stand for durable). Michael Lewitt, who runs Harch Capital, a hedge fund, neatly sums up the risks investors run by buying these bonds: 'It's like playing Russian roulette with all the chambers loaded.'"

Maida one heretic worth heeding
03/10/04   Value Investing
"While almost everyone else is enthusiastic about stocks -- Canadians bought an astounding $5-billion in mutual fund units in February, the industry's biggest month in four years -- he could hardly be less bullish. The cash is piling up again, for the simple reason that Mr. Maida can hardly find a single stock that he likes."

A risky world
03/09/04   Markets
"There is little room to maneuver after last year's big gains, when anything priced under $5 per share soared on the false assumption that cheap means good value, and companies could dump triple-C bonds on the market with impunity. In a telling sign of overconfidence, the 10-year U.S. Treasury bond is at 4 percent, the lowest since the late 1960s. If something were to go wrongthe Fed accidentally ignited inflation by keeping rates too low for too long, sayrates could jump. Investors would take a hit on yield before they had a chance to sell, says James Grant, editor of Grant's Interest Rate Observer: "Now the financial markets are left with very little margin for error, or for safety.""

Power to the shareholder?
03/09/04   Stocks
"Michael Eisner of Disney and Sir Philip Watts of Shell have both been forced to relinquish their roles as chairman. These changes have been chalked up as victories for shareholders. But have investors really got the better of the imperial boss?"

Canadian fund fees not that much higher than U.S.
03/09/04   Funds
"Mr. Spitzer may have something to say about what happens with fund fees in his country, but here in Canada it's up to individual investors to look after themselves. That's fine because there are all kinds of low-cost fund options out there, including index funds, no-load fund families and some mainstream funds that happen to be reasonably priced. Want to know the best way to bash the fund industry over the fees it charges? Just ignore overpriced junk funds."

Bullish options strategies
03/08/04   Tilson
"I'm generally not a fan of options. In certain situations call options -- used sparingly -- can be a sensible investment. Here are four such situations."

Value funds outperform growth
03/08/04   Funds
"Yet academic research has shown consistently that value investing produces better returns over time -- up to 7 percent a year on average, said Lubos Pastor, a finance professor at the University of Chicago Graduate School of Business."

Financial literacy for Canadians
03/08/04   Brokers
"Unfortunately, too much of the industry still revolves around consumers who want an advisor who can foresee the future and advisors who claim to be able to identify hot sectors, stocks and funds. No reputable profession would ever made such ridiculous claims."

Keep your beneficiaries in mind after a divorce
03/06/04   Taxes
"The law surrounding the designation of beneficiaries on RRSPs, RRIFs, and life insurance contracts is complex, and can vary from one province to the next. Still, your strategy should be the same. After a divorce, be sure to the change the beneficiary named on your registered plans with your financial institution itself. And if you've named a beneficiary of those plans in your will, be sure your lawyer includes in a new will (subsequent to your divorce) a clear revocation of all previously made RRSP beneficiary designations."

The last vigilante part II
03/06/04   Gross
"Hopefully by extensively reviewing the E-mail exhibit on the preceding page, clients and interested readers can understand the bulk of our strategies designed to benefit from current reflationary attempts."

Buffett's annual letter
03/06/04   Buffett
"In recent years, however, we've found it hard to find significantly undervalued stocks, a difficulty greatly accentuated by the mushrooming of the funds we must deploy. Today, the number of stocks that can be purchased in large enough quantities to move the performance needle at Berkshire is a small fraction of the number that existed a decade ago. (Investment managers often profit far more from piling up assets than from handling those assets well. So when one tells you that increased funds won't hurt his investment performance, step back: His nose is about to grow.)"

Buffett sells. Should you?
03/05/04   Buffett
"Warren Buffett is clearly not finding many opportunities to invest the U.S. stock market today. Despite the fact that he has $27 billion of cash sitting idle, concerns about valuation are driving him to sell some stocks and increase that pile of cash. In doing so, he is sending a strong, clear message not only about the specific stocks he is selling, but also about the U.S. equity market in general. Individual investors should be listening closely."

True costs of mutual funds difficult to determine
03/04/04   Funds
"Millions of Americans who invest in mutual funds have only a vague notion, if that much, of how much it costs them in fees and expenses."

Things you can drop on your foot
03/04/04   World
"China needs them in spades, as it were, which is good news for Japan"

Bubble, bubble, trouble, trouble
03/04/04   Markets
"Disney CEO Michael Eisner is in the news again - but it's useful to recall that his record of shareholder abuse didn't start yesterday. Nor was Eisner by any means the only corporate chief who found a way to milk his shareholders during the great stock market bubble of the late 1990s. The story of the Great Milking, and how it came to pass, is the subject of Roger Lowenstein's highly readable chronicle of the era, Origins of the Crash: The Great Bubble and its Undoing. It is terrific."

Ottawa should put brakes on taxing trusts
03/04/04   Trusts
"Given the likelihood of a spring election, the smart play would be for the government to do nothing on trusts and pick up the file again later on. A backlash from seniors struggling with low interest rates is the last thing the federal Liberals need on the campaign trail. Procrastinating on trusts may yield another benefit. By the time the government gets around to this issue, it may not be an issue any more."

Ottawa mulls tax changes for trusts
03/03/04   Trusts
"The federal Finance Department is holding top-level talks and conducting secretive private sector consultations to decide whether it should clamp down on the tax treatment of income trusts in the March 23 budget."

Canadians mutual fund sales soar
03/03/04   Funds
"Canadians showed renewed confidence in equity markets and flocked back into mutual funds in a big way in February as they spent $5-billion during the RRSP season's last month."

A Canadian Graham Stock
03/03/04   Stingy Investing
Over the last three years I've highlighted Benjamin Graham's time-tested strategy for defensive investors in an effort to uncover undervalued U.S. stocks. Based on the relative success of the method, many people have asked me to apply the approach to the Canadian markets.

Toss out the toss-up
03/02/04   Fun
"Their preliminary data suggest that a coin will land the same way it started about 51 percent of the time. It would take about 10,000 tosses before a casual observer would become aware of such a small bias, Diaconis says. "Maybe that's why society hasn't noticed this before," he says."

Futile courtroom dramas
03/02/04   Law
"The solution is not to write off capitalism as a hopeless casino where crooks get rich and the suckers get fleeced, it is to recognize that regulation cannot in reality protect investors if they deal with financial institutions driven by their trading desks to exploit every angle for a fast buck. Before the regulatory wave of the 1930s in the United States and the 1980s in Britain, for those investors who made sure to deal with top quality institutions: J.P. Morgan, the First National Bank, Kidder Peabody and the Boston money managers (or Schroders, Rothschilds, Hill Samuel, Warburgs, Hambros), their money was both safe and earned a decent return. Only investors dealing with "bucket shops" entered the world of Damon Runyon and Arnold Rothstein and lost their money. As Morgan would have told you, regulation is absolutely no substitute for character."

Dinner and tips
02/28/04   Value Investing
"Tilson, nevertheless, is a curmudgeon -- a young curmudgeon. He is part of an informal gang that's often called Graham-and-Doddsville, after the two financial geniuses Benjamin Graham and David Dodd, who in 1934 wrote the classic book "Security Analysis," which urged investors to "look for a margin of safety" when they bought stocks."

Retirement savings planning should be a year-round sport
02/28/04   Taxes
"If you're like many Canadians, you may have forgotten to make your registered retirement savings plan contribution this year. Actually, you have until Monday to make that contribution, but many will neglect this task. Today, I want to focus on the balance of 2004, and some RRSP contribution ideas you should consider throughout the year."

How to lead a rich life
02/27/04   Thrift
"These accounts of the rich and spendthrift point to one big question: What does all that income and spending add up to? A lot of nothing, it turns out. One of the more shocking measures of our "prosperity" is the fact that the United States spends more on trash bags than 90 other countries spend on everything. In other words, the receptacles of our waste cost more than all of the goods consumed by nearly half of the world's nations."

Sorbara is now damaged goods as finance minister
02/27/04   Government
"The facts are as follows: Mr. Sorbara was a Royal Group director from the company's initial public offering in 1994 until he resignedlast fall. During that period, the building products company did tens of millions of dollars in business with company insiders, including most or all of the $32-million in sales to the controversial St. Kitts resort controlled by chairman Vic De Zen. Those deals touched off the criminal and regulatory probes the company confessed to Wednesday evening."

Advisors urge caution as CMHC eases rules
02/26/04   Debt
"Sceeles says the CMHC announcement comes at an odd time, considering the fuss that's been made in recent years regarding the high level of consumer debt in North America."

Heading for a fall, by fiat?
02/26/04   Government
"Perhaps, too, investors have been lulled into a false sense of security by the performance of central banks in recent years, and the independence that has been granted to many of them by governments. But this very aura of inviolability may be storing up problems, since it means that governments can borrow still more at cheap rates. And if governments then find themselves crushed by debt, you can rest assured that this independence will be taken away. And then, once again, the paper in your pocket will only be as good as a politician's promise."

Fannie's and Freddie's big fight
02/26/04   Government
"On Feb. 24, however, the gloves came off. Federal Reserve Chairman Alan Greenspan told the Senate Banking Committee that Fannie and Freddie have grown so large -- together they own or guarantee $4 trillion in home loans, or three-fourths of all single-family-mortgages -- that they pose an unacceptable risk to the entire financial system."

Royal Group drops
02/26/04   Government
"Ontario Finance Minister Greg Sorbara resigned from his position as a director with Royal Group Technologies Ltd. in October, 2003 to take up his post with Dalton McGuinty Liberal government. He was also on the company's audit committee."

Investors looking to politicians for investment help
02/26/04   Government
"Prime Minister Paul Martin and other politicians will receive a plea tomorrow to stop the abuse of small investors by the investment industry. That's how bad things are for small investors these days. To have any hope of being protected from bad financial advice, you have to complain to the prime minister."

Why punish early adopters?
02/25/04   Brokers
"From my perspective, the eradication of embedded compensation can't happen fast enough. It is only when it becomes totally impossible to bilk the system that consumers can feel protected from advisors who "double dip" or invest money in money funds at "no load" while suggesting the funds in question are "free". We've already established that advisors need to be paid. It should be obvious, therefore, that advice is never "free". Sadly, too many consumers would rather avoid dealing with that harsh reality than work an advisor who has the decency to force them to come to terms with it."

Return of the master
02/25/04   Stingy Investing
"Benjamin Graham, the father of value investing, developed some of the earliest and most successful techniques for selecting stocks. Despite all the changes in the financial world since Graham's heyday on Wall Street in the 1930s, '40s and '50s, some of his simplest methods have continued to perform unusually well."

Is that really your tax refund?
02/24/04   Taxes
"If someone owed you $1,200, would you pay someone else $100 or more to get your hands on that money if all that stood in the way was at most a two-week wait?"

Martha Stewart's surreal ordeal
02/23/04   Law
"So the Martha Stewart trial has come to this. Judge Miriam Goldman Cedarbaum ruled that the government cannot introduce testimony about how Stewart's statements to the press asserting her innocence of violating insider trading law affected investors of her firm, Martha Stewart Living."

Good companies, bad stocks
02/22/04   Academia
"The inverse relationship is familiar but why are good stocks such a bad buy?"

Lottery Players/Stock Traders
02/21/04   Academia
"Stock trading also is a negative-sum game. But whereas the frame of lottery-ticket buying as a negative-sum game is transparent, the frame of stock trading as the same game is opaque. As Treynor (1995, originally 1971) noted, people confuse the stock-holding game with the stock-trading game. The stock-holding game is a positive-sum game; buyers of stocks can expect to receive, on average, more than they spend. The stock-trading game, however, is a negative-sum game. In the absence of trading costs, management fees, and expenses, stock traders can expect to match the returns of an index of all stocks. But after trading costs are considered, they can expect to lag that index."

Time to tackle the bias
02/21/04   Brokers
"It's all very well to shift the regulatory focus from trades to advice and to beef up disclosure, but until the compensation system is product-neutral, clients can never be certain that advisors are truly focused on their best interests."

A wake-up call to the fund industry
02/21/04   Funds
"The CSA, as well, has hurt mutual fund investors and its own credibility by giving in to the industry and leading the way in eliminating long-recognized, much-needed protections for fund investors."

The ins and outs of trading by telephone
02/21/04   Brokers
"The second-class citizens among discount brokerage clients are those who trade by telephone. While minimum on-line stock trading commissions go for anywhere from $24 to $29.95, a comparable trade done over the phone with a live representative might typically cost $43. Phone clients also get worse service. When markets are on a tear, clients who want to talk to a rep are more likely to face delays than those who place orders on-line."

Bearish options strategies
02/21/04   Markets
"Longtime readers might wonder why a patient, long-biased, fundamental value investor like me would adopt such a strategy, given the high cost and limited life of options. My answer is that I view these investments as insurance policies, hedging my mostly long portfolio."

The hungry dragon
02/20/04   World
"Nowhere is the impact of China's growth clearer than in the world's commodity and raw materials industries. No industries will lose more if that growth slows"

02/20/04   World
"Why has the German economy performed so much worse than the rest of Europe?"

A renewed force in Asia
02/18/04   World
"A new economic force is rising in Asia. Growing at an annual pace of 7% in the last quarter of 2003, it left both the old guard of Europe and the big shot, America, for dust. With its exports surging by 17.9% (at an annualised rate) in the three months from October to December, its monetary authorities are struggling to keep its currency down. Meanwhile, its firms are scrambling to add capacity to meet the demands of customers at home and abroad: investment in fixed capital grew by 22% in the final quarter of 2003 (again, at an annualised rate)."

The buck doesn't stop here
02/18/04   Government
"Why Treasury Secretary Snow can't prevent the dollar from falling, even if he wanted to."

Fears of split hold back spousal RRSPs
02/18/04   Taxes
"Despite the benefits of spousal RRSPs, many couples are reluctant to take advantage of them, say financial advisers -- and the prospect of marriage breakdown is one of the main reasons."

It's RRSP season but don't panic
02/18/04   Stingy Investing
"To avoid the last minute RRSP panic, simply put new money into high-yielding short-term debt. Good old GICs, high-interest savings accounts, and treasury bills are all possibilities."

State's new technology finds tax cheats
02/17/04   Taxes
"State officials dismiss the notion they are playing Big Brother, but the potential is rather Orwellian. In theory, said Revenue Department Commissioner Alan LeBovidge, the state may eventually be able to track down so much information about a resident's finances that the state, rather than the individual, could complete the individual's tax return."

Are stock prices reflecting greed (again)?
02/17/04   Markets
"At the end of 2003, the S&P 500 stocks were trading for an average 28 times the past 12 months per-share earnings, while the Nasdaq, dominated by technology stocks like Cisco, Yahoo and Intel, had a whopping P/E of 118."

Dollar drinking in the Last Chance Saloon
02/17/04   World
"But if our policymakers are already crowding around the bar in the Last Chance Saloon, things could get very tricky indeed. We know they did the right thing in 1987. We know they would want to do the right thing today. But could they? Would they be able to reduce interest rates sufficiently to bail the markets out, to re-instill confidence. Or would investors take a look at the policymakers, see that they were in the Last Chance Saloon, and realise they simply lacked the ammunition to provide the solution?"

Estate planning pitfalls
02/15/04   Taxes
"Badly thought-out estate plans can result in financial grief for beneficiaries and a boon for the taxman"

Build your own RRSP with ETFs
02/15/04   Indexing
"Here's a little project for a cold weekend afternoon in RRSP season: Build your own pension fund. Some of the sharpest investing minds in the country run pension funds, but you can do it yourself in an hour or so spent in front of a computer."

The reserve army
02/13/04   Economy
"Flawed though they may be, the employment numbers are of fundamental importance. Two crucial questions for economic output and for the suffering caused by unemployment are: what portion of the working-age population does not work and how many of those that do not work want to do so?"

Making 'cheap' romance memorable
02/12/04   Thrift
"Quick: what are the three most romantic gifts you've ever gotten? I'll bet at least one or two of them cost very little, if anything at all."

02/12/04   Management
"First, I know of no evidence - none - that shows that stocks of companies that give detailed guidance have higher valuations than stocks of companies that don't. Or are less volatile."

For rent, cheap
02/11/04   Real Estate
"High vacancy rates, falling rents: music to a renter's ears and causing heartburn for landlords."

RRSP ads once again promoting track record
02/11/04   Funds
"The annual RRSP ad blitz has begun -- and it's bound to give investors a jolt of deja vu.With stock markets rebounding in 2003 after three torturous years, mutual fund marketers are once again trumpeting snappy performance numbers in registered retirement savings plan campaigns, a tactic most haven't used in years."

Play it safe the Ben Graham way
02/10/04   Graham
"The logic behind Graham's rule is twofold, involving safety and value. In the event of bankruptcy, current assets will be converted to cash at close to their carrying value, so by paying less than two-thirds of net current asset value, you're likely to get most of your initial investment back after paying off all the liabilities."

Who's minding the store?
02/09/04   Management
"Recent scandals in business ethics gnaw at the very roots of a capitalist system."

Let the dollar drop
02/08/04   World
"America must bear much of the blame for its failure to do anything to curb household and government borrowing and so boost saving. Its easy monetary and fiscal policies are now beginning to look reckless. The dollar's slide has rightly shifted some of the burden of economic adjustment on to other economies. Sooner or later, though, America will have to face up to its own responsibilities, too."

Vanguard: what flag are they flying now?
02/08/04   Indexing
"All industries, the fund industry included, need competition and new ideas. Through Vanguard, John Bogle has proven the benefits of low-cost, long-term equity investing. But Vanguard had little to do with the great technological capitalization of the last century. From the gun-slingers to the penny-pinchers, all mutual fund companies have their benefits and drawbacks."

An on-line broker for you
02/07/04   Brokers
"Some brokers are better for certain types of investors, though. That's why this year's version of Globe Investor's annual on-line brokerage rating for RRSPs sets out three different investor profiles -- the neophyte, the established investor and the active investor -- and then outlines the best and worst choices for each."

Old sale set tax precedent for Black
02/07/04   Taxes
"When the owners of an Ontario grocery store won a Tax Court ruling six years ago, the case got little public attention. But its impact was felt in companies across the country because it suddenly created an opportunity for business people to pocket millions of dollars tax free."

Requiem for the record store
02/07/04   Stocks
"Now a new threat looms. The market for legally downloadable music is tiny today, but the success of Apple's iTunes online music store and the rush of rival services to the marketplace is expected to gobble up an ever-larger share of the pop music pie. A recent study by Forrester Research, which examines technology trends, predicts that in five years fully one-third of all music will be delivered through modems, and the CD itself will be passe, if not obsolete, in the years after. This isn't necessarily bad news for the record labels, but it could be lethal for brick-and-mortar stores."

Cow wanders into bank
02/06/04   Fun
"A Friesian cow took a detour from a wedding where she was meant to be a guest of honor, wandering into a German bank where she was caught on security cameras sidling up to the tellers."

Distorted values
02/06/04   Accounting
"The use of pro-forma earnings by a large number of companies is misleading not only for the specific companies involved, but for the market as a whole. Over a long period of time the average price-earnings ratio (P/E) for the S&P 500 has been about 15.5 times with a range, until 1998, of 22 on the high side to 7 on the low side. Keep in mind that this history is based on trailing reported earnings."

Dividends at risk
02/05/04   Stingy Investing
Income-oriented investors have recently been put between a low-interest rate rock and a risky-stock hard place. Long-term government bonds yield little real income which has pushed investors into the stock market in search of healthy dividends. Regrettably, dividends are much less certain than interest and income-oriented investors should keep a close eye on dividend stocks for signs of weakness. Fortunately, there are several ways to tell if a stock's dividend is potentially at risk.

Sickness or symptom?
02/05/04   World
"Arguably, however, the ILO and others rightly concerned about child labour are looking at the wrong target. It will start to disappear, and faster, if poor countries pursue general policies that help them to grow more quickly, such as cutting tariffs and opening up more to foreign investment. Rather than forever sermonising, rich countries could do more to help eradicate child labour by themselves dropping trade barriers to imports from poor countries."

Tax bill has increased 1550 percent since 1961
02/04/04   Taxes
"The total tax bill of the average Canadian family has increased by 1,550 percent since 1961, according to a new book, Tax Facts 13, released today by The Fraser Institute. That translated into an additional $25,965 in taxes for the average Canadian family."

IFIC should aim its guns at other fund industry issues
02/04/04   Funds
"IFIC was certainly within its right to complain about the CDIC commercials, but is this really the issue that tops the group's agenda right now? Mutual fund investors hope not."

The last vigilante
02/04/04   Gross
"Simply put, it means that borrowers will pay more in real terms, affecting consumption, home building and buying, business investing, and government deficits alike. The lower real interest rate "wind" at their backs will instead turn into a mild headwind. The economy will slow. It may falter."

Ex-CIBC trader arrested in fund probe
02/03/04   Government
"A former trader with Canadian Imperial Bank of Commerce has been arrested on criminal charges stemming from New York Attorney General Eliot Spitzer's investigation into mutual fund trading, people familiar with the investigation said Tuesday."

Mutual-fund industry wants federal ads axed
02/03/04   Funds
"Canada's mutual-fund industry is locking horns with the federal government, charging that an advertising campaign by one of the government's agencies is scaring away investors at the height of the RRSP season -- just when fund sales are recovering after a nasty slump."

New Vanguard ETFs
02/02/04   Indexing
"The exchange-traded class of shares of 14 Vanguard index funds began trading on the American Stock Exchange on January 30, 2004, at 9:30 a.m. The new VIPER Shares feature some of the lowest expense ratios among similar exchange-traded funds tracking specific market segments (large-, mid-, and small-capitalization stocks) and equity sectors."

Some U.S. index funds provide a 'natural hedge'
02/01/04   Indexing
"Index investing in the U.S. market these days is like walking up a down escalator. With the Standard & Poor's 500, Dow Jones industrial average and Nasdaq 100 indexes soaring, and the U.S. dollar falling against our Canadian currency, most index products last year returned merely chump change."

Consider the "Stewardship Quotient"
02/01/04   Bogle
"Happily, there are still funds and fund managers that have tried to hold the fort against the industry's new paradigm in which marketing has superceded management."

Getting their money back
01/31/04   Brokers
"Regulators are taking steps to compensate Canadians cheated by rogue brokers"

Finding money in banks
01/31/04   Stocks
"Year in and year out, financial stocks make remarkably stable and productive investments. In fact, it's kind of a mystery. If they're so good, why are they so consistently cheap?"

A taxing battle
01/30/04   Taxes
"Companies owe it to their shareholders to avoid paying unnecessary taxes. The trouble is that one person's abuse is another's smart planning. And the tension between those two views is likely to increase."

Out of control
01/29/04   Stocks
"The poison pill is one of the most egregious creatures of American corporate law. It exists to stop shareholders enjoying their full ownership rights by threatening, if triggered, to dilute the value of those shares in certain circumstances specified by a firm's board. They first caught on in the 1980s, when boards used them to deter hostile takeover bidshostile, at least, to the board, though not necessarily to shareholders."

Greenspan blasted
01/29/04   Markets
"Greenspan was upset, O'Neill contends, because corporate executives weren't playing fair. They weren't reporting what was actually happening at their companies, and the Federal Reserve chairman seemed to think the whole system upon which this nation's economy is built was crumbling."

Perpetual debt
01/27/04   Bonds
"In a 1789 letter to his friend James Madison, Thomas Jefferson raised the philosophical and moral question of whether "one generation of men has a right to bind another." He believed the answer was no, "that the earth belongs in usufruct to the living." He believed it a principle of "very extensive application and consequence, in every country." Applying it to government borrowing, he argued that it was unjust and unrepublican for one generation of a nation to encumber the next with the obligation to discharge the debts of the first. After all, the following generation cannot have given their consent to decisions made by their fathers, nor will have they have necessarily benefited from the deficit expenditures."

Irrational optimism
01/27/04   Markets
"Since 1900, the worldwide real return on equities averaged close to 5 percent a year (before costs, fees, and taxes). This is appreciably lower than is frequently quoted from historical averages, a difference that arises because we use a longer time frame than other studies and adopt a global focus. Prior views on the long-run safety of equities have been overly influenced by the experience of the United States. Furthermore, the US evidence that, over the long haul, stocks have beaten inflation over all 20-year periods is based on relatively few nonoverlapping observations and is hence subject to large sampling error."

A short history of the other MIT
01/27/04   Bogle
"But how much longer before public awareness begins to catch up with the sweet deal that the fund managers have cut themselves? The answer is that it has already begun to happen."

Paying with plastic
01/27/04   Markets
"While Korean credit card lenders were reckless and far less experienced than their Western counterparts their recent travails shows the vulnerability of the industry to the bursting of a credit bubble. Shareholders in JP Morgan Chase should start praying that they haven't been passed yet another wooden nickel."

The loonie flies too high
01/25/04   Economy
"Economic misfortune of one kind or another struck almost every corner of Canada in 2003, from the SARS virus in Ontario and mad-cow disease in Alberta to hurricanes in the Atlantic provinces and forest fires in British Columbia. But by far the sharpest brake on growth has been the soaring Canadian dollar."

Investors can be their own worst enemy
01/25/04   Value Investing
"Success in investing doesn't correlate with I.Q. once you're above the level of 25. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing."

Two-faced capitalism
01/25/04   Management
"This is a switch. CSR was conjured up in the first place because government action was deemed inadequate: orthodox politics was a sham, so pressure had to be put directly on firms by organised protest. Ten years on, instead of declaring victory, as well they might, disenchanted NGOs like Christian Aid are coming to regard CSR as the greater sham, and are calling on governments to resume their duties. Might this be a sign, Mr Benioff notwithstanding, that CSR has finally peaked? If so, it might be no bad thing. If bosses are no longer to get credit for pandering to their critics, they may as well go back to doing their jobs."

Now's the time to chat up your adviser
01/24/04   Brokers
"This year, plan to spend a little time with your adviser. When he or she recommends a fund for your RRSP, offer up these 10 questions as a conversation starter. Remember, you're not challenging your adviser so much as you're engaging him or her to show you care."

ING redefining funds the same way it did savings accounts
01/24/04   Brokers
"Where ING differs is in the fact that it has created a true zero-cost model, while most of these other dealers have fee loopholes all over the place."

Buffettesque Superinvestors
01/24/04   Value Investing
"Whitney Tilson talks about 12 up-and-coming, mostly unknown investment managers whom he believes will substantially outperform the market over time. They manage money in very different ways, but all are from the intellectual village of Graham-and-Doddsville. Individual investors stand to learn a thing or two from them."

Trashing money
01/22/04   Government
"As the Dalton McGuinty government in Ontario recently made clear, it's full speed ahead for the province's plan to largely phase out trash. As with all utopian plans, this strategy (orchestrated mostly without public input by non-elected officials) will require lots of money and social engineering on a massive scale."

Don't get hit by falling rates
01/22/04   Funds
"Rate cuts give bond fund holders a short term bounce but "bond funds will continue to eke out modest returns" in the optimistic case of long term stable rates, Rothery says. So he favours low-fee "frugal funds" from firms like PH&N, Leith Wheeler, Legg Mason and Barclays. "Should bonds yield 5%, you don't want to see almost half of your interest going to pay fund fees.""

Two new books on debt can help dig you out of it
01/20/04   Debt
"You're either born smart about debt or you learn through bitter experience. Two new books offer a third way -- let experts teach you the ins and outs."

Black crossed the line and now he will pay
01/19/04   Stocks
"Conrad Black has always been a corporate executive of exceptional talent -- not so much at running businesses but at buying and selling them. Over the years, his deal-making savvy has contributed enormously to his wealth, if not always that of his shareholders. But above all else, Lord Black has been a master at exploiting the grey area between what is acceptable to shareholders and what is legal, and he has taken full advantage of his skill and flexible approach to extract as much money and privilege as he felt he could."

Will scandals spoil the fun?
01/18/04   Funds
"At long last, the bull market is back. And not a moment too soon for long-term fund investors, who after three years of wrenching losses are finally being rewarded for their patience."

Use incentive trusts to reward, not punish
01/17/04   Trusts
"When it comes to your estate, planning ahead is critical. Today, I want to talk about an estate tool worth considering. I'm referring to testamentary incentive trusts."

Dig deep for hidden value
01/17/04   Value Investing
"The trick to value investing is to buy good companies when nobody else wants them, which requires a strong contrarian streak -- and buckets of patience. It is not a game for day traders or investors with weak stomachs."

Repudiating the national debt
01/16/04   Bonds
"Before the Reagan era, conservatives were clear about how they felt about deficits and the public debt: a balanced budget was good, and deficits and the public debt were bad, piled up by free-spending Keynesians and socialists, who absurdly proclaimed that there was nothing wrong or onerous about the public debt. In the famous words of the left-Keynesian apostle of "functional finance," Professor Abba Lernr, there is nothing wrong with the public debt because "we owe it to ourselves." In those days, at least, conservatives were astute enough to realize that it made an enormous amount of difference whetherslicing through the obfuscatory collective nounsone is a member of the "we" (the burdened taxpayer) or of the "ourselves" (those living off the proceeds of taxation)."

Punishing critical analysts
01/15/04   Law
"The judges in the LVMH case cited the analyst settlement reached in the United States as evidence of Morgan Stanley's perfidy. But that case included ample evidence that analysts issued reports they did not believe and caved in to pressure from investment bankers. Such evidence was not required in France."

The 'yo-yo' car sale trap
01/15/04   Thrift
"You've got your new car. You showed it off to all your friends. You've driven it to work a few a times. You love it. Then you get a scary phone call."

Is your boss a crook?
01/15/04   Management
"Forget shady financial deals and legal shenanigans that grab headlines. It's moral lapses like hypocrisy, favoritism and disrespect for employees that pose the biggest ethical problems at the workplace."

SEC finds widespread fund abuses
01/14/04   Brokers
"Securities regulators said Tuesday that they've found widespread abuses at 13 out of 15 Wall Street brokerages probed in the sale of mutual fund shares."

The big payday
01/14/04   Taxes
"Wall Street thinks tech will win big from Washington's tax breaks. But there are bigger winners."

Management expense ratio update
01/11/04   Funds
"There have been many articles in the press lately about Management Expense Ratios (MERs), and some people may be wondering what exactly is included in the calculation of the MER of a mutual fund. The following is a review of the exact makeup of MERs."

Pension peril looming
01/11/04   Management
"Workers are angry as well. When the PBGC picks up a pension plan, be it from U.S. Airways or LTV Steel, they often get only a fraction of what they were originally promised. Critics say corporations have been irresponsible, and now are forcing healthy industries to pick up the tab and endangering the retirements of millions."

Investing: Profession or Business?
01/10/04   Funds
"Based on our S&P scouting report, these managers seem to follow the index's strategy with regard to turnover and limited time on macro forecasting, and deviate from the index's strategy with regard to concentration and a sharp focus on price-to-value discrepancies."

Tom Hanks - Portfolio Manager
01/10/04   Gross
"That history points towards an environment of lower than expected real rates of interest, low total returns for bonds (a 4% total return future world), an apparently overvalued corporate sector, and intermediate maturity bonds that should perform equally with long bonds at half the volatility. The one bond investment that fits into each of these boxes? Intermediate maturity TIPS."

Watchdog to abolish mutual fund conflict rules
01/10/04   Funds
"Ms. Stromberg said the rules governing conflicts and self dealing were initially put in place to ensure that fund managers meet their fiduciary duty by acting in the best interests of investors. She said requiring funds to have independent committees is "not an equal trade-off." The proposed rules will provide less protection for investors than the existing regime, where rules are in place prohibiting mutual funds from such practices as owning stocks or bonds in a related entity, she said. There is also plenty of evidence in the corporate arena that independent directors are often powerless to prevent problems, she added."

A scary time for stocks
01/09/04   Value Investing
"So, without further ado, my opinion on these three factors is quite bearish. In contrast to the current cheery consensus, I think that the economy is not as strong as it appears, interest rates have nowhere to go but up, and high stock valuations already reflect a best-case scenario, so there's little upside and substantial downside."

Put down that tool
01/09/04   World
"Anna Diamantopoulou, the European commissioner for employment and social affairs, smells a rat. Firms in other European countries have not made much use of opt-outs. But, she thinks, nasty British bosses may be forcing workers to sign opt-outs as a condition of taking a job. (Some Americans may actually want to work more than 48 hours, but surely no European would be so daft, seems to be her reasoning.)"

Be sure to compare service fees if you use your card a lot
01/09/04   Thrift
"Here's how the credit card business works. Dazzled by rewards that suggest lifestyles of the rich and clueless, people sign up for cards and end up paying bloated interest charges and/or a vast array of service fees."

Liquidator: 6,500 tech firms among 'walking dead'
01/08/04   Stocks
"Amid rising hopes for a high-tech turnaround, there's this sobering sign: Martin Pichinson -- a man who has buried nearly 150 failed startups since 1999 -- has swooped into Silicon Valley like a vulture lurking over a pack of wounded animals."

German companies cutting pension plans
01/07/04   Management
"Three major German companies this week have disclosed plans to cut back on their pension benefits for workers, with one, Commerzbank, even doing so without first consulting workers - a move that is highly unusual in Germany."

January, hemlines and the Super Bowl
01/07/04   Fun
"Watching how the first five trading days go is really just a truncated version of something called the January barometer. Look at the S&P 500 since 1950, and you'll see that January has predicted the markets' performance for the year all but eleven times. (Last year was one of the misses.) Stunning right? Hang on."

Deferring tax payment puts money in your pocket
01/07/04   Taxes
"Procrastination can work in the realm of taxation, too. You see, delaying the requirement to pay tax can actually save you tax. This is true now more than ever."

Investors beware the backside of the bull
01/07/04   Funds
"It's time you were warned about the other kind of bull market. That's the one where the bull's in the propaganda generated by an investment industry looking to cash in on a huge stock rally. Right now, we have both kinds of bull markets."

Apple debuts lower-priced iPod
01/06/04   Stocks
"Apple Computer Inc. Tuesday introduced a new lower-priced version of its popular iPod, just weeks after the portable music players flew off the shelves, one of the holiday's season's hottest sellers."

Layoffs coming at Kraft?
01/06/04   Stocks
"Kraft Foods Inc. plans to lay off 10 percent of its salaried work force as the company tries to revamp its slow-growing North American business, a person familiar with the situation said this week."

More than pure luck
01/05/04   Funds
"For the 13th year in a row, a mutual fund called Legg Mason Value Trust (LMVTX) has beaten the benchmark Standard & Poor's 500-stock index. No other fund has come close to this amazing feat. In fact, most funds, most of the time, fail to return more than the S&P, which is a good proxy for the market as a whole.For the 13th year in a row, a mutual fund called Legg Mason Value Trust (LMVTX) has beaten the benchmark Standard & Poor's 500-stock index. No other fund has come close to this amazing feat. In fact, most funds, most of the time, fail to return more than the S&P, which is a good proxy for the market as a whole."

The year of the car
01/04/04   Stocks
"But now that the Japanese, South Koreans and Germans have unleashed an assault on the light-truck market, Detroit has to respond aggressively. Do the Big Three have what it takes to fight back this time? Their new cars must win customers and do so profitably. This looks like the only way Detroit can stay on the road."

Value Investing by Damodaran
01/03/04   Value Investing
"Value investors are bargain hunters and many investors describe themselves as such. But who is a value investor? In this chapter, we begin by addressing this question, and argue that value investors come in many forms. Some value investors use specific criteria to screen for what they categorize as undervalued stocks and invest in these stocks for the long term. Other value investors believe that bargains are best found in the aftermath of a sell-off, and that the best time to buy a stock is when it is down. Still others adopt a more activist approach, where they buy large stakes in companies that they believe are under valued and push for changes that they believe will unleash this value."

Banks feel the heat in Parmalat scandal
01/03/04   Stocks
"International banks felt the heat from the multi-billion-euro Parmalat scandal Saturday as the Securities Exchange Commission in Washington said it was investigating whether they were negligent or reckless by selling the food firm's bonds."

Value Investing overview by Damodaran
01/03/04   Value Investing
"A value investor is one who pays a price which is less than the value of the assets in place of a firm."

Ten helpful tips for saving and investing this year
01/03/04   Thrift
"Eat less, exercise more. Now that we've taken care of your physical well-being in 2004, let's talk about your financial health. No lectures here. Instead, we'll look at 10 easy-to-follow tips for saving money and investing smarter. You may have heard some of these before, but they bear repeating."

Ditching the peace
01/02/04   World
"Nine years ago, members of the World Trade Organisation agreed not to take each other to court over farm subsidies. But the "peace clause", as this agreement is known, expired on December 31st. Will its end mean the beginning of a trade war?"

Eight Thrifty Value Stocks for 2004
01/01/04   Stingy Investing
"At the start of each year I search through the S&P500 in an effort to uncover a few thrifty value stocks. Aside from sticking to large companies, I also look for inexpensive yet profitable businesses with little debt. So far, the results have been quite gratifying."

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