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moneysense.ca, 22/02/08
This and That
- David Swensen urges investors to keep it simple in an article in The New York Times.
- Financial Advisors talk about the worst RRSP mistakes they’ve seen.
- James Daw praises UFile for offering tools to split pension income.
- Jonathan Chevreau writes about a lazy portfolio for younger investors with a long time horizon and high risk tolerance.
Have a nice weekend everyone!
moneysense.ca, 22/02/08
[...] cool in the stock markets, Yale edition Posted by siliconprairie under Uncategorized Canadian Capitalist posted a link to a great NY Times article today. The article, covering David Swensen’s [...]
Hi, why doesn’t anyone talk about gold and silver for savings instead of worthless paper RRSP account? I made the biggest mistake this year; I pulled my money out of my RRSP and bought gold at $650 per oz and silver at $13.00 per oz. Sorry no, that wasn’t a mistake today gold is at $945 per oz and silver at $18.00 per oz. People stop saving paper promises and get back to real money.
2000 Gold = $300 per Oz. Oil = $30.00 per Barrel
2008 Gold = $945 per Oz. Oil = $100.00 per Barrel
2000 Gold / 2000 Oil = 10 Barrels
2008 Gold / 2008 Oil = 9.45 Barrels
Real Money !!!
Brian: I personally have zero enthusiasm for gold because over the very long term, the best that can be said is that the price will keep pace with inflation. That’s right, gold’s expected real rate of return is zero!
That said, the price of gold tends to move sharply in short periods of time and experts like William Bernstein recommend a small 2% weighting because it is low enough not to hurt total portfolio return in bad years and could double or more and boost total portfolio returns in good years.
1980 Gold = $875 per oz
2008 Gold = $945 per oz
Annual ROR = 0.275%
Also, it’s very difficult to buy bullion. The best that you can buy conveniently is certificates, mutual funds and precious metals mining companies.
I was previously looking at buying a bit of gold but not as an investment – I wanted to try my hand at jewelry making as a hobby. And I have to say that it’s tough to get that lump of metal! You have to buy through some broker who gets their cut and so you still get shafted.
As income investments, I prefer real estate, usually through REITs and developers. I also like financial services, but investing in that sector is like driving a Jeep through Kandahar right now – talk about a minefield! Buy the wrong one and POW! Get blindsided big time.
To Ksin
Gold is a Store of Value not an investment for returns. If you’re going to save anything don’t save dollars in a RRSP account and expect it to be worth anything in 20 years. The US fed., Bank of Canada, ECB, Bank of England are devaluing paper money to bail out big banks. Once you understand inflation and money creation by central banks then you can understand why gold is rising in the terms of dollars. Look below at how gold buys pretty much the same amount of Oil but in dollars it’s totally different. Yes gold when thru a cycle back down to $280. In that time it was a bear market in gold and bull market in stocks. Please Google Money as Debt to learn more about central banks and money creation. I only want to help protect your worth.
1980 Oil average price $80.00 per barrel 1980 Gold High was $875 per Oz.
One oz of Gold Buys 10.93 barrels of Oil.
Today
Oil $100 per barrel and Gold $945
One oz of Gold Buys 9.45 barrels of Oil.
To Phil S: If you in Canada go to your location Scotia bank branch and order bars or coins. It’s not that hard but the tellers won’t have a clue what your talking about. If you Toronto, then visit the Scotia headquarters and buy directly from their vaults. Here is a link http://www.scotiabank.com/cda/content/0,1608,CID6045_LIDen,00.html
Yes investing in Mining companies is tricky and you can get burned that way. Stay away from certificates and mutual fund. Once you touch real money Gold you will understand.
The data isn’t at my fingertips, but I believe in Canadian dollar, gold only doubled in the 8 years between 2000 and 2008. This is quite terrible considering gold is in a bull run. What happens when it reverts to the mean?
Regarding RRSP investments, it is also good to know that someone can contribute to an RSP in one year and take the deduction later, when their marginal tax rate is higher.
So, when I was a student, I could still contribute a few thousand dollars to get the benefit of tax deferral, and then claim those few thousand in tax deductions after I started full-time employment. As a student, I had enough deductions to avoid paying income tax.
Googling Money for Debt will bring you to a video that is a favourite of The Canadian Action Party and the Democrats for Social Credit (a US group). Both of these fringe parties are heavily influenced by the monetary theories espoused in the early part of the twentieth century by Major Douglas, a British engineer. Douglas advocated a course of action, he called Social Credit, in order to stave off the impending doom of an imploding monetary system.
Leading edge boomers like myself will remember that there were Social Credit parties in power provincially in Alberta and BC.There were federal Social Credit Party members of parliament in the fifties and sixties. There was also Real Caouette’s Ralliement de Creditistes that sent Quebec MPs to Ottawa in the early sixties. They too espoused social credit theory.
This idea that we will go bust due to the expansion of the money supply, as created by banks, has been around for decades and rejected by all except fringe groups. As the old fringe groups fold a new generation seizes on the theory and starts a new version of social credit as if it were a new revelation they just had.
No thanks.!I have been through my gold bug cycle and discovered it was a dead end. Investing in sound businesses through stocks and MFs, inside and outside of RRSPs has put this early retiree in good shape .
The Democrats for Social Credit are a New Zealand political party, and the Canadian Action Party promotes the use of the Bank of Canada granting low, or zero, interest loans to the government for building infrastructure. While the Democrats for Social Credit may be “influenced” by Douglas’s monetary theories, they promote a “bastardized” version of them, and the Canadian Action Party is not influenced by his ideas, but instead promotes a form of Neo-Keynsianism.
Douglas was opposed to the formation of any Social Credit Party. He was an advisor to William Aberhart for a brief period of time, but left over disagreements in policy. Douglas said, ““The proper function of Parliament, I may perhaps be allowed to repeat, is to force all activities of a public nature to be carried on so that the individuals who comprise the public may derive the maximum benefit from them. Once the idea is grasped, the criminal absurdity of the party system becomes evident.” (“The Tragedy of Human Effort,” Address at Central Hall, Liverpool, October 30, 1936.) Social Credit seeks to eliminate party politics.
Douglas’s monetary theories are based upon his A+B theorem which states:
“A factory or other productive organization has, besides its economic function as a producer of goods, a financial aspect—it may be regarded on the one hand as a device for the distribution of purchasing-power to individuals through the media of wages, salaries, and dividends; and on the other hand as a manufactory of prices—financial values. From this standpoint its payments may be divided into two groups:
Group A – All payments made to individuals (wages, salaries, and dividends).
Group B – All payments made to other organizations (raw materials, bank charges, and other external costs).
Now the rate of flow of purchasing-power to individuals is represented by A, but since all payments go into prices, the rate of flow of prices cannot be less than A+B. The product of any factory may be considered as something which the public ought to be able to buy, although in many cases it is an intermediate product of no use to individuals but only to a subsequent manufacture; but since A will not purchase A+B; a proportion of the product at least equivalent to B must be distributed by a form of purchasing-power which is not comprised in the description grouped under A. It will be necessary at a later stage to show that this additional purchasing power is provided by loan credit (bank overdrafts) or export credit.”. (C.H. Douglas, Credit-Power and Democracy, Aust. Edition, 1933, pp. 22-23)
The theorem demonstrates that prices rise faster than incomes when regarded as a flow. This denies the validity of “Says Law” in economics. The result of this fact is that society keeps going into ever increasing debt in order to consume what it has already produced.
To eliminate this problem, Douglas proposed the issuance of debt free credits as a dividend and price rebate. The price rebate is based upon the scientific fact that the real cost of production is consumption over an equivalent period of time. The dividend is based upon the fact that as technology increases the productivity of labour, less labour is needed to produce a unit output, and labour is constantly being displaced in the productive process.