Comments on: This and That: Baby bull or sucker rally?

By: coetsee

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By: Michael James

Michael James — Fri, 27 Mar 2009 21:56:09 +0000

Adam: I’m a big fan of doubling mortgage payments. I used it (along with yearly paydown privileges) to get rid of my first mortgage in 4 years. Check your mortgage agreement to see whether the bank has an out on allowing skipped payments. You’re likely to want your emergency fund if you lose your job. That might be the very time that the bank withdraws the privilege to skip payments. If this is the case, then doubling a few mortgage payments to get payment-skipping privileges won’t work as an emergency fund.

By: Adam

Adam — Fri, 27 Mar 2009 21:15:52 +0000

Another note on the emergency fund concept. My mortgage allows me to make up to double payments every month on my mortgage. That over payment goes directly against principle(cutting interest costs) and should I ever need to skip any payment during the term, I can skip an equivalent number of payments as equal to my over payments.

If I made three double payments, that would afford me 3 months of missing payments (should I ever need it). If I don’t need it, well then bonus for me as I saved interest by simply incorporating my double up payments into my emergency plan rather than have it sitting in cash.

By: Thicken My Wallet

Thicken My Wallet — Fri, 27 Mar 2009 15:20:23 +0000

The most interesting stat in the SI article is that 1 in 30 alternative investments succeed. Food for thought next time someone gets pitched on some new and exciting investment idea.

By: Phil S

Phil S — Fri, 27 Mar 2009 14:03:16 +0000

That was a statistic for total automotive sector jobs in Canada, so it likely also includes all of the non-union positions which are not in jeopardy (eg. Toyota, Honda and their suppliers). It came from some journalist who obtained that number from Statistics Canada.

By no means am I advocating that the industry should be rescued. I’m a total capitalist and I don’t even think we should have bailed out the financial sector using tax dollars. All I’m saying is that mass layoffs the size of an auto sector collapse could trigger a stock market pullback… Because people who are cash poor would have to pull from their portfolios to pay their bills and hence, in my humble opinion, the fate of the Big 3 would have a potentially huge impact on stock prices.

In my thesis, I’m linking the fate of the Big 3 with whether this is a fool’s rally. If the Big 3 somehow get out of this unscathed, then I think this is a real bull rally. If GM & Chrysler collapse or pull out of Canada, then this is a fool’s rally. Do I know which way things are going to go for the Big 3? NO. But that’s all I’m saying – the risk is NOT out of the market. I would NOT recommend that investors dive into the market with both feet because things CAN possibly get a lot uglier. If you want to gamble, of course, then go ahead and do whatever you want. But I suggest that people still need to at least keep some powder dry, in case of the worst case scenario.

By: Al R

Al R — Fri, 27 Mar 2009 13:59:32 +0000

Also important to note that Toyota and Honda manufacture autos in Ontario, accounting for approximately 1/3rd of total output.

By: Michael James

Michael James — Fri, 27 Mar 2009 12:21:58 +0000

Phil S.: Here is the quote from the CAW web site:

“The impact of this job loss on the economy is much worse when the indirect, spin-off jobs, are taken into account (there are approximately 7 jobs created for every one job in the auto sector). ”

They claim to be accounting for the spin off jobs like your restauranteurs and waiters.

Let me ask a more direct question. Did you simply make up the 500,000 figure having no idea if it is really 50,000 or a million, or is there some basis for it?

By: Al R

Al R — Fri, 27 Mar 2009 12:21:42 +0000

Phil S – I’d be careful about quoting the multipliers that industry boosters come up with. If you add up all the multipliers from all industries, you’d find that they add up to far more than the size of the actual labour force.

In other words, most industries overestimate their impact on the economy. Makes it easier for them to get corporate welfare.

By: Phil S

Phil S — Fri, 27 Mar 2009 12:04:11 +0000

To Michael James. Try telling that to, say for example, a restauranteur in either Oshawa or Windsor. The chef, maitre d’ and waiter staff don’t work for an automotive company, but they do live in one-industry towns supported by automotive. As far as multi-industry towns with big automotive employers like Brampton, Oakville and Aurora, it probably won’t be quite as extreme, but I’m sure it will be felt.

That said, I think one of the auto giants should be permitted to fail. It is only in that way that we can reduce the global over-capacity of vehicle production. It will be painful for Ontario, but it is a necessary pain.

By: Michael James

Michael James — Fri, 27 Mar 2009 11:12:46 +0000

Phil S: According to this CAW web page (http://www.caw.ca/en/sectors-major-auto.htm), there are 33,000 auto workers and there are 7 other jobs created for every one in the auto sector. This means that even if there was a complete loss of the entire auto sector, 264,000 Canadian jobs would be lost. This is far short of your estimate of 500,000 jobs lost if any one automakers pulled out of Canada.