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Q&A: An Expanded Canadian Pension Plan?

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Yesterday Federal Finance Minister Bill Morneau shared the federal government’s plans for an overhauled and updated CPP (Canadian Pension Plan). Why’d he do this? Because the government sees that many, many Canadians are not saving enough for retirement and there is concern over 1.1 million Canadians retiring with a significantly lower standard of living compared to when they were working.

Here’s what you need to know, as well as a refresher Q&A in how CPP works:  Keep Reading

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The Press & Their Political Narratives That Tell the Faux Story

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The article this post stems from is an opinion piece by a New York Times journalist who covers women’s rights, human rights, health and global affairs. Clearly, he is a democrat. This being said, his point is extremely valid regardless of what party he affiliates himself with: the media has a responsibility not to portray candidates within a shallow narrative, as they consistently and frustratingly do. (Billionaire businessman Mark Cuban has recently spoken out about this as well.) Not only is this not fair to the candidates, but it isn’t fair to the audience, the population, who trust journalists and the media to give them a full picture of what is going on in an election cycle.

The media has a responsibility not to portray candidates within a shallow narrative, as they consistently and frustratingly do.

All of that being said, the title of the article is: “When a Crackpot Runs for President.” But, I mean, he has a point.

Here is an excerpt:

On the PolitiFact website, 13 percent of Clinton’s statements that were checked were rated “false” or “pants on fire,” compared with 53 percent of Trump’s. Conversely, half of Clinton’s are rated “true” or “mostly true” compared to 15 percent of Trump statements.

Clearly, Clinton shades the truth — yet there’s no comparison with Trump.

I’m not sure that journalism bears responsibility, but this does raise the thorny issue of false equivalence, which has been hotly debated among journalists this campaign. Here’s the question: Is it journalistic malpractice to quote each side and leave it to readers to reach their own conclusions, even if one side seems to fabricate facts or make ludicrous comments?

President Obama weighed in this week, saying that “we can’t afford to act as if there’s some equivalence here.”

Read the full article by Nicholas Kristof published in The New York Times Opinion Pages on Sept. 15 2016, here.

Feature image via Newsday.com

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4 Things To Know Today

Trump defends Putin’s “I didn’t meddle, swear,” the dems have several notable election victories, Bitcoin Cash is gaining in momentum

What Is a Hedge Fund?

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For starters, we all know what “hedging” means. It means to reduce the amount of risk you are open to, most commonly heard in the phrase, “hedging your bet.” While this definition once applied to the hedge fund, today it totally does not.

Hedge funds and the people who run them are particularly interesting because they are a sensational representation of the very wealthy. Known for being extravagant, highly opinionated, and very happy living in a place of extreme risk, hedge fund managers have been loosely referred to as “masters of the universe.”

Hedge funds were born in 1949 when Alfred Winslow Jones formed the first as a new sort of investing strategy where a fund manager would “hedge,” or try to avoid significant loss by going short in positions (shorting a stock means that you believe the value is going to decrease, so you bet against it – learn more here), as well as going long (invest in securities with the intention that these stocks and bonds are all going to increase in value). By carefully balancing the risk the fund was exposed to, potential risk was mitigated. This part is key, and is where the name hedge fund is derived from.

Today, hedge funds largely make grand scale speculative investments where they are betting on a huge upside based on their predictions for market movements and economic conditions – often with no hedging involved. These funds are playing to beat the market on a macro scale and their ability to do this is referred to as “alpha.” When investments of this scale are made, the potential for upside is massive, but the potential for loss is also massive and can have the ability to shut a hedge fund down. The thing about hedge funds is that they are typically built on the reputation of the managing partner or partners and their ability to beat the market and provide investors with huge returns – it’s similar to stock promoters (smaller scale, and likely more relatable as we all know one); have a few big public losses under your belt and you’re going to have a very challenging time raising money for your fund or next venture.

A particularly memorable hedge fund fail involved Bernie Madoff, the guy who was caught running a Ponzi scheme and highly publicized as the face of American greed culture. In 2008 he was sentenced to 150 years in prison, as well as a $170 billion in restitution fees. Here’s how he scammed investors out of $65 billion.

The details:

  • As with any investment that offers an enormous upside or downside, hedge funds are only open to accredited investors, people who can stand to lose what they invest. In the US, investors must have a “net worth exceeding $1 million excluding their primary residence.” (Forbes)
  • Hedge funds love leverage. “Hedge funds will often use borrowed money to amplify their returns. As we saw during the financial crisis of 2008 [and in the movie, The Big Short], leverage can also wipe out hedge funds.” (Forbes)
  • Hedge fund managers are pretty free to act as they wish with their pool of investor money, as long as they disclose up front their investment strategy to investors.
  • And the reason we read about their lavish lives and extreme wealth? The fee structure on a hedge fund is unlike anything else: 20% of all gains generated in addition to a 2% asset management fee. So when they win, they win BIG.

Feature image via blog.kosten.co

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US Economy Finally Finds Lift for the Middle Class

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During a recession, who is it that gets hit the hardest? The average American, aka, the middle class. This is the majority tax-paying class, the group that are the most at risk when economic conditions decrease for they are the ones in the middle; the ones who are most entangled in the economic systems being employees dependent on corporations for income and health care, and carrying considerable debt on mortgages, vehicles and credit cards. This is a generalization, but I think a pretty fair generalization (and can also be said for the Canadian economy).

This means that when stimulus is pushed into the economy (the Federal Reserve and Government leverage their monetary and fiscal policies to inject the economy with more money, cheaper credit, and new tax policies designed to help a limping economy grow with more consumer and commercial spending), it reaches the people at the top first. These people are the heads of banks and corporations and it is then their responsibility to push the stimulus down through the levels of the economy and population mainly through offering easier access to loans, credit and creating new jobs. In theory this works, though certainly a lot of the stimulus is lost on the way down as the Federal Reserve and Government can’t force what is done with the new money and policies (often it is big business and wealthy investors who benefit most), and it does take time for the middle class to feel any financial betterment.

Now finally, after nearly a decade of economic stimulus and expansion, the middle class are feeling some love and it’s time for a semi-celebration.

On Tuesday census data was released “showing that median household income in the US rose a whopping 5.2 percent in 2015, to around $56,500. According to that data, incomes rose for black families, white families, Hispanic families and Asian-American families. It rose for young people and in households headed by middle-aged adults and older people. In short, the improvement was across the board to a remarkable degree.”

5.2 per cent is significant as it is considered fairly strong income growth, but it is still less than the growth that the typical American family experienced back in the mid-1990s, and is still less than the median household made in 2007 before the financial crisis. The New York Times calls these gains “an important milestone for the economic expansion that began in 2009. For the first time in recent years, the benefits of renewed prosperity are spreading broadly.”

Read the original article, The Economic Expansion Is Helping the Middle Class, Finally, by Neil Irwin, and published in The New York Times’s Upshot on Tuesday, September 13 2016. Unless otherwise cited, all quotes are from this article.

Feature image via One Way Ticket featuring model Lily Donaldson photographed by Skye Parrott, Dossier Journal #10 Fall/Winter 2012.

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National Bank of Canada: “Healthy” Price Corrections for Vancouver Housing Market

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Today in New York Bloomberg held a Canadian Fixed Income Conference where Stefane Marion, a Montreal-based economist and strategist at National Bank of Canada commented on the future of the Vancouver housing market. According to Marion, “Vancouver’s housing market may enter a correction with price declines of 10 per cent,” going on to call it a “healthy correction.” Keep Reading

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Where is the Economy Going?

Over the past few years there’ve been many broad and very public predictions of an impending market downturn. I remember

US to Allow Victims of Terror to Sue Foreign Governments?

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Today, 15 years after the terrorist attacks of 9/11, the US House of Representatives (here is a chart that explains where the House sits in US government), has passed a bill that would allow victims of terrorist attacks to sue other countries for their alleged involvement. The bill stems from families of 9/11 victims wanting to sue Saudi Arabia on the basis that 15 of the 19 hijackers were Saudi.

Historically, the US has barred lawsuits against foreign governments, and for good reason. According to the various documentaries out there, we can’t be certain who is in fact responsible for the terrorist attacks of 9/11, and certainly allowing US citizens to sue other nations would open up the floodgates for other countries to sue the United States for their significant and often fatal involvement in international conflicts.

While the bill does have broad bipartisan support from both sides of the House, Obama has said he will veto the bill. Then Congress has said they will veto his veto, or look to override it with the needed support from two-thirds of the lawmakers in the House, as well as in the Senate.

Read the original article by Kristina Peterson, published in The Wall Street Journal on September 9, 2016.

Feature image of the US House of Representatives via thinkinghighways.com

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4 Things To Know Today

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A Timeline: The Many Republicans Who Won’t Support Their Nominee

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Editor’s note: this article may border on an op-ed as there may be some personal opinions present…

On Sunday The New York Times published a timeline of all the outrageous, mean, stupid, even stupider, and plain ignorant things that good ‘ol Trump has said. Out loud. On tv and at conventions. The whole thing is unbelievable. Last summer a former colleague and I were in San Francisco watching the initial republican candidate debates and couldn’t believe that Trump had actually put himself in the race. We concluded that it was most certainly a stunt and that he likely had a new tv show premiering and was interested in ratings. Funny enough, yesterday I was listening to Hillary Clinton’s podcast and she said that she had had the exact same thoughts about Trump. But sweet jesus, no, this is a not a drill, I repeat, this is not a drill. This is real life and it is kind of terrifying that there are people want such a crazed, lying, loon for president, even if they don’t like Clinton. Clearly I am biased here. There have been and are many republican leaders I had felt support for and admired, but this guy deserves neither for all of the same reasons that we wouldn’t like a human in real life – there’s not much to respect. But, I digress.

This timeline is very important because it not only highlights a ton of stupidity, it also shows you at what point the republicans started abandoning The Donald in favour of my girl Hillary. It’s also the first time in history that a party has so publicly denounced its own candidate, as well as the first time that prominent republicans are choosing to vote for the democratic candidate. Without further ado, here is the timeline and all of the GOP people who say No, Trump, just no, sit down (or f*ck off).

screen-shot-2016-09-09-at-11-08-39-am

Feature image via Salon.com

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4 Things To Know Today

Trump defends Putin’s “I didn’t meddle, swear,” the dems have several notable election victories, Bitcoin Cash is gaining in momentum

The Long & Short of It

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The stock market allows us to speculate, based on sentiment and pertinent information, about the market value of a company and its shares. More often than not investors pick stocks based on their assumptions that the prices will increase, but also sometimes because they believe that the stock will lose value, a much riskier venture. Keep Reading

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Where is the Economy Going?

Over the past few years there’ve been many broad and very public predictions of an impending market downturn. I remember

ETFs vs. Mutual Funds

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The summary, up front: (like dessert before dinner)

They both allow you exposure to many different investment opportunities and therefor, diversity in your portfolio. An ETF tracks a basket of shares or an index, trades on the stock market and is purchased as all other shares are, typically via a broker and you pay your broker’s fee and the trade fee. A mutual fund is professionally managed, takes a large sum of money made up from many different investors and uses that money to buy into various different investments that make up the fund. Keep Reading

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