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Tuesday, December 2, 2008
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STOP SITTING ON YOUR ASSETS
We live in interesting times! The news is mostly unsettling if not disastrous. The US based sub-prime fiasco, Iraq, corruption in Afghanistan, oil, global food prices, Zimbabwe, Global Warming, the terrible cyclone in Burma, China’s resurgence, and the seemingly permanent US election process.We are all aware that major changes are taking place and that the world is experiencing simultaneous crises, any one of which represents a huge challenge. We know that in many ways they are all related, and that we are in an uncertain period between historical epochs. New models are going to emerge but nobody knows what they will be. We have seen oil prices rocket upwards and we vaguely expect that other shoes are going to drop.
Old business models and deeply-rooted assumptions are being challenged, including most of what we think we know about money. Most of the conventional wisdom about mortgage financing is based on the losses experienced during the Great Depression of the 1930’s. Sheltering savings in the home, by paying down the mortgage, was perceived as the best way to build protection against another such calamity, referred to in previous newsletters as “Black Swan” events. Pay off your mortgage and live debt free, became the mantra.
The current sub-prime crisis reminds me of the last housing market crash when home prices plunged about one third. At the height of the boom, in May 1989, I bought a home with a considerable down payment. By the early 90’s the value had fallen by 30% and only ten years later, about six years ago, did prices start to climb until we are now slightly ahead of 1989 levels. Fortunately, I did not have to sell in the nineties, otherwise I would have taken a huge loss.
During that period, when governments and companies downsized to reduce debt, homeowners were saddled with losses and had to live with the consequences.
Having observed and experienced these events, I have come to the view that there is a better way. It is possible to look at a mortgage as a financial planning tool! Instead of focusing on debt, it is more profitable to focus on managing and optimizing ‘net worth’. We should consider the opportunity cost of maintaining “dead” home equity, which earns us nothing, and which may be vulnerable to “Black Swan” events such as the one we are experiencing now.
In my travels I met American author Marian Snow who invited me to co-author a Canadian edition of her book “Stop Sitting on Your Assets”, which advocates this new approach. I have accepted her invitation because it ties in with our shift in thinking from that of mortgage broker to that of mortgage planner. During my spring initiative I also changed the face of our website by making it a springboard for launching the Canadian version of “Stop Sitting on Your Assets”. The book presents a holistic view of how to safely leverage the equity trapped in your home and transform it into a constant flow of wealth and security.
Before launching the book I would like to tell you via email how to reserve a ‘free copy’. To test the accuracy of our email data base this letter is being sent by both snail mail and email. If you did not receive an email version it indicates that we do not have your email address. If that is the case, please, respond to morwatch@ca.inter.net
Old business models and deeply-rooted assumptions are being challenged, including most of what we think we know about money. Most of the conventional wisdom about mortgage financing is based on the losses experienced during the Great Depression of the 1930’s. Sheltering savings in the home, by paying down the mortgage, was perceived as the best way to build protection against another such calamity, referred to in previous newsletters as “Black Swan” events. Pay off your mortgage and live debt free, became the mantra.
The current sub-prime crisis reminds me of the last housing market crash when home prices plunged about one third. At the height of the boom, in May 1989, I bought a home with a considerable down payment. By the early 90’s the value had fallen by 30% and only ten years later, about six years ago, did prices start to climb until we are now slightly ahead of 1989 levels. Fortunately, I did not have to sell in the nineties, otherwise I would have taken a huge loss.
During that period, when governments and companies downsized to reduce debt, homeowners were saddled with losses and had to live with the consequences.
Having observed and experienced these events, I have come to the view that there is a better way. It is possible to look at a mortgage as a financial planning tool! Instead of focusing on debt, it is more profitable to focus on managing and optimizing ‘net worth’. We should consider the opportunity cost of maintaining “dead” home equity, which earns us nothing, and which may be vulnerable to “Black Swan” events such as the one we are experiencing now.
In my travels I met American author Marian Snow who invited me to co-author a Canadian edition of her book “Stop Sitting on Your Assets”, which advocates this new approach. I have accepted her invitation because it ties in with our shift in thinking from that of mortgage broker to that of mortgage planner. During my spring initiative I also changed the face of our website by making it a springboard for launching the Canadian version of “Stop Sitting on Your Assets”. The book presents a holistic view of how to safely leverage the equity trapped in your home and transform it into a constant flow of wealth and security.
Before launching the book I would like to tell you via email how to reserve a ‘free copy’. To test the accuracy of our email data base this letter is being sent by both snail mail and email. If you did not receive an email version it indicates that we do not have your email address. If that is the case, please, respond to morwatch@ca.inter.net
BLUE MONDAY
The third Monday of each new year, this year January 21, is called “Blue Monday”, the most depressing day of the year. On that day I attended the 2008 Conference of mining venture companies in Vancouver where about 500 junior mining companies, with properties around the globe, set up shop to exchange information, promote the potential of their properties and to try to raise capital from investors. I happened to be in Vancouver for other reasons but was interested to hear the keynote speech and various panel discussions dealing with the Sub-Prime Crisis.
On ”Blue Monday”, while the US markets were closed for Martin Luther King Day, ‘out of the blue’ Asian stock markets crashed. Understandably, gloom settled over the mining conference and more people were clustered around TV sets following the market turmoil than were visiting the exhibitor’s booths. With a show of humour the first speaker reminded the audience that on such days even good stocks turn into “owl stocks”. They are “owl stocks” when you call your broker and say: “Sell” and his chirpy answer is “to whoo, to-whoo, to-whoo?”
The days’ major news story, the Market crash, reminded me of a phenomenon known as “Black Swan” - the occurrence of a highly improbable event.
Before the discovery of Australia, Europeans thought that all swans were white. It was an unassailable belief, 100% confirmed by empirical evidence. The sighting of the first black swan in Australia showed that there could be a serious problem with what we learn by observation. A single observation invalidated a general statement derived from confirmatory sightings of millions of white swans.
A “Black Swan is an event with the following three attributes:
First, it is unexpected because it is outside the range of earlier observation.
Second, it carries an extreme impact and the element of surprise.
Third, in spite of the fact that it is completely unexpected, human nature makes us concoct “after the fact” explanations, to make it seem retrospectively predictable.
From my ringside seat, among venture capitalists seeking to find worthwhile investment opportunities from a sea of proposals with unpredictable outcomes, I realized that a “Black Swan” event is not always negative. A high grade mineral discovery, for example, can result in a huge payoff. The reward comes from recognizing an opportunity when you see it.
Nassim Nicholas Taleb, author of the highly informative and entertaining book “The Black Swan”, points to our blindness with respect to the life consequences of significant random events. He also points out that our life paths are also determined by the cumulative effects of small random events, chance encounters and decisions which might not change the world but do completely structure our lives.
“Black Swan” events have always occurred, but today, earthquakes and hurricanes for example have more severe economic consequences than in the past because there are more of us in vulnerable areas with more complex and valuable infrastructures.
I first became aware of the “Black Swan” phenomenon while in San Diego in 2006, when the author was interviewed on TV and was asked to explain the spectacular implosion of the high flying ‘Amaranth’ fund, named after the flower that ‘never dies’, which lost $7 billion dollars in a few days. His laconic answer was ‘a case of Black Swans’.* (see my letter “Black Swans” of January 2007)
The current Sub-prime Crisis is another “Black Swan” event with global consequences. The fact that millions of mortgage borrowers are losing their home equity should bring us to understand that equity, the difference between the value of a home and a mortgage, cannot be protected. I see it as the typical “Black Swan” scenario that has implications for all of us. Let me explain.
A recent CMHC study determined that approximately 75% of Canadian home owners have the elimination of mortgage debt as their number one financial priority. While the goal of owning one’s home free and clear, as a nest egg for retirement, has long been widely applauded, the fact is that there are many wealthy people, who could buy their homes with cash, who choose to have a mortgage, often the largest possible mortgage. What does the ‘smart money’ know about money that most of us don’t know? The answer is that they know how to make their mortgage interest tax deductible and how to find investment opportunities elsewhere that generate returns that more than offset the cost of the mortgage.
What if most of what we think we know about money is not true or no longer relevant? Is it possible? Most of the conventional wisdom about mortgage financing is based on the experience of the Great Depression, some 80 years ago, after which well meaning financial planners formulated mortgage financing and investments strategies to protect home owners from the adverse effects of another such calamity. During the intervening years a lot of legislation has been passed to better protect consumers, but life expectancy has also increased with the result that we need asset protection for many more years than before.
We are now in the 21st Century with thinking that might be out of touch with today’s reality. We should consider the opportunity cost of maintaining “dead” home equity, which earns us nothing, and which may be vulnerable to future “Black Swan” events.
Recent innovative mortgage products make it possible to take advantage of a strategy that allows the conversion of mortgage interest payments from the “after tax” to “tax-deducible” category. Using this strategy it is possible to increase total assets faster than by using the conventional approach of minimizing mortgage interest payments by paying down the mortgage as quickly as possible.
Vancouver was only a stop on my way to San Diego where I met with the author of the book “Stop Sitting on Your Assets”. We agreed that I would co-author a Canadian version of her book. I will team up with financial planners and conduct seminars to bring this new thinking to the attention of a larger audience – but I can assure you that as my client, you will receive your VIP back stage pass before this takes place.
I realize that my enthusiasm for the new approach to ‘mortgage planning’ may not resonate with everybody. It is however an option, for those whose circumstances and temperament it fits, to safely leverage the equity trapped in their homes and to transform it into a source of increased wealth and security.
Stay tuned, and beware of Black Swans!
THE ROAD TO AVALON
In September, my wife Adriana and I made a spontaneous decision to take a one week trip to Newfoundland. We love un-planned, un-scheduled, un-hurried travel with opportunities for chance encounters. Hiking along the ubiquitous wind-swept shoreline trails of the Avalon Peninsula, picking blueberries along the way, striking up conversations with other travelers, and enjoying the hospitality and comfort of B&Bs, suited us perfectly. Although I wanted to get away from business for a while, I did have thoughts about the sub-prime havoc south of the boarder and recalled earlier periods of upheaval that affected home equity and the mortgage business in Canada.
Bed and Breakfast places are as unique as the people you meet in them. Imagine a person from London who described his work as ‘arbitrage tax negotiator’! This outlandish description was enough to stimulate a lively exchange between his global equity trading vs. my street level view of “lazy home equity”.
At another B&B I met the author of a new real estate book with the intriguing title “The Naked Home Owner”. While the title is rather amusing the metaphor aptly expresses the apprehension of many homeowners over their equity today.
The current mortgage crisis in the States, reminds me of the oil price shocks of the seventies and the eighties market crash. During the oil crisis, interest rates surged to more than 21% and, during the late 80’s, high, short term, interest rates resulted in reduced consumer spending, substantially eroded property values and job losses.
I remember the last real estate cycle very clearly because I bought my house at the peak, in May 1989. Now, after nearly 18 years, its market value is just about back to the 1989 level. At the lowest point I had lost a lot of “lazy equity”. I call it “lazy equity” because I earned no return on the equity tied up in my house. Subsequently, I realized that, had I made only a small down payment, or no down payment at all, the equity could have been invested in other assets that might have appreciated rather than depreciated. Of course, I have enjoyed living in the house and did save money by paying down the mortgage. However, saving money is not the same thing as making money.
While paying off a mortgage does reduce interest costs, at the same time it denies us the opportunity to invest that money elsewhere. By tackling the goal of paying down a mortgage first, before developing a wealth accumulation plan, we may fail to consider the important role a mortgage can play in such a plan.
Alan Greenspan, past president and chairman of the U.S. Federal Reserve, known for his conservative views, apologized publicly the other day for underestimating the potential impact of the un-controlled sub prime market on the housing market and the economy. He had concluded that ‘crashes’ cannot be avoided and that they should be considered as self-correcting mechanisms that restore balance or equilibrium.
How can the hapless homeowner protect equity, the difference between home value and outstanding mortgage financing, when significant “corrections” in real estate values are always possible? The answer is that we must carefully re-evaluate our beliefs and strategies.
Many of our attitudes and beliefs are inherited from our parents and their generation, who thought of their home equity as the ultimate retirement fund or their house as an asset which might also be passed on to the next generation. They taught us to make a big down payment, get a fixed-rate mortgage, and to make extra principal payments whenever we could, to pay down the mortgage debt as quickly as possible.
The problem with this strategy is that it has become outdated. The rules of the game have changed. Unlike our parents, we no longer have the same job for 30 years, depend on a company’s pension plan for a secure retirement, live in the same house for 25 years or keep the same mortgage.
Wealthy people, who have the ability to pay off their mortgages, understand how to make mortgages work for them, and choose not to pay them off. They make minimal down payments, keep their mortgage balance as high as possible, choose adjustable-rate mortgages and, most importantly, integrate their mortgages into their overall financial plan.
The good news is that any homeowner can now implement the strategies that the rich use to increase their net worth. In the last 12 months, dramatic changes in mortgage financing now allow homeowners to combine saving, debt reduction and investing. You can even make your mortgage interest tax deductible! Implementation of these strategies requires that we change our view of a mortgage from a millstone of debt, to an item to be integrated into an overall financial plan.
The traditional strategy has two limitations which, under some conditions, may be restrictive and costly. The equity which is gradually accumulated cannot be accessed without selling the property. It does not contribute to the increasing value of the property nor can it be used elsewhere to generate wealth. Worse still, in circumstances of job loss or other economic disruption, the very time when access to capital might be most necessary, home equity is effectively locked in and unavailable to the owner.
The circumstances of each individual or family are unique and it is not appropriate for everyone to adopt these particular wealth creation strategies. However, if you would like to learn more about them and to discuss whether they might be appropriate for you, please give me a call.
Bed and Breakfast places are as unique as the people you meet in them. Imagine a person from London who described his work as ‘arbitrage tax negotiator’! This outlandish description was enough to stimulate a lively exchange between his global equity trading vs. my street level view of “lazy home equity”.
At another B&B I met the author of a new real estate book with the intriguing title “The Naked Home Owner”. While the title is rather amusing the metaphor aptly expresses the apprehension of many homeowners over their equity today.
The current mortgage crisis in the States, reminds me of the oil price shocks of the seventies and the eighties market crash. During the oil crisis, interest rates surged to more than 21% and, during the late 80’s, high, short term, interest rates resulted in reduced consumer spending, substantially eroded property values and job losses.
I remember the last real estate cycle very clearly because I bought my house at the peak, in May 1989. Now, after nearly 18 years, its market value is just about back to the 1989 level. At the lowest point I had lost a lot of “lazy equity”. I call it “lazy equity” because I earned no return on the equity tied up in my house. Subsequently, I realized that, had I made only a small down payment, or no down payment at all, the equity could have been invested in other assets that might have appreciated rather than depreciated. Of course, I have enjoyed living in the house and did save money by paying down the mortgage. However, saving money is not the same thing as making money.
While paying off a mortgage does reduce interest costs, at the same time it denies us the opportunity to invest that money elsewhere. By tackling the goal of paying down a mortgage first, before developing a wealth accumulation plan, we may fail to consider the important role a mortgage can play in such a plan.
Alan Greenspan, past president and chairman of the U.S. Federal Reserve, known for his conservative views, apologized publicly the other day for underestimating the potential impact of the un-controlled sub prime market on the housing market and the economy. He had concluded that ‘crashes’ cannot be avoided and that they should be considered as self-correcting mechanisms that restore balance or equilibrium.
How can the hapless homeowner protect equity, the difference between home value and outstanding mortgage financing, when significant “corrections” in real estate values are always possible? The answer is that we must carefully re-evaluate our beliefs and strategies.
Many of our attitudes and beliefs are inherited from our parents and their generation, who thought of their home equity as the ultimate retirement fund or their house as an asset which might also be passed on to the next generation. They taught us to make a big down payment, get a fixed-rate mortgage, and to make extra principal payments whenever we could, to pay down the mortgage debt as quickly as possible.
The problem with this strategy is that it has become outdated. The rules of the game have changed. Unlike our parents, we no longer have the same job for 30 years, depend on a company’s pension plan for a secure retirement, live in the same house for 25 years or keep the same mortgage.
Wealthy people, who have the ability to pay off their mortgages, understand how to make mortgages work for them, and choose not to pay them off. They make minimal down payments, keep their mortgage balance as high as possible, choose adjustable-rate mortgages and, most importantly, integrate their mortgages into their overall financial plan.
The good news is that any homeowner can now implement the strategies that the rich use to increase their net worth. In the last 12 months, dramatic changes in mortgage financing now allow homeowners to combine saving, debt reduction and investing. You can even make your mortgage interest tax deductible! Implementation of these strategies requires that we change our view of a mortgage from a millstone of debt, to an item to be integrated into an overall financial plan.
The traditional strategy has two limitations which, under some conditions, may be restrictive and costly. The equity which is gradually accumulated cannot be accessed without selling the property. It does not contribute to the increasing value of the property nor can it be used elsewhere to generate wealth. Worse still, in circumstances of job loss or other economic disruption, the very time when access to capital might be most necessary, home equity is effectively locked in and unavailable to the owner.
The circumstances of each individual or family are unique and it is not appropriate for everyone to adopt these particular wealth creation strategies. However, if you would like to learn more about them and to discuss whether they might be appropriate for you, please give me a call.
Canadian Actuaries Urge Government To Make Mortgage Payments Tax Deductible
The thorny issue of allowing Canadian homeowners to deduct mortgage interest payments from their income tax is back in the news, after the Canadian Institute of Actuaries suggested it would help people save for retirement. And that's important because a recent study commissioned by the group says that two-thirds of Canadians expecting to retire in 2030 are not saving enough money to avoid financial hardship. Click Here to view the rest of this article.
MILE STONES
This year is a milestone in the history of Tridac Corporation Limited, marking our 30th anniversary.
Looking back over these 30 years, my strongest impression is one of change. It seems as if we began in a time of relatively slow change, then we tossed away our quill pens and accelerated into the modern age of frenetic widespread change and instant communication.
Until only a few years ago banks operated much as they always had. Secure, powerful and unchanging they operated under the “Three-Six-Three” rule, which meant paying depositors three percent for their money, lending it out at six-percent - and closing the doors at 3:00 PM.
When banks limited credit to a select few, and when it was still possible to start up a Trust Company with only $3 million, mortgage brokers supplied those small, innovative Trust Companies with high ratio mortgages. It was a time when banks reserved CMHC insured loans for “risky” borrowers – and then only if they could afford a 25% down payment.
Never hotbeds of innovation, banks stuck with five year term mortgages, 25 year amortizations and no provisions for early pay out. To cope with this inflexibility, we frequently employed “Vendor Take Back” (VTB) mortgages, which were often traded to eager private investors. The VTB and mortgage broker access to private money helped to lubricate the system for borrowers.
Over the years, borrowers and lenders have experienced some difficult times! A real shock occurred during the oil crisis of the late 70’s, when interest rates rocketed to 21%. But in spite of those phenomenal rates, few people lost their homes. The recession of the late 80’s was much worse because many people lost their jobs and the income necessary to pay for shelter. G7 governments finally learned that deficits and inflation do not mix well and we have since seen interest rates sink to progressively lower levels.
Canadian Credit Unions were the first institutions to innovate when they introduced weekly and bi-weekly payment options to facilitate accelerated mortgage repayment by their members.
The events of 9/11 precipitated a further rapid fall in interest rates which have been down to the mid four percent range three times in the last five years.
Recognizing that Consumers wanted choice, rather than simply taking what their financial institutions offered, I had Tridac join the The Mortgage Centre franchise network ten years ago. The Mortgage Centre, with a network of over 100 locations from coast to coast, operates an exclusive mortgage market system through which lenders compete for mortgages via an electronic bid process that makes their best offers available to purchasers.
The evidence seems to indicate that this was a wise move because the share of mortgages originated by mortgage brokers has increased from less then 1% to about 35%.
In the old days, when lenders called the tune, consumers were more or less obliged to accept the 25 year amortized standard mortgage, as the only flavor available. Now that banks have been forced by the market, to provide the flexibility introduced by Credit Unions and mortgage brokers, we have raised the bar. Today, we help borrowers to save money and to get out of debt as soon as possible. In fact, our Mission Statement is:
“We are committed to helping you
achieve debt free home ownership,
at minimum cost, in minimum time.”
We now see our role as more like that of a financial advisor. We recommend that home buyers exploring mortgage financing not begin with the question: “What is your mortgage rate?” but rather, “How do I position myself to pay the least amount of interest over the life time of the mortgage”. Unlike lenders, who naturally benefit if borrowers pay more, rather than less interest, we benefit if we have happy clients whose good experiences lead them to refer their family, friends, neighbors and colleagues to us when they need a mortgage.
This way of doing business is called “By Referral Only” and I am delighted to be able to say that, by constantly trying to exceed my client’s expectations, more than 90% of my business comes from returning clients and referrals. I am so pleased by the level of referrals that, in order to express my thanks, we will be having a draw on December 31, called “Skip or double up a payment”. Consistent with the above Mission Statement, the draw will have three prizes, each equal to the highest monthly mortgage payment of the three winners.
Every client, for whom we have arranged mortgage financing in 2007, and everyone, who has given us a referral leading to a completed application in 2007, will be entered in the draw.
Tridac Corporation, which was originally formed by myself and two partners, expanded over time to three locations in Toronto, Mississauga and Ajax. Then circumstances changed and we consolidated to our one attractive and conveniently located office at Danforth and Broadview. The most recent significant change occurred when my son Christopher joined me in the business after graduating last year with a degree in Business and Economics. He decided he would like to join me after enjoying a summer job with Firstline Trust.
This year is also the 15th anniversary of another of my companies, Hansa Mortgage Investment Corporation. Hansa is a “Mortgage Investment Company” or “MIC”, a private mortgage investment fund, which lends mortgage money in niche situations, which do not conform to institutional lender guidelines. Most of the money in the fund comes from investors self directed RRSPs. Over 15 years the RRSP investors, who previously invested their money in individual mortgages, have made an average annual return of 10.36%, without the problems associated with managing their own funds. If you have RRSP funds available and would like to consider becoming a shareholder of Hansa Mortgage Investment Corporation, please give me a call. We have room to expand and can accommodate a few more investors.
My career as a mortgage broker has been challenging, satisfying and rewarding so I wish to not only thank you with the “Skip or double up a payment” draw, but also ..
You are invited
to celebrate with us
during the “Taste of The Danforth” festival
Friday August 10 and Saturday August 11
between 6.30 and 9.30 pm
To enjoy some delicious food and drinks
Looking back over these 30 years, my strongest impression is one of change. It seems as if we began in a time of relatively slow change, then we tossed away our quill pens and accelerated into the modern age of frenetic widespread change and instant communication.
Until only a few years ago banks operated much as they always had. Secure, powerful and unchanging they operated under the “Three-Six-Three” rule, which meant paying depositors three percent for their money, lending it out at six-percent - and closing the doors at 3:00 PM.
When banks limited credit to a select few, and when it was still possible to start up a Trust Company with only $3 million, mortgage brokers supplied those small, innovative Trust Companies with high ratio mortgages. It was a time when banks reserved CMHC insured loans for “risky” borrowers – and then only if they could afford a 25% down payment.
Never hotbeds of innovation, banks stuck with five year term mortgages, 25 year amortizations and no provisions for early pay out. To cope with this inflexibility, we frequently employed “Vendor Take Back” (VTB) mortgages, which were often traded to eager private investors. The VTB and mortgage broker access to private money helped to lubricate the system for borrowers.
Over the years, borrowers and lenders have experienced some difficult times! A real shock occurred during the oil crisis of the late 70’s, when interest rates rocketed to 21%. But in spite of those phenomenal rates, few people lost their homes. The recession of the late 80’s was much worse because many people lost their jobs and the income necessary to pay for shelter. G7 governments finally learned that deficits and inflation do not mix well and we have since seen interest rates sink to progressively lower levels.
Canadian Credit Unions were the first institutions to innovate when they introduced weekly and bi-weekly payment options to facilitate accelerated mortgage repayment by their members.
The events of 9/11 precipitated a further rapid fall in interest rates which have been down to the mid four percent range three times in the last five years.
Recognizing that Consumers wanted choice, rather than simply taking what their financial institutions offered, I had Tridac join the The Mortgage Centre franchise network ten years ago. The Mortgage Centre, with a network of over 100 locations from coast to coast, operates an exclusive mortgage market system through which lenders compete for mortgages via an electronic bid process that makes their best offers available to purchasers.
The evidence seems to indicate that this was a wise move because the share of mortgages originated by mortgage brokers has increased from less then 1% to about 35%.
In the old days, when lenders called the tune, consumers were more or less obliged to accept the 25 year amortized standard mortgage, as the only flavor available. Now that banks have been forced by the market, to provide the flexibility introduced by Credit Unions and mortgage brokers, we have raised the bar. Today, we help borrowers to save money and to get out of debt as soon as possible. In fact, our Mission Statement is:
“We are committed to helping you
achieve debt free home ownership,
at minimum cost, in minimum time.”
We now see our role as more like that of a financial advisor. We recommend that home buyers exploring mortgage financing not begin with the question: “What is your mortgage rate?” but rather, “How do I position myself to pay the least amount of interest over the life time of the mortgage”. Unlike lenders, who naturally benefit if borrowers pay more, rather than less interest, we benefit if we have happy clients whose good experiences lead them to refer their family, friends, neighbors and colleagues to us when they need a mortgage.
This way of doing business is called “By Referral Only” and I am delighted to be able to say that, by constantly trying to exceed my client’s expectations, more than 90% of my business comes from returning clients and referrals. I am so pleased by the level of referrals that, in order to express my thanks, we will be having a draw on December 31, called “Skip or double up a payment”. Consistent with the above Mission Statement, the draw will have three prizes, each equal to the highest monthly mortgage payment of the three winners.
Every client, for whom we have arranged mortgage financing in 2007, and everyone, who has given us a referral leading to a completed application in 2007, will be entered in the draw.
Tridac Corporation, which was originally formed by myself and two partners, expanded over time to three locations in Toronto, Mississauga and Ajax. Then circumstances changed and we consolidated to our one attractive and conveniently located office at Danforth and Broadview. The most recent significant change occurred when my son Christopher joined me in the business after graduating last year with a degree in Business and Economics. He decided he would like to join me after enjoying a summer job with Firstline Trust.
This year is also the 15th anniversary of another of my companies, Hansa Mortgage Investment Corporation. Hansa is a “Mortgage Investment Company” or “MIC”, a private mortgage investment fund, which lends mortgage money in niche situations, which do not conform to institutional lender guidelines. Most of the money in the fund comes from investors self directed RRSPs. Over 15 years the RRSP investors, who previously invested their money in individual mortgages, have made an average annual return of 10.36%, without the problems associated with managing their own funds. If you have RRSP funds available and would like to consider becoming a shareholder of Hansa Mortgage Investment Corporation, please give me a call. We have room to expand and can accommodate a few more investors.
My career as a mortgage broker has been challenging, satisfying and rewarding so I wish to not only thank you with the “Skip or double up a payment” draw, but also ..
You are invited
to celebrate with us
during the “Taste of The Danforth” festival
Friday August 10 and Saturday August 11
between 6.30 and 9.30 pm
To enjoy some delicious food and drinks
OSCAR NIGHT
While flipping TV channels on Oscar night this year, I heard that the star of the film “Das Boot” (The Boat) had died. The news brought back memories about the co-star of that movie, Klaus Wennemann, with whom I went to school as a boy in Germany. It also heightened my interest in the annual Hollywood spectacle that was about to begin because of another film star’s connection to my place of birth. 
While Ben Mulroney gushed over the actress Nicole Kidman in her deep red dress, with his quip: “You look like the Canadian flag”, believe it or not, I was actually more interested in the lady who accompanied Leonardo DiCaprio. No, it was not one of his super model girl friends. It was his mother, Irmelin.
Irmelin was literally the ‘girl next door’ when I was growing up in my hometown of Oer-Erkenschwick, until she emigrated with her parents to the United States, where they settled in the Bronx. Then later, when as a young man I crossed the Atlantic from Hamburg to New York on board the ocean liner Hanseatic, I was carrying a parcel from neighbours in Germany. When I delivered the parcel only Irmelin, who was then in her last year of high school, was at home,
Eventually, Irmelin’s parents returned to Germany where they retired in 1985. Irmelin remained in the States, where she had married, and raised as single parent the now famous Leonardo DiCaprio. Irmelin visited her parents regularly and for that reason, the young Leonardo often spent his summer holidays in my home town. Just a few years ago, while vising my parents, I met Irmelin’s 92 year old mother once again.
While I am only mildly interested in the Oscar spectacle, you will understand that due to my, admittedly limited, connection with the family, I was interested to see the star’s mother and I was secretly rooting for Leonardo to win an Oscar for his role in “Blood Diamonds”.
So he didn’t win, but with his talent there is always another chance next year.
My connection with Leonardo is an example of the theory, ‘Six Degrees of Separation’. This is the notion that any two people on the planet are connected through a chain of acquaintances that averages only five intermediaries. I don’t know Leonardo DeCaprio and in fact I have never met him, but I feel some “connection” because I knew his mother. You must have had occasion yourself to say “ It’s a small world”.
Through a similarly short chain I am connected to US President George Bush. Some years ago, my wife and I became friends with another couple whose son attended the same school as our boys. Indirectly, through them, we found ourselves at a dinner party with Mike Harris and his wife, shortly after he became Premier of Ontario. Over dinner he related how he had recently been fishing in northern Canada with George Bush Senior, the former US President. It was a novel experience for me to be exposed to a politician whose world is so alien to mine and I was also struck by the fact that there were only three degrees of separation linking me to the former president and only four to the current President, George Bush Junior. (I don’t know what George Bush thinks of this!)
I also learned something else that evening - about handshakes! When I was introduced to Mike Harris and we shook hands, he extended his free hand ever so lightly under my elbow and, drawing me closer, asked: “and where are you from?”.
I knew that mumbling, ”I am from Scarborough”, was an inappropriate response. What he meant was “Where are you from originally?” A skilful opener like this can lead to a series of questions that follow easily from one to the other - and the ice is broken. Many people feel a little uncomfortable when they meet others for the first time, particularly in a group, feeling they don’t know what to say. While most of us are reluctant to get into discussion with complete strangers about politics, religion or the world’s troubles, we will respond to simple, non controversial questions about our origins or how we happen to know the host.
Unless you think that the person you are meeting might be a mafia king pin I think the innocuous personal question creates a better bridge than “what about those Leafs?” Fans of professional sports teams can talk endlessly about “their” teams and players while learning nothing about each other.
I think that eastablishing rapport, breaking down barriers and communicating, are such important skills that it is worth the effort to conciously practice proven techniques.
If you have found yourself to have interesting connections ala “Six Degrees of Separation”, I would be most interested to hear about them, over the phone or in writing. Of course, if we meet we can always practice “the politicians handshake”.
While Ben Mulroney gushed over the actress Nicole Kidman in her deep red dress, with his quip: “You look like the Canadian flag”, believe it or not, I was actually more interested in the lady who accompanied Leonardo DiCaprio. No, it was not one of his super model girl friends. It was his mother, Irmelin.
Irmelin was literally the ‘girl next door’ when I was growing up in my hometown of Oer-Erkenschwick, until she emigrated with her parents to the United States, where they settled in the Bronx. Then later, when as a young man I crossed the Atlantic from Hamburg to New York on board the ocean liner Hanseatic, I was carrying a parcel from neighbours in Germany. When I delivered the parcel only Irmelin, who was then in her last year of high school, was at home,
Eventually, Irmelin’s parents returned to Germany where they retired in 1985. Irmelin remained in the States, where she had married, and raised as single parent the now famous Leonardo DiCaprio. Irmelin visited her parents regularly and for that reason, the young Leonardo often spent his summer holidays in my home town. Just a few years ago, while vising my parents, I met Irmelin’s 92 year old mother once again.
While I am only mildly interested in the Oscar spectacle, you will understand that due to my, admittedly limited, connection with the family, I was interested to see the star’s mother and I was secretly rooting for Leonardo to win an Oscar for his role in “Blood Diamonds”.
So he didn’t win, but with his talent there is always another chance next year.
My connection with Leonardo is an example of the theory, ‘Six Degrees of Separation’. This is the notion that any two people on the planet are connected through a chain of acquaintances that averages only five intermediaries. I don’t know Leonardo DeCaprio and in fact I have never met him, but I feel some “connection” because I knew his mother. You must have had occasion yourself to say “ It’s a small world”.
Through a similarly short chain I am connected to US President George Bush. Some years ago, my wife and I became friends with another couple whose son attended the same school as our boys. Indirectly, through them, we found ourselves at a dinner party with Mike Harris and his wife, shortly after he became Premier of Ontario. Over dinner he related how he had recently been fishing in northern Canada with George Bush Senior, the former US President. It was a novel experience for me to be exposed to a politician whose world is so alien to mine and I was also struck by the fact that there were only three degrees of separation linking me to the former president and only four to the current President, George Bush Junior. (I don’t know what George Bush thinks of this!)
I also learned something else that evening - about handshakes! When I was introduced to Mike Harris and we shook hands, he extended his free hand ever so lightly under my elbow and, drawing me closer, asked: “and where are you from?”.
I knew that mumbling, ”I am from Scarborough”, was an inappropriate response. What he meant was “Where are you from originally?” A skilful opener like this can lead to a series of questions that follow easily from one to the other - and the ice is broken. Many people feel a little uncomfortable when they meet others for the first time, particularly in a group, feeling they don’t know what to say. While most of us are reluctant to get into discussion with complete strangers about politics, religion or the world’s troubles, we will respond to simple, non controversial questions about our origins or how we happen to know the host.
Unless you think that the person you are meeting might be a mafia king pin I think the innocuous personal question creates a better bridge than “what about those Leafs?” Fans of professional sports teams can talk endlessly about “their” teams and players while learning nothing about each other.
I think that eastablishing rapport, breaking down barriers and communicating, are such important skills that it is worth the effort to conciously practice proven techniques.
If you have found yourself to have interesting connections ala “Six Degrees of Separation”, I would be most interested to hear about them, over the phone or in writing. Of course, if we meet we can always practice “the politicians handshake”.
Tax Benefits of Real Estate Ownership
If you rely on media coverage during the money season for an appreciation of the value of real estate ownership, you might be misled into believing that, while a house or condominium is useful as a place to keep your stuff, real estate carries little significant tax benefit. In reality, real estate offers more tax advantages than other classes of investment, particularly for home owners.
As the annual RRSP frenzy descends on Canada, even ever-popular discussions of the weather take a back seat to talk of Registered Retirement Savings Plans until the contribution deadline March 1. The yearly financial hype-fest then broadens to include more income-tax issues and rages on until the return-filing deadline April 30. In May, spring inspires a renewed interest in gardening and real estate.
Home buyers are often ignorant of these financial benefits, or overlook their significance, when deciding how much to invest and where. Developers, builders and real estate brokers place the emphasis on floor plans, mortgage rates and decor. Television, with its make-over madness, and other media as well, reinforce a home buying perspective that places investment far down the "must have" buying list.
Yet, real estate is the single largest financial investment most Canadians make, even though the selection process for residential property seems to emphasize esthetics over asset management. Consumers would benefit from a deeper understanding of how their home, cottage and income properties can become a significant active partner in their future. According to a TD Economics' estimate, "more than 70 per cent of Canadian families are currently homeowners. The total value of residences exceeds C$1 trillion and land and housing together account for one-third of all personal assets. Given this importance, the future value of a home should be included in the financial plans of Canadians."
If you are considering the purchase of a home -- new or resale, any type of ownership or design -- be aware that all profit made on this investment will be tax free if it's your principal residence. Buy smart, renovate for added value, add on market appreciation, and sell well, and all that profit or capital gain is yours -- unlike the money made on stocks and bonds. According to the Canada Revenue Agency, if the real estate was your principal residence for every year you owned it, you don't even have to report the sale on your tax return.
Market and economy fluctuations can affect the amount of profit, but real estate has the added advantage of being a live-in investment, so one must add this cost-reducing advantage into the calculation.
Home ownership carries additional financial benefits as the selected highlights below illustrate:
Special government savings and rebates For example, rebate of part of the GST or HST paid on a new owner-built or builder constructed residence, including condominiums, a substantially renovated house, a modular/mobile home or a floating home. For co-operatives, shares in the capital stock of the co-op, which represent the equivalent of ownership, are eligible. New residential rental property also qualifies.
Tax-free access to RRSP funds The Home Buyers' Plan (HBP) allows tax-free withdrawal of up to C$20,000 from your RRSP to buy a qualifying home, provided the amount is gradually repaid over 15 years. The property may be bought or built for yourself or a related person with a disability. When multiple buyers purchase a property, each may withdraw up to C$20,000 under the HBP. Funds may be withdrawn under the Lifelong Learning Plan at the same time.
Income generation using real estate Renting out all or part of your home generates rental income, which can be offset by allowable expenses. Principal residence status may not be affected by rental activity if rules of timing and depreciation are followed.
Home-based business head quarters Working at home, telecommuting, or operating a home-based business allows certain expenses to be claimed against income, including a proportionate share of mortgage interest.
Related tax credits In Manitoba and Ontario, provincial Property Tax Credits may reduce the amount of income tax due.
Search out the full range of opportunities related to home ownership, many of them presented in the +400 articles of this column on Decisions & Communities. Obviously, before you act on any financial benefit, investigate the qualification criteria, locate the correct forms and ask many questions of your financial advisor or the Canada Revenue Agency staff. For instance, to qualify for the GST rebate, the fair market value of the house and land must be less than C$450,000.
While you're pondering ways to gain the greatest benefit from RRSPs and on your income tax return, go a step further and consider how to use the financial advantages of home ownership to your benefit -- now and in the future.
Written by PJ Wade
As the annual RRSP frenzy descends on Canada, even ever-popular discussions of the weather take a back seat to talk of Registered Retirement Savings Plans until the contribution deadline March 1. The yearly financial hype-fest then broadens to include more income-tax issues and rages on until the return-filing deadline April 30. In May, spring inspires a renewed interest in gardening and real estate.
Home buyers are often ignorant of these financial benefits, or overlook their significance, when deciding how much to invest and where. Developers, builders and real estate brokers place the emphasis on floor plans, mortgage rates and decor. Television, with its make-over madness, and other media as well, reinforce a home buying perspective that places investment far down the "must have" buying list.
Yet, real estate is the single largest financial investment most Canadians make, even though the selection process for residential property seems to emphasize esthetics over asset management. Consumers would benefit from a deeper understanding of how their home, cottage and income properties can become a significant active partner in their future. According to a TD Economics' estimate, "more than 70 per cent of Canadian families are currently homeowners. The total value of residences exceeds C$1 trillion and land and housing together account for one-third of all personal assets. Given this importance, the future value of a home should be included in the financial plans of Canadians."
If you are considering the purchase of a home -- new or resale, any type of ownership or design -- be aware that all profit made on this investment will be tax free if it's your principal residence. Buy smart, renovate for added value, add on market appreciation, and sell well, and all that profit or capital gain is yours -- unlike the money made on stocks and bonds. According to the Canada Revenue Agency, if the real estate was your principal residence for every year you owned it, you don't even have to report the sale on your tax return.
Market and economy fluctuations can affect the amount of profit, but real estate has the added advantage of being a live-in investment, so one must add this cost-reducing advantage into the calculation.
Home ownership carries additional financial benefits as the selected highlights below illustrate:
Special government savings and rebates For example, rebate of part of the GST or HST paid on a new owner-built or builder constructed residence, including condominiums, a substantially renovated house, a modular/mobile home or a floating home. For co-operatives, shares in the capital stock of the co-op, which represent the equivalent of ownership, are eligible. New residential rental property also qualifies.
Tax-free access to RRSP funds The Home Buyers' Plan (HBP) allows tax-free withdrawal of up to C$20,000 from your RRSP to buy a qualifying home, provided the amount is gradually repaid over 15 years. The property may be bought or built for yourself or a related person with a disability. When multiple buyers purchase a property, each may withdraw up to C$20,000 under the HBP. Funds may be withdrawn under the Lifelong Learning Plan at the same time.
Income generation using real estate Renting out all or part of your home generates rental income, which can be offset by allowable expenses. Principal residence status may not be affected by rental activity if rules of timing and depreciation are followed.
Home-based business head quarters Working at home, telecommuting, or operating a home-based business allows certain expenses to be claimed against income, including a proportionate share of mortgage interest.
Related tax credits In Manitoba and Ontario, provincial Property Tax Credits may reduce the amount of income tax due.
Search out the full range of opportunities related to home ownership, many of them presented in the +400 articles of this column on Decisions & Communities. Obviously, before you act on any financial benefit, investigate the qualification criteria, locate the correct forms and ask many questions of your financial advisor or the Canada Revenue Agency staff. For instance, to qualify for the GST rebate, the fair market value of the house and land must be less than C$450,000.
While you're pondering ways to gain the greatest benefit from RRSPs and on your income tax return, go a step further and consider how to use the financial advantages of home ownership to your benefit -- now and in the future.
Written by PJ Wade
Valentine
When I returned at year end from my trip to South America the Christmas mail was still waiting to be read. Nowadays, when daily mail consists mainly of advertising flyers and bills, the hand addressed envelopes, colorful foreign and “special edition” Canadian stamps create a charged air of curiosity and expectation. I was not disappointed.
In addition to the greeting cards, I received a number of Christmas letters with news from friends and family about their past activities and plans for 2007. Travel news tops the list of subjects. I was impressed by the fact that simple, local, “holidays at the cottage” are “out”, and multiple trips a year to the most exotic of places are “in”.
Gone also are the handwritten letters of the past, and ‘in’ are the templated, businesslike, word-processor generated family newsletters. The tools of our information society such as, cell phones, messaging, hotmail, bloging, U-tubing, MSN, VoiP, and the demand for instant communication have pushed old fashioned letter writing aside.
Handwritten letters demand a certain effort, skill and spontaneity. Above all they imply intimacy and exclusiveness. Unlike Christmas and New Year, when we celebrate family and friendship, Valentine’s Day is specially designated to celebrate love and romance. It is therefore particularly suited to the old fashioned craft of letter writing, a skill which I have had occasion to practice. This leads me to speak of my wife Adriana and to tell you how we met.
I was a student at Carleton University and decided, with 6 friends, to drive non-stop, in two cars, to Mexico City during the Christmas break. The real reason for the trip was to hike up the snow-capped mount Popocatepetl, a 17,888 ft volcano SE of Mexico City. After the hike I decided to take a local bus to still “off the map” Acapulco. Unlike the popular tourist destination that it is now, Acapulco was then a laid back town where I would sit around Hornos beach with the fishermen who set their nets out in the bay at sunset, and where I checked my rucksack at the Greyhound station over night, and slept on the beach.
Early in the morning, on one of those carefree days, a number of taxis pulled up to the beach and deposited more than 40 girls, who instantly transformed and enlivened my view of the beach. It didn’t take me long to follow them to the water and make contact. They were from Argentina, on a Rotary’s Club arranged exchange, and were to live with American families for several months at various locations around the US. Acapulco was just a stop over. Three days of contact with one of these lovely girls was not enough, so we exchanged home addresses and I was promised a letter once she knew where she would be staying in Miami.
That promised letter never arrived! But, with memories of a great vacation, I returned the following Christmas to Acapulco and from there I then sent her a card with the words: “Greetings from Acapulco – but it is not the same without you.”
When I returned to Ottawa I found a letter from Argentina telling me that she had returned to Argentina soon after arriving in Miami because her mother passed away. Comparing date stamps we found that the letter and card had crossed in the mail. The year of silence was forgiven and forgotten and, encouraged by the synchronicity of our first letters, we began a prolonged period of letter writing. At first we just replied to each other’s letters. Then the frequency increased and we wrote without waiting for a reply. At one time in the third year, Adriana returned from a holiday to find 21 of my letters waiting for her.
Long distance phone calls to Argentina, at $12 per minute, where prohibitively expensive, so the frequency of letters increased from one letter a week, to two letters a week, a letter every day and eventually to letters morning, noon and night.
Finally, in my last year at university, we hatched a plan to meet again, with the understanding that we would end the relationship if we didn’t click. When I met Adriana at the Ottawa airport it was on a bitterly cold January day. The heater in my Volkswagen bug wasn’t working and I had to wrap her in a blanket for the ride to the Mirador Hotel.
It didn’t take us long to re-discover our spark and we got engaged within three days. I bought an engagement ring at People’s Credit Jewellers with the inscription “Para Siempre” and promised to one day buy the diamond. Adriana flew back to Cordoba in Argentina to break the news that we intended to get married as soon as I graduated. Her father didn’t speak to her for the next three months but, in the end, when I arrived three days before the wedding, he sent his small private plane, a Bonanza to Buenos Aires, to pick me up. I had two return plane tickets in my pocket, bought with money I had borrowed from friends, because I was a student with no job and no money.
Three days after our wedding Adriana’s brother also married and we all went to Copacabana in Rio de Janeiro for our joint honeymoon.
I cannot end this story with the phrase “the rest is history”. No! It was the beginning of a tremendous adventure in married life. We have three fine sons and my brother in law has five children, two of whom got married last year. One of those weddings was the occasion for our December trip to Argentina. It was only later that I got “permission” to go on the hiking and hitchhiking trip to Patagonia and Tierra del Fuego. I cannot give you the recipe for a lasting marriage, but while I was on the hiking trip, in Torres del Paine, I met a New Zealand helicopter pilot, who mused, over a bottle of good Chilean wine, “The best way to keep a marriage intact is to make her like you”. I thought this was quite similar to the biblical proverb: “Give, and the receiving will take care of itself”. When I think about it, any problems we’ve had, generally occurred when I got those ideas the wrong way round. But happily our marriage has survived … so far!
In addition to the greeting cards, I received a number of Christmas letters with news from friends and family about their past activities and plans for 2007. Travel news tops the list of subjects. I was impressed by the fact that simple, local, “holidays at the cottage” are “out”, and multiple trips a year to the most exotic of places are “in”.
Gone also are the handwritten letters of the past, and ‘in’ are the templated, businesslike, word-processor generated family newsletters. The tools of our information society such as, cell phones, messaging, hotmail, bloging, U-tubing, MSN, VoiP, and the demand for instant communication have pushed old fashioned letter writing aside.
Handwritten letters demand a certain effort, skill and spontaneity. Above all they imply intimacy and exclusiveness. Unlike Christmas and New Year, when we celebrate family and friendship, Valentine’s Day is specially designated to celebrate love and romance. It is therefore particularly suited to the old fashioned craft of letter writing, a skill which I have had occasion to practice. This leads me to speak of my wife Adriana and to tell you how we met.
I was a student at Carleton University and decided, with 6 friends, to drive non-stop, in two cars, to Mexico City during the Christmas break. The real reason for the trip was to hike up the snow-capped mount Popocatepetl, a 17,888 ft volcano SE of Mexico City. After the hike I decided to take a local bus to still “off the map” Acapulco. Unlike the popular tourist destination that it is now, Acapulco was then a laid back town where I would sit around Hornos beach with the fishermen who set their nets out in the bay at sunset, and where I checked my rucksack at the Greyhound station over night, and slept on the beach.
Early in the morning, on one of those carefree days, a number of taxis pulled up to the beach and deposited more than 40 girls, who instantly transformed and enlivened my view of the beach. It didn’t take me long to follow them to the water and make contact. They were from Argentina, on a Rotary’s Club arranged exchange, and were to live with American families for several months at various locations around the US. Acapulco was just a stop over. Three days of contact with one of these lovely girls was not enough, so we exchanged home addresses and I was promised a letter once she knew where she would be staying in Miami.
That promised letter never arrived! But, with memories of a great vacation, I returned the following Christmas to Acapulco and from there I then sent her a card with the words: “Greetings from Acapulco – but it is not the same without you.”
When I returned to Ottawa I found a letter from Argentina telling me that she had returned to Argentina soon after arriving in Miami because her mother passed away. Comparing date stamps we found that the letter and card had crossed in the mail. The year of silence was forgiven and forgotten and, encouraged by the synchronicity of our first letters, we began a prolonged period of letter writing. At first we just replied to each other’s letters. Then the frequency increased and we wrote without waiting for a reply. At one time in the third year, Adriana returned from a holiday to find 21 of my letters waiting for her.
Long distance phone calls to Argentina, at $12 per minute, where prohibitively expensive, so the frequency of letters increased from one letter a week, to two letters a week, a letter every day and eventually to letters morning, noon and night.
Finally, in my last year at university, we hatched a plan to meet again, with the understanding that we would end the relationship if we didn’t click. When I met Adriana at the Ottawa airport it was on a bitterly cold January day. The heater in my Volkswagen bug wasn’t working and I had to wrap her in a blanket for the ride to the Mirador Hotel.
It didn’t take us long to re-discover our spark and we got engaged within three days. I bought an engagement ring at People’s Credit Jewellers with the inscription “Para Siempre” and promised to one day buy the diamond. Adriana flew back to Cordoba in Argentina to break the news that we intended to get married as soon as I graduated. Her father didn’t speak to her for the next three months but, in the end, when I arrived three days before the wedding, he sent his small private plane, a Bonanza to Buenos Aires, to pick me up. I had two return plane tickets in my pocket, bought with money I had borrowed from friends, because I was a student with no job and no money.
Three days after our wedding Adriana’s brother also married and we all went to Copacabana in Rio de Janeiro for our joint honeymoon.
I cannot end this story with the phrase “the rest is history”. No! It was the beginning of a tremendous adventure in married life. We have three fine sons and my brother in law has five children, two of whom got married last year. One of those weddings was the occasion for our December trip to Argentina. It was only later that I got “permission” to go on the hiking and hitchhiking trip to Patagonia and Tierra del Fuego. I cannot give you the recipe for a lasting marriage, but while I was on the hiking trip, in Torres del Paine, I met a New Zealand helicopter pilot, who mused, over a bottle of good Chilean wine, “The best way to keep a marriage intact is to make her like you”. I thought this was quite similar to the biblical proverb: “Give, and the receiving will take care of itself”. When I think about it, any problems we’ve had, generally occurred when I got those ideas the wrong way round. But happily our marriage has survived … so far!
RRSPs VS. HOME OWNERSHIP
Here is an excellent article from The Globe & Mail that highlights some concepts on home ownership that I have always felt strongly about. Jim Stanford argues a strong case for choosing to create value in your home rather than risk your retirement money in volatile markets.
DECEMBER REAL ESTATE UPDATE
The December 2008 Real Estate Update has been published. Click here to view.
BLACK SWANS
On December 27 I found myself hitchhiking in Tierra Del Fuego at the tip of South America, on the Argentine side oft the border with Chile, hoping for a ride to take me the remaining 190 km to the Magellan Strait ferry.A few days earlier I had completed a 7 day trip in one of Chile’s national parks, “Torres del Paine”, hiking with a group of eight strangers from far flung places, in the majestic world of glaciers and snow capped mountains, the home of pumas, condors, foxes, and a variety of wild llamas. It is a wonderful place and I was very happy to fulfill an old ambition to hike in this part of the world.
To complete another lifelong ambition I flew, on Christmas Day, from Punta Arenas on the western shore of the Magellan Strait, to Ushuaia, the southernmost town in the world, just 80 km north of Cape Horn. Ushuaia, with its’ fine harbor, is the last port of call for the many cruise ships that now visit Antarctica. It houses a population of 50,000 in low rise buildings that perch on the mountain slopes that rise steeply from the harbor. Many of the buildings are painted in pastel colors, and they are all built low to protect the population from the incessant strong cold winds that roar unimpeded around the southern oceans.
Hitchhiking the 650 km from Ushuaia back to Punta Arenas allowed me to relive a little of the experience of “thumbing” my way around the world as a young man. Vehicles are infrequent, but people were very friendly and I could see them coming from miles away by the plume of dust that was thrown up by their wheels on the gravel road. Being out on my own, with the land and the people, I found the three days of hitchhiking to be just as rewarding as the hiking in “Torres del Paine”.
While in the National Park, we hiked up to the Grey Glacier, the shrinking of which, was noted in Al Gores’ recent documentary “An Inconvenient Truth”. When we were shown how it was receding at 30 meters a year I was taken with a series of thoughts about unintended consequences. In the quest for warmth, wealth, mobility and technological progress we have exploited fossil fuels to the extent that we are now facing unprecedented climate change. The future is uncertain for all mankind and many people are already suffering drought, flooding and violent weather that likely results from the unintended consequences of our ignorance and lack of restraint.
Thinking about all this, a metaphor popped into my mind that I had encountered for the first time, a few months earlier. Last summer, Amaranth, the six billion dollar futures fund imploded overnight and disappeared. It seems that, while no fraud or self dealing was involved, the fund managers had sought to replicate their 2005 success when they had made a killing from oil and gas futures following the disruption wrought by hurricane Katrina. They had figured that a hot hurricane season in 2006 would present another opportunity to repeat the trick. Contrary to predictions the season was quiet and no hurricanes hit the US Gulf coast, with the result that prices failed to shoot up as they had expected. They then had to liquidate other holdings to meet the oil and gas losses. I happened to see an interview on TV with the Amaranth president. When asked to explain the catastrophic failure of the fund he had replied that it was simply a case of “Black Swans”.
Outside of Australia, black swans are rare and the point of the metaphor was to say that, while most of us think of swans as white, you will occasionally encounter a black one. It reminds me that we all make unfortunate decisions from time to time that can cause setbacks and disruptions in our lives. Of course we are also subject to unforeseen calamities, financial and otherwise, that are natural, or at least not the result of personal error. We can however, take prudent steps to reduce some exposures to risk. There’s lots of advice out there advocating exercise and better eating habits and we can also seek out the knowledge and advice we need to better manage our financial resources.
However, I do not want to dwell on negative possibilities at the beginning of a new year. This is a good time to reflect on the year that has passed, to ponder what we can be grateful for, and to choose an inspiring objective or two for the year ahead. If you feel the need for more inspiration, I recommend you download the documentary “The Secret” from the link found below.
If you have not yet seen “An Inconvenient Truth” you may want to consider renting the DVD. It helps us to realize that the environmental, and other troubling issues of our time, require us to participate and collaborate in the development of solutions.
On a personal level I very much appreciate that all of you, my clients, have helped me along the way. Thank you for rewarding me with your business when you had the opportunity to go elsewhere, and for recommending my service to your family, friends and neighbors in 2006.
WIKINOMICS
Wikinomics challenges our most deeply-rooted assumptions about business and shows new business models and how masses of people can participate in the economy like never before.
Mass collaboration is revolutionizing the corporation, the economy, and nearly every aspect of management. Masses of people are creating TV news stories, sequencing the human genome, remixing their favorite music, designing software, finding a cure for disease, editing school texts, inventing new cosmetics, or even building motorcycles.
A brilliant guide to one of the most profound changes of our time.
Friday, November 28, 2008
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