The Wealth Management Blog

Does wealth breed selfishness?

2012-04-20T17:24:56Z

Provocative new research at the University of California, Berkley, suggests that those of means ARE different from their more humble brethren, and NOT in ways that would make one proud. According to studies conducted by social psychologist Paul Piff and his university colleagues, wealthy individuals are more likely to LIE, to CHEAT and to STEAL then their less fortunate counterparts. They are even more likely to do things as mundane as cutting off other drivers and refusing to wait for pedestrians at crosswalks.

The research points to a number of reasons, but three stand out:

Entitlement

· The cars, the schools, the trips, the postal code, and the toys…they set up a paradigm of entitlement. Wealthy individuals sometimes feel they deserve to have things and this is extended to justify bad behavior like lying and cheating. This is witnessed more strongly with children of wealth who have grown up in an environment of abundance.

Isolation:

· Wealthy people are less dependent on maintaining social bonds to help provide basic necessities. The very ability to provide for themselves removes some of the behavioral barriers that would otherwise be kept in check. Wealth subsequently can be isolating and reduce or eliminate a negative conclusion from the consequence of social comparison.

Empathy

· Social bonds are considered desirous and influential, but because of their ability to self-provide, they are not necessary glue for those with abundance. As a consequence, wealthy individuals may display less empathy and be unconcerned about the impact of their behavior on others.

You may read this and think – that’s interesting – but it doesn’t apply to me. I have great values. I wasn’t born into money. I earned every cent I have. And you are probably right on all fronts. But, what about your children? Your grandchildren? How are you shaping them into the good people you are sure in your heart-of-hearts they truly are?

I work with a lot of families to who grapple with these questions. My advice is always to set your children up for success.

How?

Start by talking with them. A recent study by Dr. Margo Hilbrecht, revealed that the average Canadian parent only spends 35 minutes a day talking to their 5-12 year old child, and 5 minutes a day talking to their teen.

Talk about things that matter – both to you and to your children. When possible, try to have a values based conversation. Talk about why you are making a decision to do something, buy something, or to support someone…or why you aren’t doing those things. Ask your child what s/he would do in your circumstance. Don’t multi-task. Really take the time to listen to his/her answer.

Spend money on experiences with your children, not on the latest ‘material or consumables products.’ Go on trips; Go to plays. Go to movies your kids want to see (even ones in which you have no real interest); Rent out a rink and go ice skating; Go skiing; Let each child pick a restaurant and go for dinner there once a month. Help out at a food bank. Take an adult vacation together. Be creative. In choosing to spend money on experiences (especially ones that benefit other people) you help create meaningful, long-lasting and positive emotions[i] in your offspring.

This advice will not help you get them to clean up their rooms, but it may help them to be better, happier people.

Dr. Julie Morton, Principal, Conscious Legacy Consulting helps high net worth families create the personal, family and business legacies they desire. She will be our guest speaker at our Inside the Tent event on May 3^rd entitled: Self worth. Net worth. What values will you pass on?

[i] Aknin, L.,B,, Dunn, E. W., Barrington-Leigh, C. P., Helliwell, J., Biswas-Diener, R., Kemeza, I., Nyende, P., Ashton-James, C., & Norton, M. I., (October, 2010). Prosocial spending and psychological well-being: Cross-cultural evidence for a psychological universal. NBER Working Papers . National Bureau of Economic Research, Inc. No 16415.

The 3 most common portfolio woes -- and how to fix them

2012-04-12T20:09:17Z

Earlier this year, our Managing Director and Chief Wealth Management Officer, David Lloyd published a month-by-month Personal Finance Checklist to help readers organize and optimize their financial affairs and it's been a popular post on this blog.

April is a good month to review your portfolio after first quarter results are in: Perhaps a little 'spring tune-up' if you haven't revisited your strategy in awhile?

On that very subject, here's a link to an article by Stephen Hafner, one of our Managing Directors & Portfolio Managers, written for the website Accretive Advisor. Stephen identifies the three most common portfolio problems we see -- and how to fix them.

Is the next generation ready to fund retirement?

2012-04-05T19:45:49Z

Last week's federal budget included the much anticipated changes to the Old Age Security (OAS) pension. But not nearly as soon as some thought. With changes being phased in over six years beginning in 2023, the reality is that the majority of Canada's baby boomer population will be unaffected by the changes. Currently, at over $6,000 per year with a claw back feature reducing the amount received based on income, the reality is that for most of our clients OAS is an afterthought in their retirement planning. But what this change does signify is a continuation of two societal trends that have been going on for decades. ]]> One is that “old age” is most definitely occurring later in life and the second is that the burden of funding one’s retirement years is being shifted from governments and corporations into the individual’s hands. Canadians and many other citizens from the developed world are living much longer, healthier and more active lives. Canada is now the sixth G8 nation to make upward changes to their retirement age.

Corporations have long been transitioning heavily from defined benefit plans to defined contributions plans placing the onus of retirement planning on the individual. Governments are clearly signalling the same. Although about half of the baby boomers are getting a pass on OAS changes, the future impact will be felt by their children, Generations X and Y. It is they who will likely be faced with smaller support systems, higher health care costs, and longer retirement periods.

Of course everyone wants to help their children. The question of how and how much is a frequent point of discussion in the work we do with clients.

What’s universal is a desire to provide the tools and encourage the good habits that will enable the next generation to live an independent and financially stable lifestyle. A meaty subject to be sure and we thought worthy of further examination.

We will be tackling it at our next Inside the Tent client gathering: Net Worth. Self Worth. What values will you pass on? Thursday May 3, 6:30 pm – 8:30 pm. All clients welcome. RSVP to your portfolio manager at Newport Private Wealth.

Adult Children Returning to the Nest

2012-03-21T13:21:31Z

Many of our clients are justifiably concerned for the future welfare of their children. Some are torn between letting children find their own way and accepting that it is, and will likely continue to be, tougher for our kids than we had it. Finding a job, affording to buy a home, uncertainty surrounding government services, caring for an aging demographic and responsibility for an enormous debt burden for which they did not incur, are steep hurdles we did not have to overcome.

One issue facing boomers today is adult children moving back into the family home, indefinitely. So what are some of the issues and practical steps to make sure this family reunion doesn’t turn out to be a like All in the Family (aka Archie Bunker and family)?

Set expectations – How long is long enough? Most people manage deadlines, so why shouldn’t your children? Is rent to be paid? We’ve seen parents collect rent and then give it back when funds are needed for a down payment on a home. At the very least, children should earn their keep by doing jobs around the house and also abide by house rules.

Parents need to understand and then discuss their plans for retirement and how those may affect ongoing support for their children. For example, selling the family home and downsizing is often integral to the plan. In order for that to happen, the nest cannot have children living in it.

Planning for death with adult children living in the family home can be complicated. The death of one parent may cause the survivor to re-evaluate whether the family home is too much for them to manage. The subsequent death of the surviving spouse when an adult child still lives in the home can be difficult as executors manage the distribution of estate assets

Disability brings on many issues. Physical disability may require the home to be retrofitted at significant expense. Although moving may be the best decision, parents may chose the expensive retrofit to ensure the home is available for junior.

Mental disability is the foundation for elder abuse, especially if adult children who have power of attorney for the personal care of their parents are living in the family home. Shipping off a parent with dementia to a care facility is a convenient way to accelerate receipt of an inheritance. It happens!

Raising our children to become responsible and independent adults is a parent’s priority. Allowing adult children to return to the nest can provide temporary financial relief, but does little to prepare them for life and arguably robs them of the experience of figuring it out on their own.

What women want from their financial advisors

2012-03-15T19:37:25Z

As an independent professional woman, I’ve always bristled at the suggestion that there is somehow a difference in how I approach the management of my assets simply because of my gender.

But having just come back from a Women Advisors’ Forum in the U.S. this week, I have to say there is a lot of research to suggest women do have different expectations than men – and these are not being very well met by the financial industry.

]]> A 2009 survey of 12,000 women by Boston Consulting Group found that women are dissatisfied with the products and services available to them in many consumer categories. Guess which industry is at the bottom of the heap: Financial Services. Keynote speaker, Eleanor Blayney, co-founder of Directionsforwomen.com, suggested there are two reasons for this: intimidation and patronization.

According to the same study, most women don’t have a bias toward dealing with female advisors – only about 11% expressed a gender preference.

So what DO women want from their financial advisors?

We put competence and experience ahead of gender. Yet, Blaney suggests women don’t measure these factors by title, credentials or functions. We want to know why you are in this profession. What brought you here and how can you help us?
We tend to value advisors who bring life experience in the many issues we face (work-life balance, caring for elderly parents, singlehood later in life, etc.) not just investment experience. We want someone who can help us build a roadmap for our lives. (Hearing this from the speakers I have to say was validating as this is exactly the comprehensive wealth management approach we try to take with our clients at Newport Private Wealth, both men and women.)
We want to connect our money and our values. According to Blayney, females are not driven to achieve “optimization of risk adjusted returns” for their capital. Rather, we want an advisor who can help us increase our worth – both our financial and human capital. We may even want you to play the role of financial mentor, without making us feel inadequate.
Advisors should know that we may also want more time and more information to make our decisions than our male counterparts and there is some research that suggests we are better investors than men because of it! Read Women Make Better Investors Than Men, But Why?
We want a collaborative exchange with our advisors. We want to be heard, not ‘fixed’. (Think Men are from Mars, Women are from Venus.) In other words, advisors should listen more than they talk and work jointly with their female clients to develop sensible strategies for increasing their clients’ wealth and security – as opposed to rushing to solutions or pigeon holing them into pre-packaged investment products. Which makes me wonder again, isn't that what everyone wants, regardless of gender?

How (not) to choose a financial advisor

2012-03-05T15:17:55Z

Last week a friend of mine asked me for help with his portfolio. His portfolio hadn’t made any money in eight years and he hasn’t made RRSP contributions for the past two years because he’s been so unhappy with the performance. He’s already switched advisors once (in 2008). Right now he’s feeling stuck and wondering what to do next.

A look at the portfolio reveals that the fees are high (MERs of about 2.75%) and he has an over-weighting in small cap mutual funds – both of which have dragged down his performance. But perhaps what’s more revealing is how he came to choose his current advisor.

He told me: “We knew each other when we were 18 year old boys. He left for university in his 20s like I did, and ended up as a RR, eventually settling with his current firm. He had a local radio show in our home town – I even went on it from time to time thinking even if I don’t get any returns, at least it will be good for my business – but this really has not panned out.”

Now, he’s a close enough friend I can tell him that’s a pretty poor reason for choosing an advisor. But he’s not alone. So very often people choose advisors on the basis of personal relationships, a referral from a friend or ‘gut instinct’ from an initial meeting. Of course we all want to deal with people we know, like and trust. That’s important. But it’s not enough. You’ve got to be clinical in your approach if you want to find a competent and professional advisor who is a good match for you . A couple of years ago I wrote a piece for our website on 10 Criteria for Choosing an Investment Advisor. My friend’s story reminded me to share it again.

A night at the Oscars

2012-03-02T21:45:04Z

On vacation with my family last week in Los Angeles, we couldn't help but get caught up in the Oscar mania that surrounded us. As we drove through the streets of Beverley Hills, and walked the famed Rodeo Drive, we were struck by the irony and the contrasts: California, the near bankrupt state, bloated with debt, yet opulence everywhere you turn. Every car seems new and everyone is in a hurry to get to where they can be seen wearing the latest fashions.

As a parent, it was refreshing to hear my 25 year-old daughter say, "this all seems so pretentious." I couldn't help but smile and feel relieved that 'she gets it.' See my blog - We've failed our kids, shame on us.

On our flight home, we all watched The Descendants; the George Clooney flick that garnered so much attention at the Oscars. Clooney plays the role of Matt King, a wealthy lawyer who is the sole trustee and one of many beneficiaries of a $100 million+ family property that is to be sold.

The parallel story line deals with Matt's new found responsibility for his two daughters as a result of his wife's comatose condition after an accident. Matt and his family have lived quite modestly and he shielded his daughters from their massive wealth.

My favourite line in the movie: Matt says, "I don't want my daughters growing up entitled and spoiled. And I agree with my father: you give your children enough money to do something but not enough to do nothing."

This is actually a paraphrase from one of the world's wealthiest and best investors, Warren Buffett (maybe why the line resonated with me). When asked how much money he would bequeath to his children, Buffett replied, "I want to give my kids just enough so that they would feel that they could do anything, but not so much that they would feel like doing nothing."

Regardless of source, this is a great summation of the balancing act parents face in providing for the needs and wants of their children. How ironic given the opulence in the city the movie was featured.

Reset your clock. Market timing doesn't work.

2012-03-01T15:27:10Z

I recently met with two of my clients, a retired couple, to review their investment accounts. They were pretty pleased with the performance so they asked me to take a look at an account they had managed elsewhere that hadn’t performed as well. After doing a bit of digging, it became apparent that a different strategy was being employed: market timing. This involves buying securities when you believe the market is about to go up and selling them when you believe the market is about to go down.

Market timing, technical analysis, program trading, whatever terminology is used to describe the process, is a method that rarely benefits an individual investor and often serves to generate higher commissions for the advisor. Anyone who has taken an introductory finance course will remember that missing the ten best trading days in any year can result in an investor missing a substantial portion of their potential return. This is so often quoted that it is treated as gospel by advisors. So I decided to look at returns for the S&P TSX over the three-year period ending December 31, 2011, the same time frame that my client had asked about.

Over the three year period, the stock market generated a positive return of 29.47%. $100 invested on January 1, 2009 would be worth $129.47 on December 31, 2011. If an investor missed the ten best trading days in each of the 3 years, 30 days in total, they would have lost 41.1%. So the saying is true.

However, when you look at the data, many of the worst performing days fall right around the best performing days. To be fair, a market timer probably isn’t only going to be out of the market on the 30 best days. If you had also missed the three days preceding and following the best performing days, you would have generated a positive return of 2.49% over the three year period. Much better than the loss of 41.1% but significantly lower than the buy and hold strategy.

It is only natural that as investors we seek to outperform the market. However, over the long term the best strategy is to diversify your portfolio across a large number of investment categories in a manner that reflects your tolerance for risk and your objectives for your portfolio. Properly structured, you will be able to withstand any market volatility and remain invested, resulting in superior long-term returns.

5 Things To Know When Developing Your Estate Plan

2012-02-22T19:33:28Z

My partner, Kelly Willis, wrote a poignant post last week about the loss of her husband and the estate challenges she found in her path, all during a time she struggled with her bereavement. As a private client lawyer with many years of estate planning under my belt, I wanted to share some of the more frequent issues and misconceptions I have witnessed in dealing with families who were unprepared or had inadequate estate plans.

]]> Estate planning is a little like pre-nuptial agreements for couples excited about their pending marriage…why talk with lawyers and plan for the end of marriage when all seems so perfect today? Wills are a bit like that….why think about death, loss and sorrow while I’m relatively young, healthy and the sun is shining? You know it needs to be done….but you rationalize that “I’ll get around to it.”

In the world of estate planning, it’s so very wise to plan for dark days while it’s bright and sunny. The consequences of not doing so are more profound than you might expect. If you think the law is designed to do what you would probably do in the “unlikely” event your family is caught off guard by your unexpected death without a valid will, or incapacity without a power of attorney, you should think again.

Here are 5 things to think about when developing your estate plan:

It doesn’t automatically all go to your spouse. Many people assume this: that if they die unexpectedly and without having gotten their will done on time, the law will ensure everything will go to their surviving spouse. If you leave kids behind, this just isn’t true. In Ontario, your surviving spouse will receive a preferential share ($200k) and then split the balance with your children (the split determined on how many kids you leave behind…if you have 2 or more children they will receive the lion’s share and your surviving spouse a minority interest). And if the children are minors and the government steps in to represent their interests…not a desirable scenario;
Estate planning is not simply “death planning.” It also means planning while you’re alive. So think of it that way because your professional advisors will. Strategically using family trusts and holding companies…developing proper shareholders agreements…marital agreements…preparing for potential incapacity (mental or physical) through powers of attorney….these are all estate planning issues developed while you are alive;
Don’t let the “tax/probate tail wag the dog” as many do. Determine your wishes, what is best for you and your family, all in the context of your unique circumstances, and then envelop those wishes with the most efficient tax and probate plan possible;
Be flexible….and ensure your plan is flexible. When you think it through, the estate you create through your will may go on for decades following your death as trusts are created for children and grandchildren. Your will is then rather biblical in nature for your family because it may govern your estate, and potentially impact lives, on an inter-generational basis. And just as it is impossible to count the number of angels on the head of a pin, so too is it impossible to foresee so far in advance for your family….so develop a flexible plan that allows your executors to adapt.
Your kids are all right...or are they? Most wills dole money (and big money) out to kids at defined ages without any thought as to whether they’re prepared to receive it. Why not develop your estate in a manner that helps prepare your child to receive a large amount (by, say, ensuring that your child participates, upon attaining majority, in the administration of his or her trust fund….requiring your child to deal with professional advisors, taxation, investment decisions and the like in advance of receiving his or her inheritance)?

Without a current will that is considered and strategic, that integrates all of your affairs…from your family trusts, to your company and shareholders agreement, to your cottage and second home outside Canada, to your life insurance and tax planning…you are certain to leave your family with a tangled mess and a challenging labyrinth of complicated issues they are forced to sort through “after the fact.” This mess invariably leads to increased professional costs, delays in distributions, frozen assets, increased tax & administrative fees, reduced estate values, increased likelihood of court intervention…and, regrettably, must be shouldered by those you leave behind…the ones you love the most. So speak to your advisor. Your sunny days are now.

Annual Economic Outlook for Entrepreneurs

2012-02-15T14:12:39Z

Our own Peter Churchill Smith, Managing Director, will be the keynote speaker at the CEO Global Networks’ Annual Economic Outlook for Entrepreneurs on Thursday, February 23rd.

Peter’s plain-speaking talk, designed specifically for the business audience, will look at where we are, where we’re headed, and what you need to know to make smart decisions.

The cost is $129.00 per ticket and can be purchased on-line. Click here to register.

We have arranged for clients of Newport Private Wealth to attend as our guests. To obtain your complimentary ticket, simply contact us by email for on-line registration and the promotional code.

See event details below.

Bereavement is bad enough

2012-02-07T20:08:02Z

My husband passed away a year ago last month. We ought to have been prepared. Two years earlier he had been diagnosed with a rare form of cancer for which there was “little predictive data". We chose to be optimistic. When he died due to complications from surgery I was shocked and devastated.

Shock was the protection I needed to get through those first few weeks, but as reality set in grief took its place. It was in this condition that I was catapulted, like so many others in my position, into the surreal state of dealing with my husband’s estate. If there is any benefit in my experience it is to help others become better prepared.

I have to confess I was ‘fortunate’ under the circumstances. My husband had a valid and current will; our affairs were reasonably straightforward; I had been the ‘chief financial officer’ during our marriage so I was used to managing our finances; and I had the support of the professionals here at my firm whom I trusted as advisors and friends. In theory, I was well equipped to handle my responsibilities as executor.

]]> The reality though was more challenging: There were important choices to make; some with near-term deadlines and long-term consequences. Taxes and probate fees were higher than expected; the settlement process slower (still ongoing). Family members needed to be consulted. The amount of paperwork felt never-ending and overwhelming. All of this, of course, takes place when one is in the emotionally weakened state of grief (i.e. anxiety, sleeplessness, forgetfulness, etc.)

Through the entire estate settlement process, I kept thinking, “I simply cannot imagine what it would have been like for me had my husband died without a current will.” I begged friends to make sure their families’ estate plans were in order. “Bereavement is bad enough,” I said. “You absolutely do not want to go through this without having everything buttoned down.”

And yet, that is precisely the risk many people are taking according to a study by BMO Financial Group last year: 15% of Canadian baby boomers do not have a will. Nearly half of those aged 45 and older have not reviewed their will in over ten years. That is a terrifying thought.

A lot can happen that can impact one’s estate over a decade: Businesses are started or sold. Divorce and re-marriage. Births and deaths. Change in financial circumstances or asset base. The possible consequence is that what you would intend to have happen upon your passing may differ materially from what actually does; leaving your loved ones dealing with a host of thorny issues when they are the very least able to cope.

A recent high profile example: the estate of author, Michael Crichton who died at age 66 leaving behind a wife who was six month pregnant and an outdated will that had language excluding any new children. A legal fight broke out between family members over whether the baby should be allowed to inherit. The judge ultimately ruled the child should receive its share of the inheritance but it was a stressful and costly experience that could have been avoided entirely.

Today is Valentine's Day and Monday February 20^th is Family Day (in three provinces). Do something truly loving for your family this holiday: if you do not have a valid and current estate plan, get one.

Don’t know any estate lawyers? Ask your general counsel for a referral. Or your financial advisor. Or call me! We know a number of good estate planning lawyers we could point you to. Just please, make the call.

Planning your estate may not be fun, but it is truly a loving act.

Looking for investment success? Don't look back!

2012-02-07T19:53:10Z

In pursuit of investment success, it is human nature to look backward for guidance. Unfortunately, it’s also a misguided strategy that can be very costly:

A recent article by Andrew Hallam in Canadian Business magazine suggests we are “hard wired to rely on established patterns” when it comes to investing (read Your Own Worst Investing Enemy). Hallam cited the example that “the average U.S. mutual fund from 1980 to 2005 gained 10% per year. But the average investor in those funds made only 7.3% -- giving up more than one third of their potential earnings each year.” That’s because investors were doing the wrong thing at the wrong time (i.e. selling funds that weren’t performing and buying those that had been doing well and prices were higher).

Now more than ever investors need to be thinking about portfolio changes that will position them for the future not the immediate past.

]]> Consider that it has been five tumultuous years in the world of investments and we are very much in uncharted waters:

Never before have interest rates been close to zero while the economy is growing (albeit slowly). Rates were this low in the early 30’s but the economy was shrinking then;
US stocks (excluding dividends) have made virtually no money for investors in over ten years;
Gold has outperformed the world’s leading stock market for four decades;
In a very short period of time, China has become the world’s second largest economy and consumes 40% to 50% of the world’s commodities;
We have just endured two financial crises (credit crisis in 2008/2009 and Europe 2011) in five years causing a flight to safety by investors and driving bond yields to below 2%;
Last year, the Canadian bond market returned approximately 9% while the S&P/TSX dropped 11%;
Governments have taken emergency measures to stabilize their economies at enormous cost and the price is likely to be sub-par growth for several years yet to come.

So will the winners of the last five years outperform in the next five years? Will bonds continue to outperform stocks? Will gold still gleam? Will Canadian real estate continue to outperform? Will interest rates eventually rise?

These are the questions.

What are the answers? No one has a crystal ball however we would suggest that the picture looks a little less confusing if you look back more than five years for guidance – perhaps even 50 or 100 years. What will you learn?

Bear or “sideways” markets are very normal. They typically last 15 years. While that may sound discouraging, we are likely 10 to 11 years through the current bear market;
Interest rates have not been this low since the 1930’s. We were fighting negative growth then. Clearly, rates cannot stay at these levels forever;
Government bond yields are now in the 1.5% to 3% range and bond portfolios need to be carefully managed with rates so low. Even a modest rate increase will wipe out any returns from government bonds, especially long term bonds. In our view, the better strategy is twofold: own corporate bonds instead (higher yields) and ensure that the bonds have a below-average term to maturity;
Looking back more than five years will remind you that there is predictable behavior during times of financial crisis. There is always a “flight to safety”. Investors retreat to “cash” and the US dollar rises (it being the safe haven);
As investor confidence begins to return, safety and yield are the watchwords. Historically that may point to bonds but with bond yields so low and dividend yields looking attractive (some high quality companies paying dividends of 3-4%), we believe investors will move their funds in this direction this time.

Be brave. Be patient. Above all, be diversified. These are very uncertain times. It is possible that there are deeper setbacks still ahead on the way to sustained growth but I would avoid the temptation to be excessively conservative. For that reason, it is prudent to be very diversified.

Resist the temptation to measure success over one or two years. Instead, pretend that you are in a five year race. Do an audit of each investment in your portfolio. Will the income or dividend grow over the next five years? Will it be higher in five years?

Lastly, be smart. Looking back for guidance over 2007-2011 looks like a losing strategy in the race for success over the next five years. We believe that the winners in 2012-2017 are going to be very different.

Tourmaline Oil hit 2012 production target

2012-02-03T19:42:46Z

For those who are regular readers of our blog, the name Tourmaline Oil Corp. should be well known. We participated in Tourmaline’s initial capital raise in 2008 and continued to invest through IPO in November 2010 (see our earlier blog posts). Tourmaline is our single largest holding in the Newport Canadian Equity Fund today.

Tourmaline released their corporate overview presentation last week and it shows a continued path of impressive growth in production levels. Already this year, in the last week of January, Tourmaline achieved its 2012 average daily production target -- well ahead of schedule.

Management’s five year outlook is for continued production level growth -- with an estimated 45% increase for 2012; they have achieved production levels above their provided guidance for three consecutive years.

Despite downward pressure on natural gas prices (due to increased supply from shale gas and unusually warm weather), Tourmaline’s guidance shows a company net positive cash position occurring in 2014.

Longer term, demand for natural gas is expected to rise in both North America and abroad, and the demand/supply fundamentals will have to revert to a sustainable level. In the meantime, the management team has built capacity to realize steadily lower operating costs and improved production efficiencies.

To view the full Tourmaline corporate overview presentation Click here.

Greece default a positive for markets

2012-01-25T19:20:44Z

“There is too much debt in the world and if Greece defaults on its debt, this will be good for the markets in the short term, especially if it defaults big."

That was the message we heard yesterday morning from Barry Allen of Marret Asset Management, considered by many to be the top manager of high yield bonds in Canada and one of the external managers we use for yield mandates.

Barry was in to give us an update and his view was uncharacteristically optimistic: “Now that the European Central Bank has put a floor under European banks with its 3-year loans, smaller governments can now default without bringing down the banking system."

Barry contends that Greece and Portugal should, and will, default and this will be good for the overall global deleveraging that will continue for several years.

He also reminded us that Italy runs a structural budgetary surplus and has a strong industrial base that “makes good things people all over the world want to buy", especially luxury goods desired by the growing affluent classes in emerging markets.

He thinks Italy will be successful in its efforts to crack down on tax evaders, citing the amusing anedote of the recent tax raid on the luxurious winter resort of Cortina D'Ampezzo. Tax inspectors found 42 top-end cars registered to people with declared annual incomes of 22,000 Euros (about $29,000 CAD). The investigation highlights the problem of tax collection in Italy, which Barry thinks will ultimately be resolved given the strong sense of nationalism and patriotism in that country; the upper middle class “will do their part to put the country back on sound fiscal footing."

Barry's overall message was that Europe is in better shape than the world has given it credit for. Not exactly a screaming ‘buy signal’, but still upbeat news for a grey January morning in Toronto.

Do you feel wealthy?

2012-01-17T19:08:31Z

"Am I wealthy?"

It’s a question we are often asked by clients.

Given that many of them live modest lifestyles, a lot of them don't feel wealthy.

A study by Fidelity Investments found that 42% of American millionaires do not feel wealthy. The investable asset level at which they said they would feel wealthy?: $7.5 million.

Ironically, of the 58% who said they do feel wealthy, $1.75 million of investable assets was the amount at which they reported feeling wealthy.

So who is ‘wealthy’ in Canada?

This month's issue of Report on Business magazine published a summary of Canada’s highest income earners: The top 1% -- 246,000 Canadians – earn a minimum of $169,300 per year; the average income for this group is just over $400,000.

The top 0.1% make an average of $1.49 million and a rarefied 0.01% of Canadians get by on $3.83 million a year.

Still, these people are what Thomas J. Stanley, author of the Millionaire Next Door would call ‘Income Statement Affluent’; income being an imperfect predictor of net worth.

According to Investor Economics, a research firm specializing in financial services, there are an estimated 562,000 households in Canada having more than $1 million in investable assets and 19,000 households with $10 million or more. According to Report on Business magazine, there are 24 billionaires in Canada.

Perhaps wealth, like age, is just a number; it's more about how you feel.

Do you feel wealthy? How much would you need to feel wealthy? What would happen if you decided to feel wealthy even if your actual net worth doesn’t yet meet your definition of wealthy?