The Walker Report

Can the EU Survive The Syrian Refugee Crisis?

It’s been a tough few years for the Eurozone. Between the ongoing debt problems and the pervasive deflation Europe has seemed to be on the ropes consistently since 2008. Somehow the Union has continued to survive, despite being constantly assailed by financial crises, rejected constitutions and now referendums on future membership.

What all these problems represent is the failed integration of the European people into a “European people”. Despite years of effort Germans are still Germans, French are still French, and Brits are still Brits. In fact, far from creating an integrated whole where a common identity is shared across the continent, many countries face challenges about their own integrity. The Scottish nearly became a country separate from Great Britain, in Spain a Catalonian independence party recently won big, and don’t get me started on the issue in Belgium. What this all means is that national self interest still trumps European self interest, and so while Greek problems affect everyone they remain primarily Greece’s problems in the eyes of many.

Meanwhile interest in being part of the EU is on the wane, with Britain scheduled to have a referendum on its future involvement leading a general trend about Euroscepticism. In Holland a whopping 83% of voters want greater say about transfers of power to the EU. On December 3rd, Denmark will be voting about changing its “opt-out” status into “opt-in”, but the anti-euro sentiment is growing and while a pro-EU yes side seems to be winning, it isn’t winning by much.

Other countries that had sidestepped EU membership are decidedly more firm about not joining. Norway’s initial membership was ultimately rejected by a small majority in the 1970s, today pro-EU support in Norway is only around 20%. In Iceland, a country that has had a pending request to join the Union for some years let its membership request lapse this year, citing that its future is better served outside the EU.

Into this mess is the migrant crisis, which while currently focused on the Syrian refugee situation has been a much longer issue including the abundant number of people risking life and limb crossing the Mediterranean from North Africa. But despite how moving the plight of the refugees has been, including the sad picture of a little boy drowned on a beach in Turkey, the German response of “no upper limit” for refugees seems to have already hit it’s upper limit. The President of Germany, Joachim Gauck, has said “Our reception capacity is limited even when it has not yet been worked out where limits lie,” a sentiment that has been echoed by other German politicians and an increasing number of Germans themselves.

With 10,000 refugees arriving daily into Germany and still boatloads more coming into the south coast, Europe is finding itself stretched to the limits about how to deal with such an influx of migrants. The scale of the human suffering that is prompting these moves makes it often impolite to discuss the nuts and bolts of taking so many people at one time, and objections raised by critics are quickly shouted down as racist. But with more than 800,000 refugees this year expected by Germany there are calls to fairly distribute the asylum seekers across Europe, a call meeting mixed to negative responses by many nations.

Much of the focus on Europe’s woes has been about financial matters, but the EU has aimed to be more than a financial union, it has sought a social union as well. And while Europe’s financial problems are well understood and the response to those problems have been unified, the social integration is far from even. Germany may have taken a stand for enlightened moral behavior in accepting so many people, but they notably don’t speak for many other nations, neither rich like Britain (a promise of 20,000 over the next five years) or poor like Greece who had 50,000 people arrive in July alone.

And despite whatever successes the EU bestows upon member states, a future European Union may be a looser European Union in the end, in itself a promise of more instability for the future of Europe.

October 2, 2015October 2, 2015 by The Walker Report of Walker Wealth Management and Aligned Capital Partners Inc

In Praise of Investor Optimism

My industry is awash in optimism. This makes intuitive sense, for the entire process of investing assumes that the companies you invest in will go up in value. Regardless of how conservative and cautious a portfolio manager is, underlying his dour outlook is an optimist that runs a portfolio of various stocks, each one intended to make money.

For this reason it is incredibly rare to hear outright negativity from professionals, which I suspect contributes to a subtle sense of unease by the average Canadian who must both trust a portfolio manager to look after his money while scratching their heads at a market that can decline significantly in value with no perceivable change to the asset mix they are invested it.

This is Bill Gross. Until 2011 he was a very successful manager with PIMCO, where he headed up their largest fund. Then he made a contrarian prediction about the markets, lost a lot of money and was fired from his fund.

Even when we do get very negative views from portfolio managers, the subtext is still optimism, just for THEIR investment choices. There is never a contrarian market call that doesn’t seem to serve double duty as a marketing plan as well. When Bill Gross famously said that the US was going to tank back in 2011, he was also claiming that his investments wouldn’t and took a contrarian stance that proved to be very costly for his investors. The same is true for Eric Sprott, whose own doubt about the future of stock markets had prompted some very optimistic numbers about the value of gold and junior mining companies.

For the average investor much of this can be quite exasperating as investing shies away from the ways we attempt to establish certainty. Investing is all about educated guesses, and despite many different tweaks the rules for investing remain surprisingly limited: “buy low, sell high” and “diversify”. Professionals have attempted to improve and refine how these two things are done, seeking out the best ways to analyse companies, markets and whole countries, but in the end these two rules still provide the best advice to investment success.

I wish to write to you about a mistake on your billboard... — I wish to write to you about a mistake on your billboard…

But as investment guides go, reveling in the uncertainty of the investments is something that many people don’t want. Instead they would much prefer to hear about what is going to happen in a matter-of-fact manner from an “expert”. This is why there is always a market for doomsayers and contrarian predictions, because of the certainty they seem to offer. It feeds our innate sense that there must be a right and knowable answer about the future that can be revealed to us.

And yet like their biblical equivalents, contrarian predictions have all failed to live up to their hype. Just as every “end is nigh” doomsday cult has disappointedly had to move the calendar date for the end of the world, the number of people who have proclaimed loudly the end of traditional investment world is both numerous and filled with failure.

And so, frustratingly, investors are faced with the assuredness of doom-saying predictioners (who are almost certainty wrong), and the cheerfully faced optimistic portfolio managers who routinely remind investors that there is no bad time to invest, that bad markets are “corrections” or “set backs” and that significant price drops are “buying opportunities”.

And yet I doubt we would have it any other way. If we could be absolutely certain about what stocks were going up or down and when there would be no money to make in the markets as companies would always be priced correctly. And whether we realize it or not, it is hugely helpful to remember that there exists no accurate way to divine the future, no Ouija board that can contact the dead, no equation or computer that can process the world’s data to tell us what is happening tomorrow, next week or a decade from now.

I derive great comfort in this, because the optimism that drives the investing world is also a wider optimism about the future. Experts predicted famines wiping out millions in 1970s and 1980s, environmentalists predict the end of all things, and political talking heads bombard us with a daily diet that everything is awful, but our world is healthier, wealthier and kinder than ever before. And unbelievably investors believe in that world, even when they don’t know it.

September 30, 2015September 30, 2015 by The Walker Report of Walker Wealth Management and Aligned Capital Partners Inc

What The *$#! Is Going On? (And What To Do About It)

Over the past month it would seem that all hell has broken loose on global markets. A generous explanation might use the phrase “increased volatility” while a more pessimistic reading would say that we are heading for another global recession. Either way, people are nervous and money is being pulled out of the market by investors in droves. Year to date returns off of major indices are all negative. The TSX and the Dow are both -8% for the year while the S&P 500 is -5.5%. So what is happening?

The earliest threads for the most recent round of economic confusion date back to last year, when the price of oil began to fall. Normally falling oil is a welcome sign but in the economic climate we are in, one desperate to see some inflation, falling oil just meant more deflationary pressure. The plummeting oil price also hit a number of economies quite hard. Resource rich economies like Canada, Russia and Venezuela all took it on the chin. The falling price has been exasperated by the Saudi price war against the burgeoning US shale production.

For many investors a falling oil price also seemed to shine a light on a declining need for oil, not one born of environmental concern, but of a falling global demand. That leads us to the current problem with China. China’s problems are likely vast and not well understood yet. There is secrecy around the Middle Kingdom when it comes to economic matters, but it is likely that the Chinese are not immune to the same kind of avarice, greed and hubris that usually underlies most market bubbles. The Chinese have had a stock market collapse that has been followed by increasingly grim statistics and a revisit of the overbuilding narrative that has followed on the heels of China’s economic success.

Janet Yellen, of California, President Barack Obama's nominee to become Federal Reserve Board chair, testifies on Capitol Hill in Washington, Thursday Nov. 14, 2013, before the Senate Banking Committee hearing on her nomination to succeed Ben Bernanke. (AP Photo/Jacquelyn Martin) — Janet Yellen, of California, President Barack Obama’s nominee to become Federal Reserve Board chair, testifies on Capitol Hill in Washington, Thursday Nov. 14, 2013, before the Senate Banking Committee hearing on her nomination to succeed Ben Bernanke. (AP Photo/Jacquelyn Martin)

The final piece of this puzzle was the looming interest rate hike from the United States. Interest rates are closely tied to rates of inflation and are important tools for governments in trying to mitigate recessions. Since the United States has had a near 0% interest rate there is some eagerness to push the rate up and give the Fed some options if the market sours. But critics have spent most of the year worried about a rate hike, citing the strengthening dollar and weak inflation rate as reasons not to do it. When the Federal Reserve took that advice though and opted to postpone the rate hike last week, the response of immediate joy was overwhelmed by the sudden realization that perhaps the US economy was not strong enough to withstand a rate hike and the global economic picture was far worse than previously thought.

Whether this means we are actually heading for a recession, it’s too early to say. No one knows what is really going on, but the sentiment, what people believe is going on, is resoundingly negative. Combined with an aging bull market and the highly liquid nature of investing has meant that there is simply more volatility in the markets than before.

Looking over the business news is little more than a guessing game informed by various analysts about what is (or is not) happening. But the best question that investors should be asking themselves is what do they need to have happen to their investments? While no one is looking to lose money, retirees and pre-retirees need to give real thought as to whether their investments suit their financial needs over the coming few years, and what kind of financial storm they could weather. So the smartest thing you can do regarding your investments is call up your advisor and discuss your investment strategy going forward.

Need Some Help? Give Us A Call To Review Your Investment Strategy!

September 25, 2015September 25, 2015 by The Walker Report of Walker Wealth Management and Aligned Capital Partners Inc

Beware False Prophets

Screen Shot 2015-08-27 at 4.38.40 PM — I have shamelessly grabbed this image from The Economist and their article “The Great Fall of China” which I recommend you read.

Investors endured an indignity Monday as global markets reeled from further bad news from China. Overnight (for us, not China) the Shanghai market saw it’s single biggest day decline, now dubbed “Black Monday” which set off sellers worldwide. The TSX dropped 420 points, the Dow Jones was down over 500 points, a drop in excess of 3.5%. The FTSE had its biggest drop in two years and brought it to its lowest since February 2014. In short, it was a bad way to begin a week.

Since then China has cut interest rates, which has encouraged global investors that doom may not be close at hand and markets have bounced up from Monday’s lows, most notably in the United States. But the news from China isn’t good. A toxic mix of investor debt, a bursting market bubble, falling exports, rumored slowdowns and a depreciating Reminbi have scared global investors. China is the world’s second largest economy, and though it isn’t integrated into the global economy like the United States, it’s impossible to conceive of a Chinese slowdown that won’t be felt the world over.

Investors should be cautious. There is a lot of speculation and it is still too early to truly know the full extent of both the problems in China and the fallout for global markets. But the threat of a global recession is real and when China’s problems are added to the abundant weaknesses found in many economies there are solid reasons to be concerned.

Big events like China’s shifting economy typically bring professional talking heads out of the woodwork to speculate about what the future might be like for investors as a result of the changing economic fortunes for the Middle Kingdom. These predictions usually over reach, though the seers behind them are intelligent, well meaning, knowledgeable and very sincere. It should be remembered too that there is great demand for experts who will take the hodgepodge of various financial data and attempt to turn it into a roadmap to understanding the future. Historically these predictions, and their adherents often don’t do well over the long term.

A name many will be familiar with illustrates my point. Canada’s own Eric Sprott, the founder of Sprott Asset Management, saw his success over the years brought to heel through his conviction in gold. Convinced that the vast printing of capital to combat the 2008 financial crisis would undermine currencies and the only safe investment was gold, Sprott ended up losing vast amounts of money by not just betting on gold’s future but by choosing the riskiest way to invest in it. Why did he do that? Backed by considerable data, a lot of analysis and his own success he was sure that he was making the right call. At the last event I attended for Sprott I sat bewildered as conspiracy theories were tossed around to explain the continued decline in gold’s price rather than face facts that they were simply wrong.

The shock of this event was largely not predicted. Afterwards predictions about American's economic future also proved incorrect. — The shock of this event was largely not predicted. Afterwards predictions about American’s economic future also proved incorrect.

There is enormous comfort in predictions. They give a sense of control and suggest an ordered universe that one can make sense of. But successful investors long ago realized that winning meant dealing with risk rather than predicting the future. Any event or scenario that seems to place countries, economies or people on a set destiny that cannot be broken is only ever superficial. Regardless of the seriousness of the situation invariably people will take action to change their fate, often with unexpected consequences. Whether it is a financial catastrophe like 2008, a price war over oil, or the sudden reversal of fortunes for the next anointed economic power, these situations are all temporary and the correct response from investors should be guarded opportunism and not confident certainty about future events.

August 27, 2015August 28, 2015 by The Walker Report of Walker Wealth Management and Aligned Capital Partners Inc

A BRIC You Can’t Build With, A Ship That Won’t Sink

The month of August has so far been a repeated drumming for global markets. Falling oil prices, the devalued yuan and a collapsing Chinese stock market have people running scared, and if we’re totally honest it’s probably too soon to know what it really happening as easily panicked sellers jump the gun.

Instead I’d like to take a moment to reflect on the fall of the BRICs, the supposed new economies of the developing world. Back in 2003, two Goldman Sachs analysts wrote a paper called “Dreaming With BRICs: The Path to 2050” which made a convincing case that Brazil, Russia, India and China would grow substantially over the next half century. For a while that seemed true, and the few BRIC mutual funds available returned solid results to investors who bought the BRIC story.

Today much of that story sits in tatters. Russia is more regional gangster than growing economic power, a victim of its own pointless efforts to reestablish hegemonic influence and maybe even undo NATO. Brazil is a longer story, but financial mismanagement has largely undermined Brazil’s early 21st century economic kick start, leaving interest rates too high and an economy on a path to recession. India is perhaps the only country that sits separate from this mess, but as a democracy (one mired in corruption no less) it’s own worst enemy is often protectionist populism that threatens to undo it’s own promise.

Yes, I have managed to shoehorn this image into my article. Have you watched this movie recently? Me neither. I haven't missed it either. — Yes, I have managed to shoehorn this image into my article. Have you watched this movie recently? Me neither. I haven’t missed it either.

But with the Chinese economy heading for what looks to be a potentially prolonged slow down (or worse) it seems safe to say that we’ve lost the path to 2050 and aren’t in danger of finding it anytime soon. This is a useful reminder that predictions about the futures of markets, no matter how grounded in math they may be, are in fact almost always misguided. That may seem obvious with much of the recent history a testament to predictions gone wrong, but it is surprisingly easy to be sold on investment ideas that seem to be an inevitable certainty.

There are a multitude of reasons for this, not the least of which is the human defect to see patterns in randomness. Attempts to control and manage huge events; to understand, tame and control random elements of nature is the underpinning of almost every story of hubristic arrogance that leads to tragedy, both literary and literal. Whether we are watching a history of the Titanic, or Alan Greenspan testifying to the benefits of derivative markets, there is always an iceberg somewhere threatening to make a mockery of our certainty.

This is what travelling the ocean was frequently like in history. Had we waited until we had an unsinkable boat we would never have sailed anywhere.

I’m of the opinion that there may be somethings simply to complex to be fully understood. That shouldn’t mean we shy away from complicated markets, rather we should be mindful about the risks of participating. After all, the Titanic sunk largely as a result of the assumption it could not. But people had been sailing across the ocean for centuries with considerably greater danger. That’s a useful reminder about investing. Good investment strategies don’t seek out perfect investments, ones that cannot be undone by bad markets, instead they assume that markets are filled with risks and aim to navigate the dangers.

August 21, 2015 by The Walker Report of Walker Wealth Management and Aligned Capital Partners Inc

Oil’s Cheap, So Now What?

mugato oil — Yes. I know I’m using the meme incorrectly. Please don’t email me about this.

The price of oil continues to fall, and it won’t be long before investors and the media will be asking whether it’s time to load up on energy within portfolios. Right now the primary focus is on how low the price can get, with current estimates suggesting that $30/barrel is not out of the question, and some predictions claiming it could go even lower. So when is the right time to buy, and how much of a portfolio should be allocated to energy?

These are good questions, but not for the reasons you might expect. Answering those questions mindfully should help any investor better understand the underlying assumptions that go into making smart investment decisions. For instance, why should a $30 barrel of crude be an attractive price to buy? Superficially we assume that it’s a bargain: the price was $100, now its $30, so you should buy some. But what should matter to an investor is not the new price but whether that price is inherently flawed. The sudden drop in the price of oil may lead us to believe that oil is too cheap, but if so what should the proper price be? Determining what a fair market price should be can be challenging, one matched only by trying to figure out when the price has actually bottomed and won’t go any lower.

But say you feel comfortable that the price of oil has reached its final low and is significantly undervalued, you’ve still yet to figure out the best way to participate in the rebound. For instance, are you going to invest in individual oil companies, or will you purchase a mutual fund that buys a basket of various energy firms? If the former, what kind of companies do you want? Big energy firms like Shell and BP, or some of the very small producers? Will you be buying into shale oil, tar sands, or investing in energy production farther afield?

If that feels too complicated a set of questions to answer you could always buy an exchange traded fund (ETF). ETFs have become quite common today as a method to passively have your investments mirror various indices, but they were initially a way to simplify investing in commodity markets. So rather than focus on the companies that will extract the oil, you’d rather invest in the price of the barrel itself. That has the advantage of removing any extensive analysis that may be needed to be done on a company (profitability, type of oil investment, liabilities), but carries the down side of significant volatility.

Getting over all those hurdles leaves only the question of how much of a portfolio should be allocated to the energy sector. The answer here is as frustrating as all the rest, it will depend on how much volatility you can stomach. If you are encroaching on retirement, a good rule of thumb would be not too much (if at all). If you are very young and aren’t intending to use your investments for sometime you can presumably accommodate quite a bit more.

After all that the only thing left is to have the price rise. What could stand in the way of that? Perhaps a prolonged battle for market share that sees a continued lowering of the price, or even nations not sticking to their assigned production targets. Maybe an international treaty that could see a former energy producing nation reenter the market place, flooding it with cheap oil. An extended slowdown in a significant economy might also reduce global demand, prolonging the lowered valuation. Even the arrival of new technology could displace a portion of the market driving down future oil requirements. Or the simple knowledge that proven reserves are abundant can remove market concern of future shortages. In other words, lots of things can still prevent a rapid rebound in the price of oil.

The point here isn’t so much about oil but about more clearly seeing the risks that underlie “sure thing” opportunities. There is no easy money to be made in investing. Opportunities, no matter how superficially guaranteed they may seem still come with dangers that shouldn’t be ignored. Cheap buying opportunities can be good, and if they make sense should be pursued. But all investing comes with risks and not being aware of those risks can lead to serious mistakes in the management of a portfolio. More than one competent investor has been badly burned over-estimating the likelihood of a significant rebound. The lesson is don’t let your lust for opportunity crowd out sound investing strategies.

August 20, 2015August 20, 2015 by The Walker Report of Walker Wealth Management and Aligned Capital Partners Inc

Donald Trump Is My Pick For Republican Nominee

Look at this guy. What color is that? Orange? Has he got orange hair? Remember when Lloyd Robertson had orange hair? I remember when Lloyd Robertson had orange hair.

The arrival of Donald Trump to the Republican primaries has been greeted with mock and outrage by much of the media. There he is, an unapologetic billionaire blowhard with something akin to hair on top of his head, now best known for telling celebrities that they are fired. He was an immediate subject of derision, an unserious pretend candidate who says offense things regularly and calls people he doesn’t like “dummy.” To Democrats he has been a welcome addition to the Republican lineup. For Republicans he’s nothing but a headache. And if one thing is clear it’s that nobody thinks he should be the nominee. Except me. I think he will be a great nominee, and importantly I think he may be able to change some fundamentally terrible aspects of the Republican Party.

Talking heads and professional media types tend to disparage people who they don’t think look or act like a politician should. Donald Trump talks at a grade 4 level. He says impolite things and doesn’t seem to care what people say about him. He talks about himself incessantly and, again, the hair. Stubbornly “the Donald” continues to do well in the polls despite this.

But it shouldn’t have escaped anyone’s attention that the Republican Party has been in a holding pattern for the last few elections. Winning the nomination has usually meant a grueling process of ratcheting up the rhetoric around a few hot button issues, important to a dwindling number of older voters and rural Americans and out of touch with the growing urban class that is increasingly defining the voter base of general elections. By the time a winner of the primaries is declared, the candidate now looks to be stuck in an Orwellian, “Shooting an Elephant” conundrum, theoretically in charge of the mob, while totally beholden to its will.

This has been good news for Democrats, who have been happy to have the Republican nominee become an ugly caricature of cruel populism; out of touch with a modern electorate, thumping a bible and alienating moderate conservatives who don’t believe they can trust their own party to lower taxes without forcing women to carry children to term, poor people to die without medicine, and science textbooks to be re-written in ways largely defined as “stupid.” Good for Democrats, but bad for a healthy democracy. One party shouldn’t be electable, while the other crazy.

There is a museum in Kentucky where this isn't a parody. — There is a museum in Kentucky where this isn’t a parody.

But “The Donald” has the power to change that. Unlike other politicians that try and position themselves as outsiders, Trump really is an outsider. He may not have impressed anyone with his talk about Mexican illegals, but on other issues he has had the ability to surprise. On campaign finance he has denounced the system as broken, highlighting his own political contributions in exchange for favours. He’s called Jeb Bush (the presumed nominee) beholden to his donors. He may not win points from Rosie O’Donnell, but he’s broken the traditional Republican line on Planned Parenthood. Fundamentally, Donald Trump is different from other Republican candidates, in no rush to distance himself from his urban roots, unapologetic about his more liberal leanings, but credible in the eyes of many on business and economy related issues.

As if to make my point, these two helpfully posed for a photo together.

Trump’s current lead reminds me of Rob Ford, another unapologetic, shameless, larger than life character who seemed to exist in spite of condemnation from the media and the established political class (I found this article after I wrote this piece, but it explains my thoughts well on the two). Yet the sincerity of Rob Ford’s belief that only he would fight for tax payers won many over, even in the face of more polite, more polished and more traditional politicians. You don’t have to love people like Rob Ford or Donald Trump, but their ability to change the political terrain, to question traditional assumptions about the electorate and undo the laziness of identity politics (the ultimately abusive and anti-democratic idea that these are “my voters” and those are “your voters”) is healthy for a democracy, even when you don’t like the messenger (I think the same might be said for Bernie Sanders).

So, whether Donald Trump wins, or implodes dramatically before the July 2016 Republican nomination, he’s my pick to be the next nominee. And he’s going to be big. Big. Uuuuuuuuuge.

August 18, 2015August 18, 2015 by The Walker Report of Walker Wealth Management and Aligned Capital Partners Inc

This One Thing All Young Couples Need…

Since getting married, my wife and I have been ticking all the traditional boxes that couples are meant to do to mark progress in our lives. We’ve bought a house, started a family and make an earnest effort to save money for our retirement. In addition to all the big boxes, we’ve actively tried to tick the small ones as well. We’ve painted rooms, changed fixtures and done both major and minor repairs to our home. We’ve purchased insurance, attempting to balance the twin pulls of simple and easy term insurance against whole life policies. Our growing family seems to incur a regular monthly unexpected cost, and there rarely seems a week when I am not heading to Home Depot to address some nagging issue that has suddenly come up. But with my second child expected within the coming month I realized that there was still something that neither my wife nor I had done; a will.

This is my daughter. Her financial future shouldn't be compromised because I was too lazy to get a will completed. — This is my daughter. Her financial future shouldn’t be compromised because I was too lazy to get a will completed.

My conversations with clients regarding wills and estates are typically initiated with an older generation. It isn’t uncommon to find that people don’t have wills, or if they do, that they are hopelessly out of date. This makes logical sense, the older someone is the closer to death they are, and ensuring that their will reflects their wishes for their family and estate is important. This is especially true for people who have been divorced, have blended families or complicated estates that need tax protection.

Ha ha ha, we've left you literally nothing but debt! — Ha ha ha, we’ve left you literally nothing but debt!

But it is easy to forget that young couples, particularly those with children also need a will. If anything it is more important that a well thought out will is in place for young families, since an unforeseen accident should not mean that your spouse and children aren’t cared for in the manner you would want. But many young families don’t have wills, and they don’t have them for simple but largely stupid reasons.

Like insurance, getting a will done seems both like an enormous chore and an easily delayed one. There are lots of things to consider and a will means putting some real thought into what should happen to you if you were to die. Where are your assets? What should happen to them and who should get them? Who should care for your children? Should a trust be created? Who should be your executor? Does your will require a financial planner for the estate or assets (yes, I know that seems like a plug but I’m being serious)? Beyond simply answering these questions, you need to have this conversation with the people you name inside the will. All of this can seem quite laborious (or expensive), especially when you think you are too young to need such a document.

I scour the internet looking for pictures that are appropriate for our articles. And you know what, there isn't a lot around on wills that isn't stock photography of documents that say "Last Will and Testament" or pictures like this. What is this? Is he meditating on death? Is he about to walk into the water? It's actually pretty grim when you think about it. — I scour the internet looking for pictures that are appropriate for our articles. And you know what, there isn’t a lot around on wills that isn’t stock photography of documents that say “Last Will and Testament” or pictures like this. What is this? Is he meditating on death? Is he about to walk into the water? It’s actually pretty grim when you think about it.

Dying without a will is also far worse than you may care to guess. No will means no say in who should raise your children. You have no way to designate your beneficiaries, no say over the financial future of your kids and your estate may pass to people you hadn’t intended on. More mundanely, you have no chance to improve the tax efficiency of your estate and the government will be setting the rules for what happens to your assets.

A study from 2012 suggests that more than half of adult Canadians don’t have a signed will. That number grows frighteningly when we look at younger Canadians, with 88% of them between the ages of 27-34 lacking a signed will.

The business of planning for a life after you’re gone may seem grim, boring and expensive, but it is a critical element of being a financially responsible adult. Young families owe it to their children, significant others and the legacy of their own hard work to ensure that an accurate and easily accessible will is part of their financial plans.

If you have any questions about wills, or need help getting one established give us a call!

(Also, if reading this made you realize you also need insurance, give us a call about that too.)

August 17, 2015August 17, 2015 by The Walker Report of Walker Wealth Management and Aligned Capital Partners Inc

Canada’s Bad Week (Or The Best Recession Ever)

Perennial pessimists like myself have been waiting for something to go wrong with the Canadian economy for some time. But years have passed and the economy continues to defy logic. Despite abundant consumer debt and a housing bubble of record proportions, and an economy dependent on volatile material and natural resource markets, disaster has forever loomed but never struck. And while the TSX hasn’t always been the strongest performer, the Canadian stock market has proven to be quite resilient over the past few years.

TSX performance YTD, July 24, 2015. Yahoo Finance

That may be coming to an end however. The TSX has had five negative days in a row, following a sudden cut in Canada’s key interest rate. This is the second unexpected cut this year, dropping the lending rate from 1% to 0.5%. Energy prices remain quite low, off 50% from their high last year, and severely stunting Alberta’s economic engine. The Bank of Canada (BoC) was reportedly taken by surprise by the negative GDP numbers for April, marking four consecutive months of GDP contraction and edging us closer to an “official” recession of two consecutive negative quarters. Just this week the BoC predicted a $1 Billion deficit, challenging the Federal Government’s expectation that they would have a $1.4 Billion surplus.

Joe Oliver flees reports after refusing to take questions

The price of West Texas Crude, over the past 18 months. From NASDAQ

The optimism that surrounds Canada’s economic future is an unspoken assumption that a reviving US economy floats all boats, just maybe not this time. As the United States economy continues to improve, the Federal Reserve continues to remain optimistic about raising the lending rate, a sign of burgeoning economic strength. Canada is going the other direction, and for now it seems, the two economies are diverging.

Things could still turn around; the Canadian economy has shown surprising resilience so far, and our falling dollar could very well help super charge the Ontario manufacturing engine, or the price of oil could begin a steep rise (it has in the past) and restart the Alberta economy. But the challenges faced are fairly enormous.

But if I’m concerned about one thing, it seems to be the general Canadian obliviousness to the problems we are facing. The National Post called this the “Best Recession Ever”, because of how little has changed despite the worsening GDP. The BoC’s June Financial Service Review highlighted that the biggest threats to the Canadian market would be “some event” that would make it difficult for Canadians to service their ballooning debt, but that such an event was “very unlikely”. That was despite the collapsing oil price and the sudden need for two interest rate cuts.

Optimism can easily become denial as “experts” twist themselves into knots attempting to explain how risks are really benefits, danger is really safety and hurricanes are only storms in teacups. And while business news thrives off of both controversy and hyperbole, there is also a vested interest in making things seem like they are under control. The news should be exciting, but never give the impression that the experts don’t know what is going on. Thus, everything is explainable and only in hindsight do we acknowledge just how out of control it seemed to be. Whether this is the case for Canada right now is hard to say. But the risks associated with Canada have been large for some time, and they have been ignored, dismissed or marginalized regularly by experts within the media. Being a smart investor means facing those risks honestly and acting accordingly.

July 24, 2015July 24, 2015 by The Walker Report of Walker Wealth Management and Aligned Capital Partners Inc

When The Cure is Worse Than the Disease

Last week most of the world was expecting a chaotic, but unavoidable Greek exit from the Euro, but following more final, final negotiations a deal was ultimately hammered out between Greece and it’s creditors. A quick glance over much of the media shows that many view the new bailout as a temporary reprieve at best, and an extension of a cruel policy at worst. Greece gets more debt, more austerity and zero concessions from Europe.

Greece has proven to be a needless problem for much of Europe, but one that has highlighted many of Europe’s fundamental weaknesses. Greece may have navigated itself into this mess, but it isn’t unreasonable to expect that solutions to Greece’s problems eventually look like, well, solutions. In short Greece needs one of three things. Either to be treated like a fundamentally poor state requiring transfer payments from the rest of Europe (unacceptable to Germany), relief in the form of debt forgiveness (unacceptable to the ECB, Germany and the IMF), or to exit the euro and revert to the drachma (unacceptable to Greece).

Notably none of these options has been pursued. Instead the status quo has been maintained to nobody’s satisfaction. The Greek government is outraged that the deal is effectively worse than the one they rejected. Most of Europe is upset at how poorly the negotiations were handled by both sides, and the brash and ultimately useless Alex Tsipras has ultimately failed in getting any of the concessions he thought he might secure through his brinkmanship.

There is some light at the end of the tunnel however. There is now some hope for debt forgiveness in the future. And if Greece hits its austerity and reform targets there may be continued relief on both interest rates for existing debt and the opportunity to push the payment dates farther out into the future. While this may signal some progress, the problems that underlie the Greek crisis still exist across Europe.

Those problems have everything to do with Europe’s loose federation and shared currency. I recommend the above video to quickly explain the inherent problems within the euro. But for now it looks as though the only winner in all this is the integrated EU zone. Once again it seems that the decisions made were about protecting the European experiment, even as that experiment makes matters worse for Europeans. That raises questions again about what the point of the EU is if not to improve people’s lives.

July 14, 2015July 14, 2015 by The Walker Report of Walker Wealth Management and Aligned Capital Partners Inc