Financial journalism

[dagan]

[Restored from backup 2006-07-18]

Fine. I'm the only one here who talks to hundreds of these regular, real people every year but you all know better.

Huh? You're the only one who talks to people?

[mike]

I'm getting tired of debating this topic.

Actually here is a case of nobody being completely right or wrong.

I must admit smelly that when I read the older Carrick articles and then compared them to his more recent stuff, that there certainly is an appearance of a turnaround.

But then again I question whether this 'change of heart', if indeed it is that, is as dramatic or drastic as you would seem to advocate.

When I look at the comments of the other posters here, those who do not support your POV, I have to conclude they are mostly well thought out and they also, as you have done, make some good points.

I liked in particular Bruce's earlier, rather lengthy piece.

So, without taking sides, I come to the conclusion that no one is quite right and of course no one is dead wrong.

[yielder]

From this you deduce that Rob didn't like PPNs in 2005?!?

Yep. I focused on what Carrick said not what he was quoting from industry individuals who were pushing product. Most of what you've quoted is not Carrick but industry people. You're putting words in his mouth. In the first article, Carrick specifically says that "a long-term investor would do better to simply buy stocks or funds." He's kinda wishy-washy because that's about as far as he goes. By the June article though he's far from wishy-washy in not endorsing PPNs, saying that they are "a complex, illiquid security" and that investors would be better to "commit to more transparent, higher-returning traditional investments."

[jiHymas]

On a related note, looks like someone else agrees with me.

http://www.canada.com/nationalpost/fina ... 1ee174fc6c

To his critics at Kellogg, Cramer essentially says, pffft.

"I have a record, it is demonstrable, empirical and easily available. I have said over and over again don't pay up after the close, buy at 10:30 to 11:30," he wrote in an e-mail. "I haven't read their blather because you could not be more rigorous than I have been."

He recounted a long list of his successful recommendations, including buying Google at US$200.

Hymas' First Rule of Advisor Appraisal: When they start telling anecdotes, look for your hat.

[saylavbda]

Carrick is one of the better financial journalists in Canada.

Did someone forget a smilie face, or does Smelly really have a point here.

[smelly]

Yep. I focused on what Carrick said not what he was quoting from industry individuals who were pushing product. Most of what you've quoted is not Carrick but industry people. You're putting words in his mouth.

That's because you know the biz and know more about the topic than Robbie. Unlike most of his readers. But he's the messenger, he's the guru, he's the expert in many of his reader's minds so if he's repeating his source's words, he's validating their message by broadcasting it to thousands of readers.

Anyway, I'm off to see Buddy Guy in Hamilton tonite. May be off the air for a couple of days so maybe this topic will die a natural death.

[yielder]

Unlike most of his readers. But he's the messenger, he's the guru, he's the expert in many of his reader's minds so if he's repeating his source's words, he's validating their message by broadcasting it to thousands of readers.

I guess I think people are more intelligent and less sheeplike than you do.

Anyway, I'm off to see Buddy Guy in Hamilton tonite. May be off the air for a couple of days so maybe this topic will die a natural death.

Enjoy the show. Natural death??? I doubt it, given your one-man crusade.

[Shakespeare]

Unlike most of his readers

Dummies don't generally read the personal finance columns in the G&M. They may be inexperienced - but if they are interested enough to read, they will likely be interested enough to learn.

Anyway, I, like Bruce, don't ascribe to the mushroom method of treating people who want to learn about investing. If the articles they read just push them into asking an advisor for clarification, they perform a service.

[dagan]

[Restored from backup 2006-07-18]

If the articles they read just push them into asking an advisor for clarification, they perform a service.

Maybe that's why smelly is so obsessed with journalists? He has to explain and address what they write about with his clients?

[parvus]

Bruce wrote:

And, like GICs and unlike funds, the open investor's return (if any) is taxed as interest.

Unless you sell before maturity. Then it's a capital gain, the manufacturers say. How long before maturity? Three to six months, same as trying to take the gain, or loss on a bond — from what I've heard. I don't think CRA has seen enough gain/loss harvesting yet to police this. But then, I could be wrong. If anyone's seen a Tax Court or Supreme Court ruling, bring it on.

[Bylo Selhi]

Back to Carrick. Thinking about investing in PPNs? Take it from the experts: Think again

Yet another reason to take a pass on principal-protected notes: Lots of investment advisers don't like them a bit and are keeping clients away...Conceptually, PPNs sound attractive if you're the sort of conservative investor who still hasn't shaken off the trauma of the bear market that began this decade. In practice, PPNs are a finely tuned machine for extracting money from unsophisticated investors and transferring it to banks, brokers and those advisers who are willing to sell them. The fees are stiff with PPNs, and they're inadequately disclosed. Same goes for the formulas used to determine how much benefit investors will get from increases in the value of the underlying product. Such are the drawbacks of buying an investment that guarantees you won't lose money (not counting inflation, of course)...

Vancouver-based adviser Adrian Mastracci said his issues with PPNs include the high fees, the lack of clear information on how they work, the limited market for selling them before maturity and the fact that inflation undermines the capital guarantee. "The bottom line is whether the costs are worth the potential benefits," Mr. Mastracci wrote. "I prefer other alternatives for my clients."...

Re...

Advisers have sold lots of PPNs to clients in the past couple of years, a period in which assets in these securities have doubled to about $7-billion. But as some advisers drill down into the details of how particular PPN issues work, they're making a decision to avoid this product altogether.

...shouldn't advisors do their exploratory drilling before they sell $7B worth of "oil wells" to the unsuspecting public? (One possible answer: 5% of $7B = $350M.)

[yielder]

Back to Carrick. Conceptually, PPNs sound attractive if you're the sort of conservative investor who still hasn't shaken off the trauma of the bear market that began this decade.

THE “GET BACK TO EVEN” SYNDROME

[yielder]

A mean-reversion portfolio.

[Small Investor Activist]

The only financial journalist I currently respect is Barry Critchley for his continuous pounding of the OSC and poor industry practices. His series of articles crticizing Burn Fry and mocking the OSC for not taking action against FMF was beautiful.

In the opinion of many the business press turns a blind eye, is liable and deserves its fate as the old media withers away. The Globe and Shill, what a joke.

[brucecohen]

The only financial journalist I currently respect is Barry Critchley for his continuous pounding of the OSC and poor industry practices. His series of articles crticizing Burn Fry and mocking the OSC for not taking action against FMF was beautiful.

You either don't read much or are not aware there's a world outside of Toronto. Year after year, for some two decades, David Baines of the Vancouver Sun has likely done more than anyone in Canada to expose stock market cheats, liars, frauds and double-dealing.

In the opinion of many the business press turns a blind eye, is liable and deserves its fate as the old media withers away. The Globe and Shill, what a joke.

How, pray tell, have you gauged "the opinion of many"? A linked source would be useful in gauging the credibility of your comments. And the last time I looked, Barry Critchley's paper -- The National Post -- was a broadsheet newspaper. If that isn't "old media," what is?

[Small Investor Activist]

You either don't read much or are not aware there's a world outside of Toronto. Year after year, for some two decades, David Baines of the Vancouver Sun has likely done more than anyone in Canada to expose stock market cheats, liars, frauds and double-dealing.

Yes that's right David Baines is awesome, his contribution enormous.

Daw at the Star is ok. From time to time some reporters shine for small investors. I blame the editors, owners more for all the PR driven stories.

[yielder]

Investors' challenge: Keep fees low

Your challenge when trying to ride along with the trend is to pay as few charges as possible that would increase the distance between you and stock market returns or bond yields. That will mean limiting every dollar you spend on administration and trading fees, and staying clear of the expense and uncertainty of trying to pick individual stocks, market sectors or investment managers. Over long periods, you will improve the odds of beating most professional fund managers, pundits and dabblers.
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If you are beginning a monthly savings and investment plan, the cheapest way in Canada to access stock market returns is to use low-cost mutual funds that track the price indexes of stock markets.

Toronto Dominion Bank, Canadian Imperial Bank of Commerce, Royal Bank of Canada and mutual fund manager Altamira Financial Services offer funds with annual expenses of less than 1 per cent of assets. TD's fees are lowest.

These funds can be purchased directly without a discount brokerage account, but the pricing and selection of index funds could influence your choice when you step up to a discount brokerage.

[parvus]

small investor wrote:

Daw at the Star is ok. From time to time some reporters shine for small investors. I blame the editors, owners more for all the PR driven stories.

Okay, so I'm confused. If small investors can't trust their advisors, but then again, they can't trust the (old) media — is CBC radio's 5:45 am blurb any better? — what is it, actually, that they're supposed to do? Trust themselves, assess their risk tolerance and take responsibility?

Just wondering.

(BTW, I am a small investor, with a mix of no-load and load funds, a couple of stocks and no bonds yet, and I don't have a broker, because my account size is hardly worth their while, nor do I have a planner, because my estate is quite inconsequential; what I have will go to benefit my spouse and then the university library — if they're willing to accept a small library or sell it for profit.)

[Bylo Selhi]

Protected notes may leave you exposed

Principal-protected notes (PPNs) have long been one of those "have your cake and eat it too" financial products that -- in my view anyway -- just didn't cut it for average investors. Securities regulators are equally dubious about PPNs, judging from an Investor Watch advisory just issued by the Canadian Securities Administrators (CSA)...

Regulators are concerned about "increasingly complex structures" that may pose risks to investors. Because many PPNs are sold without a prospectus they are also worried about proper disclosure. Before investing in PPNs, the CSA says, investors should know about the high fees and illiquidity of many of these products. "There is no guarantee that you will get back more money than you invested," the CSA asserts, "If you take your money out early, you can lose the guarantee on your principal and be charged a fee."

Based on the Portus et al experience what guarantee is there that you'll get back even the amount you invested, let alone earn any positive return?

[NormR]

Protected notes may leave you exposed

Principal-protected notes (PPNs) have long been one of those "have your cake and eat it too" financial products that -- in my view anyway -- just didn't cut it for average investors. Securities regulators are equally dubious about PPNs, judging from an Investor Watch advisory just issued by the Canadian Securities Administrators (CSA)...

Regulators are concerned about "increasingly complex structures" that may pose risks to investors. Because many PPNs are sold without a prospectus they are also worried about proper disclosure. Before investing in PPNs, the CSA says, investors should know about the high fees and illiquidity of many of these products. "There is no guarantee that you will get back more money than you invested," the CSA asserts, "If you take your money out early, you can lose the guarantee on your principal and be charged a fee."

Based on the Portus et al experience what guarantee is there that you'll get back even the amount you invested, let alone earn any positive return?

Even if the guarantee is good, you're almost 100% likely to be ripped off with PPNs. They do provide a good test for advisors. If they recommended them then you should probably get a new advisor.

[yielder]

Based on the Portus et al experience what guarantee is there that you'll get back even the amount you invested, let alone earn any positive return?

Surely you aren't lumping these or these in with Portus et al. Certainly in the first case and probably in the second, there's little (to no risk?) of a Portus event.

[Bylo Selhi]

Based on the Portus et al experience what guarantee is there that you'll get back even the amount you invested, let alone earn any positive return?

Surely you aren't lumping these or these in with Portus et al. Certainly in the first case and probably in the second, there's little (to no risk?) of a Portus event.

No, I was thinking of the likes of Norshield and Norbourg.

[DanH]

Based on the Portus et al experience what guarantee is there that you'll get back even the amount you invested, let alone earn any positive return?

Surely you aren't lumping these or these in with Portus et al. Certainly in the first case and probably in the second, there's little (to no risk?) of a Portus event.

No, I was thinking of the likes of Norshield and Norbourg.

A clarification: Portus did not sell linked notes. They sold units of a trust that - in turn - were to buy linked notes. You're comparing debt obligations with domestic (Norburg) and offshort (Norshield) trusts. I'm not sure that's relevant since I suspect there are different mechanics with respect to the custody and flow of money.

Plus, while a bank could in theory run away with your money; it's unlikely to happen at the hands of one of our big chartered banks. And if there is a bad apple within the bank who commits fraud, the bank would cover any losses.

[Bylo Selhi]

A clarification: Portus did not sell linked notes. They sold units of a trust that - in turn - were to buy linked notes. You're comparing debt obligations with domestic (Norburg) and offshort (Norshield) trusts. I'm not sure that's relevant since I suspect there are different mechanics with respect to the custody and flow of money.

Thanks for the clarification Dan. Part of the problem is that at the time this stuff was available for sale, few people, including advisors and other pros, understood those nuances and their implications.

Plus, while a bank could in theory run away with your money; it's unlikely to happen at the hands of one of our big chartered banks. And if there is a bad apple within the bank who commits fraud, the bank would cover any losses.

Precisely why I wasn't at all thinking of the banks even though they're probably the heaviest promoters of PPNs.

[yielder]

Plus, while a bank could in theory run away with your money; it's unlikely to happen at the hands of one of our big chartered banks. And if there is a bad apple within the bank who commits fraud, the bank would cover any losses.

Hence, my little (to no risk?) of a Portus event comment.