What Recession and what Government?

Richard-

Those are very Interesting comments.

What I can see –tangibly-with the economy and market place, at least in the financial industry is as follows:

1. People are worried about the markets (US plus recession) and many do-it-yourself-ers are selling at the wrong time.

2. I know for a fact that there were fund companies and banks who for the last year offered “Notes” which guaranteed the invested capital from an investor and offered increasing value with the market. The problem came when the worry set in and market levels went down due to the banks exposure to sub-prime products. When the beginning of the real slide in October occurred, it ‘triggered’ these “Note Providers” (many banks and Fund companies) to sell all underlying stock and simply buy strip bonds in order to make good on the guarantee element. At least 1-2 thirds of October’s massive slide on the TSX took place simply for this reason since so many people had been sold these “guaranteed products”. The ‘bitch’ for the customers who purchased these is that the notes carried another condition…the investment is locked in until 2012 or longer. So, once the skies clear next year (in 6-12 months) these people will be pissed. But that is not my point. My point is that this one product alone, caused much of the price slide in October due to managers having to sell stock quickly to cover the guarantees by purchasing the bonds. This is another “Selling At The Wrong Time” situation thus causing the market to slide further downward.

3. So with values going down on portfolios, income for advisors on trailer fees or monthly administration fees tied to as a percentage of the value of a client’s portfolio is also down. So Christmas parties and bonuses to assistants are gone. I have had to cut my assistant from 3 days per week down to 2.

4. Mutual Fund companies who traditionally have client appreciation parties including dinner and Casino nights right about now ($3000-5000 cost) for any given restaurant – for the advisers who give them business throughout the year, have been canceling. So imagine the effect on the restaurants and the trickle down effect. I suspect many from my industry are canceling plans for winter travel. I know I have. Yet strangely –since I have modeled my business on a very cheap fee base for the clients, where the monthly cost from me beats out everyone else, my business activity is now increasing…I put in another $100,000 to certain investments for clients last week and a big banker brought me a new client who signed with me on the spot. But this won’t translate into new income personally for about a month.

5. What I do know from my time in this and the transport industry years ago, is that when there is the smell of recession in the air, the weaker cash flow companies immediately let people go or stop replacing those who leave. This attrition factor is now happening in many companies. –Nortel?

6. Also far less people are talking to me about planning to sell their houses or buy new ones…the last one (Canadian) to buy a condo in Florida was 5 months ago…. With the higher Canadian dollar, which as you know…

7. It is also a wonderful time for management to bust the balls of unions if not bust them outright with unbridled glee and perhaps legitimacy under the cloak of the dreaded R word. –GM, Ford??

So given the above factors, many are holding on to their money, hiring is in freeze mode, lay-offs are taking place in Canada, businesses are ‘receding’ where they can without killing themselves. Recession is occurring on various fronts…just not a massive one….not yet anyway once the trickle down process has hit other sectors in the economy we shall see.

The government situation is not helping. The opposition parties due to their philosophic disparities are not gaining legitimacy or credibility with the common man in their new found coalition. As far as the conservatives are concerned, they let the damned genie out of the bottle by calling the last election with hopes of scraping together stronger support…but they blew it instead.

So Canadian politics-- even with the opposition calling for economic packages as a mask to their political opportunism, is not good medicine and only distracts investors attention from the credibility we have as the world's strongest financial system.

…And a happy new year …fa ..la..la la ...LAAAAA.

Bah humbug?

Les