Ian Royle

The juxtaposition of those two things left me smiling.  Today, it is Thanksgiving Day in Canada.  Thanksgiving day is a day when everyone gets together and eats ham and turkey and stuffing and potatos and complains about other family members, politicians and the ecomomy.  Lately there has been more complaining about the economy.  But wait, no that is what it is, that is not what it is supposed to be.  We in Canada live in a great nation, full of opportunities and potential.  Thanksgiving is a day that we should be counting our blessings and be thankful that our election ballots are paper and not bullets, that we don’t vote about the status of our government with our feet as refugees or rebels with guns.  We should be thankful that in Canada hunger is for the most part unheard of.  That social systems exist to at least try to help people in crushing poverty, instead of the slums of other nations in the world where those in places of poverty are doomed to continue it until they die.  We should be thankful that our police, while a little too eager to pull the trigger on their tazers, are still the first people we call when we are in trouble.  We should be thankful that while wait times are long in the hospital at least we know that the staff are competent, that medicine is available and that ambulances will get us there on safe streets.

One other thing about being thankful for what you have, even if it is only the breath in your body…it is the first account of your resources.  And you cannot move ahead if you are pessimistic about what you have because you cannot be at the same time optimistic about your prospects.  A line from the movie Fight Club pops into my mind right now, “It’s only after you’ve lost everything, that you’re free to do anything”.  I don’t read that pessimistically, but along side the Bible, “naked we came and naked we shall return.”  The things we have are nice, but our personal worth is not found in the things we have.  That is external, that is fleeting, that is based on what other people say.  I say, if you have just suffered a crushing defeat, and hind sight is always twenty-twenty, then now you have within you wisdom and knowledge that was not there before.  Within you is something more valuable than what surrounded you.  Get up, be thankful you are still alive and get going again.  Your personal worth is in yourself, you accumulated once and you will do it again.

I want to be clear I am not an expert, I am a carpenter who has invested in real estate, financial stocks, energy stocks, pharma stocks, mining stocks, manufacturing stocks and service industry stocks.  I still have investments totalling in the 7 figures.  I have taken a hair cut in the last couple of years and I still work 44 hours a week in the commercial construction industry.  That said…the trend in the market is definately downward, but market timing is what get a lot of people in trouble.  No one can predict the future, so no one knows the news to come and markets gyrate wildly on the news.  Trouble brews in the Niger delta and oil shoots up, people begin defaulting on loans in California and financials world wide fall, Maple Leaf Foods is sued over a (hopefully) single tragic event and the stock falls.  I remember this with RIM, they were sued and when the dust settled in court those who could see future earnings and sales did well.  I certainly will not predict a bottom in these turbulent times, but no one can.  The market WILL emerge and those who have carefully made plans during these times will emerge from it with renewed strength and wealth.  Two years ago everyone was grumbling because everything in the market was overpriced from the homes we purchased to the gasoline we put in our cars to the insane P/E ratios people were purchasing stocks at.  It all didn’t make sense.  It was the effect of people having money they didn’t earn.  And if you haven’t bled for it you can’t shed a tear when you lose it.  No I won’t call a bottom, and yes the stocks can go down.  But at this point I would suggest that with gasoline prices falling that at least will leave some extra money in your pocket at the end of each week.  Find something in your budget, open an online trading account and start researching stocks that have healthy book values, earnings records, and good P/E ratios.  All this information is available online.  Start picking though the stocks and find good ones with long histories of solid performance, that are selling at good prices now.  And then act.  Stocks sectors I am personally looking at are as follows.  Railways, since decreasing fuel cost will translate into lower costs even if this only offsets lower freight volumns they should be okay.  Cheap restaurants.  Tim Hortons will not suffer under these times.  I think they will do better.  People will always buy their double-doubles and since Tim’s model is now to bake in one location and ship by truck frozen food to it’s retail outlets, lower fuel prices will mean higher net profits.  Other potential buys for me include McDonalds, Harveys and other fast food restaurants, Wendy’s still has internal issues and I will avoid them.  Some of you people out there will be opposed to this investment but alchohol should also be a good by in times like these.  I cringe saying that but the cynic in me says it’s true.  Molson Coors, Inbev come to mind.  As well I think this recession will be okay for big box renovation stores, Rona, Home Depot, Lowes etc. since maintanance is still required and kitchen and baths are an emotional buy.  One other non-discressionary type stock I am looking at is Saputo.  In a previous post I mentioned Agrium.  Know this I am not authorized to give any advice regarding stocks and what you are seeing here is my personal thoughts on the market and my own investment strategies.  I could be extremely wrong.  Do not follow me.  Feel free to track how I am doing and laugh if I do really terribly but do not make any purchases based on what I say here.  Maybe you should do the opposite.  Three years from now though I think any one who sees this time for what it is, a time of opportunity, these people will be happy.  The recession of the eighties didn’t last forever, nor did that in the nineties.  I kick myself for not having purchased some very good stocks in the energy sector during those lean years.  I had the extra money since I had a good job in the Alberta oil patch, but without mentors my money slipped through my hands.  This time around I have no plans to let this slip through my fingers and will begin buying stocks now, that have good value, even though I know they may and likely will go lower.  I am openning an RESP online in Q-trade for my infant son and plan to use about one thousand dollars of extra money I have a month to give him his start.  I hope everyone out there will realize this financial crisis isn’t ushering in the end of the world.  Games like this are zero sum, sort of.  The wealth didn’t vanish, it moved.  And it will continue to move.  As Proverbs 22:13 says:

The sluggard says, “There is a lion outside!”
       or, “I will be murdered in the streets!”

In todays world we could say The speculator says, “There is a bear in the market!”

I’ll temper that exuberance with one more Proverb, 22:3;

A prudent man sees danger and takes refuge,
       but the simple keep going and suffer for it.

Take the above as you will maybe it is wise to sell everything like everyone else and wait with whatever you can get out of the market.  I am always suspicious of the crowd, after all it was the crowd that was cheering the rocket ride up and now it is the crowd that is rushing like a mob for the loan exit, or is it more like lemmings to the sea.  We shoudl be prudent and wise, have no anxiety since it is the fear of the future, and the past should have taught us by now this too will pass.  All anxiety does is robs us of the ability to function optimally in todays reality because of pessimism of the future.  To everyone out there be blessed.

Rich and poor have this in common:
       The LORD is the Maker of them all. (Proverbs 22:9)

It has gotten pretty late today before I started writing this post.  I thought I’d talk about budgeting.  Budgeting is absolutely imperative to surviving at anytime.  Resources only go so far and the flowing in of resources should always exceed the flowing out except, EXCEPT during extreme times of stress, such as injury, job loss or a tragic event such as a death.  But if you have been budgeting previous to such events you should have a cushion to see you through.  My wife and I have a budget that we try to hold to.  We use Excel to create a column of all sources of income, another column shows all expenses related to investments (we own houses) and another column shows personal expenses.  Each personal expense slot has an allowance attached to it.  We try not to exceed any of the slots.  Should one be exceeded we try to find the money in another slot, such as entertainment.  And we always like to have our largest slot as debt repayment.  That slot currently sits at two thousand dollars.  So each month, two grand plus goes to debt repayment currently.  The plus comes from any of the allowances for each personal expense slot not used.  For example, we budget one hundred and fifty dollars for fuel which is about right.  However lately I haven’t been needing to go far to work, I’m a carpenter so work is everywhere.  Right now I work right around the corner from home.  That means substantial saving for fuel.  But those extra savings barring unexpected overruns in groceries or such in another slot are then applied to debt repayment.  The longer you have a budget, the more refined it becomes and the better you and possibly your family will function as well.

This is something that just occured to me today.  Like any margin account, a meltdown in any asset class will trigger sell-offs of any and all stocks to bring the account back in balance.  Estimates for the total losses on bad loans in the US real estate market seem to be around 1 trillion dollars.  That seems like a lot doesn’t it.  Except that in the last 5 days, the TSX has given back the entire gains of the last 4 years with losses since ONLY August amounting to 440 billion dollars or, .44 trillion dollars (http://www.financialpost.com/news/story.html?id=873340).  The Dow though is even more insane, from http://ap.google.com/article/ALeqM5gHs5OM3gFG_DytQQZFbWfgPT08MAD93NTHUG0

Investors suffered a paper loss for the day of about $100 billion, as measured by the Dow Jones Wilshire 5000 index. For the week, investors lost $2.4 trillion, and over the past year, the losses have piled up to $8.4 trillion.

and from the wall street journal:

http://online.wsj.com/article/SB122363315976122397.html

Mr. Baer, who was a Treasury-futures trader on the floor of the Chicago Board of Trade in 1987, said, “I’ve never seen a credit market like this one. The fear has gotten way ahead of the fundamentals,” including an unprecedented round of coordinated central-bank rate cuts this week that would normally prompt banks to increase their lending to one another.

Mr. Market has clearly lost his head in this spate of depression following mania.  The bubble was bad, buoyed up by a clear surge of mania, but just like we all overreact when we wake up Sunday morning to realize we took our credit card to the bar the night before and can’t remember anything after 7PM…this is a gross over-reaction at this point.

The estimated world GDP is:

For Canada and the United States paper losses amount to over 11 trillion dollars!  Or one sixth of the entire world GDP!  Does this even seem logical.

Is there someone out there who can explain this to me, because it seems farcical!

It may sound idiotic but I’m seriously thinking of picking up stocks in a lot of these companies such as Agrium that close 10 Oct 08 with a p/e ratio of less than 6!  Or  Canadian Pacific Rail with a P/E of 9!

This is craziness.  The blood is in the streets and people are running from these buys.

Quick someone talk some sense into me!  The herd can’t possibly be wrong can they?

These are two classic comic book series that ran from the early sixties to the late eighties.  Pick any one up though and you are transported into the sixties.  Simple stories about heroics in world war 2.  That’s all goodnight.

I’m going to ramble this evening.  Prices are falling for oil.  That sucking sound you hear is the refilling of the fuel tanks of SUVs abandoned a few months ago.  Gasoline in the double digits rather than triple digits is a steal to most people.  So while petro reserves are up, due to lower demand…I think as the economy causes a pinch on the wallets, people are going to take up driving again as a means of entertainment.  So I do think demand will remain high for the product that makes Alberta rich and Canada go.

Aldrous Huxley wrote Brave New World origionally as his concept of a utopia.  It wasn’t until much later, that he realized that the destruction of human freedom through interference with biological function was a dystopian nightmare.  At least that’s what a poli-sci student working with me this summer on a construction site told me.  Brave New World is a book about a dystopia in the future, I can’t remember but I think Adelle Nyberg taught me this book in grade twelve, but whatever.  Brave New World (BNW from now on) is similar book to George Orwell’s 1984.  Both involve protagonists who are subversives in the world order.  Both involve societies where freedom does not exist.  And in both stories our protagonists lose, sorry to spoil it, but, I haven’t.  Because these books are much more about the mechanisms of enslavement.  1984 is an imagining that has come to pass.  His fiction has become reality.  In those nations previous to emerging from behind the iron curtain and currently in North Korea.  The use of violence by brutal regimes against the populace is not something we have to imagine.  We can read about it in the news.  And we have also seen that the populations of nations like East Germany, and Hungary and Latvia and Lithuania and Russia have overcome the kind of monsters that haunt the pages of .  Huxley’s dystopia hasn’t happened, at least not yet.  Science can’t accomplish it, yet.  But the mechanisms of enslavement are much more sinister in BNW,  The mechanism of enslavement is the destruction of the very core potential of some individuals to render them unable to appreciate what they are and leave them utterly content in whatever menial task they have been assigned.  The right to have children is removed from the population, all children are “born” in factories.  The fetuses are assigned to categories of humans.  Alphas, Betas, Deltas and Epsilons.  Alpha fetuses receive little tampering and are allowed to develop normally.  They become the leaders of civilization.  Epsilons are the bottom.  Chemicals inhibit their physical development and alcohol destroys their mental potential.  They fill jobs most would not want.  Betas and Deltas are engineered to fill the gap between the Alphas and The Epsilons.  And the society is in a constant state of excitement.  Drugs are distributed to dull the people, and orgies are encouraged.  So while most are designed to be happy with their possition, any who aren’t are lulled by constant debauchery.  The control as I said is far more sinister since the slavery mostly goes unnoticed.  I’d have a read of this book if I were you. Huxley, Brave New World.  Borrow it from your library.

These are difficult times.  The world is in a time of upheaval.  I don’t want to use words like unprecedented, or unseen, because such gross hyperbole is an overstatement.  This isn’t an influenza pandemic, or a genocide or a world war.  This isn’t even remotely on the scale of tragedy like that.  This is financial loss, and we will all recover from it, and we will all forget about it.  These are times when old, bad ideas get discarded and new innovations will be discovered.  These are exciting times to be around.  Sure, their will be pain but remember pain is weakness leaving the body!

Two of the best books I have ever read that are reasonably short are Generals Die in Bed by Charles Harrison and Heart of Darkness by Joseph Conrad.  Neither book takes very long to read and both will change you.  My dear friend, Frank Chen, read Generals while we were living in Taiwan.  I got him to read it since, him being a Canadian, this was a good book to read about Canada.  To give you a quick understanding of the tone and mood of Generals I would suggest you follow this link to the Wilfred Owen poem Dulce Et Decorum Est.

Generals is a very realistic fictional account of trench warfare during World War I.  It follows the protagonist throughout his engagement with the Canadian Expeditionary Force in Europe.  The brutality of the war and it’s effect on the characters are simply told and have tremendous impact on the reader.  It is at once compelling and revolting.

The other fiction book is Joseph Conrads Heart of Darkness.  I first read H of D in grade eleven under the instruction of Mr. Finni.  H of D is a classic, narrated by Marlow.  Having read everything published by Conrad, Marlow is now as real or perhaps more real than many people I know.  Marlow is a sage, a strong man, made wise by his years travelling the world.  And he tells, dare I say, his stories in Conrads books!  This was my first introduction to Marlow as he told the story of his journey on the Congo river into deep Africa, the unmapped area.  The heart of darkness of the continent.  He was to go up to get Kurtz and bring him back.  The journey for the reader and Marlow though is less spacial along the river and more psychological as he endures the loss of restraint among men when they are separated from civilization.  Similar themes are also encountered in Lord of the Flies by William Golding, and a much more brief “version” of H of D can be read in less than an hour in Conrads short story Outpost of Progress.  The movie Apocalypse Now is a modern retelling of Heart of Darkness.