Juggling Dynamite

Financial ‘tainment would have us focus on US indices back near 2007 cycle peaks, but the reality of real life returns for investors have been much worse than this headline would suggest. In reality most portfolios have held overweights in popular sectors (metals, mining, social media), stocks, exotic products and new issues which have frequently lost money or dramatically underperformed the main benchmark return. People will often mention some winners they may hold. But it is the losers that can suck away benefits for the portfolio over all.

The Canadian TSX composite index has rallied over the past 6 months, but has not recovered the losses it experienced in 2008 or 2011.

Source: Cory Venable, CMT, Venable Park Investment Counsel Inc.

Moreover most traditional portfolios have suffered even more from overweights in previously popular and now falling sectors like energy, materials and mining.

Source: Cory Venable, CMT, Venable Park Investment Counsel Inc.

Without the over-valued financial sector, the TSX would be somewhere closer to 9500 rather than present 12700. From here, priced-for-perfection financials look increasingly vulnerable to slowing global demand, weak consumer credit appetite and softening realty prices in Canada.

In a related story, Marc Faber, Editor & Publisher of The Gloom, Boom & Doom Report says China’s pace of growth depends on whether authorities can deflate the nation’s massive credit bubble. Here is a direct link.

I receive marketing material in my in box every day from the investment sales side. Typically it goes something like this one this morning: “Double your production in 12 months”, learn “how to close”,”how to get clients to buy” and many other “tricks”. This clip walks “advisors” through how to amass a “shock and awe box” to attract new prospects. Too bad the industry did not direct this type of laser focus on how to actually protect and grow client capital once new victims sign up.

“Nationally Recognized Marketing Expert Seth Greene shares how to double your production in 12 months for financial advisers with his gold coaching program”. Here is a direct link.

For anyone who is still not clear on why the sales side is directly in opposition to a client’s best interests, this clip offers some insight on the math and commission structures common in the business at 15:00 on the play bar. Listen and learn as the guru explains the rich commission flows that can come off various products when compared with say you put “a quarter of the money in fixed income makin’ya nothin’.” This is a beauty, and the real reason the business is so adamant that no one should hold “low yielding fixed income”. Low yielding for the advisors they mean. Meanwhile as explained in the opening minutes of the clip, the Dow may be back at its 2007 high, but client accounts have still not made back what they lost in the 2 bear markets since 2000. High risk, high commission products for the advisors have meant wild volatility with negative returns and repeated frustration for the clients. What a great business!!

After nearly 3,000 pig carcasses were found in a Shanghai river, CNBC’s Eunice Yoon reports on the many obstacles faced by China to protect its environment as the economy grows. Here is a direct link.