Everydaymoney.ca is a daily business blog published by Sympatico / MSN Finance

Recovery or bear market rally?

Gordon Powers — 2009-05-19T06:43:00-04:00

By Gordon Powers, Sympatico / MSN Finance

While Canada took the day off, U.S. stocks rallied yesterday. The S&P 500 jumped 3% after positive news about the U.S. housing market, including an upbeat profit forecast from home-improvement giant Lowes.

Great news ... but investors are still divided as to whether the recent rise in global stock markets is the beginning of a sustained bull market, or just a bear market rally – meaning that these gains could be short-lived.

Here’s what we do know though. Once a bear market cycle ends, a large portion of the returns in the next bull market occur very early in the new cycle. In other words, it’s all too easy to miss out if you’ve been on the sidelines.

Fidelity Investments recently reviewed total monthly returns of the S&P 500 Index from 1930 to early 2009. The 14 historical bull markets analyzed are defined as periods with an increase of 20% or more in stock prices.

What did they find? Stock markets not only recover early coming out of a recession, they recover fast. In fact, a large portion of the bull market returns historically occur in the first year following the bear market.

So, while bull markets last an average of three years and have lasted as long as a decade, the biggest bang for your buck tends to come in the first year of the rebound.

Are we there yet? Probably not, says Mark Hulbert. Despite yesterday’s pop, his research suggests that the recent rally, impressive as it otherwise is, will in the end prove to be just a bear market rally.

A market driven by nervous investors placing bets on the prospect of a recovery in China, an improved outlook for commodity prices and hints of a turnaround in the U.S. housing market are likely not enough to bring about a long bull run.

Not just yet, at least.

How soon will plastic bag fees become the norm?

Jason Buckland — 2009-05-18T23:54:00-04:00

By Jason Buckland, Sympatico / MSN Finance

Once upon a time, your local university’s health clinic wasn’t the only place you could get your hands on free plastic.

But that was then, and now – in the midst of another major grocery chain announcing it will start taxing the use of its single-use shopping bags – you might not be able to find the material for free any longer.

Grocery giant Metro, which operates about 600 stores in Ontario and Quebec, has said it will charge five cents per bag at all checkouts starting June 1.

By doing so, they will join the ranks of Loblaws and Sobeys (even though Sobeys only levies the fee in Ontario) as major retailers to adopt the tax.

Yet while we might have predicted other grocery stores would jump on the plastic charge bandwagon, the date of Metro’s free bag ban is significant for a whole other reason.

June 1 is the same day the City of Toronto will begin to force stores, not just supermarkets, to charge for single-use plastic bags.

And while it’s, admittedly, only one city, the Star says environmentalists think the rest of Canada will soon follow suit.

“I think after the city of Toronto’s program is implemented, you’ll see it across the board,” the Recycling Council of Ontario’s executive director tells the newspaper.

“Especially for the national chains, they don’t tend to launch programs … by jurisdiction, they tend to do it nationally. It’s easier for them.”

Of course, there’s naturally a bit of resistance to the movement away from plastic bags. While the left-leaning Toronto was sure to act accordingly, it turns out Calgarians, for example, don’t want to be pushed around on the issue.

A “wide-ranging city report” shown in the Calgary Herald says that charging a tax on plastic shopping bags (or even banning them altogether) would be wildly unpopular, going so far as to suggest the change would be “legally hard to justify.”

Well, it turns out that report only registered feedback from a mere 300 Calgarians, so it’s tough to put a lot of weight into its findings. Still, you have to admire the city’s will.

While cutting back on the waste of landfill-clogging bags is a no-brainer, maybe banning them altogether isn’t exactly the right course of action. People do, believe it or not, re-use these bags and, when it boils down to it, should probably have the choice as to which type of material they want to shove their $200 of groceries in every other week.

But, how long will that remain the case?

Why your budget just doesn't work

Gordon Powers — 2009-05-16T06:07:00-04:00

By Gordon Powers, Sympatico / MSN Finance

Got that nagging feeling that you’re just not doing enough to manage your money? You’re probably right, which leaves you with two options. Keep writing cheques and melting plastic until your money runs out, or get a handle on things right now by establishing specific savings goals, blogger FiveCentNickel suggests.

Instead of setting up a detailed budget, complete with projections of how much his family is likely to spend in particular categories, he works towards predetermined savings goals and let's everything else unfold accordingly.

But it's hard to see how you can get there without at least a little bit of budgeting.

There's no shortage of free personal finance sites you can consult to monitor your money and set budgets, among them Justbudget, Wesabe, Easybudget, Mint, and Rudder.

Mint, for instance, is great site for those looking to take the tedium out of budgeting. Although only available in the U.S. right now, a move to Canada is in the works.

The service logs into your bank and credit card accounts to get updated information on existing balances and transactions. Mint updates all your accounts at least once a day and automatically labels each expense with a category -- groceries, utilities, gas and so on. It then organizes the data in a series of colourful pie charts so you can spot if you’re over budget on those spa costs.

It’s not as intrusive as it sounds. Mint starts with the same encryption banks use, but the difference is that on Mint, you’re anonymous – no account numbers, just a user name and password. Still, even that might be too much access for some.

In that case, you’ll probably prefer spreadsheets over their online cousins. If so, there are several free budget templates available from Microsoft. They include personal and family budgets as well as event budgets for weddings or golf tournaments.

Looking for more of a group solution? Buxfer is a site that specializes in group budgeting and IOUs among friends. Perfect for college roommates or group vacations, you can invite contacts to join and track shared bills with little hassle.

Could going to the movie theatre be a thing of the past?

Jason Buckland — 2009-05-15T04:38:44-04:00

By Jason Buckland, Sympatico / MSN Finance

When Steven Soderbergh’s The Girlfriend Experience was released near the start of the month, not many people paid attention.

Forget that the Traffic/Ocean’s Eleven director has been behind a handful of the best 30 movies this decade, his latest flick was of the indie variety which – with Star Trek looming around the corner – generally gets swept up by blockbuster fever.

Yet the dichotomy between Experience and the Star Trek prequel highlights an interesting and little-reported tug-of-war within Hollywood right now.

Depending on who you believe, movie theatres are either the hottest spots going or relative ghost towns because of the recession. Chances are most consumers are in one of two camps: a) I can’t go to the movies because I’m broke or, b) Screw this, I don’t want to sit here and sulk about the economy, I’m going out!

Despite being about the only industry to actually garner that antiquated thing called “profit” these days, there’s sentiment rolling in that physically going out to see a movie could soon be a thing of the past. And Soderbergh, for all his vast theatrical gain, is behind the movement.

While it'll still hit theatres in a limited release, Experience debuted on Amazon as an on-demand download a full three weeks before it was set to reach the big screen.

It’s a novel thought, bringing a new movie from the red carpet to your living room carpet, but Soderbergh’s done this before.

Bubble, his 2006 pic, was broadcast on HDNet at the same time it was in theatres, with the DVD release coming only four days after its initial release.

Now, you’re sitting there saying, “Yeah, but who wants to see these lame movies when, like everyone else, I just want to see Spock or the latest blockbuster or comedy or whatever.” And you’re right. Indies like Bubble and The Girlfriend Experience, no matter how good, aren’t going to change anything with regard to how you see movies.

But consider how spooked studios are of piracy. Illegal downloads and DVD leaks are causing billions in lost revenue, and it’s gotten so bad that production houses in France lobbied the government so much that they just passed a bill that will actually let them shut off your Internet if you’re caught scamming a free video.

So, if you’re the movie studios, why not compound the problem? By charging $9.99 or whatever for each online download (or, more likely, an on-demand viewing through your cable or satellite provider), you can still earn a majority share of your box office revenue and, ideally, cut down on people ripping off your property.

Not only that, but now you’re tapping into the Homebody Crowd. People who don’t want to go to a packed theatre now have an avenue to check out the newest movies right from their couch. And that’s probably a bigger demographic than we presume.

As a moviegoer, too, you’d have to enjoy the prospect. How cool would this be? Imagine having the choice of staying in without missing a beat at the box office. Even if they charge more than a normal ticket – say, $17.99 per viewing or somewhere in that range – just invite over a friend and you’re saving money. Then consider you don’t have to pay for gas or concession food, and you’re a bonafide genius for watching at home.

The only tweak to this strategy I’d suggest is, unlike Bubble, studios shouldn’t release the DVD right away. Maintain the same time period before the movie’s release and when it’s out on disc and you’ve pretty much maintained every traditional facet of the modern movie experience – only with the added bonus that you’ve opened up a revolutionary way to tap into a new audience. And isn’t that the goal anyway, to get your product to as many people as possible?

Of course, this is just a modest proposal, and you won’t be seeing any major releases at home within the year or anything. But, doesn’t this sound like something that could work for everyone involved?

My bid to become an airline executive

Jason Buckland — 2009-05-14T00:50:20-04:00

By Jason Buckland, Sympatico / MSN Finance

Shhh. My editors don’t want me writing this article. They really don’t. This one’s just between you and me.

While I’m gainfully employed by the good people of MSN, I’ve been secretly working with a hidden agenda this whole time. Each day, as I research the issues that piss off you, the consumer, I come across countless stories about airlines constantly screwing Joe Traveller, charging him outrageous fees for necessary services simply because they can.

And one thought keeps creeping back to me. Pfft, I could do that.

Sure, people would line up to turn Monte Brewer’s gravesite into a public toilet should he pass away, but guess what – that infamous ex-Air Canada CEO is one wealthy man. Like everyone else, I want in on the airline honcho cash.

The thing that gets me is that it seems so easy. Yeah, there’s a bit of public outcry over hidden fees, but the flying business is such a monopoly anyway that fliers pretty much have to suck it up and pay whatever the airlines want or they don’t travel.

But, as AC and the like have figured out, you need to be creative when screwing your customers. You can’t just have a flat fee and charge that same amount because, frankly, that’s how about every other business works. Prices have to be concealed and with the ability to vary based on nobody’s merit but the airlines’. That’s where the real cash cow lives.

So with the news coming that baggage fees have now turned into a billion-dollar industry within the kajillion-dollar airline industry, the fat cats are going to be looking for people with new ways to keep nickle-and-diming. Guys, I’m here. Please, look no further.

I decided to come up with a few ideas I could pitch to the airlines in my official bid to become an executive of the skies. Some of the more ludicrous examples of airline fees out there (like this one, where US Airways actually charge you extra for paying to check your bags in person and not online) will seem tame by comparison.

Remember, the goal is to enrage customers but be just subtle enough that it won’t make them want to drive cross-country instead. See how these make you feel:

The Bathroom Breezer Fee: A few months ago, our own James Havers wrote how Ryanair was thinking about charging its customers to use the airplane washroom. Now that’s thinking! My question is, why stop there? Don’t airlines realize how awful some of these bathrooms are? You have a dank, three-by-three foot space only ventilated by the air coming up from retractable toilet lid on your hands. It is, by most standards, terrible to use an airplane washroom and that should be, by your standards, a commodity! Why not capitalize on this? Station a flight attendant outside the bathroom at all times armed with two cans of Febreze Air Effects. Each time a guy comes out looking like a sweaty John Goodman, offer the line-up waiting to use the facilities the service of “freshening up” the room, using the whiff of whatever demons the guy left in there as an incentive. $3 each couple of sprays, all major credit cards accepted. People doing the I’m-trying-not-to-pee-on-myself legs-crossed dance will jump at this opportunity.

The Flight Re-route Charge: Let’s say, airlines, you’re operating a cross-Canada flight from Montreal to Vancouver and you run into a rough storm near the Great Lakes and need to switch paths to Chicago to offload passengers. Well, who’s going to pay for that? That’s an extra few hundred kilometres of airtime, plus the risk of having to provide connecting flights for the entire plane. Where’s the possibility for profit margin there? Why not charge five cents per kilometre of the re-route trip to the customer’s Visa after the flight? That’s about $53 per passenger you could be cashing in on from, say, Thunder Bay to the Windy City. And the beauty is that the charges come retroactively, weeks after the trip. What are they going to do, call in to complain? Go ahead! WestJet’s customer service hotline is now available to all Canadians at the low, low price of $0.99 / minute.

The Sober Pilot Tariff: Everyone knows good help is hard to find these days, and most are aware at what a gruelling job an airline pilot can be, too. That pilots like to have a drink or two, by stereotype, to take the edge off before a flight should come as no surprise. Only, problem is, passengers have this weird thing that they want to reach their destination safely and don’t want a huge waft of Tanqueray Tom Collins emanating from up in the cockpit. Whatever. Come on, guys, this is 2009 – this shouldn’t be your problem! For $7.99 per ticket (buried in the fine print, of course), we can give a retired police officer 20 bucks to shadow our pilots for the last two hours before they’re set to report to the airport. This way, we can guarantee they’ll be at (or somewhere around) the legal blood-alcohol limit as they enter the terminal. And, because we won’t follow them after that, they can even polish off a rye-and-ginger in the airport bar if they so choose. Hey, we can be on top of these guys 24/7. As an added bonus, you can now advertise “the safest service in the sky” or some other kind of preposterous rhetoric fliers will eat right up. If that’s not worth another $40 each ticket, up front, I don’t know what is.

Again, airlines, these are only a few ideas. I think I’m onto something here and I'm sure these proposals are right up your alley. Because I’m one of them, I know what the customers don’t want but will still pay for because of the insane market control you guys carry. They have no choice, believe me. I have more infuriating strategies, too.

Please leave your contract offer in the comments section below. Thanks for your time.

(Any other suggestions out there?)

Are you really a good investor?

Gordon Powers — 2009-05-13T06:49:00-04:00

By Gordon Powers, Sympatico / MSN Finance

Although you don’t see him as often now, Knight Kiplinger was often a no-nonsense guest on Wall Street Week, CNN and CNBC. Now editor of the Kiplinger Letter, the longest continually published business newsletter in the United States, he recently published an Investor Manifesto that goes a bit further than the usual “buy low, sell high” advice.

As credos go, you could do a lot worse.

I am an investor. I do not trade my assets frequently. That's speculation, not investing.

I am also a saver, fueling my investments with continuous savings from current income.

I know that every kind of asset entails risk – even cash, which can be eroded by inflation.

I know that higher returns entail higher risk, in every kind of asset.

I accept those risks, but I mitigate them by owning a diversity of assets.

I regard my home as a place to live, not as an investment. It is not a substitute for retirement savings.

I have an investment plan and a plan for asset allocation, in consultation with a financial adviser.

I invest regular amounts every month, in both rising and falling markets. I know I cannot gauge market tops and bottoms. If I receive a windfall – a bonus, bequest or gift – I gradually feed it into my regular investment mix.

I don't pour more money into hot markets nor completely cash out of plunging markets.

I spread my investments among several asset classes, in a mix fitting my age and risk tolerance.

My share of bonds roughly equals my age. I will allocate to stocks a declining portion of my financial assets as I get older.

I rebalance my portfolio every quarter. If the stock market plunges, pushing my stock allocation way below its target percentage, I sell bonds and use my cash to buy stocks.

I force myself to sell high and buy low by periodic rebalancing - just what is temperamentally difficult for most investors to do.

I know that stocks are risky in the short run, so I hold in equities no money for which I have a likely need in the next three years.

But stocks are not too risky in the long run. They have outperformed all other commonly traded assets over periods of 15 years and longer.

Foreign stocks account for at least 15% of my stock allocation. I believe that developing economies will enjoy much higher growth than the U.S. in the decades ahead.

I never borrow against my stocks. Margin calls could force me to sell good assets at a bad time.

I stick with my game plan. I do not check the value of my investments every day or even every week.

I try to keep my cool when other folks are losing theirs.

I remind myself often: I am an investor.

Can you say the same?

French anti-piracy bill sets dangerous precedent for Internet users

Jason Buckland — 2009-05-13T05:14:56-04:00

By Jason Buckland, Sympatico / MSN Finance

French President Nicolas Sarkozy announced he will resign from his governing duties yesterday, stepping aside and conceding ruling power to a political trio led by Jerry Bruckheimer, Simon Cowell and three of the four members of Metallica.

Okay, not exactly, but that’s at least the sentiment of a new anti-piracy bill passed by France on Tuesday that should be drawing the ire of every Internet user, not just ones with baguette crumbs all over their keyboards.

Channelling its best impression of George Orwell, France passed a bill that would allow its government to shut off the Internet connections of users in the nation thought to be downloading movies and music illegally – while still making them pay for the service.

The plan, agreed on by Sarkozy’s government, will operate as a kind of “three strikes” system.

Culprits, for lack of a better word, would receive two e-mails warning them to quit the downloading or they’d be cut off. Next, a certified letter would arrive at the connection’s address and, if the behaviour persists, zap! As you still pay for the bill, your Internet could be suspended for anywhere from two months to a year.

Even if you forget such a move “defies a European Parliament measure … that prohibits (European Union) governments from cutting off a user’s Internet connection” – as the Associated Press puts it – it’s pretty clear this isn’t how anti-piracy efforts are going to work best.

The glaring omission from the French strategy is, of course, that alleged perpetrators wouldn’t be given fair trial or a chance to challenge the charges levied against them. Concerns that this will set a terrifying Big Brother, totalitarian precedent on government’s ability to intrude on the Internet activity of its citizens are understandably validated here.

Plus, a move like this reeks of intense lobbying by movie and music production houses whose profits have been gobbled up by piracy. While we’re all for putting a stop to theft (more movie money surely means more jobs spun-off for film crews and the littler guys involved in production), this enforcement strategy just doesn’t feel right.

Does allowing a federal government to intervene on Internet activity genuinely have its country’s best interests at heart, or is this more a quick-fix to appease the complaints of studio heads whose cries grow impossible to ignore?

Truth is, no government knows really how to handle the issue just yet. Canada is working on legislation in partnership with countries like the U.S. and New Zealand, but it’s still a ways off from ironing out the issues on an increasingly complex concern.

No one has things figured out, but if one thing’s for sure, we’re guessing this French legislation doesn’t last long.

If GM does move, where will it go?

Jason Buckland — 2009-05-12T04:03:55-04:00

By Jason Buckland, Sympatico / MSN Finance

On the list of “bonehead decisions made with zero foresight,” the $625 million General Motors purchase of a downtown, glass-towered headquarter building in Detroit last year might rank somewhere between April’s Air Force One photo op and Al Pacino choosing to star in movies after 1999.

Not only does the timing of the buy seem a little, uh, poor looking back, but it comes across as that much worse for the auto maker following CEO Fritz Henderson’s claim that GM is actually open to moving its headquarters out of the Motor City.

Now, you can take his refusal to ensure his company will remain in Detroit as a cautious PR move, but there’s at least an intriguing case being made that GM could actually bolt from its Michigan home.

For one thing – like its good friend Chrysler – GM will almost certainly file for bankruptcy soon, likely in the next two weeks.

On top of the $15.4 billion in bailout cash it got from the U.S. feds, the company has said it will also need another $2.6 billion in May and $9 billion more for the remainder of the year.

Henderson wisely downplayed any sentiment that GM has already discussed moving internally (it’s called Detroit home since 1996), but a major flaw in his rebuilding strategy is what appears to be fuelling speculation the auto maker could leave.

GM says, in order to make the company’s profits more viable, it would like to increase vehicle imports from its plants in Mexico and Korea because it’s more cost-effective.

Well, yeah, but that comes to the obvious chagrin of the auto workers’ unions, which rightfully point out such a move would completely contradict the “job-saving intent of the U.S. government’s support for the automaker,” according to CNBC. This would be like taking 20 bucks from your grandma to mow her lawn, then making your wide-eyed little brother do it for five and pocketing the difference while you play Pac-Man or something. Not exactly the way the deal was supposed to work.

So, as a result of GM’s shaky future, a game of “Where to?” has popped up already.

Peter Cohan of Dailyfinance.com thinks GM could ship its headquarters off to Brazil or China, but even mentions Canada as a dark horse candidate.

While we hope the auto maker doesn’t have to pick up its roots (at least, my lord, for the sake of the poor, good people of Detroit), it is amazing that I’m even writing an article like this in 2009.

Would a rumour that GM might flee Michigan - the home of the automobile - be able to gain even a scrap of momentum five, even two years ago? Isn’t General Motors about as American as something can get? Crazy how things change.

Attention shoppers! How grocery stores get you

Gordon Powers — 2009-05-11T05:13:00-04:00

By Gordon Powers, Sympatico / MSN Finance

People are eating out less, restaurants are hurting, and consumers, rather than frequenting multiple outlets, seem to be going to one-stop places like a Loblaws to buy food. And their bills are climbing as a result, MSN readers tell us.

All of which suggests it’s time for a review of grocery marketing strategies.

Grocery stores know just what to do to make you buy more. And, as far as they’re concerned, they only have two types of customers: Those who don't realize how much money can be saved or those who think they’re saving money already. Either one will do.

Supermarket planners have long known that the more time you spend in a store, the more you'll buy. In fact, studies suggest that once you hit the half hour mark each additional in-store minute adds as much a dollar to your bill.

That’s why you’re seeing more sampling centres, coffee bars, cooking displays, pre-cut fruit, and in-store bakeries – all designed to get your stomach to rule your wallet and to keep you hanging around.

Have you noticed that your favourite brands seem to be shrinking? Well, you’re on to something. Roughly one-third of items at the grocery store have lost content since 2007, according to the Nielsen Co.

Over at Mouse Print, they've been tracking this downsizing of products on supermarket shelves. And the list is growing. Pretty soon, you’ll open a carton of a dozen eggs and see there are only 11.

To be sure you're getting the best value for your money in an era of shrinkage, check the unit price: it's the number on the shelf tag that says how much the item costs per ounce or pound. That way, it's a no-brainer to calculate whether the larger or smaller item is the better buy.

As long as you're already at the store, might as well pick up laundry detergent, pet food and paper products as well, right? Probably not. Even though there’s more competition than there once was, supermarkets still tend to price non-food household items higher than discount or specialty stores, knowing that shoppers will buy them anyway out of convenience.

Another danger point in the store is a sale that's not really a sale, warns the Greenest Dollar blog. For example, stores will create visual cues by using bargain bins, hanging promotional signs, or filling up endcaps at the corners of each aisle with items that are actually not discounted at all.

How are you doing when it comes to groceries?

New passport rules punch Canadian tourism in the gut

Jason Buckland — 2009-05-11T01:39:40-04:00

By Jason Buckland, Sympatico / MSN Finance

By the end of the season, people might be wondering what the least successful tourist locales were this summer – Mexico City, Fallujah, or the Rogers Centre once the Jays’ bats inevitably cool off.

Yet the rest of Canada, thanks to some well-intentioned bureaucracy, could soon become a nominee, as well.

Starting June 1, new American passport laws will take effect and make the trip across the Canada-U.S. border a little more dicey.

And, as the Toronto Star reports, that’s going to have a big time impact on the amount of tourism bucks the Canadian economy can count on this year.

When the little-promoted June deadline hits, all Canadians over 19 visiting the U.S. will need a passport or other enhanced pieces of ID or they won’t be allowed to make the trip.

(Examples of an enhanced ID include the new Ontario driver’s license – which costs $115: $40, plus the usual $75 renewal fee – though they don’t look like they’ll be ready by June 1 and cost a bit more than the $87 adult passport fee.)

While this, of course, sends Canadians scrambling to passport offices with last-minute applications, the real issue is that Americans will need a passport, too, when coming into Canada.

Problem is, only about 30% of them even have the document.

So it’s with considerable understanding that Canadian tourism officials are spooked by this trend.

As the Star muses, the timing of the passport deadline relative to the swine flu outbreak also makes matters significantly worse.

With the recession biting families in middle-class America, where else are vacationing Yanks likely to turn aside from Canada when Mexico is out of the picture?

And how many prospective dollars to stimulate our economy are we going to miss out on because of these new sanctions? Probably more than we’d like.