Horrible bosses

DOUG  By Guest Blogger Doug Rowat
.

WeWork’s former CEO Adam Neumann is, pun intended, a piece of work.

The pot-smoking, Maybach-driving, personal-trainer-punching CEO almost singlehandedly decimated WeWork’s chances of a successful IPO in 2019. Some of Neumann’s excesses included using US$13 million in company funds to invest in an artificial-wave pool company, financing former professional surfer Laird Hamilton’s “functional mushrooms” health food venture and spending US$60 million on a corporate jet that was often used to take his family to surf spots around the world. See a theme? Yes, Neumann is a surfer dude.

Unfortunately, he apparently wasn’t much of a chief executive. Eventually, the corporate bankers and venture capitalists realized that his erratic behaviour and lack of real management skill was sinking the company and, with the help of SoftBank, they arranged his ouster. Unfortunately, it cost billions including a US$725 million personal payout to Neumann himself.

Sadly, according to the Wall Street Journal, the deal effectively made worthless stocks and stock options for about 90% of the company’s employees. A WeWork senior executive bluntly told The New Yorker: “The employees got screwed.”

WeWork’s disastrous example aside, owning company stock isn’t necessarily a bad thing. In fact, I recommend it to most of my clients because the favourable strike prices (or other pricing discounts) and/or employer matching often make owning company shares a compelling investment. However, concentration risk is always the danger.

While management fiascos (or other economic or operational catastrophes) are uncommon, they do happen. Just ask Enron, Lehman Brothers, Bear Stearns, Sears, Encana, Nortel, Bombardier, BlackBerry, Bear Stearns or General Electric employees.

General Electric, in fact, provides a particularly useful case study. In 2016, General Electric stock represented more than one-third of the company 401(k). Unfortunately, just one year later the company struggled. In 2017, operational issues and particularly weak results from its power generation business resulted in a massive 50% cut to its dividend and ultimately to a spectacular 45% drop in its share price. What made this drop even more stunning was that it occurred in a year when the Dow Jones Industrial Average actually gained 25%. It’s a pretty safe bet that if your company’s share price plummets this dramatically in a non-bear-market year that it’s unlikely to recover quickly, if at all. And, indeed, GE’s share price has never recovered.

I prepared the chart below to illustrate how otherwise balanced and diversified portfolios can be negatively impacted by a 45% decline in a single-stock position. If we assume a year where the portfolio’s balanced component returns 7%—a healthy gain—zero downside protection is provided if this portfolio also includes a plummeting single stock at even just a 20% weighting. The chart also gives you a sense of the hole that many of these over-concentrated GE employees dug for themselves.

Outsized impact: if a single stock drops 45%, an otherwise balanced portfolio still suffers significantly.

Source: Turner Investments; Assumptions: a $1 million portfolio with a 7% gain for the balanced component offset by a 45% loss for the single stock

Remember also that in addition to owning your company’s equity, you also work there. A declining share price’s not only bad for your finances, but it’s probably also bad for your job security. You’re effectively doubling up your risk. Needless to say, as GE’s share price plummeted in 2017, tens of thousands of workers were subsequently laid off.

Further, maintain perspective on your company’s size. You may love the particular department that you work for and believe that your department’s indicative of an overall well-run company, but recognize your department’s relative size. Big picture, your department probably doesn’t amount to much. Unless you’re actually senior enough to sit in board meetings and are privy to detailed, high-level internal information, you don’t, in fact, have any larger perspective or insight into your company’s actual fortunes.

So, the advice?

Keep company equity exposure below 10% of your overall assets. Schwab Stock Plan Services conducted a survey in 2018 which indicated that US employees with access to company stock options and employee stock purchase plans have about 29% of their overall net worth tied up in these assets. Consider if you fall into this category. Then examine my chart above. Your downside risk is excessive. When you get the opportunity to redeem shares or exercise options, rotate these funds into a balanced and diversified portfolio.

Finally, you may also read favourable press about your company, which may further tempt you to increase your stake in it.

But this favourable media attention, while comforting, is also worthless:

Would this face lie?

Source: Google Images
Doug Rowat, FCSI® is Portfolio Manager with Turner Investments and Senior Vice President, Private Client Group, Raymond James Ltd.

 

119 comments ↓

#1 RowatNation aka Prince Polo on 02.06.21 at 9:40 am

GoEnronGo! Oh wait….

Mr. Rowat – due to your affinity for sports cards, is this considered President Biden’s rookie card?

https://www.beckett.com/news/of-course-theres-a-bernie-sanders-trading-card-from-the-presidential-inauguration-ceremony/

#2 Dharma Bum on 02.06.21 at 9:43 am

Ahhhhhhh…..yahhhhhhh….can you just go ahead and come in this Saturday…..ohhhhhh…..and I’m gonna need ya to go ahead and come in on Sunday too, Peter, so….yahhhhhh.

In any given week, I’d say I probably do about 15 minutes of actual work.

https://www.youtube.com/watch?v=2h-O9diSb2U

#3 Dave on 02.06.21 at 9:46 am

Bill Lumbergh: Hello Peter, what’s happening? Listen, are you gonna have those TPS reports for us this afternoon?
Peter Gibbons: No.
Bill Lumbergh: Ah. Well then I suppose we should go ahead and have a little talk.
Peter Gibbons: Not right now Lumbergh, I’m kinda busy. You know what, in fact I’m gonna have to ask you to just go ahead and come back later, I’ve got a meeting with the Bobs in a couple minutes.
Bill Lumbergh: I wasn’t aware of a meeting with them.
Peter Gibbons: Yeah, they called me at home.

#4 crowdedelevatorfartz on 02.06.21 at 9:47 am

Yep.
Single stocks are great for bragging rights when they go to the moon….when they tank…..humble pie.

#5 Bguy1 on 02.06.21 at 9:51 am

Hi Doug,

Thanks for the useful post.

Do you have an opinion on some Berkshire shares as a part of a portfolio, or is your advice for Berkshire the same as above?

Thank you!

#6 TurnerNation on 02.06.21 at 9:53 am

Effect on the economy?:
Yup this ain’t ending for years. 2022-23 minimum. Life in Occupied Kanada. The New Global System rolled out that cold week March 2020, here to stay. Communism lockdown. First to break people’s spirits and social bonds, and culture.

https://www.cbc.ca/news/canada/british-columbia/covid-19-restrictions-bc-february-5-2020-1.5902427
B.C. extending pandemic restrictions indefinitely
The current orders restricting daily life and socialization in B.C. are going to stay in place indefinitely, the province announced Friday.

………..

Paging Alphonse to the blog….he nailed this in November:

“#74 Alphonse Kehaulic on 11.25.20 at 7:40 pm
28 days lockdown. Symbolism. Two 8s = 88 = double infinity. In other words: Endless, in perpetuity, no timeouts for your lockdowns. Put it to you this way: From now on there will never be a time of no lockdowns.
28 Days Later was a movie about a pandemic. Just a coincidence I’m sure.”

……………..

To our forum host’s comment yesterday:

‘”Like whacking trans people and letting COVID rip through synagogues? – Garth”

Related:

https://www.tvanouvelles.ca/2021/02/05/la-cour-superieure-tranche-en-faveur-des-juifs-hassidiques
Superior Court rules in favour of Hasidic Jews
Michael Nguyen | Montreal Journal| Published February 5, 2021
The Hasidic Jewish community has won its case against the state: they will be able to meet at 10 per hall of worship rather than 10 per building, the Quebec Superior Court has just decided, specifying the scope of a government decree that will apply to all religions.

#7 crowdedelevatorfartz on 02.06.21 at 9:53 am

@#107 CL
“It’s called human pride and is the most destructive force on earth. More powerful than all nuclear bombs put together.”

++++

Trump and his Capital Hill storm troopers almost proved you right.

#8 TurnerNation on 02.06.21 at 10:15 am

Weekend update – life in Occupied Kanada.
We have Strict New Rules. Because People Did Not Follow the Rules. We have No Sympathy for them.
Following rules is our life now. Children must be raised to Follow the Rules. No longer will they know why. Just Follow the Rules.

I do not know too much about life in China but tell me how it’s going here in Kanada??

1. All public protest is banned. A local vlogger captures people in a frigid Toronto park and square, a small army of police decend upon them.
https://www.youtube.com/channel/UCFnm7oQPDYhXA-JnXmCszdQ/videos?view=0&flow=grid

– For now we can view subversive media such as Twitter videos of the protests overseas against lockdown. But New Rules for online speech are planned.
How long until we have the Great Firewall of Kanada? Only, the State media the CBC (Corona Broadcasting Corp. – hey their logo was an orange Sun) with daily updates on the New Rules?

2. All leaders at all levels of government are signed on with this New System. Those dissenters, well Ontario booted an MPP in January. He stepped out of line with the ruling regime. Also in January we saw two dozen elected reps booted or sanctioned across the land. Holiday travel we were told. A Purge in Party ranks.

3. At the local levels self-appointed Block Captains and Commandants enforce the rules. Social media reporting. Dialing 311. Online snitch/rat forms. Your neighbour might be working for The Party, watch out!
Humiliation especially online is a key component of daily life in Kanada. Lining up outside stores in the cold. 6-6-6 feet apart as per Party edict.
You see, at this distance private conversations and whispering is not possible. You must talk loudly though your muzzle, 6 feet away – loudly enough for the Smart phones and Watchers to hear you.
What was that Comrade, you have a problem with the rules or the Party? No? Ok I thought so. Carry on Citizen.

4. Recap of history, it’s back – our new Class Enemies are People who dare travel! Sun destinations are specifically banned. They do not want us healthy at all. Only stay here, in bleak cold Kanada winter.

https://en.wikipedia.org/wiki/Struggle_session

Struggle sessions were a form of public humiliation and torture used by the Chinese Communist Party (CCP) at various times in the Mao era, particularly during the years immediately before and after the establishment of the People’s Republic of China (PRC) and during the Cultural Revolution. The aim of struggle sessions was to shape public opinion, as well as to humiliate, persecute, or execute political rivals and those deemed class enemies.[1]

– Never forget this is WW3, we are the enemy. We were even issued combat instruction and gear: masks, gloves, shields. Spray guns of sanitiser too. Spray your enemy, fellow citizens.

https://en.wikipedia.org/wiki/Distancing

Distancing is the appropriate selection of distance between oneself and a combatant throughout an encounter. Distancing is significant in an altercation as it determines both attack and defence options for all parties involved.[1] Timing and tactics are also important elements of combat which are often used in conjunction with distancing by experienced martial artists.[2]

Distancing is an important concept in all combative sports and arts. It applies to both un-armed and armed combat. In a martial sense, armed combat takes the form of traditional weapons practice. Given the enormous variety of martial arts weapons in addition to the various ranges of un-armed combat, it is possible to divide distancing up into many sub-distances or ranges. Indeed, many martial arts have their own uniques expressions for various distances or ranges derived from those they specialise in.

#9 Bezengy on 02.06.21 at 10:31 am

Does anyone have a link to Canadian company pension plans, and how solvent they are? It seems to me their status is kept somewhat secretive. Perhaps I’m wrong but I can’t help but think some are facing major issues due to the pandemic.

#10 Tarot Card on 02.06.21 at 10:31 am

Thanks for the blog Garth
Thanks for the post Doug

Does anyone ask the question why the federal government did not stop Nortel and Sears for robbing the pensioners while the big Boys made millions? Because the federal government does the same thing to the federal public Service pensions, remember The 21st prime minister? Miraculously balanced the federal budget by robbing the federal PS pension of 30 billion.
Just paper right?
Yep the government cannot legislate and save the poor pensioners otherwise they would be hypercritical of their own policies.
Stock market
Here was a interesting sentence in a recent newsletter,
Everyone is holding their breath for the 10 percent market pull back ….so we get be done with it and move forward.

Anyway good advice Doug, now if you could only help my stock trading do I sell or do I buy

Have a great weekend

#11 KNOW IT ALL on 02.06.21 at 10:39 am

YUP would have never have guessed it …..

All those Executives in suits ……

I was going to equate them to the “Hoodies” but at least the kids are open and honest about their next bets.

#12 Andrewski on 02.06.21 at 10:52 am

Good post Doug. A missed opportunity in getting free money from an employer, is not contributing the max possible in to a work retirement plan, where the employer matches the employee dollar for dollar to a pre-determined amount.

#13 SimplyPut7 on 02.06.21 at 10:56 am

Single stock investments are risky, but no one stopped the kids from owning Tesla or Netflix or Peloton.

The people who control Robinhood and the Wall Street “experts” said, you can’t own these stocks ($GME, $AMC etc.) because the fundamentals were not there to support that stock price.

Really? How do these stocks differ to other overvalued stocks in other markets? The real fear the portfolio managers and analysts had was people may catch on that if you can’t convince people to buy overvalued securities their values could crumble. A Reddit group presented arguments (not just memes) to readers on the platform that certain stocks were worth purchasing and it scared Wall Street who lost the power to control investors for about 4 days.

However, Wall Street does this all the time on CNBC, Bloomberg and in financial newspapers around the world. One analyst last week said Tesla was going to $1200, why? did they find millions of Tesla cars sold and delivered to show investors they can have a market cap greater than all the top car manufacturers combined?

For those who could afford to take the loss in the speculative stocks, it was a great lesson. Those with any accounts in brokerages/fintech companies that restricted their trades may want to take a closer look at these companies to see if free trades are worth not knowing whether you can get your money in/out of your account when you really need it.

#14 Dominoes Lining Up on 02.06.21 at 10:58 am

Doug, I agree about single stocks. But I also am getting more concerned about indexes and the bigger picture. The typical market analyses right now seem way too rosy.

For example, the jobs report looks terrible for January.

https://www.theglobeandmail.com/business/economy/article-canadas-economy-shed-213000-jobs-in-january-unemployment-rate-spikes/

And now, something I have wondered about for a while, we may be seeing the start of the crumbling of other public and private infrastructure.

The first of perhaps many institutions about to head into bankruptcy?

https://thepienews.com/news/canada-laurentian-files-for-bankruptcy-after-intl-enrolments-falter/

A Canadian university going bankrupt! Wow, not expected.

But in a way, this runs parallel to other fragilities in our system.

Universities have become quietly dependent on high-tuition foreign students for years.

Just like cities like Toronto are so dependent on land transfer taxes in the real estate bubble to fund basic service costs.

Or like how the Alberta heritage fund was used not as a reserve for emergencies but to subsidize regular government costs over many years. Now the province has no backup plan or money to finance it.

A shock like Covid or a real estate shift suddenly exposes these very high risks.

If the last year tells us anything, it is that anything is possible. Even if governments are willing to print endless money, what else is lurking out there to disrupt things?

Could Canadian institutions and especially personal finances be about to have their ‘GameStop’ moments?

I expect to see some more colleges and universities reporting troubles soon. Bell Media has taken out many on-air personalities just this week. I can see the auto industry in trouble this spring with such reduced demand. What comes next, just more money-printing or serious dollar devaluation, maybe both?

#15 Cheekmonster on 02.06.21 at 11:26 am

You’ve made some excellent points and for most people this is great advice. However, you could also create the same chart to fit any narrative. For instance how about creating it for Tesla, Amazon, Netflix, Shopify or any of the other top tech companies over the last 5-10 years.

#16 Ponzius Pilatus on 02.06.21 at 11:32 am

#7 crowdedelevatorfartz on 02.06.21 at 9:53 am
@#107 CL
“It’s called human pride and is the most destructive force on earth. More powerful than all nuclear bombs put together.”

++++

Trump and his Capital Hill storm troopers almost proved you right.
———————
Watching too many GI Joe movies?
No such thing as a Capital Hill.
Washington is pretty flat.

#17 crowdedelevatorfartz on 02.06.21 at 11:37 am

@#14 Dominos
“The first of perhaps many institutions about to head into bankruptcy?”

++++

Ahhh yesss.
Those hallowed halls of learning.

One wonders what will break the bank first.
The lack of foreign students paying double tuition fees or the huge deficits in the University employee pension plans………

https://www.benefitscanada.com/news/universities%E2%80%99-pension-deficits-may-lead-to-service-cuts-558

An article from a decade ago…. and the pension deficits are much, much worse.

Seems the “M” in STEM skills was missing at school……

Will all 3 levels of govt employee pension plans be next?
Or will unpensioned private sector taxpayers be asked, once again, to buck up and pay?

#18 WTF on 02.06.21 at 11:40 am

Agreed, sold 5% last year, took the tax hit to get back to 5% in former co holdings. Diversity is yuuuge.

Dharma Bums link is hilarious and sadly sooo true. G.E. and the diminutive CEO Jack Welch thought they had the answer with Performance Management.
Massive pay increases for Executive Management.
Next drill down to the unwashed
“reward the top performers (10%,)
fire the bottom (10%,)
the rest get the scraps.
After a two years the dead wood has been purged, but the madness continues. Then Watch the resentment build and engagement plummet. Brilliant.

#19 WTF on 02.06.21 at 11:45 am

Clarification, 5% of TOTAL holdings

#20 crowdedelevatorfartz on 02.06.21 at 11:46 am

@#16 Pedantic Political Plebe
“No such thing as a Capital Hill.
Washington is pretty flat.”
+++++

Apologies Pedantic Plebe.
I mistakenly referred to Capital Hill in Seattle, Washington ( where it is very hilly).
Where antifa anarchy reigned supreme last summer….. silly moi.
I guess I should have stated (for your anal bean counting.)
The US Capital in Washington D.C.
But I’m sure even a pedant like you knew that.
Chalk one up for pedantic plebes ….

#21 Don Guillermo on 02.06.21 at 11:51 am

“Remember also that in addition to owning your company’s equity, you also work there. A declining share price’s not only bad for your finances, but it’s probably also bad for your job security. You’re effectively doubling up your risk. Needless to say, as GE’s share price plummeted in 2017, tens of thousands of workers were subsequently laid off.”

Doug – I saw this play out firsthand with Enron. I worked 3 years on two of their combined cycle power projects in Europe. One in Turkey and one in Poland. It was a workforce of mostly Brits, Americans and locals with a few of of us Canadians sprinkled in. The majority were Enron staff employees and a small group of us were consultants. Enron staff were some of the highest paid in the industry and their accumulation of shares was prolific. They were getting very wealthy on paper. After the collapse I recall a Brit friend of mine in his late thirties telling me his finances went from being a multi millionaire to barely being able to afford a good night out in Middlesbrough.
**************************************
#126 LP on 02.06.21 at 10:29 am
#60
Great; you’ve dropped some famous names in art. Feel like a big cheese now, do you? Art collecting isn’t about famous, it’s about what makes your heart soar when you look at it.
Over the years we acquired some wonderful pieces and since his death I’ve added one more gorgeous piece. Taken all together I don’t suppose their value exceeds $20k but every time I sit down with my tea I smile and thank heaven they’re around me.
The other day it suddenly occurred to me that my next move if I’m still living will be a LTC place where there won’t be room for my beloved pictures. I wept for a little while.
F73ON
**************************************
LP – Nice way to put it in perspective. Thanks!

#22 Sail Away on 02.06.21 at 11:53 am

The Tesla gigapress: another gigantic leap forward.

https://www.google.com/amp/s/www.teslarati.com/tesla-giga-press-elon-musk-master-plan/amp/

Who else is doing this? Oh- nobody… again.

#23 Sail Away on 02.06.21 at 12:21 pm

#18 WTF on 02.06.21 at 11:40 am

…CEO Jack Welch thought they had the answer with Performance Management.

Massive pay increases for Executive Management.
Next drill down to the unwashed
“reward the top performers (10%,)
fire the bottom (10%,)
the rest get the scraps.

After a two years the dead wood has been purged, but the madness continues. Then Watch the resentment build and engagement plummet.

—————

Nope. Why are you trying a character assassination?

Jack Welch’s strategy and execution was brilliant. Books have been written about it and it is widely emulated by successful companies. GEs troubles were well after Welch’s retirement in 2001.

https://www.google.com/amp/s/www.nytimes.com/2020/03/02/business/jack-welch-died.amp.html

#24 Iron Clad Rules on 02.06.21 at 12:21 pm

I have two.

First, always hire a professional in areas where I have a need for services but do not have the expertise. In my financial affairs, this meant that I have hired the services of an advisor. I learnt this the hard way but it has paid off as I am now retired and living very comfortably.

Second, never, ever, EVER, E.V.E.R, buy stock or take options in a company that hires me. Even when I was contracting, I did not do this. I know all companies will say they are well managed, and they have the annual reports and spin doctors to get their message out. Despite their best efforts, I have generally found that my worm’s eye view told me they lie. Waste, nepotism, harassment, and bad governance are everywhere.

Of course, the implicit fault in applying rule 2 is that I can’t possibly work for all companies and so, back to rule 1 – hire a professional.

I remember one dot.com company I worked for that offered stock options and stock purchases. Managers got the options, employees got access to the purchase plan. The hyped-up employees spent insane amounts of money buying stock and in more than a few cases, took out loans to do so. More than one lost a house in the subsequent crash.

#25 Dolce Vita on 02.06.21 at 12:26 pm

Well, thank you Doug.

My 90% EFTs + 10% “excitement” single stock strategy (latter to alleviate the boredom of “set it and forget” ever so reliable ETFs) has now officially achieved Royal Assent from one of Garth’s hotshots (you) along with a good dose of BEWARE.

Could not agree more.

Large $$$ single stock strategies a rich person’s game with deep pockets…I’m just not one of those people.

Point taken Doug, still, I would like to point out that my Human Nature Pandemic single stock picks so far are up 2 to 3 digit %’s (but as you point out with EVIDENCE, that can reverse real fast). Best to keep the faith with my small but burgeoning ETF investments, 2 digit returns in the past year.

Again, good to read you are agreeing small players like me can have some fun, alleviate ETF boredom without getting burned in the process.

10% max a good number. Thanks for letting me feel a little bit better about having some single stock “excitement” and fun…well, so for anyways.

#26 Doug Rowat on 02.06.21 at 12:34 pm

#14 Dominoes Lining Up on 02.06.21 at 10:58 am

If the last year tells us anything, it is that anything is possible. Even if governments are willing to print endless money, what else is lurking out there to disrupt things?

—-

What history tells us is that recessions are short lived. What history also tells us is that markets always trade higher 3 years out from a recession and 5 years out from a recession.

You won’t make any money being paralyzed by what may be “lurking”.

—Doug

#27 Balmuto on 02.06.21 at 12:37 pm

“Keep company equity exposure below 10% of your overall assets. Schwab Stock Plan Services conducted a survey in 2018 which indicated that US employees with access to company stock options and employee stock purchase plans have about 29% of their overall net worth tied up in these assets.” – Doug

So should it be 10% of overall assets, or overall net worth? And does that include real estate, or only liquid assets? Thanks.

#28 Faron on 02.06.21 at 12:41 pm

#20 crowdedelevatorfartz on 02.06.21 at 11:46 am

@#16 Pedantic Political Plebe

Oh crowdie, crowdie, crowdie. My kingdom for an “o”. No, not that kind of “O”.

#29 Dogman01 on 02.06.21 at 12:43 pm

Speaking of “Horrible bosses” driving their organization into destruction:

“Trudeau inherited a naive affection for China’s dictatorship that devolved into craven passivity in the face of blackmail. What else can explain his willingness to work with Tianjin-based CanSino Biologics on a COVID vaccine, given our highly contentious relationship with China and while the two Michaels languish in jail? The deal collapsed when Chinese authorities blocked exports of vaccine to Canada.”

“delay in getting as many people vaccinated as quickly as possible will cost lives.”

https://financialpost.com/diane-francis/diane-francis-was-the-botched-vaccine-roll-out-a-result-of-trudeau-placing-too-much-faith-in-china

https://financialpost.com/opinion/joe-oliver-the-slow-arrival-of-vaccines-is-costing-lives

Canada has spent Billions upon billions for this crisis.

9 Months ago we learned that Old Age homes were the core part of the problem, and now again Old Age homes are the core part of the problem. It appears to me Canada did nothing substantive over the 8 months and used little of the Billions spent to ameliorate this Old Age Home situation.

9 Months ago we learned that ICU bed were the stress point of our medical system , and now again ICU beds are the stress point of our Health Care system. It appears to me Canada did nothing substantive over the 8 months and used little of the Billions spent to ameliorate this ICU situation.

We learned that Canada does not have the capability to manufacture Vaccines, other counties are conducting a vaccine rollout with more efficacy than Canada. Even the USA with their non centralized Health Care system and their legacy of Trump appears to be getting vaccines into bodies much better than Canada. (Elderly Canadians in Arizona or Florida will get the vac before their fellow citizens in their own country)

We learned that Canada did not have the manufacturing capability to provide PPE.

We all knew that controlling International Travellers is important factor in limiting new variants and the spread, yet Canada was slack on this for over a full year. Seems a bit late.

For some reason we were told to initially not wear a mask, but then told to wear masks and now being told to wear two masks.

Canada has spent Billions upon billions for this crisis, yet we have no more Hospital capacity, our Old Age Homes still suck, we cannot produce vaccines. Essentially we got nothing for the money.

Why do Canadians accept this such mediocrity?

“When a bat in China ends up sickening your Granma in Kelowna, it’s time to reconsider a few things.” – Garth Turner

#30 Dolce Vita on 02.06.21 at 12:44 pm

As everybody knows the Jan 2021 Labour Force Survey job numbers were not good.

The MSM did a good job covering all the angles but the one that gave me pause was this:

15 to 24 yrs olds, ‘000’s:
Employment -107.5
Full Time +6.1
Part Time -113.6
Unemployment Rate 19.7% (up from Dec’s 17.8%)

You know, it’s tough enough at that age trying to make a start in life, let alone in the middle of a Pandemic.

Why those numbers were the saddest of all to me. 15 to 24 yrs olds accounted for 1/2 the total job losses at 212.8K.

——————————

The other thing, and I am not against it all for it, was Garth’s least favorite Business website saying markets (presumably TSE) ignored the bad Jan job numbers and are ploughing ahead (well this AM from the EU, they’ve changed that since then).

In the StatCan report you also can glean this:

Jan 2020→Jan 2021, ‘000’s:

Employment -834.1
Full-time employment -386.9
Part-time employment -447.2
Unemployed +762.2 (9.4% in Jan, +0.6% from Dec)

Hope the Markets are seeing something here that I am not.

https://www150.statcan.gc.ca/n1/daily-quotidien/210205/dq210205a-eng.htm?HPA=1

#31 willworkforpickles on 02.06.21 at 12:55 pm

Buying heavily shorted stocks can make you money if the product/s sold by a listed public company show consistent good earnings each quarter. I search for penny stocks with a record of those 3 key factors in play. Eg: buy up $30000.00 of a penny stock at 0.25 cents per share (120000 shares) and sell for 0.60 cents (3 months hence) (next quarterly release) $72000.00 and bank $42000.00 … and do this 4 times (4 qtr’s) per year and most investors only need that one reasonably safe investment vehicle at a time to get ahead.
You only ever have $30000.00 approx. (as an example) in play at any given time on a far safer than most stocks stock in play.
It’s done by targeting penny stocks (under a buck) with consistent good to high earnings that are consistently heavily shorted after each earnings release.
I will never be convinced such listed public companies aren’t covertly working with designated short sellers through a company insider/s using close contacts buying and selling their own stock. Too consistent…and they are out there operating undetected. After each qtr NR (press release) the shorts go to work driving the share price (pp’s) down…any good news in the interim between quarterlies, shorter’s working covertly with any mole from the inside will get the tip-off in advance of a coming news release and cover their short positions. After the news release and likely small jump in price (and sell op) its game on again. Short sellers working from the outside don’t have the same luxury but jump on the band wagon following the lead shorts intensifying the game through each quarter even more.
The patient swing trader (retail buyer) (you & me) buys at the lows and sells at the highs. Studying the charts over any long term stretch with a company like this is like a road map showing you approximately your next buy low and sell high points. Never think this strategy can be used with just any penny stock…It Can’t Period.
Companies like these are few and far between but they are out there. $160000.00 bank per year average and a little patience with just one of these companies in play for you isn’t that bad.

…pennies- good earnings- short sellers- consistency- patience- buy low- sell at the highs as opposed to sell high (there’s a difference) = success.
Leave high risk in rear view for good.

#32 MF on 02.06.21 at 1:02 pm

17 crowdedelevatorfartz on 02.06.21 at 11

-University and Colleges have been only hiring staff on a temporary, contract basis with no benefits for years. This was the case when I was in university 20 years ago, and it is more so now.

Your anger is misplaced.

I am confused though. Do you want regular people to lose their pensions? Do you want regular people to have no job security? What are you ranting about?

And I also assume you were out on Wall Street marching against the tax payer bailout of failing private institutions in 2008, where the executives who didn’t perform, got millions of taxpayer money and the workers got laid off.

You were marching in the street protesting right?

Sure you were.

MF

#33 Peter McLean on 02.06.21 at 1:04 pm

Wait. None of that is helping me decide if I should keep putting money in GameStop and AMC stocks. They’re down now, but they’re definitely going to go back up. I might take out some more money from my Visa card to buy more GameStop stock. A guy at work told me that it will go back up and I can use the profits from the gains to pay off my credit card money advance before the 21% interest kicks in.

#34 SoggyShorts on 02.06.21 at 1:09 pm

#15 Cheekmonster on 02.06.21 at 11:26 am
You’ve made some excellent points and for most people this is great advice. However, you could also create the same chart to fit any narrative. For instance how about creating it for Tesla, Amazon, Netflix, Shopify or any of the other top tech companies over the last 5-10 years.

************************
99.99x% of people don’t work for the top ~10 companies at any given time, and even those who do are at risk as seen by Enron and the other examples listed.
That’s the whole point: risk.

The advice from Doug is solid.

#35 mike from mtl on 02.06.21 at 1:18 pm

My employer has a common stock purchase programme, but it has so many rules/limitations all with a tiny discount – hard pass! Meanwhile I can buy/sell as many shares as I care for for a few bucks during trading hours, not that I am inclined to. Understandably for C-site this might be the norm however, being just a peon all perfectly legal per SEC/CRA.

#36 Axehead on 02.06.21 at 1:33 pm

Another example, this one Canadian but not propped up like Bombardier – Nova Chemicals.

#37 Sail Away on 02.06.21 at 1:34 pm

Hmmm…. Where have we heard this refrain? Ah:

“Send your grain across the seas, and in time, profits will flow back to you. But divide your investments among many places, for you do not know what risks might lie ahead.” Ecclesiastes 11:1-2

“It is the part of a wise man to keep himself today for tomorrow, and not venture all his eggs in one basket.” Don Quixote ca. 1605

#38 Smaug on 02.06.21 at 1:42 pm

Yep. I know people who worked at Nortel. When the company went for a crap, they lost their jobs, their pensions, and their savings, which had been invested in Nortel stock via the company’s “generous” employee stock purchase plan.

Investing your savings back into the company you work for means zero diversification. You’re already depending on that company’s continued success for your income, and possibly your pension. Put your savings – all of your savings – somewhere else.

#39 Ponzius Pilatus on 02.06.21 at 1:55 pm

I think there’s ample evidence, that giving company shares to all employees does not increase or even maintain productivity, or ensure loyalty.
The maintenance engineer does not sweep and dust faster because his promised some stock at the end of the year.
Financial incentives must be timely and tied to job performance goals related to the individual employee.
Case in point:
WestJet once was a “company where employees are also owners”, to mostly unionized now.
Furthermore, excessive bonuses to top excecutive, quite often lead to lower productivity and dissatisfaction overall.

#40 Dolce Vita on 02.06.21 at 2:12 pm

#28 Dogman01

“Why do Canadians accept this such mediocrity?”

AGREED.

————————

I was going to bide my tongue until tomorrow, but WTF I am just as angry and time for Canada to smell the roses and DO SOMETHING about it.

First, VAX Canadense or “Jab Flatline”:

https://i.imgur.com/SYqmQH7.png

3M vax’s behind schedule for Trudeaus “All vax’d by end of Sept”. Capt. Obv: Not good.

Why do I care? I live in the EU? Simple: All my cash and investments are in Canada, the few of them that I have. Italia where I live is indeed “Il Bel Paese” few can hold a candle to her in so many ways…problem: Gov Italia. Thank you, my $ stay in Canada, do not trust Gov Italia.

So with that, I want the Beavers to be healthy, productive and generate wealth, some of it for me too.

Pay attention Turner Nation on how to rant with evidence, other than the hapless Americans…

CONSPIRATIO, the gang of 4 Muchachos and what I would do.

The 4 Muchachos:

USA Pfizer, Moderna plants
UK AstraZeneca plant, bits for that vax from USA and EU
EU Pfizer, Moderna plants
India, AstraZeneca, largest mfr. in the World (SII) pledges their VAX to India.

So where are all those doses going to?

Them. And not Canada.

Simple Math example, yesterday Arcuri Italia’s VAX Czar said these many doses (Pfizer, Moderna, AstraZeneca), compare to Canada:

Feb/Mar TOTAL doses:
Italia 4.2M/8.2M
Canada 1M/???

Per capita, Canada should be getting (= 38/60 x doses) Feb/Mar:

2.7M/5.2M

Snowball already melted for Feb and same chance for Mar despite what Trudeau says, been wrong 2 months in a row, strike 3 coming.

USA, India and EU HOGGING doses, including UK complicit with the EU (UK AstraZeneca for EU’s Pfizer). Complicit? Day before the EU vax export ban threat the UK all bluster, indignity and bombast. Day after? CRICKETS.

And the UK is not your guy pal Canada. Woke up to this 3 days in a row from BBC (calling Canada thieves) and The Guardian chiming in as well:

https://www.bbc.com/news/world-us-canada-55932997
https://www.theguardian.com/world/live/2021/feb/04/coronavirus-live-news-canada-has-secured-nearly-10-vaccine-doses-per-person-us-deaths-pass-450000?page=with:block-601b3de98f08c3a6ff7fb194#block-601b3de98f08c3a6ff7fb194

Premier Ford asks the US for Pfizer…CRICKETS. Nada.

Insult to accident:

Humanitarians for the World Poor Award Winners: Trudeau/Freeland (no apology from her) think AstraZeneca doses coming March? June? worst case.

…today AstraZeneca going into the arms of Italians and Spaniards. Still think the UK is your gal pal Canada?

Oh, almost forgot. Day after EU Vax Export Ban threat…Pfizer found an extra FIFTY MILLION DOSES for the EU (more like Rogue Union) in March. Lazarus in the Lab.

So Canada, out of whose hide do you think those 50M doses will be coming from?????

USA? ✕
Rogue Union? ✕
Duplicitous UK? ✕
Going it alone India*? ✕
Canada and others? ✓

*10.8M total infectious, 10.7M of them in 2 cities. Conclusion: trust them.

—————————

What would I do?

Clearly from Min. Anand’s they are doing all they can every day YET all Canada is getting in the end is a GOOSE EGG. One hell of a Contract you must of inked with Pfizer and Moderna there Minister.

Fear not and for once a GOOD THING, top 2 Gov Canada dignitaries past careers:

1. Drama.
2. Journalism.

Put that to good use I say. #1 can shed some tears and cross his eyebrows in videos. #2 can write the scripts.

SHAME, LIE THRU YOUR TEETH, MAKE WAVES, OUTLANDISH CLAIMS INTERNATIONALLY ABOUT THE 4 MUCHACHOS and how they are hogging the World’s VAX for themselves.

“Better me than thee [expandable lives in other Nations except not ours]” the meme.

Do it EVERY DAY. Sprout a few Canada. Do it LOUDLY for the World to hear just like the UK thumbed its nose at Canada.

Time for QUID PRO QUO.

Stop taking it on the chin and being polite Canada. You just got shamed internationally for being the World’s Poor Covax thieves.

Shake the tree hard enough and something useful might fall your way (hopefully not a coconut tree, apples would be good).

The EU did it against the UK, Canada should do as well vs. the 4 Muchachos until it gets its fair share of VAX per Contract, more is better.

Do it fast and do it now. Damn the torpedoes…

#41 Ponzius Pilatus on 02.06.21 at 2:12 pm

#23 Sailo
Does not shock me that you are a fan of Jack the Terminator.
Had a boss who actually had worked directly for Jack in a top capacity in HongKong.
He lasted about 2 months.
Far too autocratic for the modern workforce.

#42 Index this! on 02.06.21 at 2:31 pm

OK, I’ll just buy index funds … because nothing could possibly go wrong there!

“As of August 1, Nortel represented 33.47 per cent of the index; the other 299 companies accounted for the rest.”

At least my GE shares only made up 3% of my portfolio!

#43 Billion Dollar Babies on 02.06.21 at 2:36 pm

Warren Buffett (Trades, Portfolio) has famously said he is against diversification. “Diversification is a protection against ignorance,” Buffett once said. “[It] makes very little sense for those who know what they’re doing.”
-Sep 9, 2020

He (Mark Cuban) says portfolio diversification “is for idiots.” You can’t diversify enough “to know what you’re doing,” he adds. You’ve got to do your homework and play your best bets, according to Cuban.
-Aug 15, 2011

Both men are hugely diversified in their investments and business interests. Ironic, isn’t it? – Garth

#44 SW on 02.06.21 at 2:50 pm

#12 Andrewski on 02.06.21 at 10:52 am
“…A missed opportunity in getting free money from an employer, is not contributing the max possible in to a work retirement plan, where the employer matches…”

Yes, if the plan allows you some freedom to invest your funds. I worked at a place that matched contributions but you could only put the pension money in some really dire mutual funds that gave little return.
I chose to take my money elsewhere (I had to contribute double) and although my total wasn’t so good for the first few years, eventually it blew by that of all my colleagues.

#45 BillyBob on 02.06.21 at 2:51 pm

British Columbia with a “U” not O

Washington (or any State) Capitol with an “O” not A

Please people, THINK OF THE CHILDREN!

That is all.

#46 Doug Rowat on 02.06.21 at 2:55 pm

#15 Cheekmonster on 02.06.21 at 11:26 am

You’ve made some excellent points and for most people this is great advice. However, you could also create the same chart to fit any narrative. For instance how about creating it for Tesla, Amazon, Netflix, Shopify or any of the other top tech companies over the last 5-10 years.

—-

What Soggy said.

—Doug

#47 Dolce Vita on 02.06.21 at 2:59 pm

#23 Sail Away

Not so fast on Welch though overall I agree with you.

I worked for them in those heady days. 2 stories for you:

First, Jack criteria for investment, new business start-ups was clear on a graph he showed of Revenue vs. ROI, said if you aren’t in the upper right quadrant don’t want to hear from you. Most in the Worldwide GE broadcast to all its businesses, simulcast, choked except for me. If I recall, the minimum IRR of a deal back then was about 10% to 14%, somewhere in there.

Second, the Pres. of GE Canada could not sign an investment for more than $15M, had to go to GE Corp above that.

Third, GE was an org divided under Welch evenly, 2 fiefdom lords. GE Canada was under 1 of them, obv.

2 deals I passed up. 1 was to buy a company about $100M back then, the other a play for a new business involving buying firms etc. just shy of $1 Billion.

$100M deal, met all the chart criteria, IRR but > $15M so had to go to the USA:
Passed my business plan up to our Fiefdom Lord in the USA, approved. Smug American counterpart SBU rewrote my plan and it was turned down by their Fiefdom Lord, other Lord not ours. They came back tail between their legs, egg on their dumb ass American faces and submitted mine to other Lord. Approved.

Meanwhile target company bought for $100/share by other firm, I could of got them (their Board agreed) for $20/share.

So bureaucracy, counterpart American stupidity and $15M signing authority cost GE that deal.

Almost $1B deal:
They loved it, met all the “intrapreneurship” buzz word of the times at GE criteria, IRR, etc. Turned it down. Wasn’t big enough. I will not tell you how well competitors did at my business plan, a lot more than $1B to say the least.

So Jack was great. Problem, wanted to keep his hands on the purse strings at all times and that consumes time. Cost GE Canada some great deals.

BTW, when Jack was in GE Plastics, he went ahead and used that SBUs money to build himself a Plastics Plant for $800M. Corporate GE did not know.

So you know, Jack liked to break the rules, he just didn’t want you to break his.

I left GE Canada about 1 year later.

#48 yvr_lurker on 02.06.21 at 3:04 pm

#17 crowdedelevatorfartz
One wonders what will break the bank first.
The lack of foreign students paying double tuition fees or the huge deficits in the University employee pension plans………Will all 3 levels of govt employee pension plans be next?
Or will unpensioned private sector taxpayers be asked, once again, to buck up and pay?

——————–

Your cut and paste article is 10 years out of date I’m afraid. How about

https://www.universitypension.ca/

In BC, it is largely a DC scheme and so not nearly as generous as in Ontario. Perfectly solvent here. Revenue at the leading universities in BC is not down as much as expected due to Covid as many more local kids were accepted, who otherwise would be on a waiting list. From what I see they are good students. A financial loss, but not nearly as much as first forecasted, and all should be fine in a few years.

Try to keep an open mind and put a bandage on the achilles heel of yours.

#49 Doug Rowat on 02.06.21 at 3:10 pm

#26 Balmuto on 02.06.21 at 12:37 pm

“Keep company equity exposure below 10% of your overall assets. Schwab Stock Plan Services conducted a survey in 2018 which indicated that US employees with access to company stock options and employee stock purchase plans have about 29% of their overall net worth tied up in these assets.” – Doug

So should it be 10% of overall assets, or overall net worth? And does that include real estate, or only liquid assets? Thanks.

—-

Let’s just say that most investors don’t understand the leverage that a single-stock position may exert on their investment portfolio OR their overall net worth.

They should be building spreadsheets similar to the one I presented.

—Doug

#50 Timmy on 02.06.21 at 3:11 pm

What about the reverse? A stock that appreciates 45%? You fail to mention that. I bought Pinduoduo last year and it is up 350%!

#51 Dolce Vita on 02.06.21 at 3:15 pm

#42 Billion Dollar Babies

“I think now that they’ve recognized their power and now that they’ve learned some lessons, we’re going to get more of it, not less of it.”

-Mark Cuban, to CNBC, Feb. 2, 2021

Other key points by Cuban:

Investors who are active on Reddit have recognized their potential influence in the stock market during the GameStop frenzy, Mark Cuban told CNBC on Tuesday.

“It’s not going to be a set of circumstances where all these people lost money, they’re going to go home with their tail between their legs and they’re never going to do this again,” Cuban said.

He also contended younger investors take a different approach to traditional valuation metrics for stocks.

——————————

Fanboi fanning the flames.

#52 Flop... on 02.06.21 at 3:26 pm

Suns out, little bit stiff after my first week back at work in 2 and a half months.

Might go for a little trundle over to the cemetery to see Garth’s great grandpa’s final place of rest…

M46BC

#53 Freedom First on 02.06.21 at 3:27 pm

Doug, really good blog today!
The comment section is really really good today too!

I love this Blog. I thank Garth for him and his co-writers continued superb great advice, and also for allowing the diversity of the comments.

Truth always shines through in the comment section too, in spite of the dark side trying to ridicule the truth tellers.

Freedom First

#54 Emma Zaun - GreaterFool Unpaid Intern #007 on 02.06.21 at 3:42 pm

I hope Garth sees the revealing irony of today’s blog title.

Have you completed our T2200 forms yet?

#55 Penny Henny on 02.06.21 at 3:44 pm

Meanwhile in the wonderful city of Toronto.
The city has announced that they will be leasing out yet another hotel for the homeless. This one is a Novotel in the posh Esplanade neighbourhood.
The expected cost per client (yes the city refers to their homeless guests as clients) is a mere $220 per night or $80,300 per year.
Crazy you say? Well this does include meals, snacks, laundry and no doubt wifi and premium cable (do they get HBO?).
Toronto striving to be the best sanctuary city that they can be.
I’m so sorry I moved.

https://torontosun.com/news/local-news/levy-upscale-novotel-to-become-latest-covid-homeless-hotel

#56 Handsome Ned on 02.06.21 at 3:47 pm

To Dolce Vita: Hopefully you’re scouting out lamp posts in Italia. Here in Canada, like the vaccine, they are woefully short for what will be needed. What do you think of Draghi taking charge?

#57 Love_The_Cottage on 02.06.21 at 3:51 pm

#41 Index this! on 02.06.21 at 2:31 pm
“As of August 1, Nortel represented 33.47 per cent of the index; the other 299 companies accounted for the rest.”

At least my GE shares only made up 3% of my portfolio!
_______________
You realize you should own more than 1 index, right? Canada, US, International, Bonds, maybe some REIT’s, etc.

#58 R on 02.06.21 at 4:12 pm

#13 SimplyPut7 on 02.06.21 at 10:56 am
If you believe Tesla is an overvalued car company, you do not understand Tesla. I believe Tesla’s market cap ,in 2030, will be greater than Amazon, Google and Apple combined. Their addressable market is just that large. “Be on the right side of change “( Cathie Woods )

#59 Doug Rowat on 02.06.21 at 4:15 pm

#49 Timmy on 02.06.21 at 3:11 pm

What about the reverse? A stock that appreciates 45%? You fail to mention that. I bought Pinduoduo last year and it is up 350%!

—-

What a revelation. That didn’t occur to me.

You can also get to work faster if you go over the speed limit and it’s a more comfortable ride if you don’t wear a seat belt.

It’s a blog post on risk management.

—Doug

#60 crowdedelevatorfartz on 02.06.21 at 4:20 pm

@#31 MF
“You were marching in the street protesting right?”

+++

Nah.
I was plowing more money into my portfolio.
:)

#61 crowdedelevatorfartz on 02.06.21 at 4:24 pm

@#44 BillyBob
“Washington (or any State) Capitol with an “O” not A.
+++

Aaaaa.

I was wondering what Faronista was prattling on about.

I cant stand spellcheck.
It keeps rewording “fartz” to faron.
On second thought.
Perhaps I should reengage it.

#62 Lead Paint on 02.06.21 at 4:51 pm

#39 Dolce Vita on 02.06.21 at 2:12 pm

I share your rage but it’s too late. We needed leadership and strategy in March 2020. I can only hope that Canadians finally see that electing pretty hair and optimism results in death, imprisonment and despair.

Woke platitudes are not an alternative to competence.

#63 Ponzius Pilatus on 02.06.21 at 6:05 pm

Dolce,
Please focus on soving the problems in your adopted new country. And, by God, there are plenty.
And we, who live in The Best Place on Earth, will deal with our First World problems.
Capisci.

#64 Ponzius Pilatus on 02.06.21 at 6:15 pm

#42

Both men are hugely diversified in their investments and business interests. Ironic, isn’t it? – Garth
——————
That’s why I never follow the market makers.
They did not get where they are by following.
Carve your own way.

#65 Ustabe on 02.06.21 at 6:33 pm

Speaking of bosses, horrible or not, this video on early days Tesla is quite interesting.
https://www.youtube.com/watch?v=eblPwXFb7TE&feature=emb_logo

I’d work for those guys. Notice the art on his wall and that they not once moaned about antifa or transgenders. Or about anything really. You all are closer to being homeless than you ever will be to those two guys. Martin Eberhard and Marc Tarpenning

Production pieces, many not even done by the artist except for signature, are not art and planning your retirement is not wealth. Planning for multi-generational wealth is.

That is your tip for the day.

#66 Lead Paint on 02.06.21 at 6:40 pm

#46 Dolce Vita on 02.06.21 at 2:59 pm

Sounds interesting but kind of hard to follow. Are you suggesting JW was a micromanager which caused downstream failure?

My understanding of Welch is that he theorised the GE could make more money becoming a provider of credit and playing the financial markets than it could actually making things. So he had a successful reign from a stock valuation perspective, but set them up for an inevitable fail.

Kind of like Canada is with regards to house prices and debt… lots of people feel rich right now.

#67 S.Bby on 02.06.21 at 6:47 pm

Enron or Nortel or GE are exceptions, not the rule. Diversification is for idiots who don’t know how to pick or value good companies. Why invest in an index fund where 95% of the companies in it are duds? And then pay the MER for the privilege of doing that?

#68 Flop... on 02.06.21 at 6:51 pm

So, I just got back from visiting the grave site of Garth’s great grandfather Ebenezer Vining Bodwell.

I took a 2 minute video of the occasion and a photo and just sent it to Garth.

I had a bit of trouble reading the stone as it was covered in moss, and concentrating, as it was extremely windy and can be heard whipping in the background.

Not too sure why I sound like Kermit The Frog in the video either?

Maybe that’s the Turner/Bodwell vibe coming through?

Wasn’t enough to cover up my gasping for breath as I tried to talk and film at the same time as I try and work my way back to some form of fuller fitness.

Kind of embarrassing.

The grave couldn’t be much more than 500 meters from my house…

M46BC

Phenomenal, and touching. Thank you. – Garth

#69 S.Bby on 02.06.21 at 6:53 pm

BTW: anybody heard of the new Brazil Corona virus variant which is shown to be particularly infectious. We now have at least four variations of Covid on the loose.

This could be a game changer and I doubt Covid will be over any time soon.

#70 Steve on 02.06.21 at 7:00 pm

I remember neutron jack, he left buildings but no people.
GE will never recover

#71 Steve on 02.06.21 at 7:06 pm

I was at a meeting during my days at nortel with the ceo speaking. He said something like corporations is like a train. My friend said that “the ceo is the engineer and see the bridge is out and will jump to save himself while us workers are along for the ride.” Funny how accurate he was, and the ceo did jump to save themself.

#72 Nonplused on 02.06.21 at 7:10 pm

Doug, given the title I expected to see a picture of Garth at the top today. Oh wait it’s to the right a bit.

Company stock options are great because they are usually free until you exercise so it is all upside and no downside for you, but not many companies still give them out in size to anyone below the VP level. I think I rode the last wave of them and after that they came up with all sorts of convoluted long term incentives (LTE’s) that were based on crap like how well our share price did compared to a basket of ten peers, etc., that severely capped the potential payout. I think when the options were first being handed out in size the companies (oil & gas anyway) never foresaw oil going to $140 or anybody holding the options to expiry, and thus cashing out big money. Except executives of course.

(See that nifty trick they did with the LTE’s? Now they no longer had to pay out based on outright moves in the sector driven by oil prices but only the differential between how our share price moved say as compared to Shell and CNRL. They moved the exposure from alpha to beta. And capped it.)

The plan I was in was meant to make things look more egalitarian, to justify the millions of stock options the executives got. So everyone got some all the way down to the secretary. Might only be 100 a year, but some. Grants were based largely on seniority and somewhat on performance so they didn’t have to pay out such big bonuses.

And of course you needed some luck. Well, a whole lot of luck. Nobody has been getting rich from O&G stock options or indeed any energy company since then. Most LTE’s expire worthless.

We did have a share matching program as well, whereby if you put money in the company RRSP plan they would match up to 2% with shares. If you have such a program I would take the free shares. Nobody stays in a job for 10 years anymore, so you will get a chance to exit the position in the not too distant future. But for the most part, I would say the right amount to put into your corporate retirement plan is exactly the amount that maximizes the company contribution or match, and after that put any extra money in your own RRSP or TFSA.

#73 crowdedelevatorfartz on 02.06.21 at 7:14 pm

@#51 Flop.

I actually poked my head out into the sun as well.
First time I’ve had a sunny Saturday off in ages.

Washed the truck.
Returned the empty booze bottles.
Purchased new work pants with the Covid expandable waistlines.

An, all around, productive day…….

#74 AACI Homedog on 02.06.21 at 7:27 pm

Sitting on about 7% cash, & can’t decide where to put some next…maybe time to average down on a low REIT…

#75 joblo on 02.06.21 at 7:30 pm

On the topic of Horrible Bosses:

https://nationalpost.com/opinion/rex-murphy-this-is-the-worst-canadian-government-ever-can-there-be-any-question

#76 WTF on 02.06.21 at 8:02 pm

#23

Well I can play that game too

“Welch blamed Immelt for the struggles of GE. But that just won’t stick. Welch always said that he should be measured by how GE did after he left. And that is not very well.”

https://www.newsweek.com/welch-businessman-legacy-long-enough-1490318

#77 mike from mtl on 02.06.21 at 8:07 pm

#66 S.Bby on 02.06.21 at 6:47 pm
…Why invest in an index fund where 95% of the companies in it are duds? And then pay the MER for the privilege of doing that?
/////////////////////////////////////////////////////////////

The heck are you on about? VOO costs 30c/1k or 3$ per 10k.. less than a transaction. There’s a lot of dumb indexes that are a waste of time true but the SP500 is not one of those.

#78 TalkingPie on 02.06.21 at 8:31 pm

The airline I worked for offered an employee share ownership program, whereby the company matched a third of whatever shares an employee buys every year. I resisted for years, thinking that my pension and salary where already dependent on the company’s success, so I put some of my eggs in another basket. Eventually, once I had a small nest egg and seeing the stock make record gains year after year, I decided that with a near 30% profit even if the stock stayed flat, it was a pretty safe bet.

The stock tanked by about 60% since the pandemic hit, probably not to rebound anytime soon. Lesson learned.

#79 Sail Away on 02.06.21 at 8:40 pm

We match employee RRSP salary contribution- 2.5% first year, 5% second and subsequent years, equating to 10% of salary if they contribute fully.

This is managed by a wealth management firm- they have recommended allocations but employees can choose their own way, and the RRSP is theirs to do with as they please. Being a company employee, I also fall under this plan and greatly enjoy comparing results of my choices vs their recommendations.

#80 Figmund Sreud on 02.06.21 at 8:50 pm

Darn good advise today, … but simply investing in a outfit – the one you work for, … or not – does not end with, just get it and hold it!

It’s true, … if you want to win, and win big, you have to watch that investment every single day. And if you also an employee, how difficult that might be? All you have to do is be diligent: curious, inquisitive, friendly with management, keep an eye not only on your job, but also jobs of others!

Anyway, … I’m not a gambler, but I do subscribe to a following part of a quite famous jingle:

You’ve got to know when to hold ’em
Know when to fold ’em
Know when to walk away
And know when to run
You never count your money
When you’re sittin’ at the table
There’ll be time enough for countin’
When the dealin’s done

You mentioned Enron, … when Kenneth Lee Lay decided to adorn the front of Enron’s annual report with his image – dancing!, for example, it was time to walk away! Most didn’t, …

… I remember distinctly being chastised for suggesting such act!

Best,

F.S. – Calgary, Alberta.

#81 Drinking on 02.06.21 at 9:02 pm

#74 joblo

I love this guy; as another poster stated he is the only opposition that we have, how true, where is Sighn lol, usual place, Toole???

Good post today for the younger one’s; for me I am more like WorkforPickles poster; it is either this virus or another that will get us. May as well enjoy life while we can, if this is posted????

#82 Millennial 1%er on 02.06.21 at 9:09 pm

This hits close to home. I recently realized that my stock options at my current company are worth, well, a lot. FMV already at 6 digits & when we go public, it might make me a millionaire (comparing to competitors). But I’m not going to have it prevent me from considering other job opportunities. If one could increase base pay by ~100% they should still consider hopping even though they’d lose out on future RSUs. Sure, the options could be a potential moonshot but, it’s potentially not. One major security incident would sink us, for example. Guaranteed cash flow is much more valuable than potential moon shots. Guaranteed cash flow = security & potentiality for leverage.

And who’s to say you can’t get options at a different company? In fact, if you jump around every 3 years you’d pretty much be naturally diversifying the stock options that you currently have.

I think the best philosophy is to just ignore stock options (save for strategizing to lower your tax burden). The more thinking & more choices you make the higher the likelihood of mistakes.

#83 Ed on 02.06.21 at 9:24 pm

Perhaps if Trudeau went hat in hand to Putin we could wrangle some Sputnik vax to tide us over?

#84 crowdedelevatorfartz on 02.06.21 at 9:26 pm

@#77 Talking Pie

I had a similar experience.
The privately owned company would contribute 1 dollar for every 3 dollars the employee put into a company directed pension plan.
When they eventually went public.
Employees were offered a preferred share price right out of the gate.
I took advantage of both options.
A few years later the new publicly traded company nuked and paved and our entire division was sold off to another company.
I sold the shares a few months later, made a tidy profit and looked at the Locked in pension plan.
It was doing nothing.
I moved it to an investment advisor and have been very happy at the returns.
The lesson?
NEVER trust the company that you work for to oversee your shares or pension.
You mean nothing to them.
Watch and if you dont like what your seeing…..move YOUR retirement funds….

#85 JM on 02.06.21 at 9:28 pm

Great advice, owning stock in the company you work for is a big mistake, and is a large concentration risk that isn’t apparent until you are walking out the door with your pink slip.

#86 Ponzius Pilatus on 02.06.21 at 9:39 pm

Talking about horrible bosses.
Jimmy Pattison started out with a used car dealership.
Every month-end he fired the worst performing sales person.
Ah, the good old days.

#87 Barb on 02.06.21 at 9:51 pm

Not a mention of this?

https://www.cbc.ca/news/canada/manitoba/canadian-scientists-national-microbiology-laboratory-1.5904035

They’ve obviously been let go with cause.
(re virus, re Wuhan!)
But still on Canada’s payroll.

Wasn’t it/isn’t it foolish and outrageous that the doctors at the head of Canada’s only Level 4 lab annually went back and forth to a Chinese university and brought students back with them?

Did this occur in Canada because child-T2 is at the helm of this country? Does he need a reminder that China is still a communist country?

Maybe he’s lost his map. It’s where the 2 Michaels reside.

#88 SoggyShorts on 02.06.21 at 10:12 pm

#64 Ustabe on 02.06.21 at 6:33 pm
… planning your retirement is not wealth. Planning for multi-generational wealth is.

That is your tip for the day.
***********************
By your definition, maybe.
For those who don’t have a desire/need for having children the goals become much different.

Live like a king and bounce my last check sounds like wealth to me.

#89 binky barnes on 02.06.21 at 10:24 pm

With Garth’s blessing I would like to take the next couple of days to seek nominees for a Canadian Mount Rushmore. I mean the Yanks have honoured their best, so why can’t we do the same?

So far I have only our current prime minister, Mr. Justin Trudeau. He is obviously a ‘lock’. But we need three more. Any suggestions? And you cannot say Trudeau…..I have already nominated him.

Let me know what you think blog dogs.

BB

#90 S.Bby on 02.06.21 at 10:25 pm

Hey Garth, could you post that video that Flop made? It would be interesting to see that.

#91 crowdedelevatorfartz on 02.06.21 at 10:30 pm

@#85 barb
“Not a mention of this?”

++++

There were a few stories in the media about 6 months ago but it seemed to be quietly killed.

Chinese scientists caught trying to ship virus samples and or carry them out….

Only in Canada.

#92 SoggyShorts on 02.06.21 at 10:31 pm

#76 mike from mtl on 02.06.21 at 8:07 pm
#66 S.Bby on 02.06.21 at 6:47 pm
…Why invest in an index fund where 95% of the companies in it are duds? And then pay the MER for the privilege of doing that?
/////////////////////////////////////////////////////////////

The heck are you on about? VOO costs 30c/1k or 3$ per 10k.. less than a transaction. There’s a lot of dumb indexes that are a waste of time true but the SP500 is not one of those.
********************
S.Bby is some sort of Rainman who can pick which 25 S&P 500 companies will do better than the other 475.
They can of course do this all the time without every single time without hitting a whammy.

Right S.Bby? How long is this unicorn track record BTW?

#93 SoggyShorts on 02.06.21 at 10:32 pm

#86 SoggyShorts on 02.06.21 at 10:31 pm
#76 mike from mtl on 02.06.21 at 8:07 pm
#66 S.Bby on 02.06.21 at 6:47 pm
…Why invest in an index fund where 95% of the companies in it are duds? And then pay the MER for the privilege of doing that?
/////////////////////////////////////////////////////////////

The heck are you on about? VOO costs 30c/1k or 3$ per 10k.. less than a transaction. There’s a lot of dumb indexes that are a waste of time true but the SP500 is not one of those.
********************
S.Bby is some sort of Rainman who can pick which 25 S&P 500 companies will do better than the other 475.
They can of course do this every single time without hitting a whammy.

Right S.Bby? How long is this unicorn track record BTW?

#94 DON on 02.06.21 at 11:00 pm

That was nice Flop.

Hope your recovery goes well.

#95 Interstellar Old Yeller on 02.06.21 at 11:32 pm

Hey Doug, I thought your post was a great discussion and illustration on concentration risk. Hope you are having a good weekend!

#96 kommykim on 02.06.21 at 11:41 pm

There is another risk associated with stock options:

Under Canadian tax law, if you purchase shares though either an ESPP or by exercising an employee stock option, your taxable employment benefit (and thus your tax liability) is based on the difference between the price you paid for the shares and the fair market value of shares on the date you receive them. While the value of the taxable benefit is fixed when the shares are acquired, the benefit can generally be deferred until the year you sell the shares.

If the shares decline in value between the date you sell them and the date you received them, then the resulting loss is considered to be a “capital loss”, which can only be used to offset capital gains and cannot be deducted against the taxable employment benefit that arose upon acquiring the shares.

ie: If you receive shares worth $10K but your company goes under, (rendering the shares worthless) before you can cash them in, you’ll owe tax on the $10K…

#97 Paul on 02.06.21 at 11:53 pm

#67 Flop… on 02.06.21 at 6:51 pm
So, I just got back from visiting the grave site of Garth’s great grandfather Ebenezer Vining Bodwell.

I took a 2 minute video of the occasion and a photo and just sent it to Garth.

_____________

You’re a good guy Flop. I hope to see this photo on the blog some day. I imagine you visit the Legion on 49th from time to time. Hope to buy you a pint some day.

Cheers,

Paul

#98 Please answer garth on 02.07.21 at 12:09 am

Hey Garth, can you please answer this question
The great reset talking about by CS, is it true or what?
I’m confused
Thanks

#99 Landlord No More on 02.07.21 at 1:02 am

#67 Flop
Your comment regarding the difficulty reading the gravestone reminded me of our experience searching for gravestones of ancestors in Ireland. At one small town, Longford, we were driven out to the graveyard by a volunteer to see the graveslab. Sure enough it was NOT easy to read. “Oh just a minute,” said our wonderful guide, as he dashed back to his car between raindrops. Soon he was bent over the graveslab brushing it with a metal brush, then dusting the slab with baby powder, then whisking the excess powder away with a softer brush. Immediately we could make out the specific letters carved into the cement in 1836. We were thrilled and plan to do that with our ancestors’ graves here in Canada. One day we will get to it!

#100 doesn't anybody notice? on 02.07.21 at 1:25 am

The bad times quickly transmogrify into the good old days? All you really have is your skin no matter how much money you think you have.

#101 Jane24 on 02.07.21 at 3:27 am

Dolce Vita I agree with you. Canada has to get it’s finger out on vaccine progress not only to crucially save countless Canadian lives but also for personal reasons. I am 66 and had my first shot in England yesterday along with all the other 60 to 69 year olds. The NHS is speeding up my second shot to 4 weeks from now because I need to get home to Canada if those doors ever safely open. The reason is that my mother died of Covid in Ontario during the summer and there is lots to do.

And Dear Dolce Vita, Italy needs to get its finger out too as our Italian holiday home has sold to Americans and I need to get to you to sort that out too! No worries we would never leave beautiful Italy just moving to Puglia. Forget the EU snail supply, order your own. Save lives by being independent for once. Move on this tomorrow.

So globally we are all in this together and those vaccines need to be shared fairly out. Countries that ordered early like Britain need to share out with countries that ordered late like Italy and Canada or we are all stuck. We all sink or swim together in this global world. Both business and lives need vaccines.

So Dolce as far as my own Canadian pension future forecasts are concerned between Canada’s lack of vaccines and the car crash that is oil and gas futures, the future exchange rate forecast for the £ vs Cdn $ do not look pretty. I will have to have a think.

#102 BillyBob on 02.07.21 at 5:43 am

#67 Flop… on 02.06.21 at 6:51 pm
So, I just got back from visiting the grave site of Garth’s great grandfather Ebenezer Vining Bodwell.

I took a 2 minute video of the occasion and a photo and just sent it to Garth.

I had a bit of trouble reading the stone as it was covered in moss, and concentrating, as it was extremely windy and can be heard whipping in the background.

Not too sure why I sound like Kermit The Frog in the video either?

Maybe that’s the Turner/Bodwell vibe coming through?

Wasn’t enough to cover up my gasping for breath as I tried to talk and film at the same time as I try and work my way back to some form of fuller fitness.

Kind of embarrassing.

The grave couldn’t be much more than 500 meters from my house…

M46BC

==================================

Nice gesture Flop, you’re a mensch.

#103 hip604er on 02.07.21 at 7:57 am

Typical oldie opinions. You grey haired should just retire and let the new generation run things. With the TFANG stocks, our generation will retire millionaires and young. The jealousy shows in all your posts.

You guys keep investing in utilities and food while you work at Walmart getting our groceries for pick-up.

#104 Phylis on 02.07.21 at 9:34 am

#87 binky barnes on 02.06.21 at 10:24 pm Jane, Jody, and Julie. Sorry Joyce, you have to wait.

#105 Bezengy on 02.07.21 at 9:38 am

This is going to get ugly.

https://financialpost.com/news/fp-street/rbc-toronto-dominion-snared-in-canada-university-bankruptcy

#106 crossbordershopper on 02.07.21 at 9:42 am

interesting topic. fortunes are made by being highly concentrated, fortunes are maintained by being highly diversified.
Garth and his band of money manager buddies are great, they take already sucesfull people and make sure they don’t loose that money by being conservative and diversified. You know balanced and diversified, bla bla bla. with the intent to simply not loose and maintain the purchasing power and priviledge and give to there children forever maintaing that position in society.
I find financial advisors never really dwell into meeting someone and say hi, so you got 2.5 million good for you. so we can keep your money warm for you, and provide that service and bla bla bla and its all good.
To make that money is the hard part. Working probably at there own business tireless hours, and risk and stress for many years.
People show up on 3rd base and think they hit a triple.
The majority of people are highly concentrated, not just in there finances, but in life,one body, one wife, one job, one house, one car, one child. one prominent TV,
i never understood why advisors talk to people who make 60K a year at a job and talk diversification. The vast majority of people are totally un diversified. Its not by choice its by reality.
In life what i have learned is simply go out and take a risk, try something and make big money. if it works out, and you dont get divorced, sick, bad business, etc you might end up in a position that some advisor will keep your money diversified for you, for a fee of course.
The rest of the people, well, I see so many people even now into there early 70s working. Lifestyle, and bad decisions led them there. I have also met people who have zero cpp cheque, thats right, zero. they never worked, well maybe sometime for cash hear and there. kinda bumbs, lots of them actually and in saskatchewan with govt benefits all in it works out to be 2000 a month net. (oas/gis/gst/sip/carbn credit) for a single person. take home. about 70 to 80% of the average person that i see who worked there entire life and sweat and toiled for a few bucks more.
Canada is one of the best countries in the world if you expect little and arent very aspirational. If you want to work more and try a business or work hard etc. I dont know, socialism is alive and well here.
so be highly concentrated and try to make lots money, if it doesnt work out, you will be like most other Canadians anyway. So roll the dice. The floor and the ceiling in most places in Canada are only 8 feet apart.

#107 MF on 02.07.21 at 10:46 am

#104 crossbordershopper on 02.07.21 at 9:42

“fortunes are made by being highly concentrated, fortunes are maintained by being highly diversified”

Then says:

“ The rest of the people, well, I see so many people even now into there early 70s working. Lifestyle, and bad decisions led them there.”

-News flash: being concentrated in a few stocks that end up tanking/not being diversified and risking it all is one of those “bad decisions” you speak of.

“ Canada is one of the best countries in the world if you expect little and arent very aspirational.”

“don’t know, socialism is alive and well here.”

The experience of my parents and many people I know is contradictory to what you are saying.

Garbage post.

MF

#108 crowdedelevatorfartz on 02.07.21 at 10:48 am

@#103 Bezengy
“This is going to get ugly.”

+++

Yep.
One wonders how many other University’s are in the same debt obligation boat….

https://www.dal.ca/news/2020/02/21/behind-the-budget–revenues-and-expenses.html

Dalhousie’s 6000 staff received a Defined Benefit pension upon retirement.

It only has 83% of its funding and must find that revenue from other sources to make up the difference.

https://www.cbc.ca/news/canada/nova-scotia/dalhousie-university-five-percent-wage-cut-1.5627776

Staff salaries and benefits(pensions incld) vacuum up approx 70% of revenue.

Tuitions contribute 40% of the University revenue while govt grants(taxpayers) contribute 50% of revenue…the remaining 10% comes from other sources.

I’m sure Dal isn’t unusual in its financial set up like most Canadian Universities.
Tuition covers a portion of the revenue while taxpayers cover the majority.

With all those foreign students staying home and that “double tuition” revenue gone……
I’m sure a lot of university’s will be standing in line with their hands out for more Liberal largess.

And most of that money wont go to the actual university itself for maintenance, equipment, lights and heat
…it will go to the staff in the form of salaries, benefits and Defined benefit pensions…..

Who will pay their pensions if the University is bankrupt?

#109 crowdedelevatorfartz on 02.07.21 at 10:57 am

@#101 hipster604

“You guys keep investing in utilities and food while you work at Walmart getting our groceries for pick-up.”

+++++
BWAhahahaha.
Good one.

The WalMart where I bought some work pants yesterday was staffed by young 20-30 something kids.
I was the oldest person in the store by far.
There was a 20 something kid opening the door to the parking lot but he wanted money for drugs….
I declined.
I guess the “door greeter Boomers” had the weekend off.

Enjoy burying the planet in styrofoam Skip the Dishes containers while the Boomers (gasp) cook their meals…
Dont forget to blame us for the mountains of cardboard destroying the last of the planet because we didnt teach you how to cook.
I’m sure there’s a you tube video somewhere for that.

#110 joblo on 02.07.21 at 11:02 am

#87 binky barnes on 02.06.21 at 10:24 pm

Here u go 3 more

https://www.thescottishsun.co.uk/news/4741009/justin-trudeau-says-he-cant-remember-how-many-times-he-wore-blackface-as-third-racist-pic-emerges/

#111 Bobbyshave on 02.07.21 at 11:18 am

Here is my opinion, The first one is to make the world more resilient because we definitely will have to face other surprises, black swans, as they are called, maybe different kinds of viruses. Second, we have to make the world more inclusive, fairer, because we have seen that we have reached unsustainable degrees, of levels, of people who feel excluded. Finally, we have to make the world much greener. We finally have to put all our energy behind decarbonisation in order to avoid a major catastrophe in the future of which we have the first signs today.
My 2 cents

#112 Dharma Bum on 02.07.21 at 11:22 am

#104 crossbordershopper

Canada is one of the best countries in the world if you expect little and aren’t very aspirational.
——————————————————————–

However, you must admit that we truly excel at mediocrity.

I, for one, specialize in it.

#113 Wrk.dover on 02.07.21 at 11:34 am

The most fiscally prudent politician in Canadian history is to be succeeded by a ….wait for it…financial advisor! OMG!

Stephen MacNeil is leaving NS with a 2019 budgetary shortfall of a paltry $500./capita.

#114 Sail Away on 02.07.21 at 11:47 am

#64 Ustabe on 02.06.21 at 6:33 pm

Speaking of bosses, horrible or not, this video on early days Tesla is quite interesting.

https://www.youtube.com/watch?v=eblPwXFb7TE&feature=emb_logo

I’d work for those guys. Notice the art on his wall and that they not once moaned about antifa or transgenders. Or about anything really. You all are closer to being homeless than you ever will be to those two guys. Martin Eberhard and Marc Tarpenning

Production pieces, many not even done by the artist except for signature, are not art and planning your retirement is not wealth. Planning for multi-generational wealth is.

That is your tip for the day.

————

Cool, thanks. Those guys remind me of myself.

I’ll definitely file your tip in my ‘Ustabe Deep Thoughts’ folder.

#115 Dr V on 02.07.21 at 12:03 pm

104 Crossborder – despite what MF says, I find this a good post, though there is always “the other hand”.

Take for example the small business providing a specialized product or service. While many would see that as too concentrated and a large risk either resulting in riches or ruin, the business owner may see this as diversified if she has a large customer base spread across multiple sectors of the economy. Unlikely all her sources of income will disappear at once.

#116 Steerage on 02.07.21 at 12:03 pm

#108 joblo on 02.07.21 at 11:02 am
#87 binky barnes on 02.06.21 at 10:24 pm

Here u go 3 more

https://www.thescottishsun.co.uk/news/4741009/justin-trudeau-says-he-cant-remember-how-many-times-he-wore-blackface-as-third-racist-pic-emerges/

…..

That’s our “leader”…. what a guy… even trump couldn’t have survived that…. that was not a one off drunken night… he liked the attention it got each time over many years….. truly stunning to win after coming to light in middle of a campaign

#117 GAV on 02.07.21 at 12:59 pm

#87 Binky Barnes

If Trudeau is the standard you are striving for, I suggest Rene Levesque, Terance and Phillip from South Park (because they fart like a Liberal talking) and the rear end of any jackass from a Canadian farm.

Make sure Trudeau’s face is carved from black shale.

#118 yvr_lurker on 02.07.21 at 1:47 pm

#107 Crowded

——
The problem here is long-standing. Good job in looking this up. The universities in Nova Scotia were all in poor financial shape even before Covid. The issue is that there are 10 degree granting schools for a thin population of 1Milllion people (with rather distinct offerings in different schools). None (except possibly Dal.. and just barely here) have the international reputation to draw a large number of foreign cash cow students. Historical construct with this as some used to be aligned based on religion). Not so viable long-term and an amalgamation has long been needed.

#119 Peter Kook on 02.07.21 at 10:59 pm

Manager,managers,managers…

Most of the not just useless, they are negatively effective.

All my countless managers want me back from WFH to the office, because they want watching me to see how am I rowing:

https://seekingalpha.com/article/111186-toyota-vs-ford-a-modern-manufacturing-parable