Weekend Reading – Black Friday deals, money tips, building a portfolio and #moneystuff

Black Friday — it’s a bit head-shaking that the fortunes of the retail sector hinge on one day/weekend/month of the year. Demonstrates just how slight and precarious the profit margin is. Now more consumer money is being spent on Black Friday than on Boxing Day, the traditional mega-sales time of year. Well done by the retail marketing gang for giving their sector an extra month to try and rake in even more money. This should cause the astute shopper to realize that if heavily discounted sales can push companies into profitability, that means consumers are way over-paying for the same junk during the rest of the year.

Preet — most personal borrowing is spent on consumables which give no future return, whereas most corporate borrowing is spent on investment which creates future returns. Think of credit card debt which comprises a healthy chunk of GDP. Also true when applied to monetary policies such as the US Fed Operation Twist — pulling future growth into the present (aka pay cut).

Tracking Expenses — hilarious that this is administered by the government who has a long and notorious tradition of not being able to track expenses. The modern public debt has grown an average of 8%/yr for the last 45 years, with the current deficit estimated to be ~17% greater than the tabled budget.

DGI — there are scientific reasons why personal finance bloggers (be they fact accurate or not) may be more successful at “staying the course” and attaining their financial goals than regular non-bloggy folk: progress monitored closely and frequently; measuring the goal (distance from); publicly declaring goals. Your blog may just be the most significant piece of your financial health.

Growth of Millionaires — we’ve probably all been inundated by the new Credit Suisse global wealth report stating Canada’s millionaire population will grow by 563,000 over the next five years. This is very exciting, however, completely misleading (what else is new in the world of money).

First off, CS defines “wealth” as “the value of financial assets plus real assets (principally housing) owned by households, minus their debts.” Thus, they are pandering to the masses by erroneously including primary residence. This inclusion triples the Canadian millionaire population from 1% to 3% if housing is excluded, as it should be.

Secondly, the CS report “for convenience, we disregard the relatively small amount of wealth owned by children on their own account, and frame our results in terms of the global adult population”. Completely inane. A true and factual analysis would not exclude a cohort simply because the value is too small. Do we exclude all $10+ million Canadian residential houses from real estate reports and averages just because their stock is a “relatively small amount”? Again, this mindless and lazy exclusion adds to the tripling mentioned above.

Thirdly, sure it’s a big number, but what does it mean? It equates into a 50% growth in millionaire population. That’s pretty good considering Canada’s annual population growth is ~1%. However, ~70% of that growth is from immigration (and will most likely grow to ~80%). So what’s the true story Canada’s millionaire explosion? Is it a matter of Canadians generating wealth, or is it a matter of foreign-created wealth being brought into Canada, and then accounted for as being “Canadian”? A more true headline (it’s safe to say) would be “350,000 millionaires to move to Canada by 2021”

Fourthly(?), no where is mentioned a replacement value. That is, just how long do these millionaires stay on the millionaire list? A recent Cornell analysis found that a mere 1% of American 1%ers (by income) stay in the 1% for a solid decade (only 5% achieve two years or more). Yes, income is undulating and dynamic, but so too can be accumulated wealth.

But more importantly, anyone reading this most likely has more wealth than 90% of the people on the planet, “the average wealth of people in the bottom half of wealth is just $159.” How much did you spend on Black Friday?

Super summary by Blunt. We do our own wills but used an official guide for our Province and had them witnessed by our accountant.