My take on the financial world

What to expect?
Normally I am not one to prognosticate on where the economy or markets are heading, but I found myself feeling inundated by the pundits over the last few weeks as we embark on 2012. So I thought, why not put a few words together for those who care to listen … so here it goes.

Are we dead in the water?
I don’t believe we are at all. I remember back a few years ago when I stopped listening to the radio as everything from the propaganda machines was negative. I listened to the radio on the way to work today.

Is Canada going to follow the US and Europe into the abyss?
I cannot see that occurring. If we were going to be a lemming, we would have gone over the cliff already. This does not mean that we are going to boom while everyone else busts (okay a bit of a cliché). I recently returned from a trip to Florida which has spent the last number of years resembling a ghost town with a bunch of sale and lease signs. For the first time, I actually saw some leased and sold signs. As such, I would suggest that the US has hit the bottom. The only question is whether or not they sit or get back up and walk. Rest assured they will not run. For Europe, back at the beginning of August I said to hold onto your hats as we were in for a bumpy ride and we have had a few knocks since then. Going forward, there are still some bumps to be had before we get back to a smooth road and like the US, when that happens it will be a walk not a run.

Are interest rates going to go up or down anytime soon?
Simply put – No. Will we not see a repeat of the interest rates from the early 1980’s through the early 1990’s until the next baby boom decides that they need a home. We will likely see a very, very gradual increase in interest rates over the next few years to a prime of approximately 5%. The reason it will be so gradual is that the majority of people are just hanging on and are leveraged to the eyeballs. If the decision makers raise the rates too quickly they will throw a lot of things amok.

Is it a good time to be investing?
I am a true believer that it is always a good time to invest, but one has to be careful as to what they invest in – common sense right, not for everyone. I believe and many of my clients have heard me say that everything regresses to the mean. What I mean is that there is a long term average trend and whenever something strays far from the mean (average) trend, the chances are it will turn around and come back to the mean. Last year, the markets were negative. The mean trend for a balanced portfolio over the last three decades would suggest a return somewhere between 6 & 10% … so we should climb this year in order to get back to the mean.

Do you need to buy life insurance now or wait?
In the last two years, the premiums on level cost life insurance plans has gone up between 20% & 50% depending on which company you are speaking of but all companies have risen. This will continue and I believe that we are about five years maximum away from seeing the end of guaranteed premium rates for life. So, get your plan now even if you are single, no dependents and no debts as insurance is still much less than paying a dollar on a dollar.

Caveat Emptor – “Buyer Beware”
For those who are not old enough to have taken the dead language in school, I translated for you. Why this as the last heading – simply because everything I have just said is equally likely to occur or not to occur. What is more important is to have someone help you decide what is right for you in your specific situation.

As always, drop me a note.