Our regular columnist, Mom2KG, is back for her usual monthly check-up. As usual, she appreciates any comments you may have.  Her columns are now collected in her own category; if you are a new subscriber,  I encourage you to read all her posts.

A number of your comments have asked for numbers as to my budget. I’m way too embarrassed for that, but here’s something almost as much: my investments, in percentages. TMW has already spat on them [TMW note: I didn't spit on them, more like kicked dirt on them- see below], but here’s your chance to put your own knowledge to the test.

Of my investments (not including home equity), the percentages are:

Cold hard cash (sitting in a bank account waiting for your suggestions) - 35%

The rest is held inside an RRSP account at an investment house, classified as follows:

Short Term Fixed Income

• “Stable Income” fund – 10%

Cash

• Actual cash - >1%
• “Money” fund – 7%

Canadian and Foreign Fixed Income

• 5-year GIC @ 4.47% - 10%

Foreign Equity

• “American Growth” fund – 2%
• “Growth” fund – 10%

Canadian Equity

• Corporate stock – 1%
• Bank stock – 8%
• “Select” fund – 4%
• “Equity” fund – 13%

Well, have at it and enjoy. What are your preferred weightings? What’s missing (e.g., there are no REIT’s)?

Also, I’m going to begin a monthly direct deposit lump sum into my investment portfolio each month. I’ve decided to put 66% of that into safe, low-risk investments, and the rest (33%) into ETFs and stocks, just for the fun and risk of it, and for learning purposes. Comments on that plan are also appreciated.

Looking at the above, I realize to some chagrin that I understand all of the above, with the stand-out exception of the mutual funds – 46% of my total investments! That’s a pretty big gap in knowing where my money is and what it’s doing. I have no idea what’s held in those funds (except some are foreign/American and some are Canadian) or what their purposes are. And those funds are where most of my money is – and, of course, what the investment advisor recommended. The MERs, however, are low: mostly about 0.5%.

When I mentioned to the advisor my plan to put money into ETF’s, he gravely warned me of the (flat) trade fee – made a big deal about it. Turns out such a fee would be 0.029% of my overall portfolio (including the cash outside his domain in my bank account). Hm. Doesn’t seem like that big a deal – was he trying to scare me off investments that wouldn’t make him any money?

Thanks in advance!

P.S. I went to the Crate & Barrel opening in Toronto with TMW himself. I want you to know he was fomenting marital discord by insisting I buy things that would wreck the family budget. Bastard convinced me, too [in my defense, the opening was for charity and I merely remarked that the bed-sheets were nice so if you need to have bed-sheets, you may as well aid charity as well. That's my story and I am sticking to it!]

TMW says- as for the “spitting” on the portfolio remark, I mentioned there may be some overlap in the mutual funds and there is a large under-exposure to foreign equity. I also thought that her advisor was unnecessarily pushing her into mutual funds without sorting out potential redundancy issues.

With the 1997 hand over to China a distant glimmer in the island’s eye, many ambitious men made their mark developing Hong Kong real estate in the go-go 1980’s. Thus, it wasn’t unusual for a newly-minted commercial banker to find a well-dressed gentlemen sitting across from him, selling dreams of glass and steel punctuating the skyline. All he need was a cool $100 million dollar. With dreams of glory (and a fat bonus) in his mind, the banker gave the green light to the latest high-rise development in Hong Kong.

Several months elapsed and the developer visited the banker hat in hand. Materials are going up. Trades want more money. We are adding 10 more floors. Can you I increase the loan $50 million? Certainly! Replied the banker. This is Hong Kong. This is the 1980’s. Greed is good. Towers are better. And my bonus, the best. With one simply signature, proving the pen is more lucrative than the sword, the loan increased 50%.

Fast forward 18 months. The commercial banker is found in his apartment dead. Suicide. The $100 million loan is now $600 million and there’s no end in sight for the development. The developer? Oh, he skipped town. Can’t find him. The development? Not finished. It appears through some lax supervision, the banker kept loaning the developer more money until his supervisors got wise to why some much money was going to a project not completed and then hard questions started getting asked.

But, wait, what’s the first thing the banker’s supervisor’s do after taking over the file? Why, they lend the project, with a new developer, another $600 million…

…this story (numbers slightly changed) was once told to me by a banker friend of mine with the moral being that sometimes when you are in the hole really deep, the only thing a lender can do is keep digging and hope you hit oil.

This is what the bailout feels like to me. You are in so deep, what’s another $700 billion (however morally abhorrent). From a pure business perspective, the hole is so deep that cutting off funds now is the worse of two options; the option being to stop the bleeding somewhat.

Despite whatever opposition one has to the bail out, it is what it is. The larger question is what are the implications to you and me?

1. Don’t panic. Financial institutions make money by lending money out. Eventually, they will unlock their vaults and pump money into the system again.
2. Interest rates are going up. Large deficits make bankers and holders of government debt worried. The best way to lessen their anxiety is to increase interest rates on new government debt which means the prime rate of lending goes up which means our mortgage rates will go up. If you have a variable interest rate mortgage, you may want to consider locking in your interest rate.
3. Here comes inflation. Inflation is upward movement of the price of goods and service. In other words, a buck doesn’t get you what it use to. Inflation is caused by a wide-variety of factors but one cause is the increased circulation of money into the monetary system. Guess how the American government is going to fund the bail-out? Yep, putting more money into circulation. Canadian Capitalist has some tips (no pun intended) on investing in an inflationary world.
4. Switch from a capital appreciation to capital protection strategy. Instead of trying to pick those high-flying stocks, it may be time to focus on cash flow friendly companies that pay dividends. At the very least, dividend paying stocks mitigate against downside risk in equity investing. A word of caution though, avoid principal protected notes. They only make the issuer richer and not you. As a side-note as well, as many other bloggers have pointed out, equity over long periods of time (10 plus years) are good inflation hedges.
5. Ask yourself where your advisor is in all of this? If you have not heard from them, consider dumping them. A trained monkey can pick stocks in good times. In bad times, you figure out whether you have hired a salesperson or an advisor.

One of the things that really annoys me about the media coverage of the credit crisis is the media paints all “financial institutions” with the same brush stroke and does not attempt to differentiate between the different players and their functions in this industry. Thus, when an investment house files for bankruptcy, everyone gets worried about their savings account at a bank when they are two different structure with different purposes.

In an attempt to separate out the different players in the financial institution, here is a quick and dirty primer of who is who and who does what. I admit this is very difficult because banks own trust companies now and investment banks own traditional deposit taking banks so there is significant over-lap. But here’s my best attempt:

Banks (in the traditional sense of the term) is a government licensed body that takes deposits (a bank is a borrower of your money) or issues bonds or stock and lends out the money raised to other parties or invests in securities. A bank’s profit on the most simple of basis is (interest earned on loans made) - (interest paid to deposit holders).

Credit union is a co-operative for its members (a co-op is a type of legal structure where the owners are also the customers of a business set up for a specific purposes- typically for charitable or not-for-profit purposes but also for profit). In other words, you can only deposit money into a credit union if you are a member. Thus, as an account holder, you are also an owner of the financial institution and there are no shareholders but members.

Savings and loan (S & L’s) is somewhere between a bank and credit union BUT with one huge structural advantage or disadvantage. Like a bank, it takes deposits. Like a credit union, some S & L’s require that account holders are members as well. But S & L are mandated in many jurisdictions to use the deposits to lend out in the form of mortgages. It is bascially a government endorsed vehicle to put out as many mortgages as possible and support home-ownership. Thus, the fate of S & L’s and the real estate market are closely tied together.

Merchant Banks has a much more amorphous definition than banks but it is basically an institution (not necessarily holding a banking license) that advises wealthy clients and corporations on how to manage their money from sourcing lending opportunities, acquisition opportunities or sourcing out money. Most wealth management arms of big banks now carry out a lot of functions of merchant banks. They are really private bankers for the rich (private equity and merchant banking are used in certain circles inter-changeably).

Trust companies are organization who act as fiduciaries, agents or trustees (hence, the name) in the administration of monies, trusts and estates. A trust company is like a faceless lawyer for a trust fund kid- they manage funds, hold onto property, pay bills and distribute income. Trust companies have now evolved into deposit taking institutions as well (which muddies the waters between banks) but with different types of restrictions than banks (they typically are limited in how they can invest deposits).

Investment banks act as advisors, agents and underwriter (in banking, an underwriter is the intermediary between the issuer of product and the general public) for the issuance of product (stock or equity). Maintain the liquidity of issued product by acting as brokers and dealers and offer advice on M & A and analogous fee generating activities. Unlike a traditional bank, it is not deposit taking (but that has changed as well recently to ensure their survival). It gets its money through issuing stock and outrageous fees.

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The image of financial institutions as one big mush of pin-striped bankers and cowboy traders most likely originates from the fact that large banks bought investment bank arms, trust company arms, merchant bank arms and then the investment bankers took over the banks and made stupid bets using our money.

Most of the credit crisis started in the investment banking sector where they started buying their own toxic products they were putting out (in some sense poetic justice but, on another level, an exercise is sheer stupidity and arrogance). The linkage is that the banks and S & L’s were lending out the bad mortgages which got packaged into the product the investment banks sold and bought themselves (this is a very broad narrative).

What goes around comes around and an era seems to have ended for investment banks as the last two great investment banks, Morgan Stanley and Goldman Sachs, have been approved to become “mere” banks and will start taking deposits from Ma and Pa in an effort to survive.  The question becomes would you deposit your money with one of the culprits of the mess we are in?

In today’s post on negotiations, I wanted to address something patently obvious. Don’t make negotiations personal. In some cases, like child-custody or separations, the nature of the negotiations are very personal. But, in most business negotiations, it is not about you. Its about the deal. So don’t turn it personal.

Some people are personally upset if negotiations did not turn out as planned. That is just part and parcel of negotiations- not every deal has to get done (a post for another time) and they are not rejecting you. They are rejecting the terms and conditions you have put forth. Everyone has different expectations and, more often than not, things don’t work out because of expectations of the person on the other side of the table and not you per se.

How do you turn negotiations personal? Watch for phrases that begin with:

“you said….”

“My problem with your position is…” (positions also implies posturing)

“How do you expect me…”

You, you, you….pointing fingers at someone; you turn the interest of parties into a personal power struggle. Instead try:

“the proposal does not work because…”

“how about trying things this way…’

“This doesn’t work because…”

Remove the words “you” and make it neutral and things don’t sound so blunt. Even if you think someone else’s position is crazy, its the position and not them and you end up removing the personalities from the discussions as much as possible (let’s face it, all negotiations have some degree of emotions in it, the key is to remove as much of it as possible).

Good luck.

I renewed my driver’s license last week. I live in Toronto where there is a $60 levy per year when you renew your license to help the city desparately raise revenue to balance its books. I have mixed thoughts over this levy. If it helps fund public transit and fills in pot-holes than its good use of the money but it also feels like a cash grab on some level.

As I was paying for this fee, it got me to thinking of the top 5 industries that try to swindle their customers at every opportunity and how they are trying to rip us off any way they can. Here is my list:

1. Airlines: They get you on fuel surcharges, they get you on extra luggage fees (especially now as some airlines are limiting the number of bags you can bring without incurring an extra charge), they get you on airport improvement taxes (technically nothing to do with the airlines), they get you on $2.50 soft drinks. Now some airlines are removing the movie screens in their planes to lighten the plane and save on fuel costs which, of course, such savings will not be passed onto the customer. Is there an industry more structured to deliver customer dis-satisfaction than an airline?
2. Cell Phones: Every month I have to pay a $6.95 system access fee and a $0.50 911 emergency access fee. Funny, I thought I paid my taxes to maintain 911. Why am I paying for it again?  Why am I paying for an access fee? Wouldn’t you roll that cost into my monthly plan? How do I know it truly costs $6.95 to access the system and its not a profit center for the cell phone companies? A system access fee to me is equivalent to pay $6.95/month so I have the privilege of entering into a mall to shop at the stores. Is not the money I spend in the mall enough? Now you want me to pay to enter the mall? Random fact- outside of health related liability, cell phone companies are one of the leading industries hit by class-action lawsuits (angry customers anyone?)
3. Sports franchises. In order to subscribe to season’s tickets, you have to pay for a seat license in order to have the privilege to buy the tickets. In other words, you have to pay for the privilege of spending more money (think of it as the equivalent of system access fees in sports). Your seat is probably in an arena that you paid for with your tax dollars since the sports franchise held your city hostage and “made” them build a facility with public money for a private enterprise to use for profit generation. Want a Pepsi? Sorry, this is a Coca-Cola only building too… and no outside food as well…
4. Banks. I thought banks made money by loaning out my deposits and earning their profit from the spread between interest received in loans and interest they pay me? So why all the service charges? Why can’t I deposit and with-draw money from a branch different than my home branch without a hassle. Why are you charging me for transaction regardless of whether I am depositing money or with-drawing it? Wouldn’t you want to encourage deposits by not counting that as a transaction in the maximum number of transaction in my service plan?
5. Automotive. Buying a car? You need to pay freight and pre-delivery inspection (in U.S., I understand that PDI is generally charged separately than freight and negotiable whereas in Canada it is lumped together). Why am I paying for someone to inspect my car? Don’t they do that at the factory? Bringing the car in for maintainance? The parts cost a lot (a friend of mine who works in this industry suggested that you don’t worry about the labour and negotiate down the parts: the mark-ups for parts are unreasonably high) and a lot of work is not guaranteed.

Your turn. Any particular industry make your blood boil? Now is the opportunity to vent…

Are you feeling dizzy yet following the stock market? Down one day, up the next. What the heck is going on? That’s the problem. No one knows what’s going on. Emotions aside, let’s remember some fundamentals of investing and the implications of them to you courtesy of renowned stock researcher Jeremy Siegel:

1. After inflation, a sample size of over 2 centuries shows stocks have returned 6.8% after inflation.
2. From the period of 1957 to 2006, the highest dividend yield stocks have returned an average of 14.22% vs the S & P 500 return of 11.13% over the same period.
   
3. The only long-term, risk free asset are treasury inflation protected securities (aka TIPS or real return bonds). As the name implies, the return on these bonds is essentially equal to the rate of inflation.

Let’s assume that Siegel’s sample sizes are large enough to be accurate and not statistical analomys and the underlying assumptions to his conclusions are still fundamental sound. Let’s also remove the noise the media is creating. What does all of these actually mean for us?

• We need to readjust expectations to historical returns. A 6.8% return after inflation may seem rather puny relative to the period circa 2002-2007 but could a mature economy like North America’s really maintain super-growth and appreciation for longer than a short to medium span of time? Most likely not.
• A pillar of good investing continues to be to investing in cash-flow rich vehicles like dividend-yield stocks. A majority of dividend yield stocks are clustered in financial sector. Some of these businesses are on shaky ground; others are fundamentally sound. Yet, a panicked investor is selling out of financial stocks to put their money in cash or bonds. Assume that some of this selling is in fundamentally unsound and sound stocks; if so, could the baby be thrown out with the bath water? Is this investor not going against the historical grain and moving out of the highest yielding sub-set of all stocks? If you want to know what makes up a good or bad dividend stock, please see the DIV NET for all things dividend.
• There’s a time and place for risk-free investments like TIPS but remember your context in life. A senior moving their entire portfolio into TIPS and money market funds may be executing a prudent strategy to mitigate against short-term volatility in the market and to protect a portfolio that is not likely to increase in size. Someone who is in their 30’s or 40’s may be shooting themselves in the foot executing a similar strategy since a fixed-income heavy portfolio is more about capital preservation than capital appreciation. With time on one’s side, it is important to be offensive and defensive in one’s portfolio.

As for me? I haven’t bought or sold a thing this month (September is always a bad month for investing regardless of the investing cycle). The only thing I am looking at is readjusting my asset allocation as part of my annual review.

I am going to end the week with a question. How much would you pay for a 2nd opinion on anything?

My parents own a condo they rent and they have to have some plumbing work done. They got a few quotes and they asked me if I thought it was fair. I sheepishly had to say “I dunno.” I am not in a trade and I don’t know if all the quotes had hidden industry fees or were charging my parents for things that aren’t necessary.

I would be equally lost if I had to get a quote to have my car fixed, my house rewired or my accountant to fight the tax authorities. Personal service industries are so mushy in terms of fees. Unless you know something about the industry or do a great deal of research, costing has a great deal of subjectivity to it (I remember a client asking me why drafting the same legal agreement was quoted at $500 for one lawyer and $1500 for another and I could not give an intelligent response - the quotes seemed so random given the work).

Getting 2nd or 3rd quotes really doesn’t help because the people quoting also want your business so they may under-cut on one thing and then make up their money elsewhere. They are so adamant that you really need this and not that but how do you know? Plus, I am always weary of the lowest quote in personal service as well. You get what you pay for in life.

I have often thought a great 2nd career or quasi-retirement job would be someone who gave nothing more than 2nd opinions on quotes with the explicit promise they are not in practice anymore so there’s no hidden agenda other than to get the best deal for you. For example, a retired accountant could basically advise you if you were paying too much or too little (there is such a thing) to have your taxes done.

Because there is no vested interest other than the fee for the 2nd opinion, there would be, one hopes, real candidness in their opinion.

There is a growing movement in the financial industry to do this. For example, Preet Banerjee, a frequent guest poster on this blog, has a $100 second opinion service (Preet, remember the referral fee is paid in small bills only. Haha!).

I would seriously consider paying someone for some real candidness on quotes. What about you?

Have a great weekend.

In the last week, two different people from completely different circles, ages and walks of life have approached me and said (to paraphrase): “my advisor tells me to invest in a dividend mutual fund. He/she says they are safe in this environment. What do you think?” I think the dividend mutual fund can be a huge trap product. It looks great. It sounds great. It often does not perform as billed.

In theory, this product should work. Studies have shown that stocks which pay increasing dividends over time out-perform stocks that pay dividends which are not increased or non-dividend paying stock. But in order to build a well-balance dividend portfolio, an investor probably requires 10-15 stocks from differing industries and over $100,000 in capital. Why not just buy a dividend mutual fund instead and benefit from diversification with a low entry fee? Plus, dividends yield stocks are safe to invest in.

But, in practicality, a typical dividend fund runs into a host of issues:

• Fees eliminate most of your dividend gain. In normal times, a typical dividend yield is anywhere from 2-3%. A typical MER on a mutual fund? To pick random examples, the TD Dividend Growth (a 5 star rated mutual fund by Morningstar) has a MER of 1.92%. Manulife Dividend Fund has a MER of 2.3%. The IG Mackenzie Maxxum Dividend Growth (Class A) Fund has a MER of 2.69%. In other words, your aggregate dividend yield in a fund is substantially eliminated by the MER.
• The definition of “dividend” can be loose. The TD Dividend Growth Fund’s largest holding is Canadian Oil Sands Trust. Not a bad stock but it doesn’t pay dividend. Its distribution is taxed as income which is not taxed as efficiently as dividends (ideally, you want to be taxed on dividends and income). Other Canadian based dividend funds hold U.S. companies. Guess what? Dividends from U.S. companies are treated as income for Canadian taxes. The result? If you hold the mutual fund outside your RSP, the fund is much more tax unfriendly than the name sounds.
• Dividend funds can create redundancies in your portfolio. Do you own a blue-chip equity mutual fund? An exchange traded fund tracking a major stock index? A host of financial stocks? If you do, why would you buy a dividend fund. Most of the largest holdings are already in equity funds and ETF’s. All you are doing is concentrating your risk and not spreading it as per a prudent asset allocation strategy.
• Buy the issuer and not the fund. IG Mackenzie Maxxum Dividend Growth (Class A) Fund is a large dividend fund (approximately $1.2 billion assets under management) issued IGM Financial Inc. (TSX: IGM). Its 5 year performance was 6.6% according to Morningstar. IGM’s 5 year performance is 16.10% (and 10 year compounded growth was 16.5% ending December 31, 2007). In other words, the shareholders of IGM are doing better than the mutual fund holders of its products by a large margin.

There are certainly well-performing dividend mutual funds out there and an exchange traded fund tracking dividend stocks would certainly elminate most of the fee issues (but perhaps not solving the redundancy issue depending on your portfolio). The point being don’t get caught in the safety and security that the brand of a dividend mutual fund may give you. Study its holdings and fees closely before you decided to take the plunge.

On Sunday morning, I pre-wrote a post about bank stocks knowing that Lehman Brothers was for sale but nothing about AIG’s liquidity issues and Merrill Lynch selling itself to Bank of America which all hit Sunday night/Monday morning, causing a mass panic on financial stocks. Wow, talk about an ill-timed post!

Regardless, some of my analysis still remains true. Non of the trinity of Lehman Brothers, AIG and Merrill Lynch were deposit taking banks. Two of the three were investment houses that bought bad assets and AIG is an insurer that took premium money and bought bad assets with it.  The Canadian banks have also fared better with RBC dropping 2.24% on Monday’s trading and Bank of America falling 35.7% on the same day (although RBC fall 3% on yesterday’s trading).

What do I make of all this? Cue the ramble.

Let’s be honest. This problem has persisted for the better part of more than the year when subprime finally exploded circa 2007. Its a little disingenuous of the media to suddenly think this is a sudden collapse. We just all acted like ostriches hoping it would go away and, because its an election year, the people in power do what kids do when they don’t want to hear bad news. They covered their ears and went “la, la, la, la…”

In many ways, the sale of Bear Stearns to JP Morgan Chase in March was really the beginning and the end. Fortune Magazine reported that when Bear Stearns was sold it had $11.5 billion in cash on their books and the Federal Reserve bascially guaranteed the value of all of Bear Stearns bad assets. As Fortune pointed out, JP Morgan Chase bascially doesn’t have to pay for the cost of the merger because it is using Bear Stearns cash to do it AND the taxpayer is footing the bill for all the bad assets. Talk about a swindle (how Bear Stearns went down with $11.5 billion in cash on its books is a lesson on how sheer panic blinds us to the facts).

What message did that send to all the other investment houses? Even if you are in trouble-big trouble- the taxpayers will bail you out. So nobody did anything of substance to fix the issue- not the investment houses, the government or the regulators. When things finally caught up to Lehman Brothers, they had one serious buyer- Barclays- who were only willing to do the deal if they got the same sweat-heart deal from the government that JP Morgan Chase did. The government said no and the house of cards finally came down (Barclays has cherry-picked best Lehman Brothers’ assets for pennies for the dollar).

As an observation of human nature, we downplay the important and prioritize the trivial and this seems to have been what happened. As opposed to making the financial institutions really answer for utterly bad risk management, we worried about how to keep companies run by millionaire i-bankers afloat so we can continue to consume, god forbid that an economy that goes up must come down.

In the last few days, everyone has been uttering 1929. 2009 will be a rough year but, as far as I know, there wasn’t some consortium made of oil billionaires pumping billions into the financial system in 1929. China wasn’t buying up America’s debt in 1929 and there sure wasn’t worker mobility in 1929 like there is now.  The population pyarmid in 2008 also makes it easier to find a job given how few workers there are with an aging population.

This is probably more like 1991and everything wil be fine eventually if you keep your head up. As my boss likes to say “get a grip people and calm the [expletive] down.”

Since 9/11, North America has been an orgy of excess. Buy more cars! Leverage your home! Max out your credit cards! Get a new hand-held every 6 months! Have we ever looked around and said “look at all this useless stuff that surrounds us that doesn’t make us happier or more efficient or content. Its just STUFF for stuff’s sake.”

Perhaps 2009 will be a reset back to a normal quality of life that doesn’t depend on 4,000 square foot homes, 2 cars and a vacation property in Mexico as the norm. If that occurs, it may actually be a good thing. Perhaps, its happening already. It was reported in the Globe and Mail today that Toronto has the most high rises going up in North America per capita (and only behind New York City in sheer number). A good number of these high-rises are in the city core which dictate smaller living spaces and make it harder to own more than one car- living like the rest of the world does.

If there is also one lesson to learn from all of this- watch how JP Morgan came out smelling like roses. It got out of exotic products very early on (it began selling a lot of exotic products it owned before they became worthless).  It never got too greedy and it stayed in cash. When the opportunity came around, it was the only player who could save anyone and bought assets on the cheap. Good rules for all of us to follow with portfolios much smaller than theirs.

This post was a little all over the place. Thanks for your indulgence.  I’ll address one product advisors seem to be flogging in this climate which I am opposed to.

We hired someone at work recently for what is primarily a book-keeping/administration position which indirectly reports to me (emphasis on indirect). I don’t work at a large company so we have no formal human resources department and someone else at the office vetted all the candidates and I ended up being the “can you confirm that this candidate isn’t crazy?” back-spot to the short-listed candidates.

Here’s the dirty little truth about interviewing. Even with companies with HR departments, eventually, you have to speak to someone with no training in the formal process of hiring people. The interviewer is just as nervous as the applicants are because, unless it is a skill-based interview (and this is usually vetted before you get to short-list), they are feeling their way through the process too. Me? I am a terrible interviewer. I am always tempted to break out into the Ralph Wiggum “do you like stuff?” line of questioning to fill the pregnant pauses.

I ended up interviewing one candidate and I asked what I consider to be a “I need to fill the blank” question and asked “what do you hate about your current job?” Well, the candidate broke out about how they hating dealing with the public and people in general and then lobbed some racial epithet about a group of customers they deal with. I am not going to repeat it and I am not a member of this group but I stopped dead for 5 seconds and then just started filling in the silence with random chatter. The candidate withdrew the next morning (not sure whether because the position wasn’t the right fit or they realize their faux pas).

The only thought that came to me after this interview is that perhaps interview questions are not meant to elicit the right answers but to weed out the absolute wrong answers and the foot in mouth moments such as hurling racial insults, complaining for 5 minutes about your boss (which happened to another candidate that got cut by the initial interviewer), complaining you don’t make enough money incessantly (huge red light for an employer), you only view the job as a short stay to “better” things etc. etc.