AT & T announced last week that it was doing away with its unlimited data plans in lieu of cheaper entry points for data.  The move was widely perceived to improve network quality and will most likely be the first of many similar announcements by other cellphone carriers. Smart Phones can use up to 7 times more data than conventional cell phones which places a great deal of stress on a network. If you have ever been in a large urban center down the eastern seaboard of the U.S., you will understand first-hand the effects of lots of Smart Phone usage during peak hours; call dropping is a regular occurrence.

For those who invest in telecommunication company stocks, it is difficult to tell what the effects will be. Unlimited data plans are revenue capping while a move to lower entry points on data may entice a new group of customers but with potentially lower margins- call it a passive aggressive race to the bottom. One also wonders if AT & T is pursuing greater quantity of customers, it ends up in the exact same place now- lots of customers overloading the network.

Mobilicity and Wind, 2 of the 3 new cellphone companies in Canada, have unlimited data plan but at more expensive rates than AT & T’s former plan (par for the course for all Canadian cellphone carriers who are at least a year behind the U.S. which, in turn, is behind Europe/Asia).

But, given the trending the U.S., it appears unlimited data is neither profitable in the long run or helps network reliability. If you have unlimited data plans in Canada and use it to the max, it may be another 12-24 months before the ride is over.

The word “de-leveraging” came and went in about 2 months during the credit crisis. An initial upswing in the household savings rate seemed to be a blimp and not a pattern. After a short period of  frugality,  Canada’s savings rate fell to 4.6% in Q1 2010 according to Statistics Canada (it was in the 6% during the late 90′s) and the American personal savings rate has seen a downward trend from over 5% in early 2009 to slightly over 3% in Q1, 2010 (back to the approximate range of 2004 rates).

There has been a lot of focus on stock allocations and risk in the last few weeks arising from Greece and the larger sovereign debt issues but the fundamental issue continues to be the same.

People are not saving enough. Household debt levels continue to rise while personal savings rates continue to fall (although household debt levels include both mortgage and non-mortgage debt which raises the question of whether real estate valuations can support our debt- a subject of another post).

But what exactly is enough savings? The figure of 10% of take-home pay has been often used as a nice round number as an ideal savings rate. The only issue with the 10% rule is that it lacks context. Studies have shown that household savings rates are influenced by factors such as interest rates, inflation, the government’s fiscal position and ratio of household net worth to personal disposable income.

When all these factors are aligned positively for the average household, the savings rate can fall and is generally seem as acceptable. Whereas when these factors are affecting households negatively, household savings by necessity must rise.

For example, during the 1960′s, a low inflation/high growth period, the savings rate for Canadians was 6.7%. In the 1970′s and early 1980′s, a high inflation/stagnant growth period, the savings rate for Canadians was in the teens and peaking at 20% in 1982 when mortgage rates were regularly between 15%-20%.

The particular issue facing all of us is that we live such economically anomalous times. Typically, savings rate tend to shot up in down times as a defense mechanism (this is why government in the past could safely increase debt- there was enough domestic personal savings to purchase the debt but if the government and its citizen are broke…). This does not seem to be happening based on recent data. Only one factor- low interest rates- seems to be aligned for consumers which would mean household saving rates should be going up but its not.

Thus, looking at savings rates today and using it as a peg, may not be very helpful and given no one knows what will happen when government turns off the taps, it is hard to predict what exactly an appropriate savings rate should be.

In such uncertainty, the only safe rule seems to be: (i) save; (ii) make it automatic; (iii) save more than you think you need since it is easier to go backwards than forwards.

In that vein, rather than buy an iPad, you can win one at Where does My Money Go. Enter now to win an iPad. Good luck.

Ellen Roseman is a consumer advocate and blogger who recently celebrated her blog’s 3rd anniversary. In her anniversary note she noted, sadly, that she believed things have gotten worse for consumers who want to resolve problems without trying to garner publicity or through legal channels.  In a world where many large companies are publicly traded, placing priorities firmly on meeting short-term expectations of shareholders over the customer’s long-term satisfaction, the observation is true.

We sometimes do not realize being a happy shareholder also means being an unhappy customer. If it becomes harder to make a dollar for many businesses, things could get worse as businesses attempt to squeeze more out of customers while giving less- all in the name of meeting shareholder expectations.

What’s a poor customer to do?

1. Beware the problem industries. Gym memberships,  gift cards, travel, extended warranties, gift cards and cell phone contracts all have specific sections of various consumer protection acts addressing these  products or industries for a reason; there are many unscrupulous people in these industries- watch out. There are also industries which are unregulated or unlicensed that need to be licensed- home contractors comes to mind immediately. Be very cautious and detailed about dealing in these products or industries (if you are wondering about consumer protection and cell phones, the Province of Quebec’s revised Consumer Protection Act (Bill 60) prohibits punitive penalties from being charged for early termination of long term contracts. There’s a possible constitutional issue in that telecommunications are federally regulated and this provincial act may be challenged. However, if it survives a possible legal challenge- this could be a huge win for consumers if adopted by other jurisdictions).
2. Verbal Agreements mean nothing if you are dealing with big business. As Mike from Four Pillars found out, a verbal agreement with a cell phone provider is not worth very much. Run if someone says “trust me” (as I have written many times, someone who is trustworthy doesn’t say “trust me”). In the world of big business, rely on the paper which brings me to…
3. Read the fine print. If the salesperson will not let you read the fine print (a very common tactic in car dealerships), it is being done a reason. The fine print is not very favorable to you. If you don’t understand the fine print, ask.  The larger the purchase, the more the salesperson should know the terms and conditions. If they try to blow you off pre-purchase, well…we know what post-purchase life will be like.
4. Do your research. Sounds simple but in an age of information over-load it is easy to gloss the details. This is the fundamental advantage of the internet. There’s always a fanatic who will review a product or service in-depth.
5. Do not allow yourself to be brow beat or bullied into a deal. The best answer a salesperson can get is “yes.” The next best answer is a “no”. The worst answer is “let me think about it.” Good salespeople understand this and will engage in a variety of tactics (create the illusion of scarcity of supply or time being a common one) to get to yes or no quickly. If you are buying something which you don’t need but want and you are feeling rushed into a decision, step back and sleep on it.  Look at it this way, if the salesperson is rushing you to buy, what do you think the post purchase service will be like if they had so little time for you before you parted with your money?

I also pause twice when things are super cheap. In order to turn a profit on a super cheap product, the business has to either (i) make an inferior product which won’t last; or (ii) provide no after purchase service. This is how the cell phone business model works. They give you the phone for cheap or free and, in return, you are not supposed to bother them with problems (at least that’s how many customer service departments are built).

Finally, I am not very Obama-esque that government is the solution to consumer protection issues. Elections are not won or loss on consumer protection. The issue is that it is easy to pass laws for show but are there any resources to actually enforce them? For example, several years ago, many jurisdictions passed franchise protection laws. The problem is that there is no department of franchise protection and franchisee had to sue to enforce their rights.  The practical issue is that most franchisees who have been victims of sharp business practices of franchisor’s have no money to hire a lawyer.

Thus, don’t rely on anyone to protect your rights other than yourself.

Kevin O’Leary, host of  the television show Dragon’s Den and Shark Tank, is a screaming head who never a person he couldn’t talk over. Having said that, he should be admired as a canny entrepreneur and for understanding and exploiting the modern media game well- scream first, scream loud and scream last; it will get you on television. O’Leary is not a screaming head because he gives good advice, he’s a screaming head because, well, he screams (…and before you think television executives know better than you or I, think Jay Leno and NBC…)

Apropos to this approach of being loud and opinionated, if not necessarily right, Canadian Capitalist recently took O’Leary to task for confusing gross domestic product (GDP) growth with stock market growth. The concept makes for a great sound-bite. For an average investor, equating the two is analytically easy but most average investors also buy high and sell low.

Is there a link between GDP growth and stock market growth? A rising tide raises all boats but one does not necessarily equal the other. Why?

GDP is the market value of all goods and products produced by a country in any given period of time. To state this another way, GDP is a measurement of all public and private sector production. It does not measure profitability. Thus, a country with a large public sector or who controls a lot of the means of production, so much so that the western concepts of private property do not apply (read China), can experience rapid GDP growth without showing any profitability.

A share price is an expectation of future profit. If a publicly traded company is doing well presently, its share price tends to go up since the market has expectations it will continue to do well, if not better, through the reinvestment of profits to build the business. In other words, share price is a function of profitability and not necessarily production.

Thus, it is possible for GDP to grow while stock prices decline. The growth could be all in the public sector, at the expense of the private sector (think Venezuela seizing private property) which sends a chill throughout the entire market or simply inefficient growth making it harder for private enterprise to succeed (if you study modern Chinese history, most would be hard pressed to argue that GDP growth during the Great Leap Forward was efficient or effective).

In fact, corporate profits, the pillar of how share are priced, play a very small role in total GDP production. Charles Ellis, author of Winning the Loser’s Game, wrote that corporate profits consists only 4-6% of total GDP growth historically.  Since corporate profits represent such a narrow slice of total GDP, it is analytically lazy to think GDP growth = stock market growth automatically.  In fact, at such a small percentage, it is possible for corporate profits to flat-line and not effect GDP growth significantly.  Certainly, there is a connection between the two but its strength tends to be overstated.

As a final note, it is important not to be seduced by GDP growth when investing in emerging markets. Many emerging markets are growing through centrally planned economies (China), with heavy government involvement and ownership (Brazil) or regulated by an expansive and byzantine bureaucracy (India). The more practical issue is that with wealth not as evenly distributed in emerging markets as mature economies, it may be more advantageous for a few to horde the profits privately than the many publicly (Russia). Thus, there must be special attention paid not to confuse GDP growth with stock market growth in this context.

Preparing taxes is always a timely reminder that it is not what you are entitled to but what you can prove.  There are countless tax deductions and credits available to a taxpayer but do you have credible proof to claim it?  For example, you cannot prove a business expense with a credit card statement. You need the underlying receipt as well.

For some, the paperwork that is our financial lives gets paid or dealt with and promptly disposed of. How dangerous is this practice? Consider the following pitfalls:

• the obvious example is returns and exchanges are usually not honored without a receipt even if you bought a store made brand. After all, how does the retailer know you purchased the good within the time allowable for returns and exchanges?
• product warranties usually will not be honored without proof of purchase. For those relying on extended product warranties offered by credit cards, the card holder is typically required to show both the proof of purchase and the credit card statement in the month the product was purchased.
• if you are claiming capital gains or losses and you bought the same stock at different prices, you need the transaction records to calculate your adjusted cost base. This is particularly important if you are enrolled in a dividend reinvestment program.
• disputing your cell phone bill, gym membership or lease on your apartment? How can you stand up for your rights without the original contract? Given the other side will not give it to you, its like fighting blind.

What should be some key items to retain?

1. Receipts for large ticket items. I staple the receipt with the warranty and put all of the warranties and instructions in a file folder.
2. Financial statements. Statements setting out your investment portfolio and transactions of what was purchased or sold is important for claiming taxes. Even if you only trade in tax deferred accounts like RSP or 401(k), the statements show a pattern to your stock purchasing behaviour which can be used to adjust accordingly.  I put all of these in a large folder with tabs (one tab for non-registered, one tab for registered).
3. Credit card statements. See above for claiming extended warranty protection. I also keep them to track monthly spending patterns month over month. They are compiled annually and stored. Receipts are stapled onto the credit card statement (especially important for claiming business expenses).
4. Bank Statements. They should be read for a reason- failure to do so within a period of time means you agree to the statement. If there are errors you do not spot, you are liable for them. They should be kept for another reason- to reconcile your cheque book and to track spending.
5. Contracts.I usually put these in a large folder.

There is a lot of planned chaos in my financial record-keeping. I keep all my receipts in a large black clip and I staple them to the credit card statements when I receive them. Then I put all my credit card statements in a folder every other month or so. There’s a folder simply labeled “tax”. I put anything related to taxes in there over the course of the year and only look at it around this time of the year. Finally, I have a filing box which is just all the odds and ends that have no easy classification for me (credit card terms of use tend to die quiet deaths in this box).

In other words, one does not have to file meticulously every single item in a separate folder or have a degree in library science. The key is to know where to find something quickly if need be.

Am I missing any important documents which need to be filed?

School can be an expensive endeavor.  Tuition, books, room, food, spending money- it all adds up. What are some ways to save money if you are sending your kids away to school?

1. Budget

Have a very candid conversation before you send your kids to school on what you are willing to spend. Stick to it.  It will teach your child to live within your/their means if you stay disciplined on a budget and it will be a good life-learning lesson on personal finance. Better yet, have the both of you sit down and prepare a budget together. If there is a shortage in the budget, your child can always look for part-time work to make up the short-fall.

2. Think  prepaid

Instead of giving your kids a conventional credit card to spend at university or college, think about providing a prepaid credit card instead. Prepaid credit cards are like debit cards in that a certain amount of money are stored on the card and when the prepaid credit card runs out of cash it can no longer be used without it being topped up with more money (paid link).

Prepaid credit cards also avoid the issue of high interest rates and teaches someone to budget properly.

Similarly, instead of arming a child with a conventional cell phone, think prepaid cell phones. The concept is the same as the prepaid credit card. You preload a certain amount of time on the phone and once it is used up, the cell phone cannot be used without topping up more minutes; it will teach your children that nothing is free in life. Best of all, most prepaid cell phone carriers do not require you to sign a long term contract.

The issue with conventional cell phones is that roaming, SMS charges, long distance charges do add up (you may be better off buying a  long distance phone card if you are sending your kids away from home rather than get a long distance plan on a conventional phone).

3. Think second-hand

I used to like buying second-hand books simply because someone highlighted all the important sections for me! Text books also go out of date very quickly (how else is a professor to make side income then to put out new editions every few years) so there is no real value in buying new.

Refurnished computers are also a good bargain (and, really, a new computer with massive amounts of memory will be used to download music and movies and not for school-work).

4. It is a dorm room, not a hotel

My regular columnist, Mom2KG, gave me this tip (who, incidentally, I went to school with so I witnessed this first-hand when we went to school). Every orientation week, vendors attempt to rent/sell mini-fridges to people. These tend to be used for nothing more than storing booze, water and more booze. They tend to be luxuries more than anything else so skip the bells and whistles.

Also avoid buying a lot of items for the dorm room (lamps, posters, book shelves etc. ) at the university book store. They tend to be more expensive. One is better off making a Costco or Ikea run beforehand.

5. Do not forget free money

There’s a lot of grants, bursaries and scholarships that most people don’t apply to. People tend to focus on the large entrance scholarships and forget the smaller grants, bursaries and scholarships. Most universities are dying to give this money away. Encourage your child to apply early and apply often. In my last year of law school, they were dying to give money away. I remember people who could afford to cover their own way were still receiving bursaries because the University had to give it away.

During the recovery from the 1990′s recession, a lot of outrage was aimed at the fact that when a company announced lay-offs the stock market indexes went up; this appears to be a trend we have seen recently. But, if rising unemployment rates are a bad thing for the economy, why are stock indexes going up?

At its very core, unemployment rates and stock market indexes are lagging and leading economic indicators respectively. A lagging economic indicator is a snapshot of the past and may not be necessarily reflective of the here and now. For example, businesses tend to engage in massive lay-offs after the financial results are in for the previous quarter; management may have a feeling it is doing properly but until the bean-counters consolidate the financial statements, it is a feeling only. Thus, a lagging indicator tends to merely validate past events.

A leading economic indicator estimates future economic activity. Stock indexes are basically a measure of future expectation of profit. Building permits issued are indicators of potential upcoming real estate activity (there is a difference between an issued permits and a built permits; the former predicts the future, the latter measures the past- if you are a real estate investor, look for built permits not issued permits when conducting your due diligence; it is a truer measure of real estate activity). Leading indicators, because of their speculative nature, tend not to be accurate all the time so take leading indicators with a grain of salt.

Thus, you are not actually measuring apples to apples when you look at unemployment rates and stock market indexes. One looks back, the other forward.

However, more specifically, why do stock markets react positively to rising unemployment numbers? The answer may be two-fold. First, massive spikes in unemployment may signal a quick descent to the bottom and an imminent recovery, meaning a quick bounce back in stock prices. Second, from a quantitative perspective, lay-offs mean lower expenses which means a company can maintain the same level of business but make greater profits.

Both factors, despite a certain cold-heartedness to the analysis, tend to warm the hearts of traders who take this as a sign things will get better for the economic performance of a stock (although not necessarily for the common working person on unemployment insurance).

If you subscribe to the theory that the worse of the credit crisis is over and we are entering into a plain-old recession (a hunch to be sure in such unpredictable times), one factor to look for to validate this theory is to see if we are going to see the early 90′s behavior again of a parallel rise in unemployment rates and stock market indexes. A long and sustained rise in unemployment rates accompanied by a long and sustained fall in stock market indexes (think years for both) may validate the depression theorist out there. It may take the rest of 2009 and early 2010 for anyone to call it.

Have a safe and fun long weekend.

Someone I had not spoken to in years call me last week to catch up. In the course of the conversation, the caller, who is self-employed, made an off-handed comment about the economy being in a depression and how we needed to become self-employed soon. My one pet peeve lately is the rather liberal use of the term depression and how short of memories we all have.

Thus, I wanted to give some context of the current downturn vs. the early 1990′s using unemployment numbers as opposed to some media driven hysteria. My sources are the U.S. Department of Labor and Stats Canada. I noticed I can’t link to the specific search pages (the searches expiry as a link page) so I had to give you the general page.

What I have done is looked at when unemployment numbers begin to trend upwards and attempted to determine when they trend back down and counted the # of months the unemployment rate was high.

I am using as my assumption my economics 100 course in undergrad that 5% unemployment is a desirable unemployment rate- not too low to trigger inflation, not too high to slow the economy. However, I will make an allowance that a healthy unemployment rate is somewhere in the 5%’s.

United States

In March 1989, the unemployment rate was 5.0% . From this date to June 1990, the unemployment rate fluctuates in the 5%’s until hitting 5.2%. After that month, the unemployment spikes to 5.5% and begins an upwards and steady accent. I will mark July 1990 as the begin of steady job losses. Here are the average monthly unemployment rates until the rate settles back into the 5%’s:

July-Dec 1990: 5.92%
1991: 6.85%
1992: 7.49%
1993: 6.9%
Jan 1994-Aug 1994: 6.3% (the unemployment rate decreases to 5.9% in Sept. of that year and begins a decent for the remainder of 1994 and onward).

That’s 50 months between the unemployment rate begin a steady climb from 5.2% back to 5.9. Peak monthly unemployment occurs in June 1992 at 7.8%. This is not to suggest that it will take 50 months to a full job recovery but it did take 24 months from the commencement of the upward trend to peak unemployment in June 1992. After that, there is a steady, albeit slow, recovery on the job front.

Thus, based on the 1991 precedent, there’s a 24 month span of rising unemployment before the rate hits peak and drops (I understand that the unemployment rate does not differentiate between full and part time jobs and good jobs or bad jobs. This is merely a snapshot).

Canada

I had a much more difficult time finding monthly unemployment rates in Canada. I have had to rely on annual unemployment rates so the analysis is much more broadly based. In 1989, Canada’s unemployment rate was 7.5%; the lowest rate in the 1980′s. Thus, Canada was not in an optimal full employment state when the economy started going south.

The unemployment rate then begins the following upward trend of annual unemployment rates:

1990: 8.1%
1991: 10.2%
1992: 11.2%
1993: 11.4%

In 1994, the annual unemployment rate drops to 10.4% and drops every year until 2000. Because of the imprecise detail of the data, it appears that the Canada took longer to hit its unemployment peak (1993 as opposed to 1992) and the recovery took longer to unfold. In fact,  it took until 1999 for the Canadian unemployment rate to get back to where it was in 1989- a full 10 year recovery!

There are a wide variety of academic sources which studied Canada’s slower job recovery. I cite one factor below.

Today

The U.S. unemployment rate is at 7.2% at the end of December 2008. There has been a general tread upwards since May when the unemployment rate jumped from 5.0% to 5.5% with two big 0.4% leaps in the rate in August and December from the previous months. If you want to start the clock running on when unemployment begins to rise, May 2008 would be a good time for the starting point.

If you believe this rescission will unfolded similarly as 1991, that would make approximately spring 2010 when the unemployment rate peaks and begins to fall. This is based purely on a sample size on one so keep this in mind.

The Canadian unemployment rate stands at 6.6% as of December 2008.

What does this all mean?

Few random observations:

1. The Canadian recovery in the 1990′s took much longer in the U.S. for many reasons. One was Canada was running massive debts and deficits prior to that time and there was a very painful transition to balancing budgets. The government’s lack of financial flexibility to stimulate the economy most likely slowed the recovery. Will this happen in the U.S.?
2. It is way too early to press the depression button. Perhaps the “holy cow, its 1992 all over again!” button can be pressed (the 1991 recession was brought on in part by a speculative real estate bubble bursting and savings and loan bailouts- in smaller scales).
3. Just hope this does not become the 1982 recession. I took a quick over-view of the 1982 recession and it was ugly by any comparison.  For example, the American monthly unemployment rate was over 10% from Sept. 1982 to June 1983 and the American Central Bank Prime Rate was 12% in Oct. 1982  (source is WSJ); Canadian unemployment rate went from 7.6% to 11% in 1982; Bank of Canada Prime Rate was 11.53% in Oct. 1982. In other words, you had the worse of both words in 1982, high unemployment and high interest rates.

…is this another “normal” recession and, our collective memories being so short, we don’t remember what a recession truly feels like? I sit on in the “let’s not get hysteria” camp and believe what we have is a good old fashion recession, of which we have no collective memory of so we are paniking (think of your advisor in their 30′s or 40′s; they would have been in school during 1991 and not experienced the full force of the recession). Howerver, time will tell…

Someone asked me the other day what I thought about Congress trying to curb executive compensation as part of the (now failed) bail-out package. I responded that I believe this is one of those classic misdirections put out by the government where the public focuses on one thing which, emotionally, is a nice hot-button topic to  act as a smoke-screen for what truly is going on. Very slowly and very steadily, the greatest banking consolidation in history is happening right before our eyes with the government’s blessing and depending on your point of view, this is either one of the best or worse things to happen.

I am not a big believer in conspiracies and shadowy men in shadowy rooms plotting our collective demise.  The roots of the consolidation almost seems more accident than design. But, facts are facts. The early and clear winners in the credit crisis so far are (in no particular order):

1. Bank of America
2. JP Morgan Chase

..and watch Goldman Sachs (see below for why). What have these two done to become the big two so far?

Bank of America benefited from the collapse from Citigroup, its largest rival. If it did nothing else, it would come out better simply based on Citigroup’s implosion. But, in September 2007 (very early on in the credit crisis), it bought ABN Amro North America and LaSalle Bank basically handing BOA the market lead in Chicago and the mid-west.

In the short term, BOA mis-stepped by buying Countrywide Financial but, in the long term, just consolidated its hold on the residential mortgage market (Countrywide had 20% of the mortgage market in 2006). Then, BOA buys Merrill Lynch for an issuance of stock (which creates dilution issues and reduces ROE but keeps BOA cashed up for more acquisitions).

Merrill Lynch may not sound like much right now but its strength is a massive and aggressive sales force. Fuse this with BOA current products and bench strength and this is a long-term strategic acquisitoin.

The result? BOA is now the largest financial services company in the world.

JP Morgan Chase was featured in Fortune Magazine as the financial institution coming out smelling like roses (relatively speaking). It dumped a lot of toxic products before the crash. In the spring of this year, it bought Bear Stearns for effectively nothing. Yes, nothing. To quote Fortune Magazine: “Dimon [the CEO] paid virtually nothing for Bear – just look at the numbers: The $11.5 billion in cash on Bear’s books should fully offset the costs of the merger. Yet J.P. Morgan captured businesses worth as much as $15 billion…”

The kicker? The Federal Reserve backed all of Bear Stearns bad assets (remember this was the first bailout) so they bought the good parts of Bear Stearns and the tax-payer effectively bought the bad parts up.

Last week, JP Morgan Chase bought the assets of Washington Mutual (“WM”) for $1.9 billion from the government (who had seized the bank). Because this is an asset and not share sale, JP Morgan Chase effectively washed itself of most of the liabilities of WM. $1.9 billion sounds like a lot until you consider WM had $188.3 billion of deposits as of June 30, 2008. Assuming even a massive withdrawal of 50% of the deposit base in the intervening 3 months, JP Morgan Chase still stole WM and surpassed its arch-rival Citigroup as well.

You could say BOA turned itself into a powerhouse by aggressive management. JP Morgan Chase was basically handed the keys to the car by the government.

…and then there’s Goldman Sachs who turned itself into a deposit taking institution in September to be eligible for Federal Reserve help. More importantly, because it now has a deposit-base to mitigate against liquidity issues (remember the issue is not financial institutions have no cash; they have no short-term cash), it can “help” the government the same way as JP Morgan Chase. Guess where Henry Paulson, U.S. Treasury Secretary, use to work? He was CEO of Goldman Sachs. Think they may get thrown a few good deals now?

…my investment advisor had a good line yesterday- “this isn’t a crash. This is nothing but a huge transfer of wealth disguised as a crash.”

There’s an urban myth that the greatest number of millionaires was created during the Great Depression. I have never seen a statistic to back this up but I can see how, in great times of change, some dive for cover and others prosper.

In a couple of weeks, parents send their kids back to school which is the happiest or saddest day of the year depending on which side of the care-giver/dependent side of the fence you sit on and how long or short the summer was. For parents sending away their kids to college/university, the advice is the usual series of don’ts: don’t spend all your money, don’t party too much, don’t fall behind in class etc. etc. But how many parents actually tell their kids: “Don’t forget to apply for every bursary possible. Its free money. Apply early, apply often.“

When I went to law school, there was a general bursary fund awarded to students on their second degree if they could prove need by the second semester of school. “Need” was a bit of a loose term. I remember a class-mate who was quite well-off by student-terms (lived by themselves in a nice apartment in the good part of town, owned a car outright, not on student loans) who applied as a lark and got $1500. FREE MONEY. Now, if your sense of justice cries out that this classmate was abusing the system, I would actually suggest not. No one applied to this bursary so every year the school had excess money sitting around. They had to give the money away. They employed people to administer this program and, as urban myth had it, the employee was bored to tears. No one applied. Thus, it wasn’t like this class-mate was taking money away from more needy applicants. There was more than enough to go around.

One more story- I once won a $500 scholarship in undergrad. How? I was the only one that applied. In the entire country. Time to complete the application? About an hour. Other Costs? Try a $1.00 to photocopy my transcripts. $500.00 for one hours work is not bad. Hell, most lawyers don’t bill that much per hour. How did I find out about it? They desperately wanted someone to win and I happened to bump into someone who knew about the scholarship and lack of applicants.

It stupefies me how much free money we leave on the table. I was once asked by a client to research some grants opportunities for them. Starting a tech company in west of Manitoba? The feds have a grant for you. An entrepreneur in Prince Edward County? The province has a grant for you. Employing employees under 35? The feds will subsidize their wage. Hiring someone on EI? The feds and the province will pay for their first 6 months of salary. Yet, after speaking to some of these grant officers, NO ONE APPLIES. Entrepreneurs always need more money but they never bother researching grants, subsidies and low-interest loans and approach banks who are anything but small-business friendly.

There’s a ton of other examples: people not applying for child-care tax credits, not applying to your local city for rebates when you purchase energy saving products (City of Toronto gives you $60 if you buy a front-loading washer), not completely maxing out every single tax deduction you are eligible for, not applying for credit cards that give you cash back etc.

Since I don’t have a post tomorrow, I will leave you with this thought for the weekend- what parts of your life are you leaving money on the table? I do not mean being frugal. I mean instances were you could be eligible to receive money but do not do it because you don’t want to apply, you don’t look into it, you don’t think you will win etc.

For those with student loans, MoneyGrubbingLawyer gives some tips on tackling student debt (incidentally, isn’t the term Money Grubbing Lawyer redundant? Haha, sorry had to go there).

Have a great weekend.