Don Coxe loves commodities for the long run and that's what his new publicly traded fund will invest in. But the fund's prospectus makes a better case for financial institutions. Bank of Montreal, Mr. Coxe's employer and the promoter of the fund, will make a much better return on investment than investors.
The Coxe Commodity Strategy Fund, which made its debut yesterday, was a hot seller, raising the maximum $260-million. It's likely that the underwriters will exercise their overallotment rights, bringing the total gross take to just under $300-million.
Investors were obviously drawn to the commodity thesis. But they were also drawn to Mr. Coxe, the loquacious financial historian whose Basic Points publication is eagerly awaited by thousands of investors, big and small, every month.
Mr. Coxe has enjoyed a fairly good track record in recent years. He didn't predict the bull market in commodities but he embraced it early and, more important, he stuck to it. He wasn't the first to figure it out, nor the best at shifting from one commodity to the other, but he was no slouch and he had conviction, which is so rare in his world. His work and reputation has earned BMO Nesbitt Burns a lot of money and goodwill. The offering of Mr. Coxe's fund continues the trend, where money is concerned anyway.
Let's look at the numbers: Assuming the overallotment is exercised, the closed-end fund will raise $297.5-million. The investment bankers, led by BMO, will earn more than $15-million. The lawyers and auditors, etc., will earn a few hundred thousand. Net proceeds to the fund will by just over $280-million. That means that a unit sold for $10 is worth only $9.47 right out of the gate.
Those are pretty standard fees as far as equity offerings are concerned but this is an initial public offering for a closed-end fund. What's the risk to the underwriters? Nothing. All the underwriters had to do was "encourage" their sales force to sell the thing to clients. Investors had better hope Mr. Coxe and his stock pickers deliver because factoring in the IPO, management and trailer fees, the fund will have to earn almost 8 per cent in its first year just to skate investors back on side. Tough to do, especially when it will take six months to fully invest the fund.
Mr. Coxe is the fund's consultant, meaning he will advise on how to weight the fund's investment between various classes of commodities. He will also advise on stock selection, although the fund has a manager to pull the trigger on stocks. The fund can hedge currencies but has no plans to, which is surprising given Mr. Coxe's often strong views on the subject.
Having stock pickers might be a good thing, since in his writing Mr. Coxe tends to think in terms of asset classes, or subclasses, and then defer to the BMO research department for individual stocks.
The management fees will be split between the money manager (in this case Harris Investment Management, a BMO subsidiary), the administrator (another BMO subsidiary) and the consultant, Mr. Coxe, a BMO employee.
If you're not yet convinced of our bank-over-fund thesis, consider that best part of the story: The Coxe Commodity Strategy Fund has an excellent strategy on how to expand its asset base, and therefore fees, with very little effort.
The fund's securities are called "combined units," because they're actually one fund unit combined with a warrant. The warrant gives the investor the right to buy another unit in two years for $11.25, regardless of where the units are trading.
Sound good? Truth is, there's little to no advantage to the investor. Derivatives are a zero-sum proposition, so if all investors exercise their warrants, they all get diluted by the same amount. They gain nothing. The warrants will be tradable but in an efficient market that doesn't change anything. Not exercising, on the other hand, might hurt you.
So why include warrants? Because it makes it highly likely that the fund will grow if, in three years, the units are trading above $11.25. And since the underwriters will help themselves to 25 cents per warrant exercised, they'll make a few more million from that exercise. Plus, of course, the management and trailer fees will be applied to a bigger base. More money for the banks.
Mr. Coxe, in case you're wondering, can't invest in this fund because he's a U.S. resident. But if he could, why would he? He's better off earning his fees, salary, bonus and stock options from BMO. Like I said, it's a much better return on investment.
Coxe fund offers great returns for (BMO) investors
$million other than per unit figures
Gross proceeds to the fund $297.50
Agents' fees $15.30
Expenses of issue $0.60
Net proceeds to the fund $281.60
Net/unit $9.47
Selling price $10.00
Opening deficit 5.30%
Annualized trailer fees $1.10
Annualized management expense $4.40
Year one gain required to restore value $21.40
In percentage terms 7.60%
Fees earned by banks/dealers on warrant exercise $7.40
Incremental annualized MER/trailer fees if warrants exercised $6.50
Assumes over-allotment is exercised
Tuesday, May 27, 2008
Three raging bulls as oil barrels higher - SHIRLEY WON
Energy stock funds have been on a tear as the price of oil keeps soaring, and at least one fund manager is sinking more of his own cash into his portfolio because of his belief in the "peak oil" story.
Eric Sprott, portfolio manager and controlling shareholder of Sprott Asset Management Inc., invested some of the proceeds from the firm's recent initial public offering into his Sprott Energy Fund last Friday.
"I bought units in that fund, and not an insignificant amount," said Mr. Sprott, who estimates he now holds at least 10 per cent of the energy fund he manages.
"We have been believers for a number of years ... that we are in what we call the peak oil scenario, where the prices will rise essentially forever because the world needs more oil than it can possibly produce and, in fact, production will go lower," Mr. Sprott said in an interview yesterday.
The price of crude hit a record intraday high of $129.60 (U.S.) a barrel in New York yesterday after billionaire hedge fund manager T. Boone Pickens said oil would reach $150 a barrel this year. Oil then settled at a record close of $129.07.
"We are not surprised by oil being at $129 or natural gas being north of $11 [per million British thermal units] and going higher," Mr. Sprott said. "The demand for alternative energy are all things that we would totally expect to be happening. ... Within two years, I can imagine [oil] going to $200."
Canada has hit a peak in conventional oil production, while the U.S. did so in 1970, he said. "Russia looks like it peaked about four or five months ago."
Sprott Energy's biggest holding is Timminco Ltd., a producer of silicon for use in making solar cells. It also owns companies like Oilexco Inc., Pan Orient Energy Corp. and Corridor Resources Inc.
The fund also has a big investment in "what we call the Quebec shale-gas play," said Mr. Sprott, referring to potential unconventional natural gas reserves under the shale of the St. Lawrence lowlands.
Laura Lau, a portfolio manager at Sentry Select Capital Corp., also believes in the peak oil theory. "I do believe that production is diminishing, but I also believe that, with higher prices, there will be a supply response from non-conventional sources," like oil sands and gas shale, she said.
Ms. Lau, who co-manages the Sentry Select Canadian Energy Growth Fund, sees crude oil reaching $200 a barrel, but "I would not say it would be sustainable."
People will change their habits and drive smaller vehicles, while developing countries like China, which subsidize oil prices for their consumers, may not continue to do so, she said.
Ms. Lau expects a pullback in the oil price within the next three months because there is "lot of speculation" in the commodity, but doesn't see it falling below $90 a barrel.
While investors might be concerned about jumping into an energy fund given current high commodity prices, they should understand that those stocks are only pricing in oil at $75 to $85 a barrel, and natural gas at $7.50 to $8 per million BTUs, she said.
Some of her favourites energy plays include Oilexco because of its development and exploration prospects in the North Sea and because it "doesn't have a lot of hedges" on the price of crude oil like many of its peers. Pacific Rubiales Energy Corp., the "premier oil and gas company in Colombia," is also favourite, she added. "They have tripled production and tripled their margins in less than a year."
Meanwhile, Garey Aitken, a portfolio manager with Bissett Investment Management, said he is surprised by the swift rise in the oil price. "The big unknown is the speculative forces in the marketplace," he said.
But Mr. Aitken, who runs the Bissett Energy Fund, said he is more "more bullish on natural gas" prices than oil. "I think these high crude prices will drag along natural gas prices as we move through 2008," he said.
His fund, which focuses on smaller-company stocks, includes names like NuVista Energy Ltd., which has more exposure to natural gas than crude oil. He also likes Mullen Group Income Fund, whose operating company is involved not only in conventional trucking, but also transporting drilling rigs for the energy sector.
Mr. Aitken, however, said he is not a believer in the peak oil theory. While it is getting increasingly difficult for the energy industry globally to supply oil, increased demand will only "motivate the industry to bring on incremental, higher cost supply," he said.
"In four or five years, the industry will be supplying more and more crude oil than today," he predicted.
Energy funds have lots of pep
Returns (as of April 30)
Net Assets ($million) MER Year-to-date return 1-year 3-years 5-years 10-years
Bissett Energy CC-A $5.8 2.5% 40.8% - - - -
Dynamic FocusPlus Energy Inc Trust $438.8 2.3% 31.0% 22.9% 16.3% - -
Sprott Energy $222.9 2.9% 30.8% 15.5% 22.7% - -
Sentry Select Canadian Energy Grwth $20.9 3.2% 30.3% 12.0% 12.2% 18.5% 13.1%
iShares CDN Energy Sector Index $543.3 0.6% 29.3% 20.9% 23.3% 28.4%
Sentry Select Cdn Energy Grwth Cl $4.5 3.3% 28.9% 11.0% - - -
RBC Global Energy $568.8 2.1% 21.7% 16.2% 20.4% 27.4% 16.1%
Altamira Energy Fund $18.6 2.9% 21.4% 11.0% 22.1% - -
TD Energy $271.4 2.2% 21.4% 9.5% 19.2% 25.5% 13.2%
Claymore Oil Sands Sector ETF $21.1 0.6% 21.1% 24.7% - - -
Qwest Energy Canadian Resource Cl - 3.5% 20.9% 9.6% - - -
Dynamic Global Energy Class $3.0 - 20.5% - - - -
CI Global Energy Corporate Class $193.2 2.3% 19.8% 16.1% 22.8% 31.0% -
CIBC Energy $172.4 2.4% 17.5% - 2.9% 14.1% 24.7% 14.4%
DOUGLAS COULL/THE GLOBE AND MAIL
SOURCE: GLOBEINVESTOR.COM
Eric Sprott, portfolio manager and controlling shareholder of Sprott Asset Management Inc., invested some of the proceeds from the firm's recent initial public offering into his Sprott Energy Fund last Friday.
"I bought units in that fund, and not an insignificant amount," said Mr. Sprott, who estimates he now holds at least 10 per cent of the energy fund he manages.
"We have been believers for a number of years ... that we are in what we call the peak oil scenario, where the prices will rise essentially forever because the world needs more oil than it can possibly produce and, in fact, production will go lower," Mr. Sprott said in an interview yesterday.
The price of crude hit a record intraday high of $129.60 (U.S.) a barrel in New York yesterday after billionaire hedge fund manager T. Boone Pickens said oil would reach $150 a barrel this year. Oil then settled at a record close of $129.07.
"We are not surprised by oil being at $129 or natural gas being north of $11 [per million British thermal units] and going higher," Mr. Sprott said. "The demand for alternative energy are all things that we would totally expect to be happening. ... Within two years, I can imagine [oil] going to $200."
Canada has hit a peak in conventional oil production, while the U.S. did so in 1970, he said. "Russia looks like it peaked about four or five months ago."
Sprott Energy's biggest holding is Timminco Ltd., a producer of silicon for use in making solar cells. It also owns companies like Oilexco Inc., Pan Orient Energy Corp. and Corridor Resources Inc.
The fund also has a big investment in "what we call the Quebec shale-gas play," said Mr. Sprott, referring to potential unconventional natural gas reserves under the shale of the St. Lawrence lowlands.
Laura Lau, a portfolio manager at Sentry Select Capital Corp., also believes in the peak oil theory. "I do believe that production is diminishing, but I also believe that, with higher prices, there will be a supply response from non-conventional sources," like oil sands and gas shale, she said.
Ms. Lau, who co-manages the Sentry Select Canadian Energy Growth Fund, sees crude oil reaching $200 a barrel, but "I would not say it would be sustainable."
People will change their habits and drive smaller vehicles, while developing countries like China, which subsidize oil prices for their consumers, may not continue to do so, she said.
Ms. Lau expects a pullback in the oil price within the next three months because there is "lot of speculation" in the commodity, but doesn't see it falling below $90 a barrel.
While investors might be concerned about jumping into an energy fund given current high commodity prices, they should understand that those stocks are only pricing in oil at $75 to $85 a barrel, and natural gas at $7.50 to $8 per million BTUs, she said.
Some of her favourites energy plays include Oilexco because of its development and exploration prospects in the North Sea and because it "doesn't have a lot of hedges" on the price of crude oil like many of its peers. Pacific Rubiales Energy Corp., the "premier oil and gas company in Colombia," is also favourite, she added. "They have tripled production and tripled their margins in less than a year."
Meanwhile, Garey Aitken, a portfolio manager with Bissett Investment Management, said he is surprised by the swift rise in the oil price. "The big unknown is the speculative forces in the marketplace," he said.
But Mr. Aitken, who runs the Bissett Energy Fund, said he is more "more bullish on natural gas" prices than oil. "I think these high crude prices will drag along natural gas prices as we move through 2008," he said.
His fund, which focuses on smaller-company stocks, includes names like NuVista Energy Ltd., which has more exposure to natural gas than crude oil. He also likes Mullen Group Income Fund, whose operating company is involved not only in conventional trucking, but also transporting drilling rigs for the energy sector.
Mr. Aitken, however, said he is not a believer in the peak oil theory. While it is getting increasingly difficult for the energy industry globally to supply oil, increased demand will only "motivate the industry to bring on incremental, higher cost supply," he said.
"In four or five years, the industry will be supplying more and more crude oil than today," he predicted.
Energy funds have lots of pep
Returns (as of April 30)
Net Assets ($million) MER Year-to-date return 1-year 3-years 5-years 10-years
Bissett Energy CC-A $5.8 2.5% 40.8% - - - -
Dynamic FocusPlus Energy Inc Trust $438.8 2.3% 31.0% 22.9% 16.3% - -
Sprott Energy $222.9 2.9% 30.8% 15.5% 22.7% - -
Sentry Select Canadian Energy Grwth $20.9 3.2% 30.3% 12.0% 12.2% 18.5% 13.1%
iShares CDN Energy Sector Index $543.3 0.6% 29.3% 20.9% 23.3% 28.4%
Sentry Select Cdn Energy Grwth Cl $4.5 3.3% 28.9% 11.0% - - -
RBC Global Energy $568.8 2.1% 21.7% 16.2% 20.4% 27.4% 16.1%
Altamira Energy Fund $18.6 2.9% 21.4% 11.0% 22.1% - -
TD Energy $271.4 2.2% 21.4% 9.5% 19.2% 25.5% 13.2%
Claymore Oil Sands Sector ETF $21.1 0.6% 21.1% 24.7% - - -
Qwest Energy Canadian Resource Cl - 3.5% 20.9% 9.6% - - -
Dynamic Global Energy Class $3.0 - 20.5% - - - -
CI Global Energy Corporate Class $193.2 2.3% 19.8% 16.1% 22.8% 31.0% -
CIBC Energy $172.4 2.4% 17.5% - 2.9% 14.1% 24.7% 14.4%
DOUGLAS COULL/THE GLOBE AND MAIL
SOURCE: GLOBEINVESTOR.COM
Investors offered easier way to buy hot Israeli stocks - DALE JACKSON
North American investors can commemorate Israel's 60th anniversary by owning a part of the country's benchmark index without the hassle of investing overseas.
Starting today, the first overseas exchange-traded fund that tracks the Tel Aviv Stock Exchange's TA-25 begins trading on the New York Stock Exchange under the symbol TAV.
Chicago-based Northern Trust Corp. is introducing the NETS TA-25 Index Fund as part of a series of foreign ETFs that include South Africa and Portugal.
Israeli equities have surged 150 per cent over the past five years, thanks in part to a rapidly emerging pharmaceutical, medical equipment and technology sector. The country's gross domestic product has been growing at a steady pace of 4 to 5 per cent a year and is expected to continue at that rate to 2012.
The changing face of Israel is prompting debate over the country's developing market status. Morgan Stanley lists it as an emerging market but next month the FTSE Group will upgrade Israel to the same designation as the United States, Europe and Japan.
"It's a country in the process of graduating to developed market," says Northern Trust chief investment officer Steven Schoenfeld. "It's moving to the big leagues on the economic scene."
The Tel Aviv Stock Exchange, or TASE, has a combined market value of $232-billion (U.S.). The TA-25 index tracks the shares of the 25 companies with the highest market capitalization. Nearly half of the TA-25 companies are industrials and 40 per cent are financials.
Most Canadian trading accounts currently have direct access to a vast array of Israeli stocks listed on U.S. exchanges. In fact, Israel is second only to Canada in terms of the number of stocks from a foreign country listed in the United States. However, Mr. Schoenfeld says most Israeli companies listed in the U.S., such as Checkpoint Systems and Amdocs, are too narrowly focused on global technology. "You don't have a complete Israeli portfolio without also having the domestically listed stocks. What this ETF provides is easy access for Canadian investors to the Tel Aviv-listed stocks where they don't have to worry about converting to shekels."
Cliff Goldstein has first-hand experience with both the unofficial and official Israeli equity markets. His Pennsylvania-based $3.7-billion Amidex 35 Israel index fund has been investing in the 35 largest Israeli companies trading in both countries for the past decade. He says he has witnessed a stark change in the nature of both markets. "We put in the New York side for stability and growth and the Tel Aviv side for volatility and risk. What we discovered was exactly the opposite."
Mr. Goldstein says Israel's maturing domestic economy and diversified export base have acted as a cushion against the U.S.-based credit crunch and the threat of inflation from Asia. "Israel has become a huge exporter to the world and they ain't selling oranges any more."
He expects established technology exports to continue driving the Israeli equity market. One of his holdings and the darling of global equity markets is Teva Pharmaceuticals - the largest distributor of antibiotics in the world.
Banking and insurance is the largest weighting in the Amidex 35 fund at 18 per cent, with technology accounting for 16 per cent and chemicals taking a 13-per-cent stake.
He also sees opportunity in the further privatization of public enterprises and the transfer of military technology for civilian uses. But he adds that the future for Israel is environmentally related industries. "The hot up-and-comer is green-related technologies; from water desalinization to electric cars to solar panels to hydrogen-powered vehicles."
However, as Israel looks forward to the next 60 years, investors must still come to terms with the ghosts of its past. Decades of political tension and acts of violence between the Jewish state and its Arab neighbours continues. Mr. Goldstein says that in his experience, there has never been any direct correlation between political and military events and Israeli business performance. "The fact that 50 shoppers were injured in a mall in the south of Israel is not going to affect Teva Pharmaceutical's ability to make drugs in Horsham, Pa., and ship them to India."
Amidex 35 Israel is a U.S. mutual fund and is not available in Canada for regulatory reasons. In addition to the Northern Trust TA-25 fund, investors wanting direct exposure to Israeli equities can purchase the NYSE-traded iShares MSCI Israel Capped Investable Market Index Fund, which tracks a broader assortment of stocks traded primarily on the TASE.
Starting today, the first overseas exchange-traded fund that tracks the Tel Aviv Stock Exchange's TA-25 begins trading on the New York Stock Exchange under the symbol TAV.
Chicago-based Northern Trust Corp. is introducing the NETS TA-25 Index Fund as part of a series of foreign ETFs that include South Africa and Portugal.
Israeli equities have surged 150 per cent over the past five years, thanks in part to a rapidly emerging pharmaceutical, medical equipment and technology sector. The country's gross domestic product has been growing at a steady pace of 4 to 5 per cent a year and is expected to continue at that rate to 2012.
The changing face of Israel is prompting debate over the country's developing market status. Morgan Stanley lists it as an emerging market but next month the FTSE Group will upgrade Israel to the same designation as the United States, Europe and Japan.
"It's a country in the process of graduating to developed market," says Northern Trust chief investment officer Steven Schoenfeld. "It's moving to the big leagues on the economic scene."
The Tel Aviv Stock Exchange, or TASE, has a combined market value of $232-billion (U.S.). The TA-25 index tracks the shares of the 25 companies with the highest market capitalization. Nearly half of the TA-25 companies are industrials and 40 per cent are financials.
Most Canadian trading accounts currently have direct access to a vast array of Israeli stocks listed on U.S. exchanges. In fact, Israel is second only to Canada in terms of the number of stocks from a foreign country listed in the United States. However, Mr. Schoenfeld says most Israeli companies listed in the U.S., such as Checkpoint Systems and Amdocs, are too narrowly focused on global technology. "You don't have a complete Israeli portfolio without also having the domestically listed stocks. What this ETF provides is easy access for Canadian investors to the Tel Aviv-listed stocks where they don't have to worry about converting to shekels."
Cliff Goldstein has first-hand experience with both the unofficial and official Israeli equity markets. His Pennsylvania-based $3.7-billion Amidex 35 Israel index fund has been investing in the 35 largest Israeli companies trading in both countries for the past decade. He says he has witnessed a stark change in the nature of both markets. "We put in the New York side for stability and growth and the Tel Aviv side for volatility and risk. What we discovered was exactly the opposite."
Mr. Goldstein says Israel's maturing domestic economy and diversified export base have acted as a cushion against the U.S.-based credit crunch and the threat of inflation from Asia. "Israel has become a huge exporter to the world and they ain't selling oranges any more."
He expects established technology exports to continue driving the Israeli equity market. One of his holdings and the darling of global equity markets is Teva Pharmaceuticals - the largest distributor of antibiotics in the world.
Banking and insurance is the largest weighting in the Amidex 35 fund at 18 per cent, with technology accounting for 16 per cent and chemicals taking a 13-per-cent stake.
He also sees opportunity in the further privatization of public enterprises and the transfer of military technology for civilian uses. But he adds that the future for Israel is environmentally related industries. "The hot up-and-comer is green-related technologies; from water desalinization to electric cars to solar panels to hydrogen-powered vehicles."
However, as Israel looks forward to the next 60 years, investors must still come to terms with the ghosts of its past. Decades of political tension and acts of violence between the Jewish state and its Arab neighbours continues. Mr. Goldstein says that in his experience, there has never been any direct correlation between political and military events and Israeli business performance. "The fact that 50 shoppers were injured in a mall in the south of Israel is not going to affect Teva Pharmaceutical's ability to make drugs in Horsham, Pa., and ship them to India."
Amidex 35 Israel is a U.S. mutual fund and is not available in Canada for regulatory reasons. In addition to the Northern Trust TA-25 fund, investors wanting direct exposure to Israeli equities can purchase the NYSE-traded iShares MSCI Israel Capped Investable Market Index Fund, which tracks a broader assortment of stocks traded primarily on the TASE.
Memo to women in power positions: You must never let your guard down - Harvey Schachter
Nini DeSesa, chairman of McCann Erickson's New York office, says she is seeing many good women reach the top of the corporate pyramid only to come coppling down. She gives five tips to women with power who would like to avoid such a fate:
Don't Become Drunk With Power
Once at the top, many women seem to forget the negotiating skills that got them there, Ms. DiSesa says. "Our democratic 'female' patience is replaced by the more efficient 'male' dictatorship. It seems far easier to just tell people what to do than it is to keep negotiating for peaceful collaboration," she writes in Executive Excellence. Men aren't punished for that failing since they aren't expected to be nurturing, but there are different expectations for women - so when they aren't seen to be nurturing, it's often described as a betrayal of trust.
Don't Stop Reading The Room
There is an arrogance that can accompany being top dog. Suddenly everyone is trying to read you - second guessing you, and sucking up to you. Instant power can give a false sense of security, and women may drop their defences. But they aren't invincible, particularly if brought in from the outside. If you aren't doing the expected job or disgruntled subordinates are undermining you with innuendo, you could be in for a nasty surprise. Never stop reading the room to distinguish between the people watching your back to protect it and those using it for target practice.
Avoid Becoming 'a Real Bitch'
Some women who have attained power aren't just tough or firm. They can become "bitches," Ms. DiSesa says. They treat subordinates badly, keeping them out of the loop, hoarding information. They don't listen to anyone else and micromanage. Women at the top can adopt many of the 'male characteristics' they admire, but must be wary of gender differences in terms of expectations. "It's okay to be decisive, courageous and focused - as long as we are also collaborative, nurturing, and empathetic," she writes.
Remember: Make Rain
Women take the reins but sometimes forget they are held to the same standard as men: Make money or get out. Ms. DiSesa notes a blog posting titled How Five Women CEOs destroyed Confidence in the U.S. Economy. "They didn't have a list of five men who had screwed up," she writes. "There is a double standard, but no one seems to argue with the almighty buck."
Don't Forget to Be Better Than Men
The double standard remains, even at the top, so women can't relax. "We must always work smarter, think better, manage more humanely, and be more patient than men," she says.
Don't Become Drunk With Power
Once at the top, many women seem to forget the negotiating skills that got them there, Ms. DiSesa says. "Our democratic 'female' patience is replaced by the more efficient 'male' dictatorship. It seems far easier to just tell people what to do than it is to keep negotiating for peaceful collaboration," she writes in Executive Excellence. Men aren't punished for that failing since they aren't expected to be nurturing, but there are different expectations for women - so when they aren't seen to be nurturing, it's often described as a betrayal of trust.
Don't Stop Reading The Room
There is an arrogance that can accompany being top dog. Suddenly everyone is trying to read you - second guessing you, and sucking up to you. Instant power can give a false sense of security, and women may drop their defences. But they aren't invincible, particularly if brought in from the outside. If you aren't doing the expected job or disgruntled subordinates are undermining you with innuendo, you could be in for a nasty surprise. Never stop reading the room to distinguish between the people watching your back to protect it and those using it for target practice.
Avoid Becoming 'a Real Bitch'
Some women who have attained power aren't just tough or firm. They can become "bitches," Ms. DiSesa says. They treat subordinates badly, keeping them out of the loop, hoarding information. They don't listen to anyone else and micromanage. Women at the top can adopt many of the 'male characteristics' they admire, but must be wary of gender differences in terms of expectations. "It's okay to be decisive, courageous and focused - as long as we are also collaborative, nurturing, and empathetic," she writes.
Remember: Make Rain
Women take the reins but sometimes forget they are held to the same standard as men: Make money or get out. Ms. DiSesa notes a blog posting titled How Five Women CEOs destroyed Confidence in the U.S. Economy. "They didn't have a list of five men who had screwed up," she writes. "There is a double standard, but no one seems to argue with the almighty buck."
Don't Forget to Be Better Than Men
The double standard remains, even at the top, so women can't relax. "We must always work smarter, think better, manage more humanely, and be more patient than men," she says.
Saturday, May 10, 2008
Dennis Gartman's Rules of Trading
R U L E # 1
Never, ever, under any circumstance, should one add to a losing position ... not EVER!
Averaging down into a losing trade is the only thing that will assuredly take you out of the investment business. This is what took LTCM out. This is what took Barings Brothers out; this is what took Sumitomo Copper out, and this is what takes most losing investors out.
R U L E # 2
Never, ever, under any circumstance, should one add to a losing position ... not EVER!
We trust our point is made. If "location, location, location" are the first three rules of investing in real estate, then the first two rules of trading equities, debt, commodities, currencies, and so on are these: never add to a losing position.
R U L E # 3
Learn to trade like a mercenary guerrilla.
The great Jesse Livermore once said that it is not our duty to trade upon the bullish side, nor the bearish side, but upon the winning side. This is brilliance of the first order. We must indeed learn to fight/invest on the winning side, and we must be willing to change sides immediately when one side has gained the upper hand.
R U L E # 4 DON'T HOLD ON TO LOSING POSITIONS
Capital is in two varieties: Mental and Real, and, of the two, the mental capital is the most important.
Holding on to losing positions costs real capital as one's account balance is depleted, but it can exhaust one's mental capital even more seriously as one holds to the losing trade, becoming more and more fearful with each passing minute, day and week, avoiding potentially profitable trades while one nurtures the losing position.
R U L E # 5 GO WHERE THE STRENGTH IS
The objective of what we are after is not to buy low and to sell high, but to buy high and to sell higher, or to sell short low and to buy lower.
We can never know what price is really "low," nor what price is really "high." We can, however, have a modest chance at knowing what the trend is and acting on that trend. We can buy higher and we can sell higher still if the trend is up. Conversely, we can sell short at low prices and we can cover at lower prices if the trend is still down. However, we've no idea how high high is, nor how low low is.
R U L E # 6
Sell markets that show the greatest weakness; buy markets that show the greatest strength.
Metaphorically, when bearish we need to throw our rocks into the wettest paper sack for it will break the most readily, while in bull markets we need to ride the strongest wind for it shall carry us farther than others.
R U L E # 7
In a Bull Market we can only be long or neutral; in a bear market we can only be bearish or neutral.
In a bull market we can be neutral, modestly long, or aggressively long--getting into the last position after a protracted bull run into which we've added to our winning position all along the way. Conversely, in a bear market we can be neutral, modestly short, or aggressively short, but never, ever can we--or should we--be the opposite way even so slightly.
R U L E # 8
"Markets can remain illogical far longer than you or I can remain solvent."
The University of Chicago "boys" have argued for decades that the markets are rational, but we in the markets every day know otherwise. We must learn to accept that irrationality, deal with it, and move on.
R U L E # 9
Trading runs in cycles; some are good, some are bad, and there is nothing we can do about that other than accept it and act accordingly.
Thus, when things are going well, trade often, trade large, and try to maximize the good fortune that is being bestowed upon you. However, when trading poorly, trade infrequently, trade very small, and continue to get steadily smaller until the winds have changed and the trading "gods" have chosen to smile upon you once again.
R U L E # 10
To trade/invest successfully, think like a fundamentalist; trade like a technician.
It is obviously imperative that we understand the economic fundamentals that will drive a market higher or lower, but we must understand the technicals as well. When we do, then and only then can we, or should we, trade.
R U L E # 11
Keep your technical systems simple.
The greatest traders/investors we've had the honor to know over the years continue to employ the simplest trading schemes. They draw simple trend lines, they see and act on simple technical signals, they react swiftly, and they attribute it to their knowledge gained over the years that complexity is the home of the young and untested.
R U L E # 12
In trading/investing, an understanding of mass psychology is often more important than an understanding of economics.
Markets are, as we like to say, the sum total of the wisdom and stupidity of all who trade in them, and they are collectively given over to the most basic components of the collective psychology. The dot-com bubble was indeed a bubble, but it grew from a small group to a larger group to the largest group, collectively fed by mass mania, until it ended. The economists among us missed the bull-run entirely, but that proves only that markets can indeed remain irrational, and that economic fundamentals may eventually hold the day but in the interim, psychology holds the moment.
And finally the most important rule of all:
R U L E # 13
Do more of that which is working and do less of that which is not.
This is a simple rule in writing; this is a difficult rule to act upon. However, it synthesizes all the modest wisdom we've accumulated over thirty years of watching and trading in markets. Adding to a winning trade while cutting back on losing trades is the one true rule that holds--and it holds in life as well as in trading/investing.
Never, ever, under any circumstance, should one add to a losing position ... not EVER!
Averaging down into a losing trade is the only thing that will assuredly take you out of the investment business. This is what took LTCM out. This is what took Barings Brothers out; this is what took Sumitomo Copper out, and this is what takes most losing investors out.
R U L E # 2
Never, ever, under any circumstance, should one add to a losing position ... not EVER!
We trust our point is made. If "location, location, location" are the first three rules of investing in real estate, then the first two rules of trading equities, debt, commodities, currencies, and so on are these: never add to a losing position.
R U L E # 3
Learn to trade like a mercenary guerrilla.
The great Jesse Livermore once said that it is not our duty to trade upon the bullish side, nor the bearish side, but upon the winning side. This is brilliance of the first order. We must indeed learn to fight/invest on the winning side, and we must be willing to change sides immediately when one side has gained the upper hand.
R U L E # 4 DON'T HOLD ON TO LOSING POSITIONS
Capital is in two varieties: Mental and Real, and, of the two, the mental capital is the most important.
Holding on to losing positions costs real capital as one's account balance is depleted, but it can exhaust one's mental capital even more seriously as one holds to the losing trade, becoming more and more fearful with each passing minute, day and week, avoiding potentially profitable trades while one nurtures the losing position.
R U L E # 5 GO WHERE THE STRENGTH IS
The objective of what we are after is not to buy low and to sell high, but to buy high and to sell higher, or to sell short low and to buy lower.
We can never know what price is really "low," nor what price is really "high." We can, however, have a modest chance at knowing what the trend is and acting on that trend. We can buy higher and we can sell higher still if the trend is up. Conversely, we can sell short at low prices and we can cover at lower prices if the trend is still down. However, we've no idea how high high is, nor how low low is.
R U L E # 6
Sell markets that show the greatest weakness; buy markets that show the greatest strength.
Metaphorically, when bearish we need to throw our rocks into the wettest paper sack for it will break the most readily, while in bull markets we need to ride the strongest wind for it shall carry us farther than others.
R U L E # 7
In a Bull Market we can only be long or neutral; in a bear market we can only be bearish or neutral.
In a bull market we can be neutral, modestly long, or aggressively long--getting into the last position after a protracted bull run into which we've added to our winning position all along the way. Conversely, in a bear market we can be neutral, modestly short, or aggressively short, but never, ever can we--or should we--be the opposite way even so slightly.
R U L E # 8
"Markets can remain illogical far longer than you or I can remain solvent."
The University of Chicago "boys" have argued for decades that the markets are rational, but we in the markets every day know otherwise. We must learn to accept that irrationality, deal with it, and move on.
R U L E # 9
Trading runs in cycles; some are good, some are bad, and there is nothing we can do about that other than accept it and act accordingly.
Thus, when things are going well, trade often, trade large, and try to maximize the good fortune that is being bestowed upon you. However, when trading poorly, trade infrequently, trade very small, and continue to get steadily smaller until the winds have changed and the trading "gods" have chosen to smile upon you once again.
R U L E # 10
To trade/invest successfully, think like a fundamentalist; trade like a technician.
It is obviously imperative that we understand the economic fundamentals that will drive a market higher or lower, but we must understand the technicals as well. When we do, then and only then can we, or should we, trade.
R U L E # 11
Keep your technical systems simple.
The greatest traders/investors we've had the honor to know over the years continue to employ the simplest trading schemes. They draw simple trend lines, they see and act on simple technical signals, they react swiftly, and they attribute it to their knowledge gained over the years that complexity is the home of the young and untested.
R U L E # 12
In trading/investing, an understanding of mass psychology is often more important than an understanding of economics.
Markets are, as we like to say, the sum total of the wisdom and stupidity of all who trade in them, and they are collectively given over to the most basic components of the collective psychology. The dot-com bubble was indeed a bubble, but it grew from a small group to a larger group to the largest group, collectively fed by mass mania, until it ended. The economists among us missed the bull-run entirely, but that proves only that markets can indeed remain irrational, and that economic fundamentals may eventually hold the day but in the interim, psychology holds the moment.
And finally the most important rule of all:
R U L E # 13
Do more of that which is working and do less of that which is not.
This is a simple rule in writing; this is a difficult rule to act upon. However, it synthesizes all the modest wisdom we've accumulated over thirty years of watching and trading in markets. Adding to a winning trade while cutting back on losing trades is the one true rule that holds--and it holds in life as well as in trading/investing.
Wednesday, February 27, 2008
How to contribute, besides early and often
What it is
A registered retirement savings plan (RRSP), registered with Canada Revenue Agency, is intended to help Canadians save for retirement.
The money you invest in your RRSP is tax-deductible and the accumulated income grows tax-free until you withdraw the funds.
When you cash in your RRSP, or make a withdrawal from it, you usually have to pay tax. But when this is done in retirement, you will likely be in a lower tax bracket than when you were earning income.
How to do it
You can open an RRSP when you are 18, or as soon as you start earning income. As many experts point out, the earlier you start saving, the more you will accrue, thanks to the effects of compounded interest.
You will need a Social Insurance Number so your plan can be registered with the government.
You can set up your RRSP at any financial institution, such as your bank, credit union, trust or insurance company; there, you can also get advice about what sorts of investments are eligible. These include cash, guaranteed income certificates, mutual funds, and publicly traded stocks and bonds.
After you make a contribution, you will get a receipt to file with your income tax form; your contribution will count as a tax deduction.
You can make RRSP investments with more than one financial institution but because each one will be registered to your SIN, they will all be part of your RRSP portfolio. (When people talk about "buying an RRSP" they mean "making a contribution to my RRSP.")
Deadline alert
You have until Friday, Feb. 29, to make your contribution for the 2007 tax year.
Contribution limits
Generally, the amount you can invest in your RRSP for a given tax year is determined by your "deduction limit," also known as contribution room, which is calculated by Canada Revenue Agency.
Your personal limit is shown on the CRA "Notice of Assessment" that would have been sent to you after your 2006 tax return was processed.
You can also contact a CRA tax office, or inquire online at http://www.cra-arc.gc.ca to find out what your limit is. (If you belong to an employer-sponsored pension plan, your limit will take that into account.)
For the 2007 tax year, the most you can put into your RRSP is $19,000. If you are carrying forward unused contribution room from previous years, however, you may be allowed to contribute more.
If you exceed your limit, that is considered an over-contribution - which may be subject to a tax of 1 per cent per month. The lifetime allowance for over-contributions is $2,000.
Foreign assets
As of Jan. 1, 2005, you are allowed to hold foreign properties in your RRSP with no limits.
Self-directed RRSPs
With a self-directed RRSP, you can manage your own portfolio by investing in a variety of instruments - cash, bonds, shares, mutual funds, or even your mortgage. If you're considering this type of plan, it's wise to get advice from your financial institution or a professional financial adviser.
Spousal RRSPs
A spousal or common-law partner plan can ease the tax burden in a couple's retirement years if one spouse expects to have a significantly higher income than the other. The higher-income spouse makes the RRSP contributions and gets the tax deductions at the time - but the plan is registered in the name of the lower-income spouse, who can withdraw funds from it later.
Making withdrawals
Ideally, your RRSP is set up for the long term. But you can withdraw part, or all, of your savings at any time - so long as you realize that the money you withdraw becomes income and you will likely have to pay tax on it.
The government does have two programs that let you borrow from your RRSP without having to pay tax, so long as you meet certain requirements:
One is the Home Buyers' Plan. It's a one-time-only program that lets you withdraw up to $20,000 from your RRSP to buy your first home (but not subsequent homes or secondary properties); at least 1/15th of the amount you borrow must be repaid to your RRSP, starting two years after you make the withdrawal.
The other federal program is the Lifelong Learning Plan, which helps pay for postsecondary education or full-time training. You can withdraw up to $10,000 per calendar year from your RRSP for this purpose (to a maximum of $20,000 over four consecutive years). The student can be you or your spouse, but not your children. You then have to repay to your RRSP at least 10 per cent of the borrowed amount each year, over a maximum of 10 years.
RRSP lifespan
The last day on which you can contribute to your RRSP is Dec. 31 of the year in which you turn 71.
That is also the deadline by which you must close out your plan.
Most Canadians transfer their RRSP assets to a registered retirement income fund (RRIF) or buy an annuity with all or part of the proceeds. You could also convert your plan to cash and withdraw in one lump sum, but that would likely result in a very large tax bill.
Sources: Canada Revenue Agency, CARP websites
*****
Work ethic
56%
Proportion of Canadians who say they plan to work as long as possible.
38%
Portion who expect to work past age 65.
82%
Portion of Canadians who say they would keep working even if they had enough money to retire.
A registered retirement savings plan (RRSP), registered with Canada Revenue Agency, is intended to help Canadians save for retirement.
The money you invest in your RRSP is tax-deductible and the accumulated income grows tax-free until you withdraw the funds.
When you cash in your RRSP, or make a withdrawal from it, you usually have to pay tax. But when this is done in retirement, you will likely be in a lower tax bracket than when you were earning income.
How to do it
You can open an RRSP when you are 18, or as soon as you start earning income. As many experts point out, the earlier you start saving, the more you will accrue, thanks to the effects of compounded interest.
You will need a Social Insurance Number so your plan can be registered with the government.
You can set up your RRSP at any financial institution, such as your bank, credit union, trust or insurance company; there, you can also get advice about what sorts of investments are eligible. These include cash, guaranteed income certificates, mutual funds, and publicly traded stocks and bonds.
After you make a contribution, you will get a receipt to file with your income tax form; your contribution will count as a tax deduction.
You can make RRSP investments with more than one financial institution but because each one will be registered to your SIN, they will all be part of your RRSP portfolio. (When people talk about "buying an RRSP" they mean "making a contribution to my RRSP.")
Deadline alert
You have until Friday, Feb. 29, to make your contribution for the 2007 tax year.
Contribution limits
Generally, the amount you can invest in your RRSP for a given tax year is determined by your "deduction limit," also known as contribution room, which is calculated by Canada Revenue Agency.
Your personal limit is shown on the CRA "Notice of Assessment" that would have been sent to you after your 2006 tax return was processed.
You can also contact a CRA tax office, or inquire online at http://www.cra-arc.gc.ca to find out what your limit is. (If you belong to an employer-sponsored pension plan, your limit will take that into account.)
For the 2007 tax year, the most you can put into your RRSP is $19,000. If you are carrying forward unused contribution room from previous years, however, you may be allowed to contribute more.
If you exceed your limit, that is considered an over-contribution - which may be subject to a tax of 1 per cent per month. The lifetime allowance for over-contributions is $2,000.
Foreign assets
As of Jan. 1, 2005, you are allowed to hold foreign properties in your RRSP with no limits.
Self-directed RRSPs
With a self-directed RRSP, you can manage your own portfolio by investing in a variety of instruments - cash, bonds, shares, mutual funds, or even your mortgage. If you're considering this type of plan, it's wise to get advice from your financial institution or a professional financial adviser.
Spousal RRSPs
A spousal or common-law partner plan can ease the tax burden in a couple's retirement years if one spouse expects to have a significantly higher income than the other. The higher-income spouse makes the RRSP contributions and gets the tax deductions at the time - but the plan is registered in the name of the lower-income spouse, who can withdraw funds from it later.
Making withdrawals
Ideally, your RRSP is set up for the long term. But you can withdraw part, or all, of your savings at any time - so long as you realize that the money you withdraw becomes income and you will likely have to pay tax on it.
The government does have two programs that let you borrow from your RRSP without having to pay tax, so long as you meet certain requirements:
One is the Home Buyers' Plan. It's a one-time-only program that lets you withdraw up to $20,000 from your RRSP to buy your first home (but not subsequent homes or secondary properties); at least 1/15th of the amount you borrow must be repaid to your RRSP, starting two years after you make the withdrawal.
The other federal program is the Lifelong Learning Plan, which helps pay for postsecondary education or full-time training. You can withdraw up to $10,000 per calendar year from your RRSP for this purpose (to a maximum of $20,000 over four consecutive years). The student can be you or your spouse, but not your children. You then have to repay to your RRSP at least 10 per cent of the borrowed amount each year, over a maximum of 10 years.
RRSP lifespan
The last day on which you can contribute to your RRSP is Dec. 31 of the year in which you turn 71.
That is also the deadline by which you must close out your plan.
Most Canadians transfer their RRSP assets to a registered retirement income fund (RRIF) or buy an annuity with all or part of the proceeds. You could also convert your plan to cash and withdraw in one lump sum, but that would likely result in a very large tax bill.
Sources: Canada Revenue Agency, CARP websites
*****
Work ethic
56%
Proportion of Canadians who say they plan to work as long as possible.
38%
Portion who expect to work past age 65.
82%
Portion of Canadians who say they would keep working even if they had enough money to retire.
Friday, February 1, 2008
The best direct investment plays in the oil sands - DAVID PARKINSON
WHAT ARE WE LOOKING FOR?
As this week's Shifting Sands special report in The Globe and Mail has illustrated, the Athabasca oil sands of northern Alberta represent not only the future for the Canadian energy industry, but also one of the biggest potential sources of growth for the entire Canadian economy. At the same time, Canada's conventional oil and gas production is in its twilight years in this country.
The S&P/TSX capped energy index does give investors significant exposure to the oil sands story, but investors who buy the index also get a lot of stocks that are bulked up on fading conventional fields, not to mention drilling and oil field services companies, that in most cases, have, at best, only a tangential connection with the oil sands. We wanted to cut through the chaff and identify the best direct investment plays in the oil sands - stocks that offer the most pure exposure to future growth in this vast and internationally important oil reserve.
Fortunately, someone has done it for us.
THE CLAYMORE OIL SANDS ETF
Claymore Investments Inc., the Toronto-based fund management company, launched an exchange-traded fund called the Claymore Oil Sands ETF in the fall of 2006 - back when the price of crude was a mere $60 (U.S.) a barrel. The ETF is based on the Sustainable Oil Sands Sector Index, created in 2004 by Derek Gates, president of Calgary-based index developer Sustainable Wealth Management Ltd.
The index focuses on Canadian energy companies that are active producers in the oil sands and, more importantly, are expected to significantly increase their oil sands production over the next 10 years.
Stocks eligible for the index must have a minimum $500-million (Canadian) market capitalization at the time of the index rebalancing, which takes place once a year (in June). But market cap is only a small factor in determining weightings for the stocks within the index.
The main criteria in determining the stocks' index weightings relate to production levels. The index and ETF are tilted toward stocks with the highest current oil sands production, the highest projected oil sands production 10 years from now, and the highest proportion of their total production coming from oil sands. Measures for liquidity and market cap are also taken into account, but they are relatively small factors in the weighting formula, said Claymore president Som Seif.
HOW HAS IT DONE?
One- and three-year performance data show the oil sands-intensive stocks have, indeed, considerably outperformed the oil and gas sector as a whole.
In the 12 months ended Dec. 31, 2007, the Claymore Oil Sands ETF generated returns of 22.5 per cent - trouncing the S&P/TSX Capped Energy Index, which was up a modest 7.9 per cent in the year. Over the past three years, total returns for the Sustainable Oil Sands Sector Index - which predates the Claymore ETF by a couple of years - are 43.3 per cent, more than double the 20.5 per cent of the TSX energy group.
As this week's Shifting Sands special report in The Globe and Mail has illustrated, the Athabasca oil sands of northern Alberta represent not only the future for the Canadian energy industry, but also one of the biggest potential sources of growth for the entire Canadian economy. At the same time, Canada's conventional oil and gas production is in its twilight years in this country.
The S&P/TSX capped energy index does give investors significant exposure to the oil sands story, but investors who buy the index also get a lot of stocks that are bulked up on fading conventional fields, not to mention drilling and oil field services companies, that in most cases, have, at best, only a tangential connection with the oil sands. We wanted to cut through the chaff and identify the best direct investment plays in the oil sands - stocks that offer the most pure exposure to future growth in this vast and internationally important oil reserve.
Fortunately, someone has done it for us.
THE CLAYMORE OIL SANDS ETF
Claymore Investments Inc., the Toronto-based fund management company, launched an exchange-traded fund called the Claymore Oil Sands ETF in the fall of 2006 - back when the price of crude was a mere $60 (U.S.) a barrel. The ETF is based on the Sustainable Oil Sands Sector Index, created in 2004 by Derek Gates, president of Calgary-based index developer Sustainable Wealth Management Ltd.
The index focuses on Canadian energy companies that are active producers in the oil sands and, more importantly, are expected to significantly increase their oil sands production over the next 10 years.
Stocks eligible for the index must have a minimum $500-million (Canadian) market capitalization at the time of the index rebalancing, which takes place once a year (in June). But market cap is only a small factor in determining weightings for the stocks within the index.
The main criteria in determining the stocks' index weightings relate to production levels. The index and ETF are tilted toward stocks with the highest current oil sands production, the highest projected oil sands production 10 years from now, and the highest proportion of their total production coming from oil sands. Measures for liquidity and market cap are also taken into account, but they are relatively small factors in the weighting formula, said Claymore president Som Seif.
HOW HAS IT DONE?
One- and three-year performance data show the oil sands-intensive stocks have, indeed, considerably outperformed the oil and gas sector as a whole.
In the 12 months ended Dec. 31, 2007, the Claymore Oil Sands ETF generated returns of 22.5 per cent - trouncing the S&P/TSX Capped Energy Index, which was up a modest 7.9 per cent in the year. Over the past three years, total returns for the Sustainable Oil Sands Sector Index - which predates the Claymore ETF by a couple of years - are 43.3 per cent, more than double the 20.5 per cent of the TSX energy group.
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