Jan 292018
 

The Next Recession is Coming

Although not directly correlated to the stock market in the short term, the economy also experiences cycles of ups and downs. Here are some graphs that have historically been very reliable when used to forecast recessions in the United States. Recessions occur when the total economic output of the country declines in two consecutive 3-month periods.

The Yield Curve is Flattening

The graph below shows the difference between the 10 year treasury yield and the 2 year treasury yield. The yield curve tends to get flatter when the economy reaches the end of an expansion phase. The vertical gray bars on the graph represent periods of recession. Every time the yield difference falls below 0% a recession happens soon after. Looking at the chart it appears we’re approaching 0% again.

 

 

Unemployment Rate Nearing A Turning Point

A lower unemployment rate is good for the economy. But at the end of every full employment cycle is a sharp increase in the civilian unemployment rate, usually accompanied by a recession. In the past a long period of declining unemployment rate has always lead to a spike up and a recession.

This rate has fallen from 10% eight years ago to 4% today. Practically speaking it cannot go much lower than this. The lowest the rate has been over the last 60 years is 3.5%. So this downward trend in the civilian unemployment rate is almost over. It’s not hard to imagine what will follow after the rate stops heading lower.

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Jun 122015
 

When choosing a potential investment to put our money in it’s important to look at all the usual financial metrics like profitability, management, history, and forecasts. But a less conventional measurement to consider and is usually harder to quantify, is employee sentiment. πŸ˜€

The world’s largest asset manager, BlackRock, which has more than $4.65 trillion of investments under management, includes employee happiness data into its models for evaluating holdings and investment prospects. “We look for companies that have solid employee rankings and want to buy companies that have improvements in employee opinions,” says Paul Ebner, a portfolio manager at BlackRock. “Happy and engaged employees lead to more wins and more sales opportunities.”

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It makes sense from a practical point of view. People who enjoy their work tend to be better at what they do and are more focused. And companies that are known to keep their workers happy will naturally attract the best talent in the industry. Research appears to back up the findings. Alex Edmans, an associate professor of finance at Wharton School of Business, discovered that companies that made Fortune Magazine’s list of the “100 Best Companies to Work For in America,” outperformed their peers by more than 2% on average annually between 1984 to 2009 (25 years.)

I have looked at the most recent Fortune listΒ of best companies to work for. The top 3 publicly traded names are Google, Salesforce, and Roche (Genentech.) Over the last 5 years (from June 2010 to now) the stocksΒ of all 3 companies have outperformed the Dow and the S&P 500 indexes. πŸ™‚

  • GOOG = +118%
  • CRM = +197%
  • RHHBY = +115%
  • Dow Jones Industrial Average = +75%
  • S&P 500 = +92%

However other studies have shown there is little to no correction between employee happiness and the profitabilityΒ of a company. Some critics say it’sΒ an imperfect and unreliable indicator, arguing that the idea of happy workers is just fluffy. I’m not sure if we should gauge a stock by how happy its workers are, but I do think that disgruntled employees can create a toxic work environment which could lower a business’s earning potential.

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Random Useless Fact

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Aug 102013
 

I didn’t get the new jobΒ (-_-;)

About 4 months ago I blogged about going for an interviewΒ at one of my favorite restaurants in the world. I was already making passive income from their stock dividends, but I decided it would be fun to make some active income as well by working there part time! Unfortunately I still haven’t heard back from their recruiter yet so I think it’s safe to assume they do not want me. Maybe I’m just not qualified to work at McDonald’s πŸ™„ Oh well. Perhaps the sluggish economy is partly to blame.

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July Employment Numbers

Speaking of the economy, south of the border the US gained 162,000 net new jobs last month. Employment rose in retail trade, services, and financial activities. They need to create about 250,000 new jobs every month to sustain a normal recovery. So the US dropped the ball a little bit in July, but it’s still an enormous success when compared to Canada’s poor performance. We lost about 39,400 net jobs last month πŸ™ Most positions lost were in the public sector like teachers, social service workers, and other government employees. Below is a broken down look at Canada’s job numbers.13_08_july_jobs

Making Money at the Movies

This actually happened a couple months ago but Cineplex has increased their dividendsΒ πŸ˜€ This has been one of my favorite stocks πŸ™‚ A couple years ago I blogged about how I invested $2,000 in CGX:TSE which owns movie theaters in Canada. I predicted that theaters would be in a great position to take advantage of all the upcoming movie brands and releases without the risk of investing in individual Hollywood studios directly. Β CGX dividends rose from 11.25 cents/share every month, to 12 cents πŸ˜€

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Jun 102013
 

Time again to learn about you, the readers πŸ˜€ Earlier this year I put up a poll on freedom 35 blog to find out what you all did for a living.Β Thanks to everyone who votedΒ (^_^) Here are the results below.

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Most of you are in high paying sectors of the economy. That’s great to see πŸ˜€ There are more technical and professional specialists than any other single occupation. 10% of readers are in the same profession as myself (arts and media.) Only one reader voted for the sales/retail category. Overall it appears that the occupations of people reading this blog matches the income that they’re making in the previous poll,Β about income.

I think readers in the two highest categories (financials and professional/tech) are over represented as visitors to personal finance blogs because they work hard and sacrifice more to earn a better living so money is probably important to them. I also like money πŸ™‚ but I’m not cut out to work in an industry that requires more than 45 hours of work per week πŸ˜› I’ve tried to be a workaholic before but I just burned out and didn’t like the high stress environment I was in. But everyone’s different. I know a fellow blogger who works at Amazon.com not too far from Vancouver. She’s only in her twenties but makes over $10,000 a month and receives bonuses multiple times a year which not everyone who works at the company gets πŸ˜€ Working hard as an engineer for one of the most competitive software giants in the world seems to fit her lifestyle, but it’s not for me πŸ™‚ She has a higher net worth than I do, but the important thing to realize is that she’s also exceptionally talented at managing her own finances πŸ˜‰ and that’s ultimately how long term wealth can be created and sustained.

I think the take away is if you want to be rich, push yourself to get a computer science degree or excel in one of those other top occupations like health care for example, but if you don’t like to work hard then at least continue reading financial websites out there because if high income earners who care about their money are gravitating towards those kinds of sites for information then perhaps we can all learn something from them πŸ™‚ Knowledge is power (^_^)

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Random Useless Fact:Β Wise words from Jake.

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Jun 072013
 

Expensive Night Out  – Read an article in the paper version of the Globe and Mail where a 16 year old Japanese adolescent went on quite the joy ride after spendingΒ $56,000 on his dad’s American Express credit card on a one night club binge. The teenager and a friend visited multiple hostess clubs, where he paid to sit and drink with women working there. At one of the venues, he spent a couple of thousand dollars on a single bottle of wine. The teenager’s dad pleaded with the local court to reduce the tab.

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Hostess clubs in Japan can’t allow minors to enter in the first place (must be 18+), so the clubs were partly responsible. The judge ruled that credit card companies should also flag questionable activities like racking up a large bill in a relatively short amount of time so American Express was also partly responsible. In the end the dad’s bill was reduced down to 800,000 yen ($8,200.) I wonder just how rich this family is (>_<) And I’m surprised credit card limits can even go up that high πŸ™‚

Job Boom  – According to Statistics Canada, ourΒ economy had its best month for job creation in more than a decade last month in May, adding 95,000 new jobs thanks in large part to the construction industry πŸ˜€ It’s the equivalent to the U.S. adding over one million new jobs in a single month. Canada’s unemployment rate fell, but still remains stubbornly above 7%.

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Blog roundup – Personal finance and other interesting articles from around the web
Pauline from Reach Financial Independence writes about the importance of customer service
Mashed Thoughts reviews a local Oyster Bar in Vancouver

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Random Useless Fact:Β A zedonk is a crossbreed between a zebra and a donkey πŸ˜€

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