Santa and his elves are due to our planet anytime now. Coincidentally, it is also an exciting time for those interested in reviewing their financial wellbeing and decision making.
- The recession is generally over and absent any catastrophe, following President Obama's signing of the Tax Bill last Friday, the stock markets are going to be on an upward trend in the next few months.
- The following are some stocks that one can put some of their money into: RACKSPACE (RAX-US)- This is the company that has the technology that enables M-Pesa to function in developing countries such as Kenya, Fiji, Tanzania, Uganda etc where large groups of the population in the rural areas do not have access to regular banking services. This company like Safaricom in Kenya is poised to continue growing at an extraordinary rate into the foreseeable future. E M C Corporation Mass (EMC -US)- This company is involved in developing cloud computing and related storage devices etc (This is the technology being used by the likes of Google to kill the likes of Microsoft, Dell, and Intel).Google (GOOG:US) or Apple but at USD.600 and USD 320 a piece, one might be wiser putting their money elsewhere. Adroit Resources (ADT:TSX).Mandalay Resources (MND:TSX). ADT & MND penny stocks are not only good for their gold but mainly for their Antimony, a rare metal available in China and very few other places. China has just imposed an export duty on this rare metal commonly used as a fire retardant and found on car seats etc. Comeco Corporation(CCO:TSX). This is a uranium producer and supplier of conversion services and 1 of 2 Candu fuel manufacturers in Canada. It has controlling ownership of high-grade reserves. Its uranium products are used to generate clean electricity globally and is a limited partner in North America's largest nuclear generating facility. It also explores for Uranium in North America, Australia and Asia. Comeco has just signed a major contract for the delivery of thousands of tonnes of Uranium to China, a country that is poised to build several new nuclear reactors in the next several years. Canadian Western Bank (CWB:TSX) is a Schedule 1 bank headquartered in western canada that specializes in full-service business and personal banking across the four western Canadian provinces (Vancouver, Alberta, Saskatchewan, Manitoba). The bank and its subsidiaries, which are together known as the CWB Group, has business throughout Canada and offers a diversified range of financial services in the areas of banking, trust, insurance and wealth management. .This bank has made profits continuously in the last 90 quarters. Western Canada is the resource centre of Canada. Canada is all about resources. Lundin Mining (LUN:TSX). Ipath DJ-AIG Softs ETN (JJS:AMEX) This an American ETF and same is on fire. It is about cotton. India has just placed a limit on exports and so has China. Cotton fields were destroyed by floods in Pakistan and it is currently winter in the north. There will be no new cotton until next year.Powershares DB Agriculture (DBA:AMEX). This powershare/ETF represents cotton, sugar, corn, beef, pork, agricultural equipment manufacturers.John Deer (DE:NYSE).Caterpillar (CAT: NYSE).CNH Global (CNH:NYSE).
- Agricultural land in the developing world eg Kenya. Population is increasing fast. Land is not growing. City properties are booming as a result of rural urban immigration and other factors including infrastructural developments especially cloud computing driven electronic banking and cell phony telecommunications. City properties are however more exposed to political risks and their returns may be too cyclical and flimsy. Food prices on the other hand are going to increasingly form a small part of people's budget with increased wealth. Their inflation will not be fully felt. As a grower/investor, one will have acquired their initial investment cheap. Furthermore not many locals and the elites in the diaspora are interested in boring rural agricultural land. It does not project them properly in their, paradoxically, classy African urban circuits, thanks to colonialism. They would rather the glittering and shining city properties the bigger the better. Rural areas is the place to go. You collect good lands for a song. This will not always be the case. People are learning fast and they are increasingly becoming pragmatic based on their realities in the western world.
- Finally, your salaried job in the west will never provide a comfortable retirement. Let us assume one was 35 years old and was earning a salary of say, $ 80,000. The spouse was also bringing in a similar sum so $160,000. After tax the two bring home say $100,000 which works out to $8,400 a month. This is obviously an exceptional couple. Even in places like oil rich Alberta, the average income is much less than these figures but let us just pretend. This family pays their mortgage, baby care, general expenses etc for a total of $4,400. They are financially disciplined so they can save $ 4000 on a monthly basis for investing into various vehicles eg RRSPs, GIC, Canada Savings bonds, stock markets etc. So, $4000 *12 *30 (Assuming they retire at age 65)=$1,440,000. Remember this is the lucky couple.
- Now here the work begins. The couple is just spring chicken sixty five. They have been praying to Mary, Jesus, Mohamed and Budha for a long life and their prayers have been heard. They have another 30 years to go. Their current cost of living as above is approximately $4000. They will have repaid the mortgage but they may also have moved to a condo where they will need to pay condo fee. Inflation in places like Canada has generally been in the region of 3%pa which is 03/12=0.25% per month. So $4000* (1.0025^360 =$9,827.37. But remember the pool of available money to blow away in retirement is $.1,440,000. $1,440,000/(30*12) =$4000 per month. But the monthly cost of living is $9,827.37. A few will have some kind of pension, the best being the public service "defined benefit plans" where they guarantee what percentage of salary one will get in retirement depending on how long one would have worked for them and their final salary. But the public is currently in an outcry and therefore like all others this is also likely to change into a "defined contribution plan" . This means all pensions will be subject to the gyrations of the stock markets. That takes me back to my bullet on stock market investments.
- Developed world stock markets are intertwined. There is flooding in Portugal you take a hit. There is rioting in Spain you take a hit. There are soccer hooligans in Ireland, you take a hit. There is too much partying in Greece, you take a hit. Then there was the infamous Nick Leeson who longed (bought) commodity futures in Singapore in 1988. Mr. Leeson is responsible for having brought down the old English Barrings Bank. There was panic and mayhem in the stock markets. People lost fortunes. Then in 2001, there was a company called Enron. The executives of that company fudged their books and accounting rules. Working with investment banks this manufacturing company recognized sales of goods they had not yet manufactured let alone shipping or delivery to their customers. They formed special purpose vehicles into which they sold these fake receivables and inventories. These companies in turn sold bonds and passed on these fake assets to the investing public. Enron continued to report growth in sales and profitability quarter after quarter . Share price soared from a penny stock to USd.330 dollar stock on the eve of the collapse in 2001. The price then collapsed to US.0.000.By this time, the executives had already cashed in their stock options. They had become zillionnaires. Management said the company was too large for them to understand everything. Auditors said they depended on management. Both teams were arrested. The case is still in court. It is the result of the so called Sarbanes-Oxley or SOX legislation in the United States of America. Next was the housing bubble of 2008 manufactured once again by the investment banking community in collusion with commercial banks and real estate agents and mortgage brokers. That explains the collapse of Leeman Brothers and near collapse of AIG, Citibank among several others. Banks continue to collapse as a result. This brings me to the next bullet.
- Developed world stock markets will always collapse. There is something major that has not been addressed. The problem is cultural. It is the way capitalism works. We expect political and company executives to bring in instance "success" as soon as they are in office and we measure their performance on a weekly, monthly, quarterly basis. We have no room for long term strategies. We want growth in our wealth today. It is not realistic. That mentality has not been addressed. Expect the next collapse. And the next. You can never make money in the stock markets for anything more than the short term. We have enough evidence to bear us out. Your house is also not an investment. It is part of the financial markets. You are wasting your money if you thought it was. It is just a place to live in. Furthermore, in time, better, newer houses come along. Populations in developed countries are expected to shrink. There is no reason why any property prices would be expected to keep on rising.
- It therefore makes perfect sense to invest in the developing world. In rural agricultural lands. Populations out there are growing. The land is cheap and the weather is perfect. Labour is also cheap. Furthermore, if governments out there can stabilize their politics and allow their citizenly to invest across their own countries unhindered by tribal animosity, they stand great opportunities for everybody to gain. For the spreading of investment capital. But irresponsible and stupid actions like Kenya government's apparent inability to restore PEV victims to their properties and to reconcile their people and pay compensation to the affected families only puts away capital. Not from donors. Rather from their own people. Especially in the diaspora. And these would be billions of dollars.
