Dec. 2017 SWM Letter

As the year ends we may find various bright packages wrapped up very neatly.  Perhaps we can do the same with this month’s letter.  There are several areas to explore:  shiny investment returns in 2017,  positive notes for 2018, and other items now on our horizon.


We’re already doing strongly with 2017 results ranging 5% to 12% for the year.  This varies by client-profile and with your specific circumstances, but for everyone 2017 has been quite favourable.  Compared to the wider market (TSX at 5%) we’ve moved ahead well.  We will know more next month when all the numbers are in and wrapped with a bow.


We see the whole world currently moving forward on all cylinders.  Growth through the developed world continues 2-4%.  Smaller, more agile economies are growing at a healthy 5-8%.   We feel safe to expect continued growth +/- 6% for 2018.  Not a guarantee, but this is what we’re seeing today.  Europe, Japan, and Emerging economies are still coming from behind with lots of opportunity for growth in the year ahead.  Canada’s story will hinge significantly on oil pricing, and how our “looney” compares to other currencies.  Overall we expect normal fluctuations and healthy growth this year ahead.

U.S. markets shot the lights out in 2017 (or at least the tech sector did) and may be flatter in 2018.  From the dawn of year-2000 to the end of 2016, S&P500 returns averaged 2.73%.  With dividends it reached 4.68%.  That’s assuming no costs to invest, and no inflation.  Minus inflation, S&P500 returned only 0.57% and with dividends just 2.49%.  No wonder our southern neighbours complain of lost years and fear tragedy besetting their retirement.  If 2017 finishes with a 20% U.S. gain – which looks possible, it’s faint hope for those whose savings slogged through 16 years of nothing.  Many U.S. firms are now counseling clients to invest outside the U.S.  That’s a distasteful theme for Americans but it cautions us to continue limiting U.S. exposure in favour of other developed and emerging economies.  (S&P Calculator here.)


An illuminating work from Carlota Perez of the London School of Economics says the world economy today is in a fifth major technological cycle since the industrial revolution.  Each stage begins with major technological innovation:  industry and canals from 1771, steam and railways from 1829, steel and heavy engineering from 1875; electricity, oil, aviation, and mass production of the 20th century;  and growth of the knowledge-economy where we are now.  In each cycle there is a time like today when benefits of new technology take increasing root through the whole economy and heighten growth and prosperity for all.  (See Forbes).

That doesn’t stop the natural ebb and flow of market fluctuations.  What it does offer is a clear perspective of increasing growth and prosperity from decade to decade.  Picture this as a staircase where we rise for several years, then take a year or more on a landing, before ascending to the next floor and another landing …

Careful readers will wisely mention those “landings” can be fraught with losses that take seasons to recover.  You’re right!  So our laser focus on “LIFE INCOME MANDATES” purposely reduces the risk and builds a faster recovery.  When the world is ready to climb the next group of stairs, Perez’ proposal explains what has repeatedly been happening to put more economic power, productivity, and convenience into the hands of more and more people.  This is the ultimate non-cynical perspective;  there will always be tomorrow, and innovation eventually delivers greater opportunities to our lives and our planet.

If you’re not convinced, consider how most of the early car manufacturers disappeared and are forgotten but the “automobile” vastly changed life and society for 100 years.  Oil was so much healthier than coal, and powered the mass production of everything we chose to put into our upsized homes.  Nortel and most other companies disappeared but today’s economic growth is intrinsically rising on the wings of that high tech revolution.  Today’s improvements in renewable energy, carbon reduction, LEEDS engineering, application of artificial intelligence in every area of research, these and many more are vital to shaping the new world we are giving our children and grandchildren.

This all relates back to how we invest.  In the long term, all is good.  For shorter periods we reduce risk with Life Income Mandates, sustaining growth and income for your life goals.


Let’s touch the surface here;  ask me further if you wish.  Bitcoin is a digital or crypto-currency.  It has a certain zest along with precipitous dangers. Emotions arise too, perhaps greed, but more likely the “FOMO” … ie. “fear of missing out.”  Imagine last year you had bought the newest IPhone with your bitcoin, but now realize if you had waited the bitcoin could buy IPhones for your whole extended family?  Was it a good buy, or “goodbye” because you spent it too soon?  Imagine the frightening reverse of this, having a bitcoin mortgage:  today your loan or mortgage would be 10-times what it was a year ago!   Looking at the street?


Now consider too, this thing is limited by design.  There are only 21 Million bitcoins available so if more people want it the price can only go sky-high.  (Yay!)  And when people decide to cash their bitcoins for IPhones, cars, and houses, they’re selling into an illiquid market so – quick as a wink – the price plummets.  (Darn!)  That’s not the gift you were hoping for!

Other concerns include sudden and untraceable theft.  Last week, someone’s bitcoin account was hacked to the tune of $70 Million.  No trace!   Awhile back, the (then) top Mt. Gox bitcoin exchange “lost” 850,000 bitcoins and went bankrupt.  Some of the biggest interests in bitcoin are those who trade illegally in drugs, arms, and pornography.  Bitcoin helps them move money.  Losses, for them, are a cost of business to get laundered profits.  Doesn’t sound like the kind of people you and I want to link up with!

Also there is the lack of financial governance.  And skyrocketing environmental costs.  Bitcoin consumes electricity equal to 2.8 Million N. American homes.  Bitcoin isn’t a gift but a gremlin; it is pandora’s box.  (More here.)

It's fair to say most of us don’t understand “blockchain” systems on which bitcoin is built.  And if we buy what we cannot understand (or if we invest family savings in it) it could as easily be a bridge to nowhere in some Florida bayou.  Whatever benefits may eventually come from ethereal currency, the systems are not in place to protect your savings.  Today bitcoin is worthy of informed descriptions including:  “fraud”, “speculative bubble”,  "financial pyramid that may collapse at any moment", “slippery money.”   (The Economist, Dec 2/17:  Investors are piling into an illiquid assets. What could possibly go wrong?)   * Also see Comment #1 below.


I’m writing a separate item on this -- call it a white paper.  If you’re interested to proof what I’ve got thus far ask me for a draft.  Briefly, insurers cannot take away a contract you already own.  But they’re taking it off the shelf so you can’t get it.  Manulife and RBC have already pulled LTCI, and Desjardins (the only one offering “monthly income” instead of reimbursements) will stop offering LTCI in June.  Sun Life may or may not keep LTCI but costs have risen, and getting paid for health costs would force you to prove specific expenses, capped by daily limits.

In an aging society, living longer and health costs escalating, we owe it to ourselves and our families to ensure a well-funded plan for comfort and care in our later years (or not-so-later years).  If we need to bring nursing and other care into our homes, or manage such costs “in a home” LTCI was a vital way to avoid destroying family wealth, a spouse’s survival income, or children’s estate.

Insurance companies have gone timid on this issue.  While we had hoped a portion of the insurance premium could become tax deductible (as a public interest for healthy aging and communities) insurers turned about and are fleeing the tsunami of aging and future health costs.

All is not lost;  there are valuable options but we have limited time to get on this.  Ask me for the white paper and I’ll value your comments before I publish it more widely.


In our 30s or 40s we include FI for goals such as children, upgrading education, and buying a home.  At 70 or 80 we keep an active “income reservoir” to assure income for the next 3-5 years, while dividends and other mandates keep money growing for what we’ll spend in our 90s.   It cannot be done with government bonds paying <3% (zero after inflation)!  That would quickly run people out of money.  So here is a peak at some of our Fixed-Income returns for 2017, realizing we can’t settle for just 2% or 3%.  Also recall an earlier "Jekyll and Hyde" discussion on fixed-income.  

A dozen of our FI holdings, ranked from lower risk bond to strategic income (since January 1, 2017):

  • RBC Monthly Income Bond,  up 1.9%
  • London Life Portico Income, up 3.3%
  • RBC Global Corporate Bond, up 3.6%
  • Franklin Quotential Div Income up 3.9%
  • CIBC Renaissance Optimal Income, 4%.
  • Quadrus Income Fund, up 4.1%
  • Brandywine Intl Bond, up 4.2%
  • Templeton Global Bond, up 4.4%
  • Renaissance Op. Growth & Income up 4.5%
  • RBC Monthly Income, up 5.5%
  • Mackenzie Strategic Income up 7.5%
  • Mack Global Strategic Income up 7.9%

Entering a new year (and whenever we're reviewing your accounts) we discuss what you need in fixed-income and how it fits with your personal needs and goals for the years ahead.  If you have any questions on how we’re using FI in your account – or if the portion has been decreasing as you draw out the income, then this is a vital focus in our new year meetings.


We wish you health and happiness this season and throughout the year ahead.  Reach us in any way we can be of assistance.  No question is too small.  No need is too great.  And when you hear someone needing help, urgent for guidance on financial security for Life let us know and be sure to introduce us.  Now and always, we are grateful to be . . .

Yours in Financial Security for LIFE!

Brian Weatherdon, MA, CFP, CLU, CPCA. 905-637-3500

627 Guelph Line, Burlington, Ont. L7R 3M7.  1-877-937-3500

Author:  (2013) A Lifetime Of Wealth — And How Not To Lose It(2013) Protecting Life, Loved Ones, and Future Dreams.  (2015) Your Business, Your Retirement: Halton Retirement Study.

** This monthly letter touches on key strategies in Canadian and global investing and financial planning. This letter is not an offer to sell any kind of security, insurance, or program. Historical returns and risk measures are not a valid guide to future performance. Returns are from publicly available sources and research from a variety of firms including but not limited to GLC, RBC, CIBC, Mackenzie, Franklin Templeton.  Opinions reflected in this letter belong solely to the author and no other body is responsible for the content expressed here. We value opportunity to consult alongside your legal and accounting firms to advance your financial security and unique goals. We are grateful always to receive your comments and questions.




  1. Two more clippings on bitcoin (Saturday Dec 16/17)

    John Heinzl remarks on the “real value in cryptocurrency” …as a teaching tool because such speculative frenzy has occurred frequently and people continue to be led into such troubles. See article at:

    Bloomberg describes what we know already of bitcoin’s energy needs being supplied from sources as dirty and carbon intensive as coal. Energy consumption of cryptocurrency today astonishingly exceeds that of 159 countries. See more at:

  2. Great Letter and very informative, thanks to you and your staff.

  3. Bitcoin as Evolving Experiment: the Frenzy and the Limitations. … see further in

  4. On BITCOIN … vast drop from $20,000 to $5,947 in a single month since January 6th. (; also While blockchain innovation will prove useful applications, Eric Lascelles (“February 2018 Economic Outlook” RBC GAM) describes bitcoin as a commodity but NOT as a currency.

  5. Update on Bitcoin. It has lost 75% this year and The Economist (Sept 1/18) discusses the let-down despite a decade of development. It has failed to become a usable currency. Security is poor (14% of the supply of big cryptocurrencies has been compromised. Decentralized nature makes it slow. There is no consumer protection. Price so volatile that merchants largely refuse it for payment. … Notably none of our clients have raised the subject this year now, and I no longer get calls asking how people can buy in.

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