Arne Alsin of the Financial Times reminds readers about the difference between price (what something costs?) and value (what is its value?) in “Pitfall that awaits the emotionally motivated ‘blind investor’”  . To determine the value is the more difficult of the questions. Often, when the price drops, investors panic and sell; in fact when the price drops, typically the risk decreases as well. “When value exceeds price, risk declines when value subsequently increases and/or price decreases. And when value exceeds price, risk escalates when value subsequently decreases and/or price increases. “Investors tend to focus only on price, and thus act irrationally.
In Wall Street journal’s “New fund flavours, new risks”  three new types of funds are presented. BRIC funds, those investing in Brazil, Russia, India and China; 130-30 funds mimicking hedge funds’ using the strategy whereby for each $100 in the fund they buy $130 of stock and they fund the $30 shortfall by short-selling $30 worth of overvalued stocks; exchange traded notes (ETNs) are debt securities guaranteed by the issuer, who promises to deliver the return of a specified benchmark. (see Barclays ETNs )
Dale Orr in Financial Post’s “What parity?” discusses how misleading the Canadian/US dollar parity really is for Canadians’ purchasing power; the only time the buying power is the same is when you are using converted Canadian dollars to buy goods in the US. Canadian GDP, measured at purchasing power parity, is still at 85% of the US’s, because goods and services are more expensive in Canada, Canadians earn less and are taxed more heavily than Americans.

In WSJ’s “The case for knowing your fund directors”  presents the case for increasing your scrutiny of funds’ board of directors. The board hires and fires the fund managers and negotiates the fees for the fund. A board with close ties to the fund company (e.g. composed of members who are also on the boards of dozens of other funds of the fund company) may not be in a good position to exercise its responsibilities.

Financial Post’s Chevreau reviews Manulife’s Income Plus hybrid product in “Manulife tweaks income plus”  . Income Plus comes with various guarantees (which many advisors think are too expensive). In its new version Manulife guarantees payments for life. Canadian Association of Income Trust Investors calls it “financial junk food”. Some advisers think that it may be acceptable for conservative GIC or annuity investors.

You better assume as part of your financial plan that you or your spouse will live to 100. WSJ’s “In the long term assume you will still be spending” discusses how one needs to make conservative assumptions, and perhaps work a few years longer and only expect withdrawal rates of under 4%, or else risk spending one’s old age pinching pennies. Perhaps even a low-cost annuity should be considered to insure a lifetime income (there are trade-offs of course, like not having the capital for the estate). The article goes on to explain that “Sussing all of this out, either on your own or with an adviser, isn’t easy, pleasant or cheap. But getting it right could be the difference between a life that’s good and one that’s just long.”

Richard Croft in “Beyond ETFs: tactical strategy” explains how blurred the lines are between active and passive strategies. For example passive is usually defined as based on an index fund. But the other component of the portfolio is the asset allocation; how to weight fixed income and equities, and domestic and foreign. This is where things can get blurred, especially when you may choose to shift away from your strategic asset allocation for the short-term and use a tactical asset allocation; Croft uses 10-20% of the portfolio (for conservative to aggressive investors) as the tactical portion of the portfolio; he also uses the tactical portion to reduce the need for rebalancing.

Ask portfolio advisors about “Navigating currency upheaval”  and you are likely to get different approaches. From don’t worry things work on about 15 year cycle, to use some hedged components in the portfolio to try to guess the direction of currencies and act on that guess, etc. My approach has been to use a globally diversified portfolio with its inherent currency diversification. While this has not led to the highest returns on my foreign exposure in recent years, it is something that I have been able to live with from a portfolio standpoint(and I am unlikely to change now that we are at parity)

And finally, for those who have been following my recent blogs about the constitutionality of discriminatory treatment of in-state vs. out-of-state individuals (as in the two-tier discriminatory Florida property tax system), there is an interesting development in Virginia. Legislators recently introduced abusive driver fees whereby Virginians may be fined from $750 to $3,000 for certain infractions; comparable infraction by out-of-stater would result in fines of $100-200. You can read about the back-and-forth of different rulings in “Arlington judge rules Virginia’s abusive-driver fees unconstitutional” , “Higher-ranking Henrico judge rules bad-driver fees are constitutional” , “Judge: Abusive driver fees unconstitutional” , “Va. Bad driver fees are upheld”  and “Virginia district court judge strikes down ticket tax”  This law is heading at least to Virginia’s Supreme Court. The law is being challenged on the basis that this is likely a violation of the guarantee of equal protection under the constitution. The ultimate outcome of this case, may have an influence on the Alabamans’ challenge in Florida.