20. June 2009 by Dan Walkow, CFA, CMT.

Manulife revealed that a  probe by the Ontario Securities Commission on whether Manulife provided appropriate disclosure on it guaranteed funds also also known as segregated funds and variable annuity guaranteed products has been initiated.

The probe has to do with whether Manulife provided full and continuous disclosure regarding market risk during last years stock market meltdown but I will take this one step further.

Point one is that even if full and continuous disclosure was provided most investors and one could argue many investment advisers did not and do not understand how these products work. A long-dated “guarantee” 10 years out gives small comfort to a 40% draw-down in the value of the  underlying funds held in some of these investment products.

Point two is that these products are very expensive both in terms of ongoing expenses, which are embedded in the fund itself so you do not see them and the commission paid to investment advisers to sell them which is large and I mean LARGE.

Point three is how tying up investment capital in these products severely limits your flexibility if you want to change your investment mix.

In the United States variable annuity products which lure investors in with the “illusion” of safety have been subject to strong criticism for all the above reasons noted.

Caveat Emptor!

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20. June 2009 by Dan Walkow, CFA, CMT.

Posted in Inflation, Precious Metals | No Comments »

20. June 2009 by Dan Walkow, CFA, CMT.

If you have an offshore account which you have not been declaring to the tax authorities you have a right to be worried. The movement afoot to force tax haven countries to release information is ongoing in the United States and you can be sure Canada will follow suit.

There are valid and legitimate reasons to have money offshore and that is for reasons of “Asset Protection”. This is done through as Asset Protection Trust where as an individual you face risks such as malpractice suits, potential risks via divorce issues, difficult family estate planning issues and so on. Bear in mind that the tax has to be paid.

A recent update in the WSJ–

The U.S. and Switzerland said they agreed to share information on potential tax evaders for the first time, the latest step toward eroding Switzerland’s renowned banking secrecy.

U.S. Treasury Secretary Timothy Geithner said the deal, which the governments began negotiating in April, “will help bring an end to an era of offshore accounts and investments being used for tax evasion.” The U.S. declined to release details until the deal, which could face a referendum in Switzerland, has been completed and signed.

Switzerland and other tax havens in Europe and the Caribbean came under intense international pressure to agree to share tax information with other governments ahead of a summit meeting of the Group of 20 governments in London in April.

Read the whole thing.

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20. June 2009 by Dan Walkow, CFA, CMT.

Current rally from early March nothwithstanding if we take a standback look at global markets and ask the question “are markets cheap” on a historical basis, you can see that using a price earnings measure, that they are.

In fact you have to go back to the early 1980’s to see similar valuations.

Of course all depends on the “E” which is earnings. In the context of the P/E right markets may be a bit ahead of themselves right now but in the bigger picture and over the longer term equities have a lot of room on the upside.

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20. June 2009 by Dan Walkow, CFA, CMT.

Paul Tudor Jones - Failure Speech June 2009

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