Categories
Personal Finance

Job Envy

Some time ago Mike’s post on the Toronto Garbage Strike struke a cord with readers and generated 85 comments.  A large amount of the discussion focused on unions (from a philosophical perspective more than that specific union or strike).  One comment that had a particularly interesting part to it (from semi-frequent commenter Brendan) focused on the idea that being jealous of someone for their job is silly, if you think their job is so much better than yours, switch to it!

My brother used to get this a lot.  People at the job site where he worked would rant about how good he has it.  After listening to them rant, he’d say that they’re hiring for his position, and encourage the person to apply.  At that point the person would either point out a part of the job they wouldn’t want to do, or admit they didn’t have the academic credentials to do it.  The pregnant silence afterwards hopefully led some of his co-workers to an understanding:  There’s a reason why jobs offer the benefits they do, it’s all a trade-off.

One of my uncles, by marriage, is always going on about what a sweet deal teachers have in Canada (it’s actually a very well paid and respected profession in Canada).  He loves to have people listen to him talk, so he makes stuff up.  He’s a high school drop out and wasn’t able to get through the academic requirements needed to teach, so now he gripes about those who have managed to actually become teachers.  As an armchair psychologist, it’s pretty clear to me that he complains about teachers out of bitterness that they are able to earn a living doing what he wishes he could.

I read an interesting article some time ago that made the assertion that students are quite savvy at choosing college majors.  Even if industry and government is saying there are lots of jobs in an industry (or that their will be), the “wisdom of crowds” kicks in and students tend to move to areas where the high paying careers actually are.  If a genuinely sweet deal appears (such as computer workers during the dot-com boom), massive numbers of people get trained for this career, flood the market, and drop the salary down to a more appropriate level.  Similarly, if there’s a job no one wants to do, eventually market pressure forces companies that need those skills to pay top dollar to get them (like Cobol programmers).

The only time this doesn’t happen is when you get a barrier to entry for a specific field.  This was one part of Brendan’s comment that I felt was somewhat misleading, it isn’t like we can all go sign up with CUPE tomorrow.  Typically union jobs are tough to get (sometimes going to the children of senior union members).  A large number of people would be willing to do the work the strikers were refusing to do, even at a lower pay rate.  But they weren’t able to.

At the opposite end of the employment spectrum you have a similar situation with Canadian doctors.  I was in pre-med for my first couple of years at university, and my classes were PACKED with smart, eager kids who wanted to get into medical school (and become doctors).  The extremely limited number of positions at Canadian medical schools meant that the majority wouldn’t get in.  Similarly there are hordes of foreign trained doctors who would love to come and practice in Canada, but quotas restrict the number that can actually enter to a fraction of applicants.  The argument supporting the limited number of positions (to train new doctors or admit foreign M.D.s) is to ensure high standards and protect the health of Canadians.  If this was actually why there were doing it, they’d have a minimum entrance requirement, then admit EVERYONE who was above this.  Clearly the goal is to actually restrict the number of jobs and, like the unions, provide superior benefits to those in the field.

Feel free to make snarky comments that I’m only dogging doctors since I didn’t become one :-).

If us computer workers had gotten protections for our jobs we might have been able to keep the gravy train flowing after the dot-com bust (and perhaps avoided the whole offshoring situation).  I think computer people are far too free-market oriented to unionize (or put other barriers in place to protect their jobs).  I certainly am.

Categories
Personal Finance

Heading Home To Questrade Discount Brokerage

As I mentioned recently, I got my 1% rebate from RBC and want to come crawling back transfer my money back to my favorite broker – Questrade.  There is one huge reason why I’m such a fan of Questrade and that is money – their $5 trades are the cheapest in the business and that is all I care about.  I also like their customer service – I’ve rarely had to wait when I phone.

Can’t I just go to any new brokerage and get my fees covered?

Yes, but you have to negotiate the transfer fees and will probably have to pay $20-$30 every time you make a trade.  As a huge fan of low-cost investing – I go for the cheapest fees.

I’d like to try out Questrade but I’m not a returning client

Good idea – in that case you can sign up here or click on the banner after the text.

Is it hard to transfer to a different brokerage?

It’s not hard but it does take some time and is a pain in the butt.  However, I calculated that I will save about $150/year in trading fees by moving from RBC ($10 trades) to Questrade ($5) fees.  $150 a year indefinitely is well worth a bit of time to make it happen.  Also – I’m not a very active trader so your savings could be larger if you trade more.

Questrade review

Questrade Discount Brokerage review

Categories
Personal Finance

Manulife Dividend Cut and Links

Manulife Financial cut its dividend by a whopping 50%.  They still made $1.8 billion in Q2 so if anything it’s probably a good buy since the stock dipped 15% today.   The company hasn’t done a good job managing the risk of its variable-annuity products over the last few years so this move was made to improve the balance sheet and lower risk.

This just goes to show that diversification is a key strategy in investing.  It also shows that stock picking is hard – it doesn’t matter how well a company is doing or how long it has been doing it – you just don’t know what is really going on inside.  Some good financial statement analysis can go a long way.

Some links

Million Dollar Journey talks about the purpose behind your financial goals.

Canadian Capitalist had a neat post on the merits of investing in collectibles such as rare stamps and coins.

Where Does All My Money Go found the impossible – free investment management.

Bible Money Matters goes through his experience with signing up for Lending Club peer to peer lending.

Cash Money Life has some unexpected ways a baby can change your budget.  Patrick should know since he just had a baby.

Moolanomy explains how to find the best online high yield bank accounts.  (American)

Military Finance Network goes over Dave Ramsey’s Baby Steps.

Carnivals

Economy and Your Finances Carnival

48th Bankruptcy and Debt Carnival

Carnival of 20 Something Finances

Carnival of Financial Planning

Money Hacks Carnival

Festival of Frugality

Categories
Frugal

Extreme Cheap: Daniel Suelo

The Bag Lady recently posted about Daniel Suelo, a man who has “quit using money like a bad drug“. I always find people, like Charles Long, Don Schrader or the Freegans to be interesting in their ability to opt-out of the Western economic and social system and chart their own course, living how they want.

Much like the others, there’s a very specific philosophy behind Suelo’s life. He was doing development work with Ecuadorean tribespeople and saw that as they became more prosperous, their health declined. He took the view that, counter-intuitively, money was impoverishing them. He spent time with the sadhus (“the revered ascetics who go penniless for their gods”) and decided that it would be easy to be a sadhu in India along with others doing the same thing, but how much harder (and more worthwhile) it would be to do the same thing in hyper-consumption America?

nobody_past_30The “noble savage” has been a particularly obnoxious idea that glorifies living primitive lifestyle close to nature. I think Suelo is buying into an illusion that money is corrupting a society that he would rather see continue to live as subsistence farmers. Some people will make unhealthy choices, when they have the option to make them. To keep a group poor (or hope for their continued or future poverty) so they can’t access these choices is short-sighted and patronizing.

A quote I love from a Danny Devito movie (I never saw the actual movie, this was just from the trailer) was “a million dollars is a motive with a universal adapter”. This is true about any amount of money. If someone has desires in life, money can assist them (directly or indirectly) in fulfilling them. Money can help you find love (ask any guy who has taken someone out on a date or any woman who has bought makeup or a push-up bra), food, knowledge (bookstores, internet connections), or pretty well anything else you might want.

Money is the ultimate symbol: it can be anything. As Suelo (and the Bag Lady) point out, money only has meaning in the context of the marketplace it is used in. They say if you gave an alien a trillion dollars it would be meaningless to them. This is true, but so what? Money is incredibly useful WITHIN this context. It’s like saying computer software wouldn’t be anything other than long strings of 0’s and 1’s if there wasn’t any hardware to run it on. This is true, but it doesn’t make software useless (it’s just part of a system).

Heidemarie Schwermer (also mentioned by the Bag Lady) apparently has lived without money for about 12 years, by bartering within “exchange circles”. I can’t understand for the life of me why she feels this is a more noble lifestyle than bartering with the global exchange circle that money makes possible (I guess I’ll have to watch the documentary). Similar I don’t understand why Daniel Suelo will accept a winter jacket from a friend, but he won’t accept money from the same friend to go buy a jacket.

In each case, people (including Mr. Suelo) are able to adopt their lifestyle because of the excess from Western living. He uses a library provided free computer and internet connection to maintain his website, and often receives food and goods from friends in the nearby town. I don’t have a problem with this, but some may attack a lifestyle that is so completely dependent on the society it rejects.

For retirement, Suelo plans to die in the canyon he has been living in instead of in a geriatric ward. I respect his fortitude to live his own life in such a manner that is radically different (and far harsher) from the society he exists in. I don’t completely understand (or agree with) his outlook on money, but I admire his resolve and the courage of his convictions.

Mr. Cheap is on vacation this week but eagerly looks forward to reading your comments when he’s back in town.

Categories
Real Estate

How To Value Real Estate

Valuation of real estate properties is quite difficult – in fact it can really only be done within a fairly broad range since in my opinion it is just too hard to try to accurately predict the sale price of a house.  The title of this post should have been “How to guess at real estate prices”.  🙂

A few years ago I spent a lot of time looking at various houses, taking notes and finding out the eventual sale price.  The reason I did this exercise was partly because I enjoyed going to open houses but also because I knew I was going to be in the market for a new house and I wanted to learn the market better.  My theory regarding house valuation was that if I looked at enough houses and analyzed the different properties and the sale prices – I should be able to gain some sort of expertise and should be able to accurately predict the value of various houses.  My theory was a failure as I couldn’t seem to gain much accuracy for various houses that I tried to predict the sale price.

I was able to learn the local housing market to some degree but if I could guess within 10% of the final price then that seemed to be as good as I could do.  A plus or minus 10% error on a $500k house is not all that useful although I was able to know when sellers set the price below market for a bidding war.  Of course I couldn’t tell what the final price would be.

Look at lots of houses

The best advice that I have for a house hunter is to look at as many houses as they can, take notes (or keep the mls listings) and find out and write down the final sale price.  The purpose of doing this is to learn the local housing market and get a feel for what kind of house will go for various prices.  You might be asking why this is necessary if you have an agent….well…..this post might give you a clue!  I think a good agent who knows the area could be a great resource as far as knowing house valuations but unfortunately not all of them will be forthcoming if they aren’t familiar with your area.  If you have the time, then the best strategy is to learn the local housing market yourself.

This also applies if you are selling your house.  In fact it’s easier to do if you are only looking at houses similar to your own since there probably won’t be that many of them.  This is useful to try to set an asking price and also to counter your agent who will generally have different ideas than you about selling prices.

Land can be a huge factor.

One of the “truisms” of real estate that everyone always says (to me at least) is that detached houses command a premium over semi-detached.  While I can certainly accept this as being true, I’ve always been skeptical that there is much of a premium involved.  After all, other than the fact that a wall is shared, the house can be very similar to a detached.

As a bit of background – in my area there are probably 65% semi-detached houses and 35% detached houses so unlike some areas, there is nothing “unusual” about a semi.   It’s also a very urban setting so land values are quite high.

More background – for any American readers –  what I call “detached” (standalone house having no contact with any other structure) you might call “a house”.   What I call “semi-detached” you probably call “duplex” or “semi-attached”.

Detached/semi-detached was one of the “factors” that I tried to analyze in my great house valuation project.   After looking at quite a few houses, I really couldn’t see any premium for detached.  Part of the problem of course was a difficulty in finding houses that were similar in many respects except for the detached component.  I concluded after a while that the detached premium was probably low enough (<5%) that I couldn’t measure it properly.

It wasn’t until much later that I realized how high the land value was in the areas I was looking at.  Since most of the houses were in reasonably good condition (for old houses) I had assumed that buyers were paying quite a bit for the house along with the land.  As it turns out the buyers were generally paying a huge percentage for the land and a surprisingly small amount for the house.  I figured this out by eventually looking at some houses that were teardowns or complete guts.  Since the house was worth very little in those cases, clearly the buyer was just paying for the land.  In one particular area I looked at – most houses were selling for around $450k.  Much to my surprise, there were a few houses purchased for around $350k, $360k that were torn down which leads me to believe that $450k houses were in fact only $100k houses sitting on $350k pieces of land.

What does this have to do with detached/semi-detached?  Well, given that the land value was such a dominant factor in my local house prices, that meant that any premiums/discounts on the houses themselves are minimized.  Ie if the detached premium is 20% but the house is only worth $100k and the land is worth $350k then a semi-detached equivalent would be worth only $20k less which I wouldn’t be able to measure.

Of course semis are different in that it’s a lot harder to tear down a semi unless you buy both halves so it’s not accurate to say that the land under a semi has the same worth as a similar sized plot under a detached house but I’m assuming it’s close enough.

I have some other main “factors” which I think contribute to house prices which I’ll hopefully share in a future post.

Categories
Book Review

Book Review: Stumbling on Happiness

“Stumbling on Happiness” by Daniel Gilbert provides an accessible overview of Dr. Gilbert’s work at Harvard in the field of psychology. It is written in a style similar to that of Malcolm Gladwell or Steven Levitt, taking interesting concepts and playfully exploring the consequences and justifications of them.

Gilbert’s central idea in the book is that we don’t really know what makes us happy and are remarkably bad at remembering what made us happy in the past or predicting what will make us happy in the future.

One amusing example he gives is on the “joys of parenthood”. He explains that people looking forward to having children envision playing with toddler, being proud at their graduation ceremony and feeding candy to beautiful grandchildren. People with children look back and remember the good times and do the best to forget the bad. When housewives are interviewed about the activities in their daily routines, taking care of the children is one of their least favourite, right at the bottom only slightly above doing housework. When the happiness of parents is charted over the course of a marriage, marital satisfactions decreases dramatically with the first child’s birth and doesn’t increase until the last child leaves home.

He explains that people still have children because it’s a belief system that propagates itself. A culture that believes it’s a joy to have children will exist longer than one that feels children are a burden (he gives the example of one religious group that was completely opposed to sex and now only a few elderly members remain).

He gives an example in the opposite direction of living with a major disability (being blind, deaf or in a wheel chair for example). Many people think that living such a life would be as bad as (or perhaps worse than) dieing, but when people who actually live with such disabilities are interviewed, they’re pretty much as happy as anyone else. Gilbert explains that we imagine the instant we first find out about the disability, and extrapolate that instant of horror and disappointment as what the rest of our lives will be like. Instead people with disabilities get used to their new capabilities, and derive satisfaction from all the things people normally do (time with friends and family, a good meal or the satisfaction in the completion of a major accomplishment).

In the book he proposes a solution to the problem of making choices that will lead to happiness (after he has shown that we’re miserable at doing so ourselves). He suggests talking to people who have made the choice we are considering and are currently living with the consequences. Gauge how happy (or unhappy) it is making them and use their experience as a predictor of your experience.

For example, if I was thinking about going to live in Costa Rica to live the cheap life of an expat in a developing nation, the best approach to figuring out if I’ll be happy there is to try to find and interview other expats who have done the same (ideally a number who have been there for the same length of time, perhaps a month). When I was a teenager I wanted to be a medical doctor, and the MDs I talked to discouraged me from pursuing this career (each one told the negatives of the profession). One told me that if I wanted to make lots of money and play around with blood, I should be a dentist and at least have regular hours. Years later I switched from pre-med into computer science when I finally convinced myself that they were right and I wouldn’t be happy in a career in medicine.

The author claims people won’t actually follow this strategy, even when it’s shown to them how effective it is, because we’re all so convinced that we’re special and that our experience is unique.

Overall I think this is an interesting book with some engaging concepts. The friend who gave it to me had the criticism, which I agree with, that it was one neat idea that had been padded to book length. I think Gilbert’s ideas could have worked better as a long article, rather than a book (it got fairly repetitious at points). If you think you might try to adopt the strategy of predicting your future happiness by talking to people who have already done what you are considering, or if you just have a general interest in psychology and what makes people happy I’d recommend reading it. Otherwise there are probably better books you can spend your time with.

Mr. Cheap is on vacation this week but eagerly looks forward to reading your comments when he’s back in town.

Categories
Personal Finance

City of Toronto Union Accrued Benefits During Strike – New Mayoral Election System Coming

Please note that this post is very Toronto-centric, very rant-like and also contains a fair bit of fantasy.  Your challenge will be to determine what is truth and what is  fiction.

I read in the Star today that apparently one of the negotiated items in the City of Toronto outside workers strike (aka “The Garbage Strike”) was for the union members to continue to accrue benefits such as sick leave and vacation days during the time they were on strike.  This is unbelievable – they were on strike – why would the city give them credit for anything?  And why stop there?  Why doesn’t the city just pay the workers for their time on the picket line (minus union pay of course).  And it wouldn’t have to be at their old pay, if the city had any heart at all then the “strike wages” would be paid at the new negotiated higher rate.

Kevin Sack who is the city spokesman (fun job) had this to say about it:

City spokesman Kevin Sack said yesterday that granting vacation and sick pay credits for time spent on strike is “standard practice” in back-to-work agreements.

Wow, thanks Kevin for that inside look at the City of Toronto’s bargaining strategy.  Was this issue even talked about or was it just assumed?

Let me just paraphrase Kevin ever so slightly and try to show what I think really happened:

City spokesman Kevin Sack said yesterday that “We got our asses handed to us and by the end of it all, we didn’t know which way was up. David and I were so busy trying to keep up with the union orders demands, that we didn’t know what we were agreeing to”.  “They made us wear women’s lingerie to the meetings, wash their cars before and after each meeting and they kept giving us ‘time outs’ in the corner if we disagreed with anything they said.  It was horrible”  he sobbed.

Another back to work item was the amnesty for various law-breaking union members in exchange for the union not punishing the small percentage of members who crossed the picket lines.  I could write a whole post in this issue but I’ll try to summarize my thoughts concisely (for the first time ever):

Amnesty for law-breaking strikers – As Mark Ferguson – head of local 416 put it:

“The City wanted to terminate and prosecute those few who got a little excited on the picket lines. We made sure of amnesty for everybody involved. What happens in Vegas, stays in Vegas!” he said.

I’m just glad that Mark made those comments at the end of the strike and not the beginning otherwise we might have seen 6 weeks of murder and mayhem in Hogtown as 30,000 members run wild through the streets knowing that amnesty would be on the the way.

Union promises not to punish scabs” – Another quote from Ferguson:

In exchange for City-sanctioned amnesty, the union made what Mr. Ferguson called “the difficult decision” not to punish what the union calls “scabs” — unionized workers who crossed picket lines during the strike.

So the union *promises* not to retaliate against the scabs?  I really hope that Miller insisted on the “cross my heart and hope to die” promise otherwise this will be the first part of the agreement that gets tossed out the window.  I mean really…is the city going to monitor this somehow?  Very naive agreement from the city.

What about David Miller as mayor?

I have to admit that I like David Miller, he’s smart guy, well-spoken, obviously competent at a lot of things and he seems to be doing a reasonable job of running the city.  He has a lot of good qualities except for quite possibly the one thing that the city really needs in a mayor – the ability to negotiate.  Miller has always been known as a “friend of the unions” which doesn’t bode well considering he’s on the other side of the table now but I just think that like myself, he’s just a bad negotiator.  Miller would have sold Manhattan Island for a better price than the natives plus he would have added some benefits as well.  For this reason I think that he would be better of in the private sector where he can use his skills and lying spin ability to forge a good career. In an ideal world it would be great if he could hired to lead the 416 union but that is unlikely to happen (to put it mildly).

I’ve written before about how the big 3 car companies got smoked by the unions every single time their contracts came up and I think part of the problem stems from the fact that a car company CEO gets hired for a lot of talents – negotiating ability is only one talent which may or may not be present in a candidate.  Union leadership on the other hand only requires one talent – the ability to negotiate.  I think that companies and governments in unionized environments should add negotiation skills to their CEO talent searches in order to compete with the unions.

Mike and Mr. Cheap will help decide the next mayor of Toronto

Yes, that’s right – I haven’t told Mr. Cheap yet (shhhh) but I’ve decided that after the silliness of the last little while, the political landscape needs to change in Toronto.  With that in mind here are the changes which will take place.

No more voting for the Mayor – it will be appointment

While Miller was a reasonable choice for mayor, the fact that Lastman got elected clearly indicates that the voters of Toronto have no idea what they doing and won’t be allowed to vote anymore.  Voting for Lastman because of those Bad Boy commercials was stupid and I’m sorry I did it.

Mr. Cheap and I will decide the candidates

The 2 candidates to be considered for Mayor will be selected by myself and Mr. Cheap with one selection each.

Toronto city council will decide who the mayor will be from our 2 candidates

The reason that Mr. Cheap and I won’t make the final decision on the mayor is because we really don’t know the city operations and politics very well.  Plus we really don’t care that much.  Having watched some of the scenes from city hall on the news last week it’s clear to me that city council is not the tight-knit political SWAT team that I had imagined it to be but they have a good (I hope) grasp of the inner workings of the city so they can have the final choice.

So without further adieu…here is my choice for the next election

Mark Ferguson for Mayor!

Yes, Ferguson – the “stays in Vegas” guy I quoted earlier.  Clearly this guy can negotiate and that is the #1 skill that I am looking for in a candidate considering the large budget shortfalls Toronto will be facing.  As he said to his union “We didn’t give up shi*”.  While this omitted the fact that the union did the time-honoured negotiating tactic of selling out each and every future member, he was right.  If this was a hockey game the score would have been 10-1 for the union.

Won’t he have a problem negotiating against his old union?  Not this guy – Ferguson is a negotiator first and union member second.  When Gretzky faced the Oilers in the playoffs in 1989 as a King, did he let up in any way because the Oilers were his old team?  I don’t think so.

What do you think?  Who should Mr. Cheap pick as his candidate?  Who would you pick and why?

Categories
Money

Cash for Clunkers Trade-In Program Has Been Reinstated

It’s been announced that the extremely popular Cash for Clunkers trade-in program will be continued after more funding was obtained to pay for the credits.  The Cash for Clunkers program was suspended on July 31 because of a concern that the funding limit ($950 million) might have already been reached.  The original program was intended to run until the money was used up or November 1, 2009 – whichever came first.

[edit Aug 30 – Cash for Appliances program announced – Get rebates for new fridge or other appliances.]

[edit Sept 27 – Cash for Appliances – List of Eligible Appliances]

[edit Dec 9 – Cash for Remodeling]

From Fox news:

The House passed emergency legislation Friday approving an additional $2 billion for the “cash for clunkers” program, whose immediate popularity this week threatened to sink the fledgling program.

Skipping over regular procedure to obtain an immediate floor vote, House Democrats’ presented a bill that would shuffle around funds from the Recovery and Reinvestment Act, an emergency stimulus for the original $1 billion budget for rebates on new cars that lawmakers worried had been exhausted in only a week. The bill passed 316-109.

The idea behind the Cash for Clunkers program is that someone buying a new car can get a large credit ($3500 or $4500) if they trade in their old car and it meets the Cash for Clunkers qualification guidelines.  Basically the old car has to get less than 18 mpg and the new car has to get at least 22 mpg.

Is the Cash for Clunkers payment taxable income?

From Fox News

It was unclear how many cars had been sold under the program. Sen. Debbie Stabenow, D-Mich., said about 40,000 vehicle sales had been completed through the program but dealers estimated they were trying to complete transactions on another 200,000 vehicles, putting the amount of remaining funding in doubt.

This program was very popular for a rather obvious reason – the government was giving a good chunk of money away if you were buying a new car and had an eligible old car to trade in.  Like any stimulus effort, it’s very difficult to determine how effective this new car credit will be.  It’s fairly certain however that the auto industry will be a major beneficiary of the stimulus especially with the new funding.  Recent years saw a domestic car market of about 16 million cars per year.  This year was projected to be only about 10 million cars so if this stimulus can get another million cars sold then that will help the car companies…who conveniently enough are owned by the government.

More articles

Is the Cash for Clunkers program over?

Cash for Clunkers program suspended – here’s why