Book Reviews ‘Q – T’

(a history by-) Author:  Duncan McDowell

Between 1910 to 1925 Royal Bank merged with five other banks. Always seen as Canada’s most progressive bank by rivals. The Royal Bank became the most skilled practitioner at the art of takeover. “Each acquisition served to fill another gap in his jigsaw of national expansion. Each piece brought a special regional advantage  greater reach into western farming communities, a fuller blanket of urban branches, or service to special niches in the economy.”

Chapter 4:  GROWTH THROUGH AMALGAMATION 1908-1925” PG 158. It was the first Canadian bank to reach assets of one billion dollars, to install a computer and to open a full service branch in Shanghai China. It was the only major bank to be listed in the first issue of “ The Financial Post’s 100 Best Companies in Canada. They also encouraged employees to share in the bank’s profits. In 1985 The Royal Employee Savings and Share Ownership Program was introduced. By the early 1990s, 85 per cent of Royal Bankers owned shares in their own bank. The segmented market resulted in the objective retail banking to provide a “cradle  to  grave's strategy. Tailor suited to saving, spending, investing and retirement needs throughout an individuals life cycle. Lots of photos from the late 1800s through to the nineties, this book is intimate, witty and educational.

Author: David Trahair, CA

The employees of the financial institutions know more about the products than you.

The big banks aren't in the business of securing your safe and joyful retirement. Their profits come from your pocket and in order to keep shareholders happy, it must always be maximized. Many products that are designed by their employees to be purposely complicated and confusing. Millions of dollars are pumped into slick advertising campaigns which create insecurity and fear. Retired people will be fishing or talking to a loved one about how confused they used to be. We then hear all about how an insurance company or bank solved all their problems and that's why they are now financially free. When it comes to buying insurance, term life will cost you several thousands of dollars less but whole life will be promoted first. After all, it makes the seller more money. What are the two major issues with RRSPs? How do mutual fund fees drain away your hard earned savings? Why are the statements issued to you so confusing? Why is a good idea to pay off your credit card debt as soon as possible? The second last paragraph on page 168 sums it up nicely. "Spend time educating yourself about investing." (Chapter 11: SUMMARY: WHAT YOU'VE LEARNED AND WHAT TO DO NEXT).

Author: Mark J. Heinzl

Anyone with a little education and experience can invest on their own.
When hiring a painter, drywaller or plumber, you'll have a good idea of the costs for parts and labor. You will also be guaranteed that the job will be done professionally and with the highest degree of integrity and quality. When it comes to investing, people are generally not as informed. Fees have a major impact on returns to investors. The higher the fees, the lower the expected return. Financial planners and advisors like fund products with yearly fees. This means bigger incomes for them and lower returns for you. They also aren't likely to share information that will help you make better informed decisions.

"Mutual fund companies rarely discuss individual stocks and companies in any detail, because they wouldn't want you to get too familiar with the names of companies in Canada and around the world. The fund companies don't want you to get the notion that you could buy these stocks on your own."

Chapter 4: Why Stocks and Bonds are Better than Mutual Funds Once you become an independent shareholder, an annual report gets mailed right to your door. This contains a multitude of useful information and highlights that are critical to the success of long-term investors. Lists of companies in Canada that make up the Toronto Stock Exchange's 300 composite index, the Dow Industrial Average and the S&P 500 in the United States, and the most successfully foreign multinational firms are grouped by industry along with a brief description of the products and services they provide to the public.

Mark J. Heinzl is a reporter with the Wall Street Journal and the Dow Jones Newswires in Toronto. He has also written for the Globe and Mail. Topics covered include Canadian business, finance and investments. The inspiration for this book was partly due to the author's grandmother, who had received bad advice from a professional and as a result, lost most of her life savings.

Author: Donald Christensen - lives in New York City and is the co-author of "Investing with the Insiders" and publishes the respected newsletter "The Insider Outlook"

Many wealthy people have achieved success by collecting fees after convincing those with hopes and dreams to play and gamble in the speculative markets.

For the greater part of this century, a bank's role was to protect the saver's money while at the same time making loans to people and businesses that needed it. Depositors were protected from the complex world of finance and could go on and enjoy life without worrying about it. Following in the steps of the fund promoters, bankers also started manufacturing their own family of funds. They are using bank branches as distribution networks in order to sell them directly to customers. Compared with traditional fixed and guaranteed products such as government and corporate bonds, the profits margins on mutual funds are much more attractive. The popularity of these funds has allowed promoters to raise prices resulting in an increased bottom line.

"The people handling your money now have more control over it and fewer controls over what they can do with it. In addition, as the people running our era of securitization they are providing absolutely no guarantee that what they do with your money will be successful. Leaders of pooled funds have all the control and they are compensated solely for their "best efforts". You carry all the risk, with almost no say in how the money is invested and, in fact, an increasingly limited opportunity to find out how it is being invested."

Chapter 4: The People Handling Your Money
Fund firms sponsor ads in newspapers and magazines. These inform readers that old age poverty will result unless an agressive investment program is begun immediately. Some of the sponsored magazines are even owned and operated by the companies selling the investment products. These high-pressure salespeople are not interested in helping you make your life easier. They just want your money. The fancy charts and graphs are marketing and sales tools that will try and convince you this is all a great idea. You: Be skeptical and investigate the risk that is presented to you. This book takes the reader through an entire century of financial turbulence.

Author:  Richard Minns

The argument here is that privatization of pensions doesn’t lead to better pensions or greater economic growth.

U.S state pensions and social security has an earning related feature that significantly redistributes income from higher to lower  income groups. It was suppose to be a counter to or insurance against the market and its failings. Privatization channels money into dividend paying stocks with growing stock prices, not new investments that could lead to real growth. Private capital is not usually for direct investment. It is mainly for trade in existing stocks and securities. In Chapter 8, “Arbitrage Capital” the reader learns that 98% of all stock market trading was the buying and selling of existing securities. The capital being channeled into new issues was 2% or less. State pension schemes don’t have to be funded, which saves on the cost of running it. Private plans have to be funded just to ensure their solvency. The financial sector has a self - interest in promoting private savings investment products. The goal here is to maximize management and trading fees. The equity market has acted as a mere facilitator of ownership transfers.  Academics and the press encourage private savings and constantly criticize social security or welfare because it doesn’t produce a “rate of return”.  The 401k plans in U.S mutual funds average 1.2% ranging up to 17%, including 3-5% sales charges. The administration charges in the U.K eat up to 30% and 15% in Chile. The Anglo American model promotes the power and influence of the markets over government. It distributes more income to the financial sector and to the most secure people in terms of employment. It has gone so far that the author concludes that the democracy of borrowers and wage earners has been replaced by a shareholder democracy of savers and investors. Richard Minns is a researcher on pension funds and an international economic development advisor. He also wrote Pension Funds and British Capitalism.

Author: Ron Chernow

In the beginning, the bank was the most powerful institution.

Companies would go to it, with cap in hand, and pay whatever rate the bank felt like charging. The upside was that companies like J.P Morgan, would nurture the growth of the biggest companies of the time, and his bankers would have seats on the board of directors. His firm helped them grow into global and multination corporations. Banks would dictate the terms and the companies would follow the orders. Fast for ward to the present, where money is everywhere. Banks are losing power to their clients. The firms have hired more educated graduates, and competition is driving down the cost of borrowing funds. Some companies have so much cash, that they are like banks. The wholesale raid on bank deposits is due to the rise of mutual funds. Investors are now seeking a better return for their money. The death of the middleman is a slow but necessary part of the financial revolution. It’s changing the way people get financial services.

Author: Clifford E. Kirsch

Financial engineering has allowed firms to create many new products.

Many institutions use derivatives to increase profits by exploiting the direction or volatility or asset prices or interest rates while reducing their overall capital at risk. These products are rarely understood by large segments of the public as large losses have made the headlines of many newspapers. How are small investors going to obtain the financial resources to protect themselves from these types of devastating losses? When parties to a transaction don't have equal access to information about pricing and current value, gaps develop which can lead to abuse. "In most instances, trusts are irrevocable, and, unless there is fraud, which is almost impossible to prove, the banks can expect to continue to serve and collect fees as trustees, regardless of its investment performance. The security of the trust business may well be the reason for banks' traditionally poor investment performance. After all, in quite literal terms, they - unlike the beneficiaries - have nothing to lose. The trust contains "other people's money." CHAPTER 12: Banks, Money Managers, Insurance Companies, and Corporate Governance/PG 288. Hedge funds are also evaluted and some firms that dealt in them got wiped out. Nervous brokers are reluctant to turn away this business because of the large amounts of fees that get generated from all that buying and selling. "The greater the volatility, the greater the likelihood of realizing a lower - than - expected return and the greater is the risk of the activity. CHAPTER 1: Commercial Banking and Securities Activities/PG 6. Many transactions equal big profits but also big risks too. According to one in depth study, a high percentage of these types of funds have not even bothered to adopt risk management policies. Barring's Bank and many more have gone under due of these types of high risk exposures. I had to read this book twice just to better understand the content, but it's worth reading and you should definitely go and get it.

Author:  Roy C. Smith

Capital goes where it is appreciated and made to feel most welcome. Wealth, if not contained, ends up slipping away. It also must be protected from theft and mismanagement. Your money in the bank is paid a specific interest. The bank takes the money and lends it out at a higher interest, pocketing the difference, which is the profit. The biggest companies are owned by pension funds all over the world. The free flow of capital across borders is healthy for our economies. International investment continues to grow at double-digit rates. Countries with huge debts simply reschedule, they don’t go broke, and they eventually pay back all debts. Conflicts of interest arise when banks underwrite issues, collecting fees and then advising their clients to buy it. Banks are responsible to their shareholders. However, many of their products contribute to the country’s low savings rate, and over time this will kill our standard of living. The lowest cost of capital in the world is in Japan. Their corporate clients are treated as kings, and they are the slaves that serve them. They are always worried about high prices, because they must import nearly everything. When doing any deal, return on equity comes in as the last reason of importance. Japanese firms use their high stock prices to raise large amounts of capital in order to make huge acquisitions. They are very conservative with their money, and have a household savings rate of about 18 percent, as opposed to the U.S with less than 5 percent. It’s also interesting to note that in Japan, the housewives manage the investments. Investment products created by the brokerage firms are sold door to door.

Roy C. Smith worked in corporate finance at Goldman Sachs and oversaw the firms business in Japan for 15 years. He now teaches banking and finance at New York University

Author: Walter Stewart

Mutual funds companies use an “investment program” or “contractual plan” in order to keep the money rolling in.

They also must keep expanding just to keep their ever-increasing fixed costs covered. Investment advisors make their money as a percentage of the investments they bring in. Walter Stewart also has an interesting opinion about the Toronto Stock Market. Learn about the TSE and how “ In point of fact, the exchange is owned by its seventy – four broker – members, who alone have the right to buy and sell the securities listed here, and who collect commissions on every share they buy and sell for their customers.” PG 115. Also at the end of the paragraph “ Still, it is the members who rule here, and the members want you to buy and sell stock as often as possible, because that is how they make most of their money.” (CHAPTER SIX: Nearer, Big Board, to Thee At the Exchange. PG 115. Hey, weren’t the exchanges designed to help companies raise money? Weren’t they designed for long term investing and not short term gambling? If you are as confused as I was, you had better get this book and read it now!!!

Author: Paul Ferris

Money managers trade more often, resulting in more volatile markets. From CHAPTER 5: ALL CHANGE “Every kind of financial instrument is being created to lure individuals into believing they are investing when they are really speculating,” (PG 160). Follow the dealers and shakers from America to Japan as they compete for client’s business and attempt to boost profits in a very competitive world. Nomura Securities in Japan sells bonds to their clients because they are safe and tax free up to $25,000. Hong Kong is able to attract capital because there are no exchange controls. The interest on deposits of foreign currency at licensed banks is paid tax - free. The SEC made the market a more level playing field by abolishing fixed commissions on May 1 st of 1975. The rise of Eurobonds have been made popular simply because the interest is paid without the deduction of tax. Follow the investment bankers from America to France, from Asia to Europe. The players of the banking world are tracked as they travel the globe in search of funding new ventures.

Authors:    Gloriane Stromberg, a former member of the Ontario Securities Commission openly criticizes the industry for exploiting ignorant investors.
Daniel Stoffman is an award-winning journalist. He writes on such topics as business, politics and social issues and co-authored the bestseller, "Boom Bust & Echo".

The appeal of mutual funds is that they offer professional management, growth, and diversification in one convenient package. The idea was to organize the savings of many small investors in order to buy a diversified portfolio of investments. This was suppose to give the small investor the same access to the stock market which was previously reserved for the very rich. Most clients view mutual funds as an investment. Money managers see them as a consumer product. The inventors are the manufacturers that recruit the retailers that sell these funds to the buying public. Some funds do well and some don't.

The big fund companies place the entire risk onto the backs of the public and simply take a cut of the action. It becomes less about managing investments and more about selling products. Previous generations knew exactly what would be earned from their investments because they would simply purchase good old reliable Canada Savings Bonds. There was little to no chance of losing even a penny of the principle. For the few that did own mutual funds, the expectation was that you would share in the growth of the economy over the long-term. The short-term didn't exist because daily results on returns were never published. You weren't going to switch to the latest hot fund because there simply wasn't one.

"The knowledge level of the people who are consuming the industry's product is so low. And that lack of knowledge gives the industry an ability to do things that aren't good for consumers. If there's a fee that you can burry somewhere, whether it's a bank or a mutual fund company or an insurance company, they'll do it."

Gloriane Stromberg, a former member of the Ontario Securities Commission openly criticizes the industry for exploiting ignorant investors.

Daniel Stoffman is an award-winning journalist. He writes on such topics as business, politics and social issues and co-authored the bestseller, "Boom Bust & Echo".

Author: John Lawrence Reynolds

On Wednesday January 26th 2005, an article by Ellen Roseman appeared in the Toronto Star Business Section about this book.

I cut out the article and bought the book. Information gives people more choices. The investment industry considers this a dangerous proposition. It merely exists in order to transfer wealth from you to them. Full service commissioned brokers or salespeople are pressured to generate more commissions and higher profits. The commission system and upper management forces advisors and brokers to figure out ways to sell more products in order to make more money. The pursuit of these types of strategies have the real potential to compromise basic principles and standarts that are in place in order to protect investors from conflicts of interest. The majority of financial advisors sell products instead of good advise. You should be most aware of a fund's prospectus. It's a legal document that outlines the fund's objectives and goals but also tells investors how much they will be paying out in fees. It's not always easy to read and most people through it away. I don't believe I ever read mine and my parents didn't seem too interested either. Many baby boomers have a fear of lack of sufficient funds come retirement. The Chapter 4 on "Mutual Funds" will tell you everything you ever wanted to know and then some about the industry and fees charged on fund products. Before you go ahead and sign anything, ask yourself: who is certain to profit from the advice being given? who benefits from this? who is actually taking the risk? whose money is being accessed? If you don't understand how something works, don't invest in it. Anybody that appreciates honesty and integrity should read this book.

Author: Harry Weitz

The Canadian Pension system includes Old Age Security (OAS), Guaranteed Income Supplement (GIS), the Canada and Quebec Pension Plans(C/QPP), and the benefits for special groups. These apply to the entire population and are provided exclusively by the government. The depression of the 1930s undermined the public’s confidence in private pensions for old age workers. In 1935, the United States responded to the demand for a government retirement program and introduced the Social Security Program in 1935. Ottawa and Quebec were always at odds but on June 4 th 1964 they reached a historic agreement. Two separate plans, one for Quebec, the QPP and one for the other nine provinces and the territories, the Canada Pension Plan. The benefits would be transferable between the two and covered workers from the age of eighteen. After 1970, more plans were selecting age sixty-five as the normal retirement age. People are living and working longer.

The private pension plans channel money from savers to investors. Big companies are more favourable investments for the long term because federal and provincial legislation has forced trustees pension funds to concentrate their stock investing to low risk blue chip companies. To be eligible for investment, equities must have a record of dividend payments for the past five years, or enough earnings for such payments. When did RRSPs come into existence? What is a defined - benefit plan? A defined - contribution plan? What is the difference? Why is the trading volume on stock exchanges so high? How much profits come from trading securities? Why is there a conflict of interest between what money managers say, and what they actually do? Learn how the investment world became institutionalized. The entire history of the private and public pension industry in Canada is examined and explained in an easy to understand format. Please read this book.

Author:  Peter F. Drucker

Pension fund socialism is an irreversible reality. The pension fund business is controversial and in need of reform. “Indeed, what American asset management today suffers from is “excess of competition.” It has become so competitive and so volatile that the participants outdo each other in promising miracles to “beat the market” and to “beat inflation.” Both are, of course, impossible. Pension funds cannot beat the market - they are the market. And history of the past ten years should by now have taught even the most gullible that no one can beat inflation.* It dispossesses everyone except the universal debtor, the government. But because the ability of the asset managers to attract pension fund business heavily depends of their promise to perform such miracles, they tend to concentrate on short  term results: the next ninety days or, perhaps, the next swing in the stock market. Yet, by definition, pensions are long term. Pension fund management therefore requires long  term strategies for true performance. It is an axiom proven coountless times that a series of short  term tactics, no matter how brilliant, will never add up to a successful long  term strategy. “Chapter 2/ Pension Fund Socialism: The Problem of Success PG 70/71.” People have to start practicing saving over consumption. When this occurs, people will buy less, prices of products will fall and this is favorable to the middle class and will allow for more stable economic growth.

Peter Drucker was educated in Austria and England. He is widely known as a management consultant for the biggest corporations and has written several books on business management and economics.

Author:  Philip Smith

The Huron & Erie Savings and Loan Society started up in 1864. Caution and financial conservatism symbolized the society’s mortgage loans. The money that was advanced to the borrower was less than one third of the value of the property given in security. One half of the cash value of the land was opposed as too risky. Farm property with thrifty farmers and a high quality soil located in prosperous areas. Being choosy reduced risk because the bank used information and assessment to make an informed and responsible decision about the deployment of its funds. Through a long series of mergers and acquisitions, Huron and Erie becomes Canada Trustco Mortgage Company in April of 1976. The name would be shorted to Canada Trust. The principles of savings and soundness, and long term planning allowed this company to thrive in the depression of 1929 and thrive in the cut - throat age of the big banks. Canada trust eventually falls prey to a takeover from a larger company.

More book reviews will be showing here soon!   Your patience is very much appreciated.