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Trusted Regina Financial Management Consultant John Barabe Discusses Inflation and Investments

John Barabe is a Trusted Regina Financial Management Consultant and he has an unwavering commitment to quality and service which has enabled him to build and retain a successful practice in Regina. He and his team of Regina financial professionals and support staff believe that planning with honesty and integrity are cornerstones to improving their clients' quality of life. He applies his knowledge to help clients make the right choices when considering all the product and service options that exist in today's marketplace. In his latest Trusted Regina financial expert article, he shares information on investment strategies and how to keep up with the pace of inflation. 

Do your Investments Keep Up with The Pace Of Inflation?


If you need $1000 per month for expenses and you have $1,000,000 in deposit accounts (for example a guaranteed investment certificate, term deposit, or savings account) earning 1.2% you are set, right? Well, if inflation is 2% the expenses will increase from $12,000 to $14,628 in 10 years and to $17,831 in 20 years. Your investment falls short of the income you need so you end up spending your original capital to make up the shortfall. 


What you need is a return that will allow you to draw an income that keeps up with the cost of living.  


Let’s simplify further with an example of the poor current deposit account returns:


In 1991 $150,000 invested in one year GIC’s earned enough to purchase a new Ford.

In 2011 $150,000 invested in 1 year GIC’s earned enough to purchase the same 1991 Ford.



Despite record low interest rates, you still need an income from your investments. If your investment return is coming from a guaranteed deposit account currently, you may not even be keeping up with inflation.  

What if there were a way to get a better return, a reasonable return, and still remain low risk? 

Unfortunately many people that need income for retirement or even just an investment return that is reasonable are not getting this direction.  I will provide you with access to unique methods to reduce risk, while allowing you the returns you deserve with the objective of maximizing your returns. I want to assure you there are investment strategies that can outpace inflation and provide you with reasonable retirement income. 


I thank you for reading this article and would like to offer you a value-added service for your time. I will make myself available to act as a sounding board. Please understand, you do not need to become a client to take advantage of this service. The reason I do this is because I became a financial advisor to help people make informed choices with their financial future. It’s very gratifying. One of two things typically occurs when going through this process; either I validate for you that your current approach is fundamentally solid, or I reveal a few minor flaws that you might want to consider adjusting.  As you know, minor adjustments can often lead to major improvements down the road. Either way, I will make myself available and ensure that this is a great investment of your time.


John Barabe, Madison Schenher and team.


John Barabe  is a Trusted Regina Financial Management Consultant




Trusted Regina Financial Management Consultant John Barabe Discusses Protecting Your Principal

John Barabe is a Trusted Regina Financial Management Consultant and he has an unwavering commitment to quality and service which has enabled him to build and retain a successful practice in Regina. He and his team of Regina financial professionals and support staff believe that planning with honesty and integrity are cornerstones to improving their clients' quality of life. He applies his knowledge to help clients make the right choices when considering all the product and service options that exist in today's marketplace. In his latest Trusted Regina financial expert article, he shares information on protecting your principal when investing. 

Protecting Your Principal 

There are many managed money (mutual fund-like) investment options. In Canada alone, there are over 20,000, and there are a further 70 plus financial institutions offering GIC’s and term deposits. A program I subscribe to lists over 100,000 investment alternatives and this is by no means comprehensive. That’s a lot to sort through! 

 

Do You Invest? 


If you invest your money into stocks, bonds, mutual funds, or a managed investment that is made up of any of these, the risk to your capital can be greater than you are willing to accept. With so many choices out there it can feel like a gamble with your life savings to pick one. If you invest in GIC’s you have a guaranteed yield, but how are you going to generate a fair return? GIC rates are among the lowest they have ever been in Canada, so this is not a good thing when you are about to earn your living from the interest. 


$500,000 invested in a 2% GIC earns $833 a month. This is very modest living from your life’s savings leaving you no alternative but to spend less or use up your invested capital if you need more.


So What Is The Solution?  


Just because interest rates are very low in Canada, does not mean they are just as low everywhere in the world. I can provide you the right direction and expertise so you can be safely rewarded by gaining access to these higher interest rates.


What About Using The Stock Market?  


In order to get a better rate of return than the near-zero returns that a guaranteed investment provides, many people turn to the stock market. Although in many years you may do well the obvious downfall here is that without warning the stock market can drop significantly taking your life savings with it.  


Suppose I told you there is a way to avoid these major declines but still have the upside the stock market provides?  



Think of how house insurance protects you from your house burning to the ground. Insurance provides a cheque that offsets your losses. It makes you whole once again (minus your deductible). We have no idea when our house could burn to the ground, just as we do not know when the stock market will experience its next major decline. I can protect your life savings in a manner very similar to how house insurance protects your house, eliminating the need to know when the next crash will happen.



Let’s call your investment protection “price drop insurance”.  With this protection in place, you can participate in the good years without having to expose yourself to the bad. You can sleep at night knowing you have protection and no longer need a crystal ball.


If you had any portion of your investments in stocks, you know how badly you did with the stock market crash in 2008. We all know that the stock market will experience another major decline again. My clients did better because of this 2008 stock market crash than they would have without it because there is above average opportunity, but only in the right direction. The good news for them is that the stock market will go down again, allowing the opportunity for above-average returns again.  


How will you fare with the next stock market correction?  


I would be glad to share with you more details of how my clients profit from market declines.  

On that note, we are past due for the next major market decline. I also have evidence that the next stock market decline will be significant. I would like to offer you a value-added service for taking the time to read this article.I will make myself available to act as a sounding board. Please understand, you do not need to become a client to take advantage of this service. The reason I do this is that I became a financial advisor to help people make informed decisions about their financial future. It’s very fulfilling.  

One of two things typically occurs when going through this process; either I validate for you that your current approach is fundamentally solid, or I reveal a few minor flaws that you might want to consider adjusting.  


As you know, minor adjustments can often lead to major improvements down the road. Either way, I will make myself available and ensure that this is a great investment of your time.


Sincerely,

John Barabe, Madison Schenher and team.


John Barabe  is a Trusted Regina Financial Management Consultant




Trusted Regina Financial Management Consultant John Barabe Discusses Boom and Bust

John Barabe  is a Trusted Regina Financial Management Consultant and he has an unwavering commitment to quality and service which has enabled him to build and retain a successful practice in Regina. He and his team of Regina financial professionals and support staff  believe that planning with honesty and integrity are cornerstones to improving their clients' quality of life. He applies his knowledge to help clients make the right choices when considering all the product and service options that exist in today's marketplace. In his latest Trusted Regina financial expert article he shares a Boom and Bust Report! 


Boom Bust Report

August 2021


I am sending this out as material information to keep everyone informed. This is not a solicitation for any investment. This is only meant to provide perspective and update you as best as I can from the extensive ongoing research that I do.

 

Market REALITY

 

We live in interesting times. In history there have been bubbles; however, they used to be contained to a region or asset. The Dutch Tulip Bubble (1630’s), South Sea Bubble (1720), 1929 crash, and more recently the 2000 Dot Com Bubble and the 2008 U.S. Housing bubble to name a few. But none of these engulfed the entire world. Fast forward to today. By nearly any metric, the stock markets are now at highs never seen before. 


How is this possible? 


Companies are shut down, closing stores and offices, or running way below capacity due to an inability to bring in workers and customers staying home.









Bond prices are also in the stratosphere. Since when do negative interest rates make any sense? This is the epitome of a bubble. Negative interest rates are only possible when investors overpay so much for a bond, that they are guaranteed to lose money. Interest rates around the world are either near, at, or below zero. Thus, loans are super cheap as interest rates are the lowest in human history (because bonds are the highest priced in history). 

 

To complete the “everything” bubble, we must include real estate. Real estate prices are a factor of the affordability of the monthly payment. Even though real estate prices are extremely high, payments are still affordable due to the lowest interest rates in history. Recent increases in housing are now eclipsing payment affordability despite the record low rates. If rates were “normal”, housing prices would have to be much lower.






The bubble is not limited to stocks, bonds, and real estate. There are other signs of a bubble. Intangible Non-Fungible Tokens (NFT-digital record of ownership), empty canvasses, non-existent music and most recently a woman’s intangible “love” have been priced in the many thousands or even hundreds of thousands of dollars! Really? 

 

Wondering what an NFT is? 


In order to really understand an NFT on an intangible asset, I will equate it to a tangible asset like a house. With an NFT you own a document that says you own the “house”. But anyone else can own the house as well (digital copy is identical to the original) and the masses can and have downloaded your house exactly as you did. The only difference is you paid a fortune for the ownership document. See the following example.

 

A digital artist named Mike Winkelmann sold his NFT (of the below image ) for US $69 million!! 

What did the buyer get? Anyone can still view “Beeple’s” original and even make exact copies of it at no cost. $69 million just does not buy what it used to. In my mind the buyer bought nothing.




There is evidence of a major bubble, now well known as the everything bubble (do your own search of the “everything bubble”). We know logic would have us buy low and sell high. When we buy high, we reduce our potential for return and increase our downside exposure (increase risk). The masses buy high and sell low despite this logic. Success secret: do the opposite. 

 

Regardless of the evidence that stocks, bonds, and real estate are in a bubble, there are still great opportunities for your life savings. Being aware of the dangers allows you to protect yourself and even profit from the opportunities they provide. 

 

I hope you are enjoying the remaining summer as we all know too well what comes next. If you have any questions, or just want to catch up, please feel free to touch base by email, phone or with an in-office appointment. 

 

Sincerely,

John Barabe, Madison Schenher and team.



 


Sources: 

https://www.investopedia.com/articles/personal-finance/062315/five-largest-asset-bubbles-history.asp

https://www.cnbc.com/2021/01/23/the-stock-market-is-at-or-near-the-most-expensive-levels-ever-by-most-measures-when-will-it-matter.html

https://currentmarketvaluation.com/models/buffett-indicator.php

https://www.researchgate.net/publication/307846512_Corporate_Reporting_of_Non-GAAP_Earnings_and_SEC_Compliance

https://www.investopedia.com/articles/investing/070915/how-negative-interest-rates-work.asp

https://www.weforum.org/agenda/2016/11/negative-interest-rates-absolutely-everything-you-need-to-know/

https://onlineonly.christies.com/s/beeple-first-5000-days/beeple-b-1981-1/112924

5 and 6 https://www.theglobeandmail.com/opinion/article-nothing-has-never-been-more-valuable-than-it-is-now/

Earlier this month, the Italian artist Salvatore Garau sold Nothing for a mere €15,000 ($22,000) – making him an underachiever extraordinaire at a time when Nothing is sacred, and people are clamouring to pay millions for it.

“You do not see it but it exists; it is made of air and spirit,” Mr. Garau said of his “immaterial sculpture,” titled Io Sono. “It is a work that asks you to activate the power of imagination.” And yet, if he had been financially savvy, he would have issued an NFT, a non-fungible token, for the work. Back in March, a digital artist named Mike Winkelmann, better known as Beeple, sold a digital collage as an NFT – not some physical artifact, but just a spritz of bits attesting to a kind of ownership-adjacent non-ownership. Anyone can still view Beeple’s original and can make exact copies at no cost. The buyer spent US$69-million.

 

https://www.makeuseof.com/what-do-you-actually-own-if-you-buy-an-nft/

 

https://www.theguardian.com/music/shortcuts/2013/jan/28/church-sold-out-cd-silence

https://en.wikipedia.org/wiki/List_of_silent_musical_compositions

https://nypost.com/2021/07/29/polish-influencer-just-sold-her-love-as-an-nft-for-250k/

http://www.olivertalamayan.com/success-secret-do-the-opposite-of-what-everyone-is-doing/

10 https://edition.cnn.com/style/article/beeple-first-nft-artwork-at-auction-sale-result/index.html

11 https://www.millionacres.com/real-estate-financing/articles/is-home-affordability-out-the-door-for-2021/

11 https://www.stcatharinesstandard.ca/local-niagara-falls/news/2021/05/07/housing-affordability-plummets-in-niagara-in-2021.html

11 https://wowa.ca/calculators/affordability   According to BMO, home buyers must have a minimum 5% down payment for homes worth less than $500K. For homes between $500K and $1M, home buyers must have at least 5% for the first $500K and 10% for the remaining amount. For homes worth more than $1M, home buyers must have a minimum 20% down payment.

12 Ninepoint presentation July 21, 2021 slides 10 and 11. 

13 https://www.youtube.com/watch?v=_qfgTf09f5I&t=1825s  well done research that details how the world used gold/silver for most of history. The reserve currency misinformation chart that is used wide spread. Less to do with reserve currency and more to do with fiat. 

 

 

The opinions expressed within this article/communication are those of the Financial Advisor and are not necessarily those of Keybase Financial Group Inc. Any data provided is for illustration purposes only. Clients and prospective clients should always read a product prospectus and fully understand all of the risks associated with the product before purchasing. Any information relating to the discussion of taxation issues is considered to be only general in nature. Clients should seek a qualified tax professional to discuss their specific tax requirements.

 

Third party publications are not prepared by Keybase Financial Group Inc. The opinions, estimates and projections contained in the publication are those of the author as of the date indicated and are subject to change without notice. Keybase Financial Group Inc. makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors or omissions which may be contained therein and accepts no liability whatsoever for any loss arising from any use of or reliance on the report or its contents. The provision of this publication is not to be construed as an offer to sell or a solicitation for or an offer to buy any securities.

 

Keybase Financial Group Inc. is a member of the MFDA and is a member of the MFDA IPC.

 

Trusted Regina Financial Advisor John Barabe explains Inflation.

John Barabe has an unwavering commitment to quality and service which has enabled him to build and retain a successful practice in Regina. He and his team believe that planning with honesty and integrity are cornerstones to improving clients' quality of life. He applies his knowledge to help clients make the right choices when considering all the product and service options that exist in today's marketplace.  In this article he gives us a little perspective and insight while ansewring the question does inflation matter.

Does INFLATION matter?


Let’s simplify inflation with a silly story: The U.S. government just printed and deposited 1 billion dollars into everyone’s chequing account. The first thing that happened is a 5-mile-long line up at the Ferrari dealer. But, will the Ferrari dealers sell their expensive cars at yesterdays price? Not a chance, because currency is now nearly worthless. 

 Above sports cars, there are exotic sports cars—and then there’s the LaFerrari! Base model starting at $1,420,112 U.S.

The purpose of my above silly story was to emphasize that printing does cause inflation. Further to that point, 78% of all money the U.S. has ever created was printed since January 2021. Please note that the M2 money supply chart was recently discontinued. I wonder why? What is the value of anything that can be produced for nothing?


Okay, enough theory. Commodities broke out to the upside (by Michael Oliver’s criteria) in October and is currently up ~28% since that breakout. He is predicting a ~50% climb in less than a year and we are on pace for his prediction to play out. 

As commodities are the basis for everything we consume, does it not make sense that costs (actual inflation) will also be increasing by about this amount? 

We have known for a long time that Statistics Canada and BLS (U.S. Bureau of Labor Statistics) understate inflation. Check out shadowstats.com (see below chart) and the Chapwood index for carefully calculated inflation (both of these independent sources calculate inflation amounts and their results roughly confirm each other, and dispel the official calculation).

Understating inflation is done to save the government billions a year. Think about union negotiations when the official inflation is only 1%. This creates unfortunate negative affects, the payout of social programs and pension plans to name a few. Over time we end up with way less income than “actual” inflation would dictate we should have. 

What if inflation, real inflation, were to be 50% from October 2020 to October 2021 (matching the increase in commodities as discussed above)? If this were the case, I would guess that Stats Canada and the BLS would have to increase their official numbers higher, much higher. After all, there is a limit to how far you can pull the wool over people’s eyes.

If “official” inflation were to become 12% (still way below the above “potential” actual) a 5-year GIC (guaranteed investment certificate) becomes ~16% and mortgage rates would jump to ~20% (there is a profit spread for banks). A $1,905 a month payment ($500,000 house with a high ratio $450,000 mortgage at 2%) would become $7,267 a month

The likely outcome for many homes would be that the bank now owns them as this payment is much too high. The bank would then attempt to sell it to recapture the debt lent out.

House prices are dictated by the affordability of the monthly payment. For example, $7,267 is not affordable. Assuming $1,900 is still affordable the $500,000 house would have to fall in price (using the same high ratio 90% mortgage - now $120,000) to $135,000. That is a drop in value of -73% or a $365,000 loss. 

Our money forms the banks reserve (bank deposits are unsecured loans to the bank/credit union/trust company). It does not matter if we deposit to savings, chequing or locked in for a time period. From our deposits, the banks loan money out at a huge leverage. I was shocked when I looked up the reserve that Canadian banks set aside. It seemed as though it was a secret (finding specifics was nearly impossible). The reserve is apparently 0.62% on average for Canadian banks. Less than one percent. Let’s make it 1% to simplify how leveraged the banks are. 

For every $100 in deposits, they loan out $100/0.01 = $10,000. All the banks need to lose is $100 of their $10,000 block of debt to be bankrupt. Considering the above losses with only a 12% inflation rate, I believe that is a real risk. 

In addition to the above, the actual amount that CDIC (Canada Deposit Insurance Corp.) could cover in a system wide banking collapse (which would likely be the result of 12% inflation) is $6737 per $100,000. It is just not designed for a system wide collapse. I do believe the money needed will be printed, but is that not what caused the problem in the first place? I believe more printing will not solve the problem, but will make the problem worse.

Also think about the effect of your money sitting in the bank. If inflation is way higher than the understated official number, deposits are not being compensated. After tax and inflation, what will you gain? Or will you suffer a guaranteed loss? 

Why is it that no one is telling you about this but me? Why is this not front-page news? Should GIC’s still be rated low risk?

So, does inflation matter? I will let you decide. There is more to this story, much more. As this plays out, we will be here every step of the way. Our objective is to guide each of you to the best of our ability and do everything we can to protect and grow your wealth. This is evident with the strategies and investments that are recommended (and more than likely implemented) already.


If you have any questions, or just want to catch up, please feel free to touch base by email, phone or with an in-office appointment. 

John Barabe and his team carefully consider your needs, goals and dreams in order to implement a well-constructed financial strategy, so that you can have peace of mind about your hard-earned money and financial future. They can simplify your life by addressing your complete financial well-being, which encompasses everything from:

John Barabe is a Trusted Financial Advisor



"The opinions expressed within this article/communication are those of the Financial Advisor and are not 
necessarily those of Keybase Financial Group Inc. Any data provided is for illustration purposes only. Clients and 
prospective clients should always read a product prospectus and fully understand all of the risks associated with 
the product before purchasing. Any information relating to the discussion of taxation issues is considered to be 
only general in nature. Clients should seek a qualified tax professional to discuss their specific tax requirements.  

Third party publications are not prepared by Keybase Financial Group Inc. The opinions, estimates and projections 
contained in the publication are those of the author as of the date indicated and are subject to change without 
notice. Keybase Financial Group Inc. makes no representation or warranty, express or implied, in respect thereof, 
takes no responsibility for any errors or omissions which may be contained therein and accepts no liability 
whatsoever for any loss arising from any use of or reliance on the report or its contents. The provision of this 
publication is not to be construed as an offer to sell or a solicitation for or an offer to buy any securities. 

Keybase Financial Group Inc. is a member of the MFDA and is a member of the MFDA IPC". 

Trusted Regina Financial Advisor Shares a Tip on Estate Planning Strategies

John Barabe has an unwavering commitment to quality and service which has enabled him to build and retain a successful practice in Regina. He and his team believe that planning with honesty and integrity are cornerstones to improving clients' quality of life. He applies his knowledge to help clients make the right choices when considering all the product and service options that exist in today's marketplace.

Here he shares a tip on Estate Planning Strategies.

Estate Planning Strategies



Many families are not aware of the estate planning options necessary to ensure their intentions are carried out on death.  Estate planning is complicated enough without adding family dynamics into the mix making preparation important.


With the current trend of living together without getting married many couples think that the same marital status that applies to taxation also applies to estate.  It does not.  

Upon death, without a valid will, a common law partner is not recognized as a spouse and would be excluded from a share in the estate.

Consideration and selection of an appropriate nominee guardian for minor children is an integral part of the estate planning process.  Why risk courts and government agencies intervening to make decisions.  You need certainty that the care of your child’s life is in the right hands.  Emotional toll is only compounded with the potential of inheritances that may be tied up and or depleted in the process.


Although a will only makes up a portion of an estate plan, there are many unintended mistakes that are commonly made.  For example, many people enter into identical wills with their spouse or partner.  

What few are aware of is by law the survivor may not change or revoke his or her will after the death of their partner.  Changes could be contested causing family problems and unintended beneficiaries.  

What if the surviving spouse develops additional needs?  What if one of the children divorce and both are beneficiaries?  What if a surviving spouse wishes to make special arrangements for a caregiver or charity that helped either party in a time of need?  The variations are endless.  This common problem is solved by adding a simple provision to your wills. 


Sometimes seemingly small word changes can have unintended but substantial legal ramifications that result in dramatic changes to the distribution of assets from what was planned.  Small changes can undo best intentions and unfortunately family conflict can result.


The process John follows for estate planning includes:


  1. Complete an estate planning checklist.
  2. Meet with you and your spouse or partner and clarify and confirm desires and objectives
  3. Ensure the people involved with your estate are aware of the intentions.  This can include beneficiaries, executors (or executrixes), trustees and guardians.  
  4. Then implement.  All the other steps are not valuable without action.

Make sure your beneficiaries are taken care of, according to your wishes. 

John Barabe and his team carefully consider your needs, goals and dreams in order to implement a well-constructed financial strategy, so that you can have peace of mind about your hard-earned money and financial future. They can simplify your life by addressing your complete financial well-being, which encompasses everything from:

John Barabe is a Trusted Financial Advisor


The opinions expressed within this article/communication are those of the Financial Advisor and are not necessarily those of Keybase Financial Group Inc. Any data provided is for illustration purposes only. Clients and prospective clients should always read a product prospectus and fully understand all of the risks associated with the product before purchasing.

Third party publications are not prepared by Keybase Financial Group Inc.The opinions, estimates and projections contained in the publication are those of the author as of the date of the indicated and are subject to change without notice. Keybase Financial Group Inc. makes no representation or warranty, express or implied, in respect therein and accepts no liability whatsoever for any loss arising from any use of or reliance on the reports or its contents. The provisions of the publication are not to be constructed as an offer to sell or a solicitation for or an offer to buy any securities.

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