The curtain has dropped on another RRSP season, the most dismal in recent memory. What is usually a chirpy celebration of national frugality has descended into a bottomless pit of misery.
Gone is the optimistic dream of Freedom 55, strolling down a Bahamian beach with your loved one. Let's try Freedom 75, flipping burgers at McDonald's until your mutual fund gets back above water.
Even the RRSP ads were depressing. At least the Bank of Montreal's TV spots acknowledged its clients are panicky -- one featured tourists shopping for "really big" worry dolls in a Latin American flea market to cope with the meltdown.
Yet, even this spot concluded with a trite sales pitch: "How do you stop worrying about your RSP? By making sense of it." I don't think so. I've got a PhD in economics, and the more I learn about this meltdown, the more worried I get.
But if you feel bad, pity the poor investment brokers. Their clients are bailing, their next BMW now just a figment of their imagination. That's why every personal investor in Canada received the obligatory feel-good letter from their broker this RRSP season. It carried a neutral title, something like Commentary on Recent Market Volatility. But what the letter really said was: "Don't panic, keep buying and, above all, please don't redeem."
There were many code words in these letters. Here's a translation of the key phrases.
Broker: "Don't try to time the markets. Invest for the long term."
Plain English: Give me your money, and don't ask questions. On this score, the money managers never practised what they preached. They asked clients to park their money for decades, then played around with it like hyperactive toddlers.
Broker: "Canada's financial system is more stable than other countries."
Plain English: Compared to a Force 5 hurricane, a mere tropical storm seems like a calm day on the pond. But if it swamps your boat, you'll still drown. Believe me, if Canada's banks were truly stable, Ottawa wouldn't have pumped $200-billion into the system.
Broker: "In the long run, stocks outperform other investments."
Plain English: In the long run, Egypt's pyramids are still there. But shares of Nortel, Bre-X and dozens of others weren't worth the paper they were printed on.
Broker: "Redeeming your investments now only locks in your losses."
Plain English: If you fall off the fifth floor of a building, don't try to grab the flagpole sticking out 10 feet above the ground - because that way, you'll never get back up to the fifth floor.
Broker: "Equities currently reflect attractive valuations."
Plain English: Like Stephen Harper said last October, the meltdown is a "buying opportunity." Since then, Canadian markets have fallen another 20 per cent -- which just proves you should never buy securities from a sitting PM.
Broker: "Buy low-priced shares today to reduce the weighted average cost of your portfolio, then you'll profit once markets recover."
Plain English: This is the money-market equivalent of Screech -- which is made from the dregs of rum barrels and watered down with water. Yes, it's less expensive. But it still gives you a wicked hangover.
All this doom and gloom puts in context the personal investing culture that has dominated our pension planning for a quarter of a century. Remember, according to the free-market view, governments can't pick winners. Now we know money managers can't, either. Yet, government still spends as much as $15-billion a year in RRSP subsidies to encourage Canadians to waste still more money on this pointless roller coaster.
After this week's carnage, stocks (adjusted for inflation) are now lower than a decade ago. If you'd taken your money in 1999 and hoarded canned food, you'd have more wealth today than by buying mutual funds. Come to think of it, those canned beans could come in handy, before all is said and done.
Jim Stanford is an economist with the CAW.
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