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We Bought the Cadillac (Fund) But Drive the Deux Chevaux

June 7, 2012

Everybody knows that a “mutual fund” is just a “product” for sale.

One hesitates to call it even a “financial product” because there are no guarantees at all; there’s no guarantee of the principle, of the return, or of the suitability of the product for the customer in terms of what they had in mind – such as capital safety and capital appreciation or good service.

The only other products that one can buy that have no guarantee, warrantee, “best before date”, or claim of suitability for the customer, are the products of criminal enterprise – such as extortion, murder, drugs, prostitution, gambling, stolen goods, et cetera – offered with the same wide-eyed appeal and zest as the mutual fund salesperson, pension fund manager, or stock market pundit.

One might say in defence of mutual funds that there is a prospectus – we’ve been warned, so to speak – and we have legal recourse, but one must remember that the victim of a crime is inevitably punished twice, once by the crime and then by the prosecution of the crime. And the mutual fund business must be really profitable since there are so many of them in every colour and flavour of promise and utility that makes the common hardware store look like an oasis of functional acuity. But no guarantees save a few exceptions such as the segregated mutual funds offered by the insurance companies and Real Return Bonds (RRBs) offered by the Government as examples of both capital safety and inflation protection but, typically, at low rates of return which might not be guaranteed.

In the past, we have tended to fight crime and the gratuitous abuse of people by giving the people what they want, such as the Provincial Lotteries or the LCBO which is a paragon of joy, profitability and functionality that not only pays taxes but employs thousands of Canadians who also pay taxes.

What the people want from their investments is capital safety and value appreciation ahead of inflation so that their money now, which they don’t need to spend right away, can be used later and buy the same things, even at the LCBO.

And they can get it from a financial product that we have described as The Canada Pension Bond™  – “3% plus inflation, every year, no matter what” guaranteed – an investment fund for savers and investors who are planning for their retirement. Think of it.

The Canada Pension Bond™

“3% plus inflation, every year, no matter what”™

Guaranteed

Instead of providing more regulation and unfounded hopefulness, the Government is in a unique position to offer such a fund which sets a new benchmark for mutual fund and pension fund management.

Will it cost us anything? The answer is no, it won’t, and, in fact, it is likely to be a profit centre, such as the LCBO,  in a number of ways that are easy to imagine. After all, saving and wealth are addictive and the technology to produce these things profitably is available, now.

Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”.

Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability.

We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now.

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