How does your annual spending compare to a typical Prime central London household?

south-kensington-houses-MEDA report on the Living Costs and Food Survey carried out by the Office for National Statistics has revealed that the people of Britain spend more and more each year. The total average weekly household expenditure was £531.30 in 2014, £14 more than the £517.30 weekly spend in 2013 and £16 more than in 2012. Although the last few years have seen a rise in household spending, Brits are paying about £22.50 less per week, than in 2006.

The four main categories households spend on are food, housing and fuel, transport, and recreation. More than 50 percent of family expenditure goes across these four categories.

HOW DO BRITS SPEND THEIR MONEY?

Typically, households in London and the South East spend the most each year, while people in the North East and Wales pay the least. Surprisingly, London families pay about £6 a week less than those in the South East and residents of the North East spend significantly more on transport than housing, with households across the nation using 14 percent of their expenditure on transport.

Residents in the United Kingdom spent the majority of their money on transportation in 2014, at £74.80 per week. The second highest category spend was housing, at £72.70, which includes fuel and power, but excludes mortgages. Families spend an average £63.90 on recreational purchases, including tickets, subscriptions, and pets; and £58.80 on food, with meat and fish averaging a quarter of the weekly food expense.

 

Another popular spending category for Brits is family holidays. The average British family of four spends a solid two months’ salary (based on an average £26,500 salary) on going away for the summer, at an average of £860 per person. April in usually the busiest month for bookings and December is the quietest, although Brits do enjoy the Winter sun. The biggest holiday spenders are those in the West Midlands, earmarking an average £1,084 per person. Families in Wales spend the second highest amount of their summer trips at an average £1,077 per person. London is third with £971 per person and individuals in the North East pay the least, at an average £675 per person.

PRIME CENTRAL LONDON ANNUAL EXPENDITURE

One of the most exclusive areas in prime central London is Mayfair. Living in Mayfair puts residents at the core of world-class dining, extraordinary culture, and select couture. Shoppers in the area spend £644,000 on clothing, shoes and accessories and £254,500 on food, leisure and entertainment, including flowers, wine and food. This level of spending is unsurprising with the range of choice locals have available to them, with over 66 percent of the top 100 retail brands available. Bond Street is an exceptional shopping destination, known across the globe, and attracts high demand from luxury brands looking for recognition on the high street. Demand has recently spread over into neighboring Albermarle Street and Dover Street and, as footfall has risen, so too have rental values.

 

According to data within a new report from Wetherell; administered by the Westminster City Council, Dataloft and EGI, the average homeowner residing in a property valued over £15 million, spends an estimated amount of £4.5 million in London a year. Residents of homes priced between £5 million and £15 million regularly spend around £2.75 million annually on local expenses. Of the £4.5 million, families spend approximately £2,700,000 on interior design and artwork each year, £644,000 on clothes, and £325,000 on employment. High-value homes hiring staff usually offer live-in contracts and high salaries. These employees have a significant disposable income and consuming patterns similar to those of their employers.

 

The tourist market of £22 billion a year is supported by the West End, where around 200 million visitors attend annually. These guests spend around £11 billion at bars, hotels, restaurants, and shops in the area alone, without including the world famous theatre district income. Despite the flourishing tourist revenue, the ‘Luxury Quarter’ is hugely supported by residents. Locals provide much more for the local economy and a recent survey conveyed on behalf of Bond Street retailers exhibits that the average spending of the local neighborhood is twice that of a non-resident Bond Street customer.

 

Norma Walton, Saving By Sharing Your Space

Saving money takes effort, work and self sacrifice.

A friend of mine saved money in his 20s and early 30s and bought a house north of the city.  In keeping with his savings mentality, he moved into the basement and rented out the main floor and upper floor to tenants.  He lived that way for five years until he got married, at which point he moved upstairs with his wife and rented out the basement.  Obviously he would have preferred to live upstairs from the beginning, but that willingness to sacrifice to save money helped him pay down the mortgage to the point where he could comfortably afford to move upstairs.  He, his wife and son now have a beautiful semi-detached home in Riverdale as a result of his savings mentality.

Sharing youroommatesr space is never ideal.  Yet in any larger city there are numerous people always looking to rent accommodation.  If you can handle a room mate or create a spot in your house that you can rent out, that money can be dedicated to paying off your mortgage faster or creating savings to purchase another house or condominium.  Many people in Toronto sacrifice privacy for the income provided by renters.  My god mom, who is from Portugal, was looking for a place to stay for a while and she moved in with an older Chinese couple and rented a room from them for far less than she would have paid for her own space. The cultural exchange was sometimes challenging but the savings were worth it for both.

 

Airbnb provides another outlet for turning your house into rental income.  In any large city there is demanairbnbd for short term rentals in lieu of hotels, particularly for larger groups that are coming into town for a wedding or a special event.  We have rented our house out through airbnb in the past and it permits us to spend time up north in the summer that we couldn’t otherwise afford.  It takes effort to ready your house for guests…with four children it takes our family a lot of effort.  But the benefits of canoeing down the Muskoka river with all four children in the boat are more than worth it.

 

Friends of mine ran an international student placement company.  They were always looking for welcoming families in which to place their European students.  Host families were compensated for accommodating those students and introducing them to Canadian culture.  From time to time there would be problems, like under age drinking or stupid behaviour, but that was the exception.  By and large the host families and the students had a good time together and often those relationships lasted long after the student had returned home.  One of those families just welcomed the student they formerly hosted, her husband and their toddler a decade after the hosting ended.

 

My girlfriend had five house mates in university to cut down on the costs of accommodation.  Six girlsroommates-2…one bathroom.  She is now in her early 50s and still gets together with them once a year.  This year was the 30th anniversary of them moving in together.  Each now has multiple bathrooms in her house but the memories they created together when they had to share just one resonate with them to this day.  Being willing to share your space can provide financial benefits along with lifelong emotional connections that may enrich your life and last far longer than the space sharing arrangement did.

 

A former client of mine got divorced and she didn’t want to sell her beautiful heritage house in Cabbagetown.  She started a Bed and Breakfast from it.  She now earns enough from renting out a couple of rooms and providing breakfast for her guests that she is able to maintain the house and pay all the costs associated with it.

Inge og Ole?s bolig
Inge og Ole?s bolig

With the above ideas in mind, take a look around at your space.  Consider whether there is any opportunity to share it to generate some additional income.

Norm Walton, House Rich or House Poor

Some days Torontonians love their real estate…and some days Torontonians hate their real estate.  That love-hate relationship can even happen all on the same day.

What is to love?

  • Toronto’s real estate is coveted internationally
  • There are approximately 100,000 new Canadians moving into the Greater Toronto Area each year, all needing housing
  • Toronto is cheaper than other major international cities
  • Toronto’s stock of freehold houses is relatively new and in decent shape relative to other large cities
  • Toronto is a fairly safe city
  • Toronto is the most multicultural city in the world and welcomes all people
  • Investments in improving residential houses in Toronto pays off when the property is then sold or refinanced

What is to hate?

traffic

  • There are no affordable freehold houses in Toronto
  • In a city of more than 2.6 million people, there are a mere handful of detached freehold houses for sale at any point in time, most of them adjacent to housing projects in far less desirable neighbourhoods in Toronto and even in those neighbourhoods, most freehold houses sell for closer to $1 million
  • Torontonians pay a large proportion of their take home pay on their housing costs, with most households paying at least 33% of take home pay on housing
  • Average mortgage costs in some higher end neighbourhoods are more than $10,000 per month
  • Average house costs in some higher end neighbourhoods are more than $2.5 million
  • The trend is to buy a house for $1 million plus and rip down whatever is there now to build a monster house to the maximum allowable density
  • Transaction costs in Toronto are far higher than surrounding areas because Toronto tacks on a city land transfer tax of about 1.5% of value in addition to the provincial tax of another 1.5% of value
  • There is a large number of condominium projects in the works and even the price points for condominiums is at least $250,000 for a tiny bachelor unit along with significant monthly common element fees

monster house 2

Predictions for the future:

  • In my opinion, Toronto’s freehold real estate will continue to increase in value over the long term given the demographics
  • Monster houses will continue to be built in higher end neighbourhoods, occupied by between two and four people at a ratio of 1 person per 1500 to 3000 square feet
  • There will continue to be a flight of young families and retirees to communities west, north and east of the city because they cannot possibly afford to live in the city
  • Basement apartments will be built in existing houses due to the immense demand for affordable rental housing of any kind and the need for homeowners to supplement their income to pay their mortgages
  • Despite the recent push by all levels of government to improve transit, commute times will continue to climb for those workers who live outside Toronto but work in the city and congestion on highways will worsen
  • The surrounding communities will benefit from an influx of numerous new residents as these bedroom communities evolve into hubs of their own over time
Happy young family spending time together outside in green nature.
Happy young family spending time together outside in green nature.

As illustrated above, the insatiable appetite for Toronto’s freehold real estate has both pros and cons.  Hence in the same day you can both love the market and hate the market.  The course of Toronto’s market seems unstoppable regardless of your personal views.  Hence you should probably either get on board with the lack of affordability in Toronto and embrace the city’s offerings or start looking for a house in the surrounding region and ensure your car has no kilometer restrictions on trade in.

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Norma Walton, Kid-Size Money Sense

“Mommy, I’d like a fitbit for my birthday.”Fitbit
“What is a fitbit?”
“Mommy!!  You know.  They track your steps and how much exercise you do each day.”
“Oh, how much do they cost?”
“I don’t know, mommy.  But if it is too expensive you don’t need to buy it for me.  Depending on the price maybe I can buy it for myself.”

My eldest son is almost 10 years old.  He is an athlete and very health conscious.  I have no doubt that he would use a fitbit and it is a great birthday present idea.  He is aware, though, that our family of six has a limited budget.  He and his siblings know that often we cannot afford the things they want us to buy.

Yesterday morning the kids and I purchased five pairs of used roller blades for $40.  The kids help me shop on kijiji and they usually come with me to view and purchase the items.  They also help me grocery shop and they know to look for items that are on sale as opposed to full price.

The kids are starting to learn how to analyze the value of the things they want.  They don’t yet have part-time jobs so they don’t yet calculate how many hours of work would be required to purchase the item, but hopefully that will come in future.  Their money sense is slowly, but surely developing.

I worked part-time from the time I was 13 years old.  My first job was at the Byron Public Library.  I loved that job and earned $3.75 per hour.  I would come home each night with at least four new books I wanted to read.  That job taught me how many hours I needed to work to pay for the things I wanted.  That job also made me appreciate that other jobs might make me more money and thus take a shorter amount of time to accumulate cash.  I subsequently waitressed and also worked on the line at Ford Motor Company, two jobs that made me far more money than the library although neither was as much fun.

Math photoLearning basic math was the first step to help our kids develop a sense of money.  Giving each of them wallets to keep their money was a second step.  Helping them understand the monetary gifts they receive and the money they earn from garage sales came next and gave them some responsibility and independence around money.  Permitting them to spend their money on items they want is also valuable as it helps them associate the cost versus the benefit of purchases.

I also find that the more involved the children are in the families’ financial decisions the more quickly they become able to analyze the choices that are being made.  My children play hockey and it costs a lot of money.  Their cousins travel to Aruba, Las Vegas and New York and get to do fun things in the sun during the winter that our family cannot afford.  Our children would love to do both but they were an integral part of the decision to allocate the money to their hockey instead of travel.  Hence they are content with that choice and don’t complain (much) about what they cannot do.

It is enjoyable to watch our children become good at understanding and managing money.  Hopefully that knowledge will help them make intelligent financial choices as they grow older.  In my view, financial prudence is similar to maintaining a healthy weight.  It is both a daily struggle and a lifelong journey.

How can small business deal with today’s currency fluctuations?

Mal Spooner is a veteran fund manager and currently teaches at the Humber College School of Business.
Mal Spooner is a veteran fund manager and currently teaches at the Humber College School of Business.

Right now it’s no secret that selling merchandise to Americans is pretty lucrative.  We also know that it hasn’t always been this way.  A relative of mine who sells lighting products to customers the U.S. is a case in point.

My brother-in-law built a very successful business with his wife from the ground up.  Their decision to sell to markets in the US worked fine, but the real boost to sales occurred when their son joined the business and talked them into selling on the Internet.  Online sales boomed, but of course so did their company’s vulnerability to exchange rate risk.

A few years ago, he was struggling to make his usual margins (which are not that big at the best of times) when the CAD/USD exchange rate approached par.  In other words, a C$ was pretty much equal to the US$.  Cross-border shoppers from the Canadian side of the border were in heaven (myself included), whereas exporters were beginning to panic.  After all, their costs were still in Canadian dollars, which was an advantage when they received sales revenue in a much stronger $US.  Converting back into Canadian currency provided a substantial bonus to their profits and quality of life.

Things are great once again, but how can a smaller business owner(s) plan ahead to make sure that currency risk doesn’t threaten their livelihood?

The graph below illustrates the impact currency can have on a business.  Imagine a fictional Canadian company that began selling a specialty cheese to the U.S. marketplace in June of 2006. The sale price stays the same (due to competitive pressures) at US$ 2.50.  Costs are steady in C$ 1.98 range.  Sales made in US dollars must be converted back to Canadian dollars.  
USD-CAD sales and profits
It is easy to see how just the exchange rate can wreak havoc on a businesses revenues and profitability.  Is it possible to anticipate or prevent this volatility?  When companies are accustomed to very large orders, it is possible to contact your bank and make arrangements to use the currency forward markets in order to ‘hedge’ your profits.  For instance, if one expects to have to convert a significant amount of foreign currency into one’s domestic currency once the order is delivered, you can arrange to lock in the forward exchange rate today, thereby knowing exactly what your margin is (and will be).

However, the orders for most small businesses aren’t large enough to make hedging a viable option. Can you plan for currency fluctuations?  Experts agree that there is no robust way to forecast exchange rates.  Experts have been frustrated trying to predict exchange rates for years, and the forward markets/futures markets are not very good predictors of the exchange rate that will actually occur in 3 to six months.

One approach that has been around (seems like forever) is the purchasing power parity theory.  The price of a consumer product (same materials, can be sourced locally or at same prices) should be the same in different countries, once adjusting for the exchange rate.  Below, the table compares the price of the rather ubiquitous iPhone in Canada, Europe and Asia.  The price of the iPhone 6s 16GB (unlocked) in the U.S. is about $699, and should be more or less the same in Nanjing, China (their currency (is the remninbi or RMB) adjusting for the exchange rate as it is in Berlin Germany (euros).  As you can see from the table, this is not the case (the prices and exchange rates are not 100% accurate due to rounding).

iPhone intl pricing

Because Germans and the Chinese have to pay an even bigger price, it suggests the the USD is overvalued relative to those currencies.  The Canadian dollar on the other hand, based on this overly simple approach is actually still a bit overvalued compared to our neighbour to the south even at these depressed levels.  Of course, our proximity to the US might simply give Canadians a great deal on iPhones not available in other countries.

We should therefore expect the USD to depreciate relative to both the EUR and RMB in due course – the forces of supply and demand (for products, services and therefore currencies) should cause disparate prices to equilibrate.  The mobile device in theory should cost the same to the consumer no matter where he/she lives.  Should the USD decline significantly (perhaps even compared to the Canadian dollar) then the margin on good and services businesses in those countries are earning today with decline.

When sales are in another currency

The problem, is that historically purchasing power parity is also a poor predictor of exchange rates. The game of international finance is extremely complex.  Not only are exchange rates determined by differing interest rates in countries, balance of payments, trade balance, inflation rates and perceived country risks, the rates are also influenced by expectations associated with these variables and more.  The bottom line for smaller businesses is that when it comes to foreign exchange risk – they are completely exposed.

So what can be done?  Planning.  It is tempting to become overly optimistic when exchange rates have drifted in your favour, encouraging further investment to facilitate more sales in the stronger currency.  Buying equipment, hiring permanent labour and leasing more space introduces higher fixed costs that might dampen or destroy profitability when the tide turns the other way.  It is important to consider ‘what if’ scenarios frequently – and especially before laying out more capital. For entrepreneurs the biggest mistake is to take for granted that the status quo will continue.  All of a sudden, you might be buying yourself a bigger house, a fancier car and sending the kids to private school – all based on current income which is linked to the current prosperity of your business.

Currency instability is a fact of life, and the best way to be prepared is to expect the inevitable. Rather than rush to spend more on expanding the business put aside a ‘safety’ cushion during good times that can be drawn upon during bad times.  If your commitment to the US, European or other markets is firm, then park the cushion into currencies you are vulnerable too.  For example, invest your cushion in US dollar denominated assets – U.S. Treasury bills will provide a natural hedge for your sales.  Similarly, if a significant volume of your sales are in Europe and the company borrows funds for operations, borrow some funds in euros as a hedge – then if the euro appreciates you’re able to pay those obligations in the same stronger currency thanks you your euro receivables.

It is widely believed today that the USD is likely to depreciate relative to a number of other currencies, and perhaps imminently.  Today might indeed be the ideal time to begin considering ‘what if’ scenarios and the actions you can take to plan ahead.

 

 

Interest Rates Rising – the sequel

Mal Spooner is a veteran fund manager and currently teaches at the Humber College School of Business.
Mal Spooner is a veteran fund manager and currently teaches at the Humber College School of Business.

No doubt you’ve noticed about half the industry pundits cautioning that the US Federal Reserve is closer to ‘tightening’ monetary policy.  What this implies for us regular folk is that they will introduce monetary measures that will allow interest rates to rise.  We have enjoyed a very long period of inflation and interest rate stability following the financial crisis (a crisis almost forgotten by many).  Despite a recent slowdown in come economic indicators, efforts by governments around to world to jumpstart an economic recovery did bear some fruit.  The rebound in profitability, employment and growth has been particularly robust in the United States.  Both Europe and China are now making efforts to replicate this success by bolstering liquidity in their financial systems as the US did.

So what’s to worry about?  Savvy investors will have already noticed that interest rates in the world’s strongest economy have already begun to rise, even before the FED has taken any action.  This is what markets do – they anticipate rather than react.  Some forecasters predict that although interest rates are bound to trend upward eventually, there’s no need to panic just yet.  They suggest that there’s enough uncertainty (financial distress in Europe, fallout from falling energy prices, Russia’s military ambitions, slow growth in China) to postpone the threat of rising rates far into the future.

Yield Curves 2015-05-02_15-28-30

What they are ignoring is that the bond markets will anticipate the future, and indeed bond investors out there have already begun to create rising interest rates for longer term fixed-income securities.  The graph illustrates that U.S. yield curves have shifted upward.  The curve shows market yields for US Treasury bonds for various maturities back in February compared to rates more recently.  So what’s the issue?  If investors hang on to their bonds while rates are rising, the market value of those bonds declines.  This often comes as a surprise to people who own bonds to avoid risk.  But professional bond traders and portfolio managers are acutely aware of this phenomenon.  So they begin to sell their bonds (the longer term-to-maturity bonds pose the most risk of declining in value) in order to protect themselves against a future rise in the general level of interest rates.  More sellers than buyers of the bonds pushes down the market price of the bonds, which causes the yields on those same bonds to increase.

Many money managers (including me) have learned  that despite how dramatically the world seems to change, in many respects history does repeat itself.  For example, while writing my CFA exams back in the mid-1980’s, I was provided with sample exams for studying, but they were from the most recent years.  I figured it was unlikely that questions on these sample exams would be used again so soon, and managed to do some digging in order to find much older previous exams.  I reasoned there are only so many questions they could ask, and perhaps older exam questions might be recycled.  I was right! In fact several of the questions on the exam I finally wrote were exactly the same as the ones I’d studied from the old examination papers.

In my experience recent history is not useful at all when devising investment strategy or trying to anticipate the future, but often a consideration of historical events further back in time – especially if trends in important economic drivers are similar – can be very helpful indeed.

The consensus is that interest rates will rise eventually.  But it is human nature to stubbornly hang on to the status quo, and only reluctantly (and belatedly) make adjustments to change.  What if what’s in store for us looks like this:  Consistently increasing interest rates and inflation over the next decade?  This has happened many times before (see graph of rising 10-year Treasury bond yields from 1960-1970).

US Treasury Yields 1960 - 1970

Before you rant that things today are nothing like they were then (and I do agree for the most part) consider the following: Is the boy band One Direction so different today compared to The Monkeys then?  And wasn’t the Cold War simply Russia testing the fortitudes of Europe and America just like the country is doing today?  Weren’t nuclear capabilities (today it’s Iran and North Korea) always in the news?

Yes there have been quantum leaps in applied technology, brand new industry leaders in brand new industries.  China’s influence economically was a small fraction of what it is today.  So where is the commonality? The potential for rising interest rates coming out of a recession.  The US government began raising rates in 1959, which caused a recession that lasted about 10 months from 1960 – 1961.  From that point until 1969 the US economy did well despite rising interest rates and international crises.  But which asset classes did well in the environment?

Growth of $100 - 1960 to 1970

Could the disappointing 1st quarter economic data be hinting that we might also be entering a similar transitioning period?  Inflation is bad only for those unable to pass higher prices along to customers.  If the economy is strong and growing then real estate and stock markets provide better returns.  Since the cumulative rate of inflation between 1960 and 1970 was about 31%, investors essentially lost money in constant dollars (returns below the rate of price inflation) by being invested in the bond market.  They would have done better by simply rolling over short-term T-Bills.  An average house in the US cost about $12,700 in 1960 and by 1970 cost $23,450 – beating inflation handsomely.

Do I believe we will see a repeat of the 60’s in terms of financial developments?  Yes and no!  There will be important similarities – especially in terms of stock markets likely performing well enough and the poor prospects for the bond market. There will be differences too.  The outlook for real estate is clouded by the high level of indebtedness that has been encouraged by extremely depressed interest rates over the past few years.  Higher rates mean higher mortgage payments which might serve to put a lid on real estate pricing, or cause prices to fall significantly for a period of time before recovering.

Companies that have substantially financed their acquisition binges with low-cost debt will soon find that unless they can pass along inflation to their customers their profit margins will be squeezed.  Who will benefit?  Commodity producers have had to significantly reduce their indebtedness – commodity prices tend to stagnate when inflation is low, and even decline when economies are growing slowly.  In a global context, these companies have had a rough time of it.  It is quite possible that their fortunes are about to improve.  If Europe and China begin to enjoy a rebound then demand will grow and producers will have more pricing power – perhaps even enjoying price increases above the rate of inflation.

Do I believe any of this retrospection will prove useful?  I hope so.  The first signs that a different environment is emerging are usually evident pretty quickly.  If there were a zero chance of inflation creeping back then why are some key commodity prices showing signs of strength now?

recent aluminum price recent copper price data

If we begin to see inflationary pressures in the US before Europe and Asia, then the $US will depreciate relative to their currencies.  In other words, what might or might not be different this time is which countries benefit and which countries struggle. Globalization has indeed made the world economy much more difficult to come to grips with.  Nevertheless, there are some trends that seem to be recurring over the years.

There will be recessions and growth spurts.  In recessions and periods of slower growth, some formerly stronger industries and companies begin to lose steam as a paradigm shift takes place, but then other industries and companies gather momentum if the new reality is helping their cause.  This is why I’ve biased my own TFSA with commodity-biased mutual funds (resource industries, including energy) and a European tilt.  You guessed it – no bonds.

Any success I enjoyed while I was a money manager in terms of performance was because exercises like this one help me avoid following the mainstream (buying into things that have already done well) and identifying things that will do well.

 

 

 

 

 

 

 

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Expectations of entitlement – where do you sit?

This is coming from Panama – Coronado on the Pacific Coast to be exact. We are here for 12 days. An interesting country – some very lovely spots and the people have been universally friendly so far! Lots of expats here – both Canadian and US. They have their own currency, the Balboa – but it is on a par with US currency so both are used interchangeably. Their driving habits rival those of Montreal – glad we are using professional, private transportation.

The expanded canal is the most amazing feat of construction in the world and they are justifiably proud of the work in progress and the eventual result. Apparently will add $6 Billion (over operating costs) to the Panamanian economy each year!

With that said, there are many deficiencies in services that we take for granted. Some of the more interesting gaps is there is no proper ambulance service, and they do not have any paramedics! You phone a private Ambulance, they locate a doctor who is available and then they come and get you – wait times up to 6 hours – yes hours – all are privately operated – cost for pickup ranges from about $300 to over $600 – CASH only – and they stop at a cash machine for you! No postal system as we know it. There is a strange courier/package system that some people use where mail is sent to PO Boxes in Miami, Florida – and sent here by air freight. No bills are mailed – everything is a cash transaction from cell phones to satellite TV to gas – cheap – $.898 per litre for diesel and about $.92 for regular gas.

Lots of stores but overall quality is “dollar-store” level – including groceries and fresh veggies and meat. Fruit is great quality as is the local seafood – the prawns and bass in particular. Meat is a huge disappointment to someone used to high quality everything. Chicken and turkeys are good – the rest – ?????

Residential water service is an interesting mix of on and off. All residences have water storage – where we are staying – 700 gallons (US) – which lasts about 2 days for the 4 of us here – wasteful aren’t we!

So what is the point of all this? First, Canadians are blessed with unbelievable wealth (and I am not talking money) and public and private services that have no equivalents here (or in many other parts of the world of course); second we don’t acknowledge that wealth even to ourselves; third as a group, Canadians have developed a very unhealthy sense of entitlement without appreciation for that which we have and fourth, we have universal access to medical and a social welfare/social services net (no, it is NOT perfect) – Panamanians have none of these.

Now they do have some advantages: there is no personal income tax; property taxes are very low; they have some low-quality grocery products that are price-frozen for low-income people; and the climate is very pleasant, with the exception of the high humidity.

My blogging colleague, Becky Wong, CFP, has done a few excellent blogs on the topic of entitlement in Canada. I am adding another voice to her message. A great many Canadians do not seem to be grateful for all that we have – most clamour for more and more but loathe paying the cost – let the Governments (all 3, or 4 levels if you include the new First Nations bureaucracy).

The ONLY source of Government and First Nations’ revenue is you and I – the people. Let us not forget this key point.

Corporations have never paid any taxes – they are merely conduits down to the people and this has nothing to do with politics either – they are simply hired tax collectors – another branch of Government taxation. This concept applies to property taxes and every other type of taxation. The idea is to hide these extra taxes from us poor taxpayers – not citizens either as Daphne Bramham of the Vancouver Sun tried to make out. Hi Daphne – many non-citizens pay more taxes than many citizens and there are more citizens who do not pay taxes than taxpayers – time to come in from the cold!

Rather than demanding or expecting more or thinking we are entitled to more, let’s think about GIVING more for a change – to paraphrase John F. Kennedy: “ask not what your country can do for you but what you can do for your country.” Shouldn’t we be a country of givers rather than takers?

IT’S ALL ABOUT FREEDOM.

No one is handed freedom on a silver platter. According to noted author and professor, Dr. W.W. Dyer. “You must make your own freedom. If someone hands it to you, it is not freedom at all, but the alms of a benefactor who will invariably ask a price of you in return.”

Freedom means that you are unobstructed in ruling your own life as you choose. Anything less is a form of slavery. If you cannot be unrestrained in making choices, in living as you dictate, in doing as you please with your environment (provided your freedom does not interfere with anyone else’s freedom), you are under command by forces stronger than you.

To be free does not mean denying your responsibilities to your loved ones and your fellow man. Indeed, it includes the freedom to make choices to be responsible. But nowhere is it dictated that you must be what others want you to be when their wishes conflict with what you want for yourself. Have a sense of freedom that does not mean that you shirk your responsibilities to your friends, family or community.

Most of the people who will try to tell you that you cannot, who will label your desire for freedom “selfish”, will turn out to have measures of authority over your life, and will certainly be protesting your threat to the holds you have allowed them to have on you. If they can help you feel selfish, they have contributed to your feeling of guilt, and immobilized you.

You must become the master of your own destiny. If you are not, you are not free. You do not need to be powerful or exert influence over others to be free, nor is it necessary to intimidate others, nor [to try to] bully people into submission in order to prove who is master.

The freest people in the world are those who have senses of inner peace about themselves. They refuse to be swayed by the whims of others, and are quietly effective at running their own lives. These are responsible people, but they are not enslaved by other people’s interpretations of what responsibility should be. This level of responsibility is to god, self, family and the community.

I will not pretend that the new forces of Unions have not restricted the freedom enjoyed by myself or by all of us. The adversarial association between employer and employee has resulted in an infinite amount of lost people working hours, and an unhappy work environment that results in disgruntled employees.

There is a better way.

There is a dire need to encourage individuals to spend, invest and work, instead of penalizing them when they do. Unions want to restrict commerce. Attempts to negotiate with the unions only result in more downsizing and corporate bankruptcies. We are all learning that a service economy must be driven by a productive manufacturing economy.

Real wealth, which comes from people’s ability to commercialize and develop new and exportable technologies, creates jobs and allows government to foster those socially necessary programs that provide new jobs and security for employees. The re-arranging, manipulation, and accumulation of capital does not provide us with new taxable income or the real creating of wealth.

For those individuals that do not want to provide equal value for equal pay should have their fellow employees drive them out. For those that want to work harder and produce more an additional yearly profit sharing program should be implemented. Those in the unit that did not want to work should not drag down those that do. Lets face it, superstars make more money and so they should. 

Unions threaten the freedom of Canadians in this highly competitive and global market place. Their role has been vastly diminished. They are dinosaurs that add little or no value to organizations or their people.

Any force, group or individual that threatens your freedom needs to be informed of their breach, even if it means putting your very livelihood or life on the line. People that want to build, grow and produce should not be taxed to death when they do so. They should standup and be counted.  We need producers of all kinds. The laggards can sit on the sidelines.

One of the great American states has the following words blazoned on their License Plates, “Live Free or Die”.  Freedom is worth fighting for, even if it takes a lifetime and great sacrifice.  God help those people that threaten my freedom.

By: Mark Borkowski is president of Toronto based Mercantile Mergers & Acquisitions Corporation. He can be contacted at www.mercantilemergersacquisitions.com