The Hotties of Occupy Toronto

Finally, what you’ve all been waiting for: pictures of hot protest girls.  My pictures don’t do them justice.  If this is you, let me know if you want me to take down your picture and accept my apologies.

Pros: Intense and intelligent. Cons: Takes a long time in airport security.

Pros: Sexy and passionate. Cons: Whatever you do, don’t bring on the hate.

Pros: Super cute and sensitive. Cons: Probably smarter than me.

Pros: Combo of my two favourites: Asians and red heads. Cons: Terrible picture, sorry.

Pros: Smart enough to bring a hardhat. Cons: Possibly a guy

More Occupy Movement Top 1% Counter Protest Signs

Thank-you to everyone who turned out to the counter protest.  I think our voices were heard.  We had some laughs, some good times, and lots of exercise as they chased as all around the city.  I’d like to share some other signs we came up with.

• Let’s face it, you all want to be like us
• My wife didn’t marry me because I’m rich – I’m also quite handsome, unlike most of you I see
• I don’t make my living from fleecing the poor – you might be thinking of Doug, over there in the expensive green dress shirt.  He totally does that.
• Hanging around all day in tents with your friends instead of working merely reinforces negative stereotypes of the bottom 99%
• We weren’t all born rich – many of us married people with money.  Maybe if you were nicer to us you could too.
• Give up yet?  How about now that the winter is coming?  Next time start your protest in early spring dumbasses
• I’ll bet you my taxes are bigger than your taxes, assuming you pay any, which quite a few of you probably don’t.
• Finance guys make less than athletes and celebrities but I don’t see you protesting them.  Well, okay, maybe you are too, but your opprobrium seems disproportionately on the those in the financial realm
• I know you’re mad at me, but I change baby, I can change!
• Look, we’ll tell you what.  We’ll give you each $100 in cash now and you declare victory, go home and get a job or something.

Trust Funds: Manna From Heaven that only the Rich Can Eat

Despite being in the 1%, private school tuition is still more than $16,000 a year.  Why do my kids need to go to a private school?  The main reason is because they are better.  The fact that they are elitist, snobby, and isolating are just bonuses in my mind.  Additionally, it is well established that schools with a philosophy (usually in the form of an adjective before the school, such as “the Waldorf school”, where they serve carrots with pineapple every day) are better but also more expensive.  An exception to this rule is the adjective “public” which really means much worse.  Pubic is also bad but fortunately often a typo.

I would not stand for a lesser school, thus my kids go to one with two philosophies (and thus two adjectives) before their name.  Anyways, this all costs mucho money, even for me, which is why we have a family trust.  Lend out at 1%, make 5% from high-grade corporate bonds, and pay less than 10% tax (versus the 46% I should pay). The income tax we save on the trust pretty much covers the school.  All legal too for some reason I could never figure out.

And before some idiot says I’m ruining the public school system I make three retorts:

#1: I still pay my large property taxes which go to a school I don’t use

#2: Now your kids never need to deal with my spoiled kids and their expensive toys they hardly use and you can’t afford

#3: You are an idiot

Why I don’t use Facebook

I used to think it was due to privacy.  Now I know the truth: my 99% friends will upload all of my statuses to www.whitewhine.com.  I must admit my day-to-day cares are quite firmly in the “first-world problems” set.  Here is a real, unvarnished look at things that plague me:

• Wow, two hours to calculate my net worth.  Why do I have to have over a dozen investment accounts 😦
• Omg – paid over $500 in commission for a single purchase.  Hate that you can’t get new issues or illiquid corporate bonds from a discount broker.  Those sorts of commissions are so unfair – makes me want to occupy his office for a while.
• Ug, more crappy toys from some kid’s birthday party.  Into the garbage with them; we only use wooden toys (such as from Melissa and Doug) in this house.
• Nanny was late today.  Stay at home wife sick.  I had to get the kids ready for school myself.  FML.
• Pet Peeve: People who use the word “Octopi”.  It’s Greek people, not Latin!  Just say Octopuses, or if you’re really the 1% of 1% snob, octopodes.  Yes, I know it is in the dictionaries now, but they’re just catering to the 99% who can’t speak good.
• Wifee bought a second $350 highchair!  Do I look like I’m made out of $350 highchairs?  I’ll admit it looks pretty damn nice though and blends with our furntiture.
• No video games tonight: need to babysit the kids.  Yes, babysit.  After much discussion and soul-searching, I think it is fine for the father to say “babysitting” even when dealing with his own kids.
• We seem to run out of bowls AND plates every Sunday.  Just need to hold on for 12 more hours until the nanny shows up Monday morning.
• So much tax this year.  I’ve maxed out my RRSP, TFSA, RESP and now have to pay the full 23% tax on my cap gains, like some schmuck earning $40,000 a year.  [1].  Before you ask, yes, I’ve maxed out the children’s trust.
• The fact that all my problems, even together in list, seem to engender zero sympathy.  And that that this post is itself a white whine.

[1]: http://www.taxtips.ca/taxrates/on.htm

A Message to the 99%: Live Within Your Means

I have lots of 1% friends.  None of them (okay all but two) are not really dicks about being wealthy.  Most of them don’t even accept that they are wealthy, mostly because they have mortgages and have to watch their spending, which truly wealthy people don’t have to do apparently.

They are often quite clueless about how most people struggle financially (I’ll post later about my knowledge base).  One friend, highly intelligent, self-made, and firmly in the top 1%, was pontificating (perhaps even opining – rich people never simply “speak” or “talk”) how bad debt is and how important it is for one to live within one’s means.  For example, he made known, I bought an inexpensive house.

At this point I interjected – “you mean that multi-million dollar house with an elevator?”

“Yes, well, I, uh,  could have bought a more expensive one” he contested a bit defensively.

I conceded that point but continued “What exactly are people supposed to learn from this example?”  I would love to hear him speak at a local money-management seminar.

Sorry, no lesson from this post.

Do the 99% have a Point?

I’m not American, but here is my sense of some of the Occupy Wall street issues, particularly as they apply to Occupy Toronto/ Canada:  asymmetric risk (get the benefits, don’t pay costs), counter-party risks (banks intertwine themselves, effectively forcing bailouts), taxation of capital gains.

Taxation: I make a lot of money from capital gains.  If I don’t sell the stock I don’t pay anything.  If I do sell, it is a capital gain, half taxable, and so I pay 23% (since I’m in the top tax bracket).  This is less than the marginal rate of someone making $40,000 in Ontario [1].  Capital gains have been taxed at varying rates in Canada [2], from zero up to 75%.  The original idea was to encourage the development of business – don’t tax it so people have more to reinvest in their business and thus build up the economy.  This makes sense, but nearly all of my capital gains are removed from this process.  When you buy or sell a stock on an exchange, it is with a 3^rd-party – the company is not involved at all.  So why tax this less?  Raising the capital gains tax in Canada would be horrible for me, but I can’t think of any reason I should be taxed less than a person making $40,000.  As a side note, high-income earners in Canada do pay a higher rate of tax.  The bottom 95% pay an aggregate average of 17% (meaning weighted towards the higher earners), whereas the top 1% pay an average of 31%.  [3]

Suggested Action: Increase the capital gains taxes from half taxable to three-quarters taxable.

Asymmetric Risk: I am using this term simply to mean a situation where you receive the benefits of your actions but not the (full) consequences.  A “freeroll” in gambling parlance.  The bonus structure at most finance companies is yearly – you get a bonus based on your personal performance and your company’s performance (and perhaps your group’s performance), although for very senior executives they do sometimes get stock on a 5-year vesting period [4].  Things go horribly wrong and you get nothing, or perhaps fired and you move on to another company.  This incentivizes people to rationally take larger risks.  For example, trading in exotic derivatives that bet on unusual events not occurring (say a housing collapse), can yield a large profit in most years and a disaster in some.  But you are getting paid on your large profit yearly and no one can take that money away from you afterwards.  Examples are found here [5].  Another case is where you suffer a large loss that hasn’t yet been discovered.  In an asymmetric risk situation you should double-down and bet more.  If you’re right you’ve avoided getting fired (and perhaps you’ll get a big bonus), and if you’re wrong you aren’t really in any more trouble.  I suspect this is why some derivative traders end up with such enormous losses (e.g. UBS and Bank of Montreal) [6].  A similar case is taking on more risk because you believe a 3^rd-party, such as the US government, will bail you out no matter what [7].

Suggested Action:  Increase the cost to shareholders, directors and executives when bankruptcy occurs.  Where possible, set still criminal penalties for those that violate banking laws and fail in their responsibilities as a director.  I think this is important, because it brings back negative consequences for actions.  The risk of going to jail (or suffering very high fines) will hopefully incentive directors to be more careful with the risks they take.  Richard Fuld, the former CEO of Lehman Brothers, let the collapse of his firm but as of this writing, still retains 100% of the more than $500,000,000 compensation he received from 1993 to 2007. [8]

Counter-party Risk: Counter-party risk itself is the risk that your counterparty (e.g. other banks) will be unable to pay what they owe you. This is an area I understand much less, but the general idea is that banks swap pieces of each other to minimize risk to themselves.    This works if they were to fail in a vacuum, but it also ties banks together if done excessively.  If one bank fails, other, teetering banks, now have their equity hit, and may be in trouble.  So they need to sell assets as well, starting a cascade of selling that crashes the markets and causes all the banks to go bankrupt.  This makes the banks “far too big to fail”, requiring government intervention, and effectively minimizing the negative impact of bankruptcy.

I attended a talk by Eric Sprott (investor extraordinaire)[9] who stated that banks equity is overstated because of the way that they model their assets, for example based on a model instead of market prices.  Even market prices won’t hold in the face of heavy selling by multiple banks in any event.   Mr. Sprott further mentioned that when bank do get bailed out, the cost is many times their theoretical equity, meaning that they were no where close to being solvent, highlighting his idea of their equity being greatly overvalued.  As a side note, he says silver will be the investment of the decade [10]. I didn’t buy any silver after the talk, which is good, because it plummeted 25% the next week.

So these intertwined banks need backstopping by governments (sovereign debt) effectively causes damage to taxpayers (higher taxes) and citizens (reduced services) to pay for the actions of others who previously benefited.  It can also cause sovereign default, where a country runs out of money to pay their obligations.  For example Ireland guaranteed all bank deposits, covered bonds, senior debt and dated subordinated debt [11].  The Wikipedia article further goes on that they did not take equity, limit salary or bonuses or replace management.  This exposed Irish taxpayers to enormous liabilities, enriching foreign bondholders who perhaps should have been made to pay the cost for holding riskier Irish bonds.  Please note that Irish depositors, similar as in Canada, already had E$1000,000 protection [12].

Suggested Action: I don’t know.  Hopefully someone smarter and more knowledgeable than me does.  Some ideas I’ve heard are increased bank capitalization rates and requiring all derivative transactions to be public.  As an engineer, I like things to be open – openness automatically encourages better behaviour.  Once this is visible it should be easier to analyze how derivatives are being used to mitigate risk and whether further regulation is needed.

The  formal Occupy Wall Street demands are here: http://coupmedia.org/occupywallstreet/occupy-wall-street-official-demands-2009

[1] http://www.taxtips.ca/taxrates/on.htm

[2] http://www.economywatch.com/tax/canada/capital-gains.html

[3] Statscan A profile of high-income Canadians http://www.statcan.gc.ca/pub/75f0002m/75f0002m2007006-eng.pdf

[4] blogs.wsj.com/deals/2008/dick-fulds-grilling-highlights-of-the-house-committee-hearing

[5] Michael Lewis, The Big Short

[6] http://en.wikipedia.org/wiki/List_of_trading_losses

[7] en.wikipedia.org/wiki/A_Colossal_Failure_of_Common_Sense

[8] en.wikipedia.org/wiki/Richard_S._Fuld,_Jr.

[9] http://www.sprott.com/main3.aspx?id=108

[10] The Double-Barreled Silver Issue, November 2010 newsletter

[11] http://en.wikipedia.org/wiki/Economy_of_the_Republic_of_Ireland#Guarantee_of_banking_system

[12] http://www.taoiseach.gov.ie/eng/Government_Press_Office/Taoiseach%27s%20Speeches%202010/Taoiseach%27s_Speech_Financial_Stability_Developments_in_Ireland_and_elsewhere_16th_November_2010_.html

Occupy Toronto Counter Protest

I’ve been reading a bunch about Occupy Toronto and Occupy Wall Street.  Like other rich people, I find it pretty hard to figure out exactly why people are there and what exactly they want.  One thing that is clear to me however, is that our voices, the top 1% of Canadians, are not being fairly represented.  Being part of such a small minority is always hard and isolating, but the level of demonization we receive makes it even harder for our voice to be heard.  We’re not all greedy bankers and CEOs that are oppressing the poor.  A lot of us have never harmed anyone – for example because we inherited a lot of money and pretty much just shop all day.  Which, by the way, helps the economy.  Others are just regular doctors and successful lawyers, marrying each other, putting in long hours and making our $500,000 a year in combined income.  One couple I know, both successful lawyers, were disappointed that their finances did not allow them to pay their nanny more than minimum wage this year.  And we graduate with lots of student debt too, although it’s true we can pay it off in a few months.  In Canada, the top 1% average just $1,900,000 in assets [1], far short of the 7.5 million our rich American brothers think they need to be wealthy [2].

Anyways, the point is I think we need to stage a counter-protest to make our voices heard.  In Canada, as of 2004, you needed a pre-tax individual income of $181,000 to be in the top 1% [1].  If this is you, join me and take to the streets to make our voices heard.  It will be a great bonding experience and I suspect afford us some much needed vigorous exercise [For those not in the top 1% of humour, this is because we will likely get chased].    We can easily pool our resources and hire a good design firm to write some catchy slogans and design some signs for us.  Should cost us ten grand, tops.  But to start, here are my ideas:

Top 1% Counter-Protest Sign Ideas

• I am the 1% – release the hounds
• I’ve got 99 problems but being rich aint one – don’t hit me!
• Live within your means: for example, my house only has 1 elevator even though I could have afforded a house with 2
• End the occupation
• We may make 12% of the income, but we pay 18% of the taxes [1]
• We’re not greedier or more rapacious than the other 99%, just more successful
• The occupy movement has so much funding now you should be protesting yourselves
• Next time factor in increased participation by women in the workforce, smaller overall family sizes, young people moving out earlier and staying in school longer and the propensity for high-income earners to marry each other before claiming such a large increase in income disparity for households.
• Not all rich people are greedy assholes earning their wealth on the backs of the poor, although I’ll admit this is correct in my particular case

Top 1% Counter-Protest Chant Ideas

• Hey, hey we’re number 1
• What do we want?  One third of the inflation adjusted real earnings increase!  When do we want it?  Actually, I think we’ve already got it so no action required! [3]
• We’re here, we’re rich, we don’t want any more bears [markets]

Finally, I’d like to address a major issue dividing the top 1% camp: the growing gap between the rich and super rich [4].  Being merely rich myself, I know how the 99% must feel.  I grew up without a grotto, and only a hot-tub/sauna combination instead of a full indoor pool

See you at Occupy Toronto on October 30th at 2:00 PM!  (Parking is challenging, so don’t take the limo)  Never be ashamed of who you are!

1: http://www.statcan.gc.ca/pub/75f0002m/75f0002m2007006-eng.pdf

2: http://www.dailymail.co.uk/news/article-1366167/US-millionaires-say-7-million-rich-need-7-5m-feel-wealthy.html

3: http://www.policyalternatives.ca/publications/reports/rise-canadas-richest-1

4: (http://www.theonion.com/video/in-the-know-are-americas-rich-falling-behind-the-s,14165/