# Four reasons you're a lucky generation of investors



## Jon Chevreau (Apr 4, 2009)

Based on the ages of people divulging data in the "Introduce Yourself" thread, it seems most of the people posting on this excellent new discussion forum are in their 20s or 30s. Speaking as a 56-year old baby boomer, I'd like to say I envy you for several things:

1.) The new Tax Free Savings Accounts. Clearly, many of you see this as a centerpiece of your retirement planning 20 or 30 years out. The boomers had nothing like this: just non-registered investments: the gift that keeps on giving (to Government tax coffers) every time you crystalize capital gains or receive dividend or interest income. Yes, we had RRSPs but they're taxable in the end game and the more we have in Defined Benefit pensions, the less we could stash in RRSPs. 

2.) The boomers paid inflated prices for stock for the last 20 or so years. You guys get to buy in during an historic bear market, at far more reasonable prices than we ever had. 

3.) Internet tools. You have a wealth of web-based free resources, from social networking sites to online news feeds to online discount brokerages to forums like this one. 

4.) Exchange-traded funds (ETFs). Another investment product that didn't exist when the boomers started out. You can build tax-efficient (if non-registered) portfolios with very low costs. 

That's my short list: i'm sure there are others.

www.wealthyboomer.ca


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## ShowMeTheMoney (Apr 12, 2009)

Yes, and in my day I had to walk 30 miles, over huge snow banks to deposit my one dollar saved that whole year . Yes, these young'ones have it soooo easy!!!


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## Rickson9 (Apr 9, 2009)

Jon Chevreau said:


> Based on the ages of people divulging data in the "Introduce Yourself" thread, it seems most of the people posting on this excellent new discussion forum are in their 20s or 30s. Speaking as a 56-year old baby boomer, I'd like to say I envy you for several things:
> 
> 1.) The new Tax Free Savings Accounts. Clearly, many of you see this as a centerpiece of your retirement planning 20 or 30 years out. The boomers had nothing like this: just non-registered investments: the gift that keeps on giving (to Government tax coffers) every time you crystalize capital gains or receive dividend or interest income. Yes, we had RRSPs but they're taxable in the end game and the more we have in Defined Benefit pensions, the less we could stash in RRSPs.


I agree. Big benefit.



Jon Chevreau said:


> 2.) The boomers paid inflated prices for stock for the last 20 or so years. You guys get to buy in during an historic bear market, at far more reasonable prices than we ever had.


I strongly agree. Huge benefit. 

The only similar time I can think of would be to be in your 30s during the 1974/75 bear market. That was an amazing time!



Jon Chevreau said:


> 3.) Internet tools. You have a wealth of web-based free resources, from social networking sites to online news feeds to online discount brokerages to forums like this one.


I agree. Big benefit. 



Jon Chevreau said:


> 4.) Exchange-traded funds (ETFs). Another investment product that didn't exist when the boomers started out. You can build tax-efficient (if non-registered) portfolios with very low costs.


I disagree. No benefit (to us).


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## takingprofits (Apr 13, 2009)

Rickson9 said:


> The only similar time I can think of would be to be in your 30s during the 1974/75 bear market. That was an amazing time!


Unfortunately, we boomers were not in our 30's during that time. The majority of us were just out of our teens and had just finished school and were attempting to find jobs or begin careers in that bear market. We did not have any money to invest yet.


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## The_Number (Apr 3, 2009)

Yes I also noticed that many of us who introduced ourselves tend to cluster around the late 20s and early 30s, and I partly agree (but partly disagree) with Jon about whether or not our generation (What are we? The tail end of Gen. X or the front end of the Millenials?) is "lucky."

It is true that we are blessed with all the tools that Jon mentioned, and there is no doubt we are benefiting from greater general awareness of financial knowledge (compared to 20-30 years ago).

But at the same time, I am highly aware of the societal shift in treating retirement from societal responsibility to personal responsibility. You can see this shift more dramatically in the U.S., but Canada is seeing some of the same trend (e.g. replacing defined benefit plan with defined contribution plan). So, in one sense, many of those wonderful tools Jon speaks of are there as a result of the arguably not-so-wonderful change. The news coverage of this recession (again more so in the U.S. than in Canada) is making us see some of the results of the eroding social protection, and it's not a pretty sight (If you don't swim, you really sink.)


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## Sampson (Apr 3, 2009)

More on societal shifts.

Our generation is also much more subject to rampant consumerism, the lowest savings rates in history, lower real take home earnings, fewer pension plans, and we are about to inherit some BIG BAD debt.

Obviously this does not apply to many of us on this forum, but I sure have a lot of peers with not a cent to their name, and no plans to get there.


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## DAvid (Apr 3, 2009)

I wonder if the Boomer's parents are the best off. A relative & accountant of that generation once described his generation as "stepping on the bottom step of the golden escalator." They grew up post WWI, benefited from the huge increases in the economy generated by WWII, and kept going! The ride was pretty much non-stop. That generation will (and has) transferred a HUGE wealth to the next generation, because they were workers, savers, and investors. They were borne in an age when telegraph was the means to move information around the world, and now interact with their grandchildren on the other side of the globe using live video in the comfort of their den.


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## takingprofits (Apr 13, 2009)

As a boomer I can agree with that one. 

Boomers' parents keep reminding us what financial geniuses they were to be blessed with 6% 25 year mortgages and high interest on their safe bank savings (10% was considered low). They could save a lot because they paid a pittance for their homes and mortgages and their savings multiplied quickly because of the high interest rates.

Boomers on the other hand couldn't save because we were paying 18 and 20% mortgage rates. We had no money left for consumerism


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## Canadian Finance (Apr 3, 2009)

I couldn't agree more. I'm 31 and plan to take advantage of all these points.

I would add a 5th one... mortgage rates. Getting a good rate now for the next 5 years will allow me to pay off my principle quicker, which in turn leads to more savings and investments.


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## beyondfunds (Apr 5, 2009)

*Another reason*

I would say we will also benefit from the lesson that six sigma events like the internet and credit bubbles are possible, and that diversification does not just mean buying stocks from different countries, or a bunch of equity mutual funds.


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## Rickson9 (Apr 9, 2009)

beyondfunds said:


> I would say we will also benefit from the lesson that six sigma events like the internet and credit bubbles are possible, and that diversification does not just mean buying stocks from different countries, or a bunch of equity mutual funds.


Or perhaps that bubble's aren't as rare as six sigma events; that the probability curve of corrections have long tails.


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## ethos1 (Apr 4, 2009)

Jon Chevreau said:


> Based on the ages of people divulging data in the "Introduce Yourself" thread, it seems most of the people posting on this excellent new discussion forum are in their 20s or 30s. Speaking as a 56-year old baby boomer, I'd like to say I envy you for several things:
> 
> 1.) The new Tax Free Savings Accounts. Clearly, many of you see this as a centerpiece of your retirement planning 20 or 30 years out.
> 
> ...


Compared to myself, you still have lots of time to make another million Jon before age 65

In nine years Jon having the availability & flexibility of 1-4, one can go imaginary wild, especially having the access to so much free information on the www, as well as what is posted by all kinds of people on forums like this one

There is no need to buy financial investing or retirement books these days or to go with any one strategy/technique ... a world of information is wide open & available to everyone, with less dependancy on the so called experts.

In my world the biggest thrill or opportunity has come from the web & the use of my computer software tools


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## archanfel (Apr 7, 2009)

My biggest concern is the buy and hold era for North America is over. The boomers invested during the golden years of NA. The technology was revolutionized several times and the US was undeniably the powerhouse of the world. Resources were plenty and productivity leaped. 

I am afraid those days are over. The US is showing its ages. Let's say China or India became the next powerhouse, Canada's unique position would be no more whereas Australia would probably benefit enormously. Even the global couch potato portfolio has 75% its asset invested in North American markets and my worry is that this is a fast shrinking market. 

Politically, North America is following Europe's steps to the left, which means less productivity improvement and huge inefficiency building up in our society. If NA consumerism collapse (which IMO is a matter of time), we might be a in a lot of troubles. Our scientific society and financial system might be our saving grace, but that remains to be seen. 

Unfortunately, both China and India have very fundamental problems which makes the future very cloudy. No idea how to hedge against the decline of NA.


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## takingprofits (Apr 13, 2009)

The idea that we entered a secular bear market beginning in 2000 that lasts for 17 to 20 years suggests that for the next decade buy and hold will not be profitable and the lows we just experienced will be revisited again years from now. This does not come at a good time for boomers who will likely be chased out of the market before this secular bear ends. They may never get back in and will miss the long term secular bull which will follow and last for most of the boomer retirement years.

Under that scenario the "lucky generation" will have to endure the next decade but after that can buy and hold their way to wealth perhaps until their retirement.


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## Rickson9 (Apr 9, 2009)

takingprofits said:


> The idea that we entered a secular bear market beginning in 2000 that lasts for 17 to 20 years suggests that for the next decade buy and hold will not be profitable and the lows we just experienced will be revisited again years from now.


This would be true if we bought the market. My wife and I never buy the market. We buy companies that churn out profits that are listed at bear-market prices.


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## fersure (Apr 19, 2009)

*Leah McLaren's whining screed*



Jon Chevreau said:


> Based on the ages of people divulging data in the "Introduce Yourself" thread, it seems most of the people posting on this excellent new discussion forum are in their 20s or 30s. Speaking as a 56-year old baby boomer, I'd like to say I envy you for several things:
> 
> 1.) The new Tax Free Savings Accounts. Clearly, many of you see this as a centerpiece of your retirement planning 20 or 30 years out. The boomers had nothing like this: just non-registered investments: the gift that keeps on giving (to Government tax coffers) every time you crystalize capital gains or receive dividend or interest income. Yes, we had RRSPs but they're taxable in the end game and the more we have in Defined Benefit pensions, the less we could stash in RRSPs.
> 
> ...


I find it funny/ironic that Jon's posting how great it is to be a late Gen-Xer/buster/miilenial/whatever on the same day Leah McLaren whining about how baby boomers are putting the screws to future generations.

Now granted, McLaren is not a financial columnist and if she lives like the fiction she writes, she deserves the huge economic smack-down she has coming to her. 

However, what isn't funny, when looking at the harsh criticism of McLaren's post is how it is impossible in this country to have a civilized discussion "macro-economic" on how the actions of one generation affect the ability of younger generations to make decisions about their own financial well being. Every argument reverts back to personal, using arguments like: "It's not my fault that the government is spending $x billions more than it takes in, therefore stop blaming my generation for the growing debt."

Looking at this list, and considering the overall theme of McLaren's article - who do you think is really benefiting today on your list? Are 20/30 year olds using TFSAs more than boomers and who's buying stocks and etfs at deflated rates?

I'm curious - are there things that you'd like to list of which you are not envious of? On balance - are you envious or not envious of "younger generations?"


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## Rickson9 (Apr 9, 2009)

archanfel said:


> My biggest concern is the buy and hold era for North America is over.


Over? It just started (again) at the end of 2008. This is the time to create a lot of wealth! My wife and I created a million bucks since the last buy-and-hold era in 2001 and we're doing to do it again!


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## takingprofits (Apr 13, 2009)

Using the figure "a million bucks" and extolling the virtues of buy and hold may give the wrong idea to some new investors reading this thread. Most people have a different idea of what buy and hold means than you do. 

Using the annual return percentages you give on your website, while it is true that you did an admiral job investing - the average person who would have invested an S & P 500 index fund (or failed to beat the returns of the index) in the beginning of 2000 and held it till the end of 2008 would have lost their shirts - they would be down almost 40%. Buy and hold would not have worked for the average investor.

You on the other hand would have made a million dollars if you had started with a million dollars - an average 8% return.


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## Jon Chevreau (Apr 4, 2009)

Fersure, the original post wasn't really about envy per se. When the market was tanking in the fall I did a couple of interactive blogs and said that while it was a disaster for near retirees and retirees it was a great chance to build wealth for the younger generation. Then I started to think about some other good things along with it.

That doesn't mean I want to be 17 again, like the current film of the similar name. My daughter's that age and I don't want to go back to that! We all get a crack at youth and, unless you are unfortunate, we all get a crack at middle age and hopefully old age. 

Fortunately, they let you start with youth first!


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## PMREdmonton (Apr 6, 2009)

DAvid said:


> I wonder if the Boomer's parents are the best off. A relative & accountant of that generation once described his generation as "stepping on the bottom step of the golden escalator." They grew up post WWI, benefited from the huge increases in the economy generated by WWII, and kept going! The ride was pretty much non-stop. That generation will (and has) transferred a HUGE wealth to the next generation, because they were workers, savers, and investors. They were borne in an age when telegraph was the means to move information around the world, and now interact with their grandchildren on the other side of the globe using live video in the comfort of their den.


But the Boomer's parents had a bunch of kids - sort of a "forced savings" sort of idea. They had the kids, raised them and then had their consumer power push them into good paying jobs and could retire with them kicking in the money for their pensions.


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## archanfel (Apr 7, 2009)

Rickson9 said:


> Over? It just started (again) at the end of 2008. This is the time to create a lot of wealth! My wife and I created a million bucks since the last buy-and-hold era in 2001 and we're doing to do it again!



Sorry, I meant buy and hold for average investors like me. 

Where did those million bucks come from? Somebody must have sold at the low point and possibly bought again at a higher point (might even from you again). Sure it's nice to get a million dollar if you are smarter than average, but by definition, the average return should be similar to index return, which is pretty flat over the last 8 years.


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## CanadianCapitalist (Mar 31, 2009)

Rickson9 said:


> This would be true if we bought the market. My wife and I never buy the market. We buy companies that churn out profits that are listed at bear-market prices.


The unfortunate reality is that a lot of investors don't even earn market returns, let alone beating it by a margin. Enterprising investors should make sure they can at least earn what could be easily achieved through passive portfolios. Don't ask me how... I'm a passive investor


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## Rickson9 (Apr 9, 2009)

archanfel said:


> Where did those million bucks come from? Somebody must have sold at the low point and possibly bought again at a higher point (might even from you again).


We buy profitable businesses during bear markets and don't sell them.



archanfel said:


> Sure it's nice to get a million dollar if you are smarter than average, but by definition, the average return should be similar to index return, which is pretty flat over the last 8 years.


Thank god it doesn't require intelligence to create wealth; otherwise I would be quite poor. I am quite honest when I tell you that my intelligence is at a normal level - at best.

All it requires is a basic ability to interpret financial statements and to buy when markets are fearful and do nothing when the markets are not.

Rinse and repeat.


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## archanfel (Apr 7, 2009)

Rickson9 said:


> We buy profitable businesses during bear markets and don't sell them.
> 
> Thank god it doesn't require intelligence to create wealth; otherwise I would be quite poor. I am quite honest when I tell you that my intelligence is at a normal level - at best.
> 
> ...


But who did you buy it from? Those guys must have made a bad decision selling it to you. The markets are fearful for a reason. People with PHD degrees study the market every day with tons of people assisting them. Therefore, it takes a lot to notice a stock that nobody else thought was under valued. I think the moneysense magazine said the best: "Thinking that you're going to beat the system and turn up lots of great, undiscovered stocks is a bit like thinking you can wander into a thoroughly explored wilderness and spot a gold mine that all the professional geologists just happened to overlook."

I have no doubt people have the ability to consistently outperform the market. However, it can not be the majority.


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## Rickson9 (Apr 9, 2009)

archanfel said:


> But who did you buy it from? Those guys must have made a bad decision selling it to you. The markets are fearful for a reason. People with PHD degrees study the market every day with tons of people assisting them.


When fear grips the market, intelligence goes out the window. People sell at 6x P/E and 1x book for no apparent reason; mostly because they feel that *insert reason for economic downturn here* will 1) endure forever and 2) spread to all sectors of the economy. Different year, same story.



archanfel said:


> Therefore, it takes a lot to notice a stock that nobody else thought was under valued. I think the moneysense magazine said the best: "Thinking that you're going to beat the system and turn up lots of great, undiscovered stocks is a bit like thinking you can wander into a thoroughly explored wilderness and spot a gold mine that all the professional geologists just happened to overlook."
> 
> I have no doubt people have the ability to consistently outperform the market. However, it can not be the majority.


It will never be the majority because:

1. The majority equate investing with activity ("Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell." - Warren Buffett)

2. They believe in market timing. They read opinions on whether the market will go up or down. They postulate on macroeconomic trends. They live, breathe and study forward indicators. I personally just go to see a fortune teller - the accuracy is oddly similar.

3. The majority equate investing with buying in bull markets or complex strategies ("it can't be THAT easy"). I am always amused at some of the esoteric option strategies posted on investment message boards and forums by novices who haven't even mastered the basics ("I like to go for cinches. I like to shoot fish in a barrel. But I like to do it after the water has run out." - Warren Buffett)

4. The majority think that investing requires a high degree of intelligence. I've met people who feel INSULTED for using basic math when investing - they feel that they are far beyond using simple arithmetic to achieve financial success ("If you have more than 120 or 130 I.Q. points, you can afford to give the rest away. You don't need extraordinary intelligence to succeed as an investor. - Warren Buffett")

5. The majority do not believe in value investing. You either believe in it or you don't. Over the years I've talked to many people - you can't learn to believe value investing; you do or you don't. I have never met somebody who "converted" to value investing. It just doesn't happen 

("It is extraordinary to me that the idea of buying dollar bills for 40 cents takes immediately with people or it doesn't take at all. It's like an inoculation. If it doesn't grab a person right away, I find that you can talk to him for years and show him records, and it doesn't make any difference. They just don't seem able to grasp the concept, simple as it is. A fellow like Rick Guerin, who had no formal education in business, understands immediately the value approach to investing and he's applying it five minutes later. I've never seen anyone who became a gradual convert over a ten-year period to this approach. It doesn't seem to be a matter of IQ or academic training. It's instant recognition, or it is nothing. - Warren Buffett")

Issue #5 is huge. If you have issue #4 then you probably have one or more of the previous issues. 

Warren Buffett wrote an article called the SuperInvestors of Graham and Dodsville to answer the critics of value investing who said that beating the market couldn't be done; that it was a lottery - a game of chance. His reasoning was that a number of individuals have beaten the market, they all came from the same investing educational heritage and that the odds of such an occurance are virtually a six sigma event - his point was that the market can be beaten - but only if an investor believed in value investing. If you didn't believe - then your reality is that it can't be done. And that's what your reality will be.

http://en.wikipedia.org/wiki/The_Superinvestors_of_Graham-and-Doddsville

The clichee that, whether you believe that you can or cannot - you are right, becomes nonetheless very appropriate for why the majority will never be wealthy.


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## archanfel (Apr 7, 2009)

Rickson9 said:


> When fear grips the market, intelligence goes out the window. People sell at 6x P/E and 1x book for no apparent reason; mostly because they feel that *insert reason for economic downturn here* will 1) endure forever and 2) spread to all sectors of the economy. Different year, same story.
> 
> It will never be the majority because:
> 
> ...


As I said, I do believe people have the ability to consistently out perform the market. However, I am no Warren Buffett. Very few people are Warren Buffett. And in my opinion, Warren Buffett can not be emulated. He has both more information and more bargaining chips than average investors. 

1,2,3,4 do not apply to passive index investors. #5 is complicated, because you do not know where value is. "no apparent reason" does not equal to "no reason". As I said, you have to be able out guess a lot of professional investors, probably including Warren Buffett. You sound like you can and I respect your track record. However, as I said earlier, you were making money not from passive investors who buys indexes and never sells. Instead, you were making money from people who thought they could beat the market, but in reality couldn't.


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## Ben (Apr 3, 2009)

fersere at #16 first posted this article, but I think it deserves to be posted again, mainly because of the relevance of the article's comments to the topic that started this thread, paraphrasing, "Are the boomers or echo generation more financially advantaged by the times in which they live(d)?"

http://www.theglobeandmail.com/servlet/story/RTGAM.20090418.wstleah18art1354/BNStory/lifeStyle/home

This is a complex question, and perhaps not one that has much value in answering, other than saying in broad strokes that each generation should shoulder a fair share of the cost of its lifestyle. Obviously, the devil is in the details there....

I would start and finish my analysis of the question by saying that it is far too soon to pass judgement on either generation. The boomers haven't folded their hand yet, and the echoes have barely looked at their first two facedown cards. Perhaps in 100 years we will be able to say who was dealt the best hand, and who best played their hand.


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## Rickson9 (Apr 9, 2009)

archanfel said:


> As I said, I do believe people have the ability to consistently out perform the market. However, I am no Warren Buffett. Very few people are Warren Buffett. And in my opinion, Warren Buffett can not be emulated. He has both more information and more bargaining chips than average investors.
> 
> 1,2,3,4 do not apply to passive index investors. #5 is complicated, because you do not know where value is. "no apparent reason" does not equal to "no reason". As I said, you have to be able out guess a lot of professional investors, probably including Warren Buffett. You sound like you can and I respect your track record. However, as I said earlier, you were making money not from passive investors who buys indexes and never sells. Instead, you were making money from people who thought they could beat the market, but in reality couldn't.


Like Mr. Buffett said, it is like an inoculation. The next best way to do well is to do passively invest in an index. Which, I believe, is probably the best way that the majority can do well for themselves. Kudos!


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## johnsazzr (Apr 20, 2009)

Canadian Finance said:


> I couldn't agree more. I'm 31 and plan to take advantage of all these points.
> 
> I would add a 5th one... mortgage rates. Getting a good rate now for the next 5 years will allow me to pay off my principle quicker, which in turn leads to more savings and investments.


Yes rates are very low but it is somewhat relative to the cost of housing compared to family income vs the same for boomers. I would suggest that it would be very difficult for the average family to afford housing today if they were single income, as was the norm for many of the boomers.


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## johnsazzr (Apr 20, 2009)

archanfel said:


> My biggest concern is the buy and hold era for North America is over. The boomers invested during the golden years of NA. The technology was revolutionized several times and the US was undeniably the powerhouse of the world. Resources were plenty and productivity leaped.
> 
> I am afraid those days are over. The US is showing its ages. Let's say China or India became the next powerhouse, Canada's unique position would be no more whereas Australia would probably benefit enormously. Even the global couch potato portfolio has 75% its asset invested in North American markets and my worry is that this is a fast shrinking market.
> 
> ...


In terms of Canada not being in a "unique" position should India and China become financial power houses I am not so sure...don't forget that they will also become consumers, and billions of them...As long as we can eventually "take control" of our wealth, which is our natural resources, we should be in a very unique and envious position with respect to other financial powers, with or without the U.S.


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## archanfel (Apr 7, 2009)

johnsazzr said:


> In terms of Canada not being in a "unique" position should India and China become financial power houses I am not so sure...don't forget that they will also become consumers, and billions of them...As long as we can eventually "take control" of our wealth, which is our natural resources, we should be in a very unique and envious position with respect to other financial powers, with or without the U.S.


The problem is that it's a lot more costly for us to ship say oil to China than countries like Russia. Australia would be in better position to provide Uranium and iron ore. I am no expert in commodities or geography, so I might be wrong, but you got my point. 

Another issue is politics. Canada seems to have a fairly chilly relationship with China and Russia. I am sure a lot of them are just for show, but it can get in the way sometimes. Australia PM took the effort to learn Chinese, I am fairly sure he didn't do it because he loved the language. 

Of course, it impossible to predict what's going to happen. China, India and Russia all have fundamental problems in their societies. I am not sure the BRIC portfolio is all that attractive either.


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