“If you see fraud and don’t shout fraud, you are a fraud”. – Nassim Nicholas Taleb

If it harms the collective, it is our duty to speak up until it no longer can harm the collective.  Based on strong ethical beliefs and historically rooted in Swiss tradition, THUT combines outstanding technological expertise with a high degree of foresight and responsibility. Thus it helps create and safeguard the prosperous societies: security and progress.

When debts and schools cost the same (Neue Zurcher Zeitung – The New Zurich Times)
  • Canada has the highest household debt of the G7.
  • The ratio of federal debt to GDP is the deepest within the G7.
  • The new Canadian government is now heavily based on the Keynesian map – the road taken for a risky strategy.
  • The Fraser Institute has shown in a study that the debt of the Federal level and the provinces has clearly increased again over the last eight years after a good eleven-year period of economy. If the total debt in the years 2007/08 was at around 834 billion USD.  On a several years low, it has grown again since then. A debt for all jurisdictions of around 1300 billion USD is expected for 2015/16. This corresponds to a growth of 54%, with the increase in the Federal level alone being 34%; In the provinces the figures vary between plus 13.2% in the case of Newfoundland and Labrador and 90.5% in Ontario.
  • Alberta is still not in the red … but approaches it with giant steps.
  • Canada and its provinces have paid interest totaling $ 61 billion in 2014/15, which accounted for 8.1% of total income.
  • The amount Canada pays in interest was only slightly smaller than what is spent on all primary and secondary schools throughout Canada.
  • The amount Canada pays in interest was greater than all the pension plans of the Canada Pension Plan (CPP) and the Quebec Pension Plan (QPP), which amounted to around 51 billion USD.
  • In Ontario, the province with the highest debt, the interest payments are expected to be about three times the expenditure on health care and education by 2018.
  • Other organizations such as the International Monetary Fund (IMF), the OECD, the rating agencies and the Bank of Canada have also warned that the indebtedness of the Canadian private households appears to be at a serious level, especially thanks to record interest rates. If this trend continues for a while, then a disruption of the interest rate is likely to be more serious.

To be average in a group of countries that are far from ideal is bad enough – in any distribution *most* are below average because of the exceptional performance of outliers.  But to be the worst in several important metrics in this same group is irresponsible and dangerous.

Foreign demand for Alberta’s natural resources contributed to our current situation.  Canada’s abundance of natural resources has interesting side effects. The trickle down of wealth erodes productivity and created a nation dependent on Alberta.  Adaptability and productivity stay low while increasing costs, inflation, and unemployment.

Even if you don’t work directly for the oil-sector, you will be adversely affected if:

  1. an increase in your mortgage payment due to rising interest rates would hurt your finances 
  2. your house price drops 20%+ while your mortgage is more than 2.5-4 times your gross annual household income depending on how much you put down
  3. you don’t have any real skills and think you can succeed in business
  4. consumer consumables will get more expensive as inflation will continue to grow more than earnings
  5. your money is not adequately protected by CDIC in the event of financial sector collapse
Pre-crisis Framework
  1. Do not fall into the temptation of cheap credit and live within your own means. Refrain from buying a home unless you are downsizing and buying a clearly undervalued property. Even consider renting.  In German, borrowing is ‘schulden’, the same word for sin.  Only half the people in Switzerland own their own home, but those who own have higher equity than home owners in Canada.  Unless you have geo-thermal heating you should have at least 2/3rds of your windows facing the south.
  2. Housing is a relatively poor investment and should only be considered if you plan to keep the property for 10+ years. Buy residential real estate for improving your life first, rental income second, and capital appreciation third.  If you can not count on capital appreciation, then buy a house cash. If the housing market has a positive outlook you can consider a home less than 2.5x your gross annual household income if you make a 20% down payment. If you can make a down payment of at least 30% you could consider a home that costs up to 4x your gross annual household income. A condo is usually the least desirable – only if the alternatives simply do not suit you or if you have the resources to acquire a multi-unit property.
  3. Maximize earnings. Be ambitious and develop and practice skill sets that will get you paid. You are the average of the 5 people you spend around with most, so choose your employers, staff, and friends carefully.
  4. Save at least half of everything you earn. It is silly to borrow money for depreciating assets like cars and furniture, unless your money is earning you much more through your business/investments.
  5. Get of out mutual funds and individual stocks and protect 90% of your cash and securities with CDIC – especially at risk is CIBC and to a lesser extent RBC, and TD.
  6. Invest cautiously, and prioritize getting rid of any debt.
  7. Autonomy and not having to rely on a job will ultimately make you happy. Having expensive to maintain items, like gas-guzzlers will take you further from autonomy and happiness.  Downsize car whenever possible.
  8. Get rid of any non-corporate vehicle payments, and avoid buying vehicles with debt unless its required for your business. If you have a mortgage and spent more than either 5% of your net worth or 20% of your gross annual income on a car = sell it.Wasting an extra $40K on a car is equivalent of wasting 1 full year of your life.  Let this serve as a reminder to avoid useless material purchases.  New carbon levy will be introduced effective January 1, 2017, and will apply to fuel but not to consumer electricity. Fuel cost is the single-highest operating expense a vehicle incurs. Take into account how many kilometers you drive in a year perhaps you can make due with a used vehicle that is 5 years old or newer with 80,000-112,000 km (based on Net Present Value calculations accounting for safety ratings, ongoing costs (fuel, maintenance, insurance), depreciation, resale.
  9. Stop watching TV, surfing the net,  playing video games, and taking unnecessary vacations.  Make your own life great instead of engaging in escapism. The Swiss love outdoor adventure sport. Make your life so good you don’t need a vacation.  The only legitimate reason someone who is not financial independent should take a vacation is to visit family overseas.
  10. Trim your contact list – cut the complainers because chances are they already lost.
  11. Most people should skip University altogether unless you attend an elite school and have skills leading you to a professional career (Engineering or Law). Make the most of your time by getting the best grades in the shortest time so you can start your career ASAP. Otherwise exhaustively learn code online or learn a trade.

 

Switzerland has no natural resources, covered by inhabitable alps and can fit in between Edmonton and Calgary! Canada has 20% of the world’s fresh water but a Swiss company is the largest water brand in the world.

 

The future will belong to:

  1. People who are the best at what they do through 90% doing & 10% learning.  Hone useful skills that allow you to deliver a service/product that people want and you can create opportunity regardless of the economic environment. Switzerland’s strong apprenticeship system has made it the most competitive country 7 years in a row.
  2. People with money. Strive to save 90% of your income.  Keep 90% of the above in investments and 10% cash. Don’t take this the wrong way, I don’t mean downsize your life. Instead, maximize your income so you are happy living on the other 10%. Follow metrics when buying a home.  Buy your car using metrics for yourself and not prestige for others. 12.7% of Switzerland’s population has a net worth over $1M vs. 1.4% in Canada.
  3. People who leverage technology. Online is the only path to scalability.  Switzerland has no resources but is ranked as the world’s most innovative country.

 

Post-crisis Framework 
  • Only now buy a Passivhaus or upgrade to a bigger one.(“Buy when blood flows in the streets.”  – Freiherr von Rothschild) The more expensive a home the more the price will drop. You may be selling your existing home at a loss but your are saving disproportionately more on the upgraded house. Choose the location that would minimize drive time. Talk to us about doing the math to see if it makes sense to rent out your existing home.
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