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ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

November 8, 2015 | Rejection

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

 

“My manager was let go this morning,” Leanne emailed me from the office early last week.  “We’ve been, ahem, asked to timeshift instead of getting paid OT, and train offshore-ers.  So the writing is on the wall.  If I do get ushered into an office in the next few days, do you have any tips for me?”

I did. More below. She texted the next morning: “More guys hit.”

Then another note from the bank. “Tales of second lines of credit and second condo purchases are hitting the floor.  They don’t usually do layoffs this close to bonuses and Christmas and I can’t remember the last time they did layoffs on Tuesday and not Friday. And thank you again for driving home the message about debt, houses, and retirement.  I hate to think just how terrified I’d be if I had a mortgage to pay.”

While the latest jobs numbers (Friday) weren’t bad in Canada, they contained a ton of part-time election employment and couldn’t mask what’s happening in the economy. All of the major banks are now shedding positions – good ones, with DB pensions. Telus punted 1,500 people before the weekend. CTV last week threw out half its editorial staff in Toronto and Montreal. Over 54,000 people have been shown the door in the oil patch and downtown Calgary in the last year. Keystone is dead. Bombardier’s on life support. Shell walked away from an Alberta project leaving $2 billion in the ground. Caterpillar and Heinz are abandoning Ontario. Husky lost $4 billion and shed 1,400 people. And Canadians just elected a majority government promising to tax the rich and overspend – because we’re fearful.

The contrast between the US and Canadian economies is sharp and painful. It’s why I suggested two years back that investors go light on maple and heavier elsewhere. If it were not for dirt-cheap rates and house porn, with people gorging on debt to buy things they cannot afford, we’d all be in the ditch. And while growth here will resume when commodity prices inevitably recover a little, that could take years. Between now and then, people like Leanne will go to work scared each day, or just go home.

“Any chance of a ‘here’s what to do when they pull you aside’ column in the next few days?” she asks. “Most of us do not think about that possibility until we are actually laid off. So what should you do if you haven’t prepared?”

Good idea. First, everybody should strive to make themselves indispensable. Managers are human. They finger people with bad attitudes, excessive wage demands, poor work habits or who back sick days into every long weekend. Corps don’t care if you just bought a house, got married or are fourteen months from your pension. Jobs aren’t social programs. Nobody’s entitled to one. And right now we don’t have enough to go around.

Second, obviously, is what Leanne underscored – assume your income could vanish. Keep debt low and manageable. Live beneath your means and save the rest. Have a Plan B. Don’t snorfle debt just because it’s cheap. Be diversified and balanced. Shun having all your net worth in one thing, like real estate. Understand that when you lose a job you need liquidity and cash flow, not granite and stainless.

Third, never assume your employer needs you. He doesn’t. So it’s a swell idea to have a up-to-date resume, a network of industry contacts and a line on job openings elsewhere. It’s never a wrong time to think about being an entrepreneur, either. Nobody’s ever going to walk into your own bakery, office or garage and fire your ass.

Fourth, if you’re axed, be smart and calculating. Hiring a pricey lawyer because you dislike your package is almost always a loser move. The lawyer loves it, the company ignores you and you burn through precious capital while feeding your anger. Move on. And commute your pension instead of leaving it in the company plan. You can usually role it over into a self-directed LIRA or RRSP, then get it invested for growth. The more you control, the better

Once the paycheque stops, budgeting takes over. Control your spending. Sell stuff to reduce debt. If you can dump the condo and rent a similar one, you’ll end the mortgage payments, strata fees, and property taxes, pay off the debt, have bucks to invest for income and reduce your cash flow by half. Or you can hang on waiting for another job which may not come for a long time, while mortgage rates rise, the market fades and your equity erodes. In other words, try not to be a fool.

Don’t be proud. Apply for EI. Move back home. Beg your ex to take you in. Shop at Costco. Turn the thermostat down. Get a crappy part-time job some Millennial will hate you for. If you’re over 50, face the fact this might be the last time you have a career gig. So do a financial assessment and determine if you actually need to work again, or can get by through adjusting your lifestyle, downsizing, moving or just putting all your capital to work generating investment income, trading brain-dead GICs for things offering regular dividends or tax-cheap capital gains. If you don’t think you need some help, you’re (a) rich or (b) ignorant.

Finally, never assume this happens to some other dude. I’ve lost jobs, been fired and seen my position eliminated. It sucks. But after the first episode I made sure I was ready for the next one. Minimal debt, max liquidity and lots of self-employment. Things don’t always work out. But failure beats rejection.

Or, you can always start a free blog.

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November 8th, 2015

Posted In: The Greater Fool

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