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October 10, 2017 | Revenge

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.

You probably don’t work for Sears Canada, but should know about it. What a mess. A tragedy in historic and human terms. The news Tuesday was the worst possible. All remaining stores will be shuttered. All staff punted. Astonishingly, that’s 12,000 people – ten thousand more than expected to be terminated a week ago.

Why Sears failed is largely irrelevant. Online killed it. The company didn’t sell enough of what people wanted. Huge structural costs for real estate and payroll benefits were unmatched by revenues. Senior management included a few losers and twits. Nepotists, too, by some accounts. Like every business that croaks, whether a corner hardware store, car dealership or national chain, its customers drifted away to something better. They had no allegiance. Does anyone these days?

Well, it’s one of the largest layoffs in Canadian history, but not the last such event. It reminds us of actions we should all take to prepare, especially if you’re in a sunset occupation like retailing, manufacturing or (of course) blogging. In a few minutes, a personal checklist for employees who never want to be Searsed.

Started in 1858, it’s now been granted the legal right to die. Long discussions with the last exec standing, Brandon Stranzl, failed. Nobody else wanted the carcass so it ended with sixteen words: “The company deeply regrets this pending outcome and the resulting loss of jobs and store closures.”

Company creditors are hungry for liquidation and the chance to secure a few pennies on the dollar. So long as Sears was operational, it was losing a million a day and just digging a deeper hole. Among those creditors are the jilted employees, but they’re SOL.

Workers are owed hundreds of millions in wages and severance payments but many will receive next to nothing. Even money placed into the company’s defined-contribution plan is in jeopardy, with some pensioners being told they can expect only a fraction of what they’d counted on. The plan is apparently under-funded, and now its corporate sponsor is kaput. Ugh.

Amid news departing execs were getting big cheques, Stranzl ignited a social media storm by establishing a ‘hardship fund’ of $500,000, available to help people whose lives had been shattered by the corporate news. Five hundred grand – to be shared by thousands of people. A joke. No severance payments meant EI became a necessity for most, so accepting any additional money, no matter how puny (the max offered was $1,200 a week for two months), might jeopardize benefits. No wonder only two dozen people have asked for a few bucks.

What can be done personally to protect against this kind of misfortune? (And, no, going NDP ain’t the solution, no matter what that Jag guy says.)

Most importantly, you need a Plan B. DC corporate pensions are inherently wonky, nothing more than glorified group RRSPs which often end up in a bunch of under-performing mutual funds. When even a corporate titan like Sears can fold, exposing an under-funded plan that immediately warns members of benefit cuts, nobody’s safe. Do not make this the pillar of your retirement income plan.

Everybody should strive to maximize their TFSAs, then ensure the money stays in there,  invested in diversified growth assets like equity ETFs. Remember – a hundred bucks a week invested here for 30 years making 7% will end up being $532,000. That should yield an annual income of $32,000 without depleting the principal and without reducing your CPP or OAS payments by a single penny. So this is job one.

After that, shovel cash into an RRSP, using the refund to contribute to the TFSA. Unless you have a defined-benefit pension (guaranteed, stable employer-funded payments), this is an excellent way to reduce tax, invest for tax-free growth then support you efficiently when some dingdong CEO destroys your employer.

Obviously having a cash reserve for an event like this would be a great idea, but establishing a personal line of credit in advance is almost as good. It costs you nothing to set up at the bank, zero to carry and can be tapped only as you require it. Go, get one now.

Worst hit among Sears employees, it goes without saying, will be those who listened to the house-humpers on this blog and bought a property in the last couple of years, depleting their liquid assets and taking on big debt. Now that the market has turned in many places, houses are harder to sell and worth less. Banks are vicious about appraisals, plus mortgage rates are rising and the new stress test looms. Being house-rich and cash-poor after you’ve lost your job is the definition of misery. Get out if you can.

The best defence against being Searsed is to never let anyone fire, terminate or lay you off. That happens when you create your own job. Start a small business and work your heart out. Build and sacrifice to achieve financial independence plus freedom from the tyranny of a disloyal corporation. Your employee friends will hate you, and vote for Justin & Bill. Still worth it. Now and forever.

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October 10th, 2017

Posted In: The Greater Fool

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