“The market is often stupid, but you can’t focus on that.  Focus on the underlying value of dividends and earnings.” John C. Bogle

The latest craze most likely to end in tears for many are the SPAC (Special Purpose Acquisition Companies) and Crypto Currency.  Both are based on promotion rather than value with many professional athletes and celebrities hyping such investments (this alone is a warning).  It is baffling how so many people are risking their savings on such speulcation when one has a much better chance on betting red or black on a roulette table.

A SPAC is a company that raises capital through an initial public offering (IPO) for the purpose of acquiring an existing company. They have been around for years and can invest in whatever they want.  It can be a family business, a publicly listed company or partner with another fund. Many private companies will try to attract a SPAC buyout to bypass the hassle of the legal work needed to go public.

You must read the prospectus before buying any SPAC.  Some have a minimum investment timeframe of many years.  A SPAC may not have to invest the shareholder funds either. It can leave the cash in low interest money market funds until it is needed, which is around .25 of 1% today, all the while paying generous salaries to their executives.

An investor will lose up to 6 to 8% of their cash to management fees upon handing over their cash.  Plus, if the SPAC makes any money, they could end up taking up to 20% of the profits.  This is somewhat the same as how the Hedge Funds work. We rate SPACs one step above investing in crypto currencies - crazy.   

Whereas SPACs are valued in legit currencies and backed by legit assets, the 6600 cryptos in circulation are backed by nothing.   There is no regulated exchange to see what all the different crypto currencies are worth.  The crypto is awfully expensive to create and consumes so much electricity to mine that the carbon footprint is greater than Argentina.  There is also a fee to convert the coin to and from another currency.

A crypto investor in the U.S. invested on the notion that for every coin created, X amount of dollars would be put into a bank savings account as protection.  Someone demanded to see the paperwork of where the money was and not one dollar was found.  At least the SPAC must register with a Securities Agency. 

There is too much risk out there. Most assets today are valued about 40% above their long-term averages. Many commodities, tech stocks and most real-estate are trading in the stratosphere.  We are experiencing a global asset bubble and history says when this occurs the result is always the same; a destructive correction that can last years. It is the only way of cleaning out the system of excesses. 

Today you can purchase shares in blue chips which yield between 4 and 7%.  This yield increases if you qualify for the dividend tax credit. There are companies on the TSX that have raised their dividend for a minimum 10 consecutive years with many over 20. Bank of Montreal and the Bank of Nova Scotia have paid a dividend every year since 1828 and 1833, respectively.  Both banks increased the dividend majority of those years.  Share prices have always followed dividend increases overtime.

As our recommendations have proven, investing in companies that increase their dividends tend to outperform the market. The average return of our current recommendations has outperformed the TSX and the Dow Jones Index with an average 230% gain over 10 years and currently generates an average 9% dividend yield based on the purchase price.  

This is slow investing but certainly better than gambling hoping that one hits the jackpot, which always ends in tears for most.  The one reason why so few people control the bulk of the wealth is they mitigate as much risk as possible and seek out above average returns rather than betting.    

You work hard for your savings so why waste it on high priced promotion where only the promoter makes the profits?  When you think about it there are so many speculative investments available and so few true opportunities that it is next to impossible for the majority to ever make money.  It is scary because the chances of anyone over the age of 50 recovering after losing a large chunk of their savings has little chance of ever recovering financially.

People forget that zero interest rates are telling us something is wrong with the world economy.  Your sole job today is protecting your savings.