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Friday, August 17, 2012

Newspaper filler isn't filling

If you take a daily newspaper, you may well have read how awful the returns are on one's investments today. And the poor returns of today are not going to improve in the future, or so we are told. I wouldn't bank on it.

I heard from one reporter who took offence at my position. This reporter had written one of the "investment world is coming to an end" pieces that so offend me. No one knows the future when it comes to investment returns. Frightening people with negative scare stories, making them feel powerless when it comes to investing for their future is wrong. It is just completely wrong.

We should be encouraging people to take an active role in managing their retirement funds. They should know enough to judge whether their investments are performing well or not. And if they are not, and they know it, they can take measures to improve their portfolio's performance. No one need accept three percent growth. No one.

The reporter who wrote me was very defensive about a piece they had written on the diminished returns to now be expected from RSP savings. This reporter told me: "I'm not going to tell you I am some financial whiz or pretend to be. I am a middle-class [person] trying to make ends meet.  I was told to get something together under deadline, the same day." They went on to say, "I was assigned [this] out of the blue."

The reporter seemed to think that it simply wasn't fair for me to criticize. I don't work to a deadline. They told me that I have " months to fume, ruminate, dissect and ultimately write" my opinion pieces. Yes I do. And it is a luxury. I admit it.

Still, what the paper ran was wrong. Quite wrong. And I can prove it. I opened a tax free savings plan some months ago and it has done very well indeed. It has delivered fine gains plus very nice dividends. I am up 18.59 percent

My tax free savings plan is up almost 19%.
And how did I pull off this miracle? I went to the library. I took out some books on investing and read them. And, most importantly, I didn't read the newspaper for advice. Unlike the authors of the books I read, newspaper writers (by their own admission) are pumping out words to deadline to fill column inches. All too sad. When I started in the newspaper business in the early '70s, financial page writers were knowledgeable folk who spent their time ruminating on the stuff about which they would eventually report. (My much larger RSP portfolio, with about 32 different investments (stocks, ETFs and mutual funds), is sporting approximately a 8.8% annualized return at this moment. It rises and falls with the market.)

I have heard from readers who protest that those who opened RSPs in the years right before the massive crash of 2008 and 09 are still struggling to recoup their losses. Earning more than six percent annually on their retirement funds is but a distant dream for these people, I'm told.

Curious, I calculated the outcome for a young person who started saving for retirement on January 1st, 2005. This is just a few short years away from the global financial meltdown to come. A conservative type, my young saver put the money in the TD Monthly Income balanced fund and reinvested the monthly payments. (A DRIP plan) They made annual contributions at the first of every year. Today, less than eight years later, they have earned the annalized equivalent of 6.1%. If they'd have put aside $3000 annually, today they would have $46,301.79. They would be well on their way to a successful retirement.
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Please read this paragraph from an e-mail from a reporter working at a daily paper.

"You quickly forgot the pressures and stress associated with modern journalism. This ain't the so-called good old days. There aren't 150 people in the newsroom anymore. Our deadlines aren't the next day, they're now. We write for the web, produce videos, tweet and ultimately write at the end of the day for the print record. We cover what we can and work with what we have . . . "

They went on to say that they think they do a fine job. I think, when you take into consideration that they are understaffed, overworked and undertrained for the rich mix of professions they must now juggle, that they do do an amazing job. But amazing is not always fine.

Monday, August 6, 2012

Duct cleaning? Is it necessary?

A kitchen renovation results in lots of dust settling everywhere in the home.

I'm having the kitchen renovated. It's my wife's idea not mine, but that is another blog. Walls have come down, flooring has been ripped out and drywall has gone up. Dust is everywhere. Friends and relatives are telling us that we have to have our ducts cleaned when this is finished. Do we?

I have always had strong doubts about the whole duct cleaning business. My experience with dust and airflow tells me that often dust, once settled, is not easily disturbed. There is often a boundary layer of dead air separating the settled dust from the moving air stream.

Laminar flow is the smooth, undisturbed movement of a gas or a liquid. I first came upon the term when studying photographic film development. To promote consistent development of film processed in the television news lab where I worked, the circulation of liquid in the processing tanks was always mechanically disturbed. This agitation of the flow had other benefits as well; It distributed the chemical bi-products of processing throughout the tanks and promoted consistent chemical bath activity. The instructors at Kodak in Rochester taught me that simply having processing liquids flowing smoothly over a piece of film was not sufficient to disturb the boundary layer.

What has all this got to do with the ducts in a home? Well I would think it quite possible that dust in ducts does one of three things: gets caught by the furnace filter, stays in the air stream to be blown back into the home or settles almost permanently in the ducts themselves. The whole duct cleaning operation is predicated on the dust doing a fourth thing --- being disturbed by the air flow, picked up and blown back into the home.

My gut feeling was that the fourth option was the least likely to occur. Years ago I had a chance to inspect a cold air return in an older home. The dust in that return had not been disturbed for fifty some years. There was a thick, felt-like layer of dust that I was able to remove in one solid, long sheet. It was not hard to imagine that some of that dust had been trapped there since the home was built back in the '20s.

Almost 20 years ago, Central Mortgage and Housing Corporation (CMHC) in Canada conducted some research into the benefits of duct cleaning. 33 homes in the Montreal area were selected for the study. Measurements of dust in the air in the selected homes showed no significant reductions after duct cleaning. In some cases, houses showed a temporary increase in dust levels for several hours after duct cleaning probably due to dust being disturbed by the process.

  • In most cases, duct cleaning resulted in significant reductions in the amount of dust on the surface of the return ("cold") air ducts.
  • In some cases, ducts were not cleaner after the cleaning exercise
  • The concentrations of dust were very low in the supply (“hot”) air ducts, both before and after the cleaning.
  • Duct cleaning did not significantly reduce the amount of energy used by the furnace fan. 
  • Duct cleaning did not significantly increase supply or return air flow rates.

The only positive outcome I could find was reduced concentrations of airborne microorganisms. Of course this may have resulted from the use of a biocide during cleaning.

CMHC concluded:

Homeowners should not necessarily expect significant improvements in their home’s indoor air quality, nor reductions in their heating bills, as a result of having their house ducts cleaned. Furthermore, until the efficiency of biocides are proven and their potential effects established, householders should refrain from having biocides applied.

I must add that to the best of my knowledge, there are no published standards when it comes to duct cleaning in Canada. When I worked at the local newspaper, I worked on a story on duct cleaning. To my untrained eye, it looked as if the workers chopped holes in the duct work with little understanding of air flow and repaired their access holes very crudely. I was not impressed.

For more info on this subject, click on the link to the United States EPA article:
Should You Have the Air Ducts in Your Home Cleaned?

I'm going to take a pass on the duct cleaning. I'll drop the hose of our vacuum down the air vents but that will be it. I may have the fan in our furnace cleaned before winter. I'll certainly change our furnace filter. But, will I have my ducts cleaned? In a word, "No."