How to Hire the Right Person

Believe it or not, at many companies it is extremely difficult to fire someone. Firing – and re-hiring – are both very expensive. It takes months of documentation to justify firing someone. This means that if you hire a crappy employee, you’re most likely stuck with a crappy employee for a long time.

People often accidentally hire crappy people because they get caught up in cliche interview questions and styles. As the same ‘ol questions and you’ll get the same ‘ol answers. Unfortunately, many mistake these rehearsed answers for a sampling of the employee’s strengths or character.

When interviewing people, I suggest managers start with the information they’re trying to uncover and work backwards from there. The information-gathering objective is the fulfilled by asking the appropriate questions.

Do you want to get a sense of someone’s initiative? Maybe instead of rolling out the expected “Name a time at work where you took initiative” you ask how they prepared for the interview. Did they check out the website? Maybe read a brochure? Or did they hunt down people at the company to get the inside scoop? Did they spend time investigating who they were interviewing with?

There are countless ways to pry at a person’s character to see what they look like raw. But you’re still going to end up with the occasional dud.

So before you make a final decision to hire anyone, do your own due diligence by collecting opinions from others. Talk to people they’ve worked with. Get them to meet with your boss and key internal stakeholders. Not only will they provide a second opinion, they’ll have a stake in the candidate’s success, if he is hired. This is a great way to spread responsibility for a bad hire.

As a hiring manager, you must remember that your candidate’s success or failure is ultimately your success or failure. You want to do everything in your power to put someone in that seat that can soar.


Dave Chappelle on Getting Screwed Early in Your Career

Entering the world of comedy at the age of 15, Dave Chappelle faced major obstacles thrown at him by unscrupulous grifters, peers and executives.

Everyone can learn from this. We’ve all gone uncredited or uncompensated for the sacrifices we’ve made. Businesses exist to squeeze more out of their people than they pay. Perhaps in aggregate this is imperative to the function of the economy. At a macro level, productivity means getting more output than what was input. This ultimately requires ripping off staff – some companies are nicer and more covert about it than others, but they all do it.

As individuals, however, it’s up to us to recognize this and fight for what is ours.


How to Answer the Question: “What’s Your Salary Expectation?”

For those in the middle of job interviews, one of the toughest questions to answer is “what’s your salary expectation?”.

You see, many people mistakenly believe they are entering into a negotiation in which they start high and eventually move lower. In reality, negotiated adjustments are minor. Hiring managers ask this question to ensure expectations are aligned with what can be delivered.

Unfortunately, good candidates might lose their standing based on how they answer this question.

Hiring managers ask this question to ensure expectations are aligned with what can be delivered.

Let’s say the pay range for a Senior Manager job opening at Company XYZ is $80k-$100k, depending on experience. This means that the hiring manager is restricted to this range and doesn’t have magical strings he can pull to go higher.

Candidate A is an 8/10 and states his salary expectation is $90k.

Candidate B is a 10/10 and states his salary expectation is $125k. Candidate B – despite being much better – likely just destroyed their candidacy. Despite being the better candidate, Candidate B just indicated to the hiring manager that they believe they are worth $125k. For the hiring manager to go back to Candidate B with a $100k offer would seem inadequate to both parties – so they simply won’t. Even if Candidate B later suggests he might be fine with a lower number, he’s already created an anchor number in the hiring manager’s mind. That hiring manager (if he’s got any brains) will worry that if Candidate B accepts a much lower offer he will remain unsatisfied and will soon seek another higher paying job that more closely aligns with his original expectations.

Candidates must understand the pay ranges that companies operate within. They are restrictive – it doesn’t matter that you have 20 years experience. The range is the range. So try to figure out what that range is before you get asked about your salary expectation.

Moreover, hiring managers want to hire people in the middle of the pay range so staff have upward salary potential while employed. A manager doesn’t want their staff hitting the ceiling in year one.

If a job is truly below your target salary, then don’t go for it. Perhaps it’s time to strive for more advanced roles.

Alternatively, if you truly want the job then state a salary expectation you know the manager can work with.

Whatever number you give, make sure it’s truly what you expect (not some multiplier of your expectations). Yes, there might be some negotiation but in my experience it tends to be quite minor. For a new hire to work out, expectations must be closely aligned with what can actually be offered. And that’s precisely why employers ask the question: “what’s your salary expectation?”.

ETFs and Funds

31 Dividend Payers that Raised in December

In my view, a dividend raise is a signal that management is confident in their business prospects – a larger dividend raise, even more so. The following is a list of large cap companies that raised their dividends in December:

(Note: Best viewed on desktop.)

CompanyAnnouncement DateAmountPrevious AmountIncrease AmountYieldEx-DatePayable Date
Darden Restaurants
Lamb Weston
Franklin Resources
Eli Lilly and
Willis Towers Watson Public
Abbott Laboratories
Bristol-Myers Squibb
Edison International
CenterPoint Energy
Carrier Global
W. P. Carey
Campbell Soup
Fortune Brands Home & Security
Erie Indemnity
Realty Income
The TJX Companies
Mid-America Apartment Communities
Alexandria Real Estate Equities
Raymond James
American Tower
WEC Energy Group
Source: Market Beat. While efforts were made to ensure accuracy, we cannot guarantee data is correct.
ETFs and Funds

5 Actions to Take Before Even Considering Investing

For many, investing sounds like a way to get rich fast. People see insane returns of FAANG stocks and bitcoin and think that’s the ticket to wealth.

For some, it is.

For those who have truly built wealth, there are many things that come before investing.

First of all, most people shouldn’t expect to earn triple-digit – or even double-digit – returns into perpetuity. Depending on how far you go back, the average return for the S&P 500 is roughly 10%. Bond returns, even less. So a well diversified investor holding a balanced portfolio might reasonably expect a 6-8% return over the long run.

For someone with $10,000 to invest, that equates to a $600-800 annual return. Hell, even if that person could accomplish 100% returns he’d only gain $10,000 in year one. Nice, but not enough to become rich unless by some miracle that feat can be repeated numerous times.

Nobody gets rich giving all their money away.

Investing is something you do with accumulated wealth. It’s a way to get your money working for you and to maintain your purchasing power. But before you can do that you must first build wealth through simple, deliberate actions.

Action 1: Spend Less Than You Earn

Seems simple. But many don’t live by this rule and rely on their credit cards to cover regular expenses.

Nobody gets rich giving all their money away. It’s so simple I feel stupid for saying it, but here we are. To accumulate wealth you first need to spend less than you earn.

Action 2: Pay Off Credit Card Debt

If you have a credit card balance you’re likely paying around 20% interest. You’ll never beat that return in the market with any consistency. So do yourself a favor and pay off that credit card debt before investing.

Action 3: Aggressively Save

Simply spending more than you earn isn’t enough. Think about it this way: every dollar you save is a dollar less you have to earn in the future. The more you can save now, the closer you will get to financial independence.

While saving 10% of your paycheck might seem daunting, it’s a standard rule of thumb. However, I suggest saving as aggressively as possible. 10% should be the bare minimum.

Action 4: Don’t Leave Free Money On The Table

Many employers have share purchase or retirement savings matching plans. I’ve known so many people who have lost this free money out of sheer laziness. People walk away from a 20, 30, 50% match – equivalent to a 20, 30, 50% instant return – yet spend their energy trying to invest in the next Tesla.

Moreover, these employee savings plans, once set up, are usually a decision-free way to build wealth since the contributions are taken off your paycheck before you even realize the money even existed.

Action 5: Earn More Money

The average age of Robinhood user is 31, and the average account size is $1000-5000. Such small account sizes suggest these people don’t have alot of wealth.

These young people are wasting their time chasing stocks when they’d get a much higher ROI investing in themselves. At age 31, most people are near the bottom of the corporate ladder. Instead of putting $1000 into Air BnB stock, spend that money on a Python course, Canadian Securities Course or CFA designation.

A little self-improvement at such a young age will pay off multiple times over a lifetime.

Investing Master Class

Dec 14 In Depth Cal-Tech Interview with Charlie Munger

Charlie Munger is an American investor, businessman, former real estate attorney, architectural designer, and philanthropist. He is vice chairman of Berkshire Hathaway, the conglomerate controlled by Warren Buffett.

Income Investing Investing

Enbridge Reaffirms Growth Targets and Raises Dividend

There are value traps and then there are hated stocks.

Enbridge is the latter, in my opinion.

After hitting a peak of $56.03 in February, its share price plummeted by about 37% and has only partially recovered its losses. Since November, however, Enbridge shares have rallied about 23% off its lows. Pretty good, but at $43/share it’s still far from it’s pre-Covid high.

With a dividend yield at 7.67% you might think Enbridge is a value trap and the market is pricing in a dividend cut. While that’s a fair assumption, I personally disagree.

First of all, Enbridge’s business model is fantastic. It provides a product and service that has fairly inelastic demand with no real substitutes and little competition. While many companies saw revenues drop close to 100% during the March/April lockdowns, Enbridge experienced a 25% drop from Q1 2020 to Q2 2020. A tough quarter, but not a death blow.

Moreover, Enbridge is run by a fantastic management team with decades of cash flow growth provided to shareholders. Indeed, after possibly the worst year for the economy on record Enbridge management is actually predicting full year 2020 cashflows to grow vs 2019. This company can grow cashflows through thick and thin.

After 2020, Enbridge management expects cashflow (aka Distributable Cash Flow – DCF) to continue to grow by 5-7%.

At $4.50-$4.80, expected full year 2020 cashflows more than adequately cover the annual $3.34 forward dividend. Management has such confidence that on December 8th announced Enbridge’s 26th consecutive annual dividend increase. That’s a solid track record.

All things equal, with a 7.67% yield and DCF growth of 5-7%, would a total return of 12.67%-14.67% be a reasonable intermediate forecast based on cash distributions? Maybe. Of course, other variables (Covid-19 anyone?) can impact the share price, but this naïve forecast aligns with Enbridge’s 25 year CAGR of 15%.

I personally hold Enbridge stock. I’d buy more if I didn’t already have a substantial position.


What if the Canadian Government Gave Everyone $45k at Birth

Governments exist to provide public goods (like streetlights) and to socialize certain individual costs (like healthcare) for the overall benefit of its population. It can be argued, therefore, that in addition to free healthcare it might be in a society’s best interest to ensure a secure retirement for every citizen.

Many governments already do this to some extent. In Canada, for example, people who contributed to the Canada Pension Plan will benefit from a schedule of payments upon retirement. Those who haven’t contributed may receive alternative retirement funding, such as the Old Age Supplement and the Guaranteed Income Supplement.

None of these provide for a particularly flush retirement, however it keeps most of Canada’s retired residents housed and fed.

What if, instead of providing supplemental income at retirement, the government gave a lump sum to each person born in Canada? The lump sum would be untouchable until retirement, and would be invested on the baby’s behalf until he reaches age 65.

Assuming a nominal return of 7% and inflation rate of 2%, a $45,000 investment at birth would equate to $3.7 million in nominal terms and just over $1 million in real terms (after inflation) by age 65. All things equal, this should provide a comfortable retirement for every person born in Canada, eliminating the need for OAS and GIS. Moreover, employees would no longer need to contribute to CPP or individual retirement portfolios, freeing up more money for consumption, if desired. But for the sake of simplicity, let’s assume people continue to contribute to CPP.

Providing $45,000 to every resident at birth would likely lead to a number of unintended consequences – such as birth tourism – but let’s leave that to the side and examine whether the broad idea is even feasible. This is a high-level conceptual look, not a thorough scientific analysis, and is meant to spark ideas and generate discussion, not propose ultimate solutions.

According to Statistica, it is expected that about 375,000 babies will be born in Canada in 2020. Therefore, to provide $45,000 for every baby born would cost about $16.875 billion annually. A ton of money. Yes, but not in relative terms.

How could $16.875 billion in new spending ever not be a ton of money? According to Employment and Social Development Canada (ESDC) – a department within the Canadian federal government – planned spending on OAS and GIS in 2017-2018 was $51.155 billion. Far more than the cost of the lump sum at birth, with much worse end results. Using the 4% rule of thumb for sustainable withdrawals, a $1 million portfolio could sustainably generate $40,000 in annual income (in today’s dollars). In contrast, OAS and GIS currently provide maximum $7,368 and $10,992 in annual income.

That’s 54% less retirement income at 3 times the annual cost to the Canadian government. While this analysis doesn’t consider all the nuances and knock-on effects, the idea seems worthy of further discussion.

2017-2018 Planned spending figure
Investing Master Class

Philip Fisher’s 15 Points to Look for in Common Stock

Philip Arthur Fisher (September 8, 1907 – March 11, 2004) was an American stock investor best known as the author of Common Stocks and Uncommon Profits, a guide to investing that has remained in print ever since it was first published in 1958.

Fisher made his clients extraordinarily rich and is recognized by Morningstar as “one of the great investors of all time”. Despite this, he isn’t well known.

Although Fisher was known as a growth investor, top value investors like Warren Buffett were influenced by his work. Buffett has called Fisher’s book “Common Stocks and Uncommon Profits” a “very, very good book”.

Fisher’s methodology was to conduct extensive research on industries and companies. Below are 15 key considerations that he used to help frame his research.

15 Points to Look for in a Common Stock

  1. Does the company have products or services with sufficient market potential to make possible a sizable increase in sales for at least several years?
  2. Does the management have a determination to continue to develop products or processes that will still further increase total sales potentials when the growth potentials of currently attractive product lines have largely been exploited?
  3. How effective are the company’s research and development efforts in relation to its size?
  4. Does the company have an above-average sales organization?
  5. Does the company have a worthwhile profit margin?
  6. What is the company doing to maintain or improve profit margins?
  7. Does the company have outstanding labor and personnel relations?
  8. Does the company have outstanding executive relations?
  9. Does the company have depth to its management?
  10. How good are the company’s cost analysis and accounting controls?
  11. Are there other aspects of the business, somewhat peculiar to the industry involved, which will give the investor important clues as to how outstanding the company may be in relation to its competition?
  12. Does the company have a short-range or long-range outlook in regard to profits?
  13. In the foreseeable future will the growth of the company require sufficient equity financing so that the larger number of shares then outstanding will largely cancel the existing stockholders’ benefit from this anticipated growth?
  14. Does the management talk freely to investors about its affairs when things are going well but “clam up” when troubles and disappointments occur?
  15. Does the company have a management of unquestionable integrity?