Week 5 - Mutual Funds

So we have covered both sides of the ledger, between debt and equity (bonds and stocks). That said, as you may have guessed, buying individual stocks and bonds can take a lot of research, not to mention following your picks once you make them. It's not as big a deal on the bond side of things (they are more 'set it and forget it' if you buy good quality bonds) but stocks do require some degree of maintenance. We are often busy or just choose to do other things with our spare time than research our stock picks. Many investment advisors don't 'do' stocks for this reason; they would rather spend their time building their businesses or monitoring other aspects of their clients' financial situations, so they leave the stock and bond selection up to others; quite often, mutual funds.

Most of you probably own mutual funds but many may not know what they actually are. A mutual fund is like a pool of different investors' money that is then used to buy many different stocks or bonds, or sometimes other asset classes, like real estate holdings. It's easiest to follow a dollar invested to find out how they work.

1) You decide it's time to do some investing but don't have all that much money to buy a diversified portfolio of stocks and bonds. Let's say you're starting with $10,000. You take your money to a bank, and ask to open an investment account.

2) After meeting with an advisor, you decide that the best idea would be to buy units (they're called units, as opposed to stocks which are called shares) in a mutual fund. For the sake of the example, we will use one of Canada's oldest funds, the Mackenzie Ivy Canadian Equity fund.

3) Let's take a look at the name. Mackenzie is the company itself. It has employees that are in charge of buying and selling the investments for a wide array of mutual funds, one of which is your Ivy Canadian Equity fund. These employees are called fund managers. When you give your money to Mackenzie, you now own units in the fund and benefit (or suffer) from the manager's ability to pick stocks that go up (or down). In this case, as the name 'Canadian Equity' tells us, this fund invests only in equity (stocks) of Canadian companies. No bonds. The 'Ivy' part is just some word they decided to use for the name.

Here's a link to globefund.com which is a good enough site for checking out different mutual funds.

http://www.globefund.com/servlet/Page/document/v5/data/fund?style=na_eq&id=17974&gf_uid=globeandmail.gf.04382357814

What's most important with mutual funds if their ability to grow your money over time. The different funds and fund companies (e.g. Mackenzie, Fidelity, Templeton, Trimark to name a few of the bigger ones in Canada) are constantly being measured against one another for their performance. There are awards each year for which managers or companies returned the highest amount of money (or lost the least amount, as was certainly the case in 2008) for their unit-holders. The ironic thing about having annual awards is that any advisor will tell you that you should hold a fund for at least three years before you make any judgement on whether or not the money is being well-managed, but I digress.

Here are some key terms that you will come across when checking out different funds:

NAV - Stands for Net Asset Value, which is a technical term for the current price of your fund units. It is better defined as the total value of all the shares of all the companies in the fund, divided by the total number of units sold. The 'Net' means that the units are valued net of any fees that the company has taken for their services, which leads us to...

MER - Stands for Management Expense Ratio, which is another name for the fees you pay to own a fund. I will speak more on fees in another column. That said, a typical Canadian equity fund usually charges fees of around 2-2.5% per year. With the fees, the company pays its employees, including the manager who is making their picks. There are also trading costs for buying and selling the stocks, which this fee pays for. Lastly, often the advisor that recommended the fund to you will be compensated a portion of the annual fee, normally 0.5-1%.

FE, ISC, DSC - Some advisors will also charge an up-front (Front End or Initial Sales Charge) commission if you want to buy a fund, while others will sell funds with bank-end (Deferred Sales Charge) penalties (you pay if you sell the fund before a set time period lapses; generally 3 years or more). Advisors are compensated additional money by the fund company, depending on how long your funds are committed before you can sell them without penalty. It can be as much as 5%, which would be the penalty you would pay if you sold the fund in the first year. There are virtually limitless fee options for buying funds - be sure to have all the information on the fee structure before you buy.

Star Rating - some websites will use a star rating to measure funds for their performance over different time periods. The rating is based on how well the fund performed, relative to the other funds in the same asset class (i.e. Canadian Equity funds). If a fund has returned the highest percentage gain over a three year period compared to all other funds that invest the same way, then it is often garnered a 5-star rating. Buyer beware: sometimes ratings do not tell the whole story. Maybe the fund had a very high percentage of its holdings in oil stocks during a time period when the price of oil rose dramatically, which led to a 5-star rating. This could lead to a few bad years, if oil prices fall and the fund still has a big position in the sector. Try to buy funds that have good long-term track records with no change in management. A fund is only as good as the individual making the investment decisions. Otherwise it is just a name.

Here are some different types of funds that are commonly available for purchase:

Canadian Equity - invests in stocks of Canadian companies

Canadian Bond - invests in bonds of either Canadian companies or governments

Global - invests in stocks or bonds anywhere in the world

International - buys and sells stocks or bonds anywhere OUTSIDE North America

Emerging Markets - invests in countries that are developing. The four most common are the BRIC nations; Brazil, Russia, India and China

There really are no limits as to what kind of mutual funds could be launched. If some manager thinks that the prospects for investment in Germany are going to be massively successful over the next few years, he or she may launch a German Equity fund to take advantage. More likely however, he/she will launch a European Equity fund and concentrate the buying to German companies while the prospects are good. Then, if things work out in Germany, they can still look elsewhere in Europe for other good investments. Funds will also focus on different sectors. Back in the late 1990s, technology funds were started to invest only in 'high-tech' companies that were sure to change the world. Some of them did but most went bankrupt. When you buy a fund, you will get a document called a prospectus, which will outline the investment parameters for the fund; locations, company size limits, etc.

In my opinion, the best way to buy mutual funds is to buy a few in different areas. Maybe buy one Canadian Equity, one International or Global equity and one bond fund. Then, each year, add to the one that did the worst (buy low) and trim from the one that did the best (sell high).

Mutual Funds in a Nutshell

Upside: Good way to own many stocks and access professional management, as well as gain access to other areas that are more difficult to research from home.

Downside: Fees can be high, managers can leave, performance not guaranteed.

As always, there is much more. But these things start looking like mini-novellas by the time I'm done writing them and I don't want to bore you. But on the other hand, it's your money! By taking the time to digest a bit of knowledge here and there, you will be much better off in the long run.

Please feel free to ask questions. Thanks, as always, for reading.

GW

Week 4 - Bonds

Last week, I tried to give a basic description of stocks, starting from the time they are created to the time they are then bought and sold on an exchange. This week, I will look at bonds in the same light. This should help you to understand the idea of a bond and why a company (or government) would issue one.

Think of bonds as loans. By this stage in my life, I know all too well what a loan is! My parents have loaned me many a dollar for a variety of different undertakings, most of them resulting in me spending (as opposed to investing) the money on dumb things and having to work to pay it back over time. Luckily for me, my parents didn't charge me any interest for borrowing their money or some of my loans could have been rather expensive propositions.

The easiest description of a bond would be to think of it as the I.O.U that I would have written my parents for their money. When a company needs money and doesn't have enough cash from the day-to-day business, they can write a giant I.O.U to whomever is willing to lend them the money. Let's take our baseball cap company from the previous post. Since we have been in the cap-making game for quite a while, we are looking to try something else with our business in order to grow it. We decide after doing some research that making T-shirts would be a good step forward. The problem is that we don't have enough cash to build the T-shirt factory or buy the equipment necessary to make the shirts themselves. We need a loan. For this example, let's assume that the bank will not loan us the money directly, so we have to issue a bond (write the big I.O.U.). We have to decide on how much money we are going to need and what rate of interest (the money that we have to pay our lenders each year for being nice enough to loan us the cash) we are willing to borrow at. If we make our interest rate too low, then nobody will want to buy our bond. If we make it too high, then of course everyone will want to buy our bond but it will cost us too much money in interest payments for the loan to be worthwhile. You wouldn't borrow money from a friend if they were going to charge you 20% interest each year, would you?? There are some factors that go into deciding how our bond interest rate will be set:

1) The Overnight Lending Rate (Bank Rate). This is the rate that we hear about on the news, that the government sets. It is the rate that one bank can lend to another overnight. The government looks at the health of our economy, amongst other factors, before setting the rate. Right now, since our economy is in such a fragile state, our bank rate is 0.25-0.5%. If times are good, there is the possibility of inflation, which would cause the government to raise the overnight rate, which makes borrowing money more costly, slowing business down somewhat. The trick is to not raise the rate too much, which would cause a recession, since lending would slow down too much. In the 1980s when inflation was a huge concern, the overnight rate got as high as 21%. Anyone trying to get a mortgage back then will remember these times all too well. I admit, this is a very simplified explanation of the overnight rate, but anyone who has a mortgage would know how the overnight rate can affect the rates they are charged. Simply put, the lower the bank rate, the lower we can set our bond rate and still have it be competitive. I'll say more on the bank rate another time.

2) Company Quality. As with any loan, you wouldn't want to lend money to a company that you didn't think could easily pay you back. If you did, then you would want a higher interest rate to compensate you for the extra risk you are taking with your money. This is a big part of how rates are set. If a company with a spotty track record of profits and losses tries to borrow money and sets a relatively low interest rate, nobody will lend them money by buying their bonds. As a rule, riskier companies need to pay higher rates of interest to get loans. There are companies such as Moodys or Standard & Poors whose job it is to rate other companies 'credit quality', or their ability to make good on their loans. It's the same for us if we go to the bank to get a loan but haven't been paying our other bills - makes it tough to get that loan.

3) Time. Just like a regular loan, a bond's interest rate will be higher, the longer the company needs the money for. If you are only borrowing funds for a year, you don't need to be paying too much interest. On the other hand, if you want to borrow funds for 30 years, this is much longer that you are asking me to have my funds tied up with you. Therefore, you will have to pay me more interest.

When we have these criteria set (the size of the bond and the interest rate, or coupon, we are prepared to pay) then we alert the public to see who wants our bond. If we've priced it right, then we should have no problem raising the money we need.

As we know, governments also issue bonds. In Canada, we have Government of Canada bonds (Canadas), Canada Savings Bonds (CSBs), Provincial Bonds, municipal bonds (munis) and also bonds for certain crown corporations, such as Canada Housing Trust. The government is issuing bonds for the same reasons that companies are; building roads, schools, hospitals and other types of public investment. They pay off the bonds through taxes, which is effectively the main income source for the government. We are lucky that our financial system is in such good shape (i.e. we have a good economy that generates lots of tax revenue and we don't have a lot of debt, relatively speaking), so that our government bonds are very safe. Other countries such as Iceland aren't so lucky. The entire country had to declare bankruptcy about a year ago. So indeed, different governments have different ratings on their bonds, depending on the health of their economy.

So let's say you like the idea of owning bonds. How does one buy them? There is a bond market, but not really a bond exchange, so to speak. Each bank will buy bonds and have an inventory of different bonds at any given time. To buy bonds, you have to phone up your banker or advisor and see what kind of bonds they have available. The advisor will ask you which ones you are looking for, so there are considerations to this question as well. To answer them, we have to understand how bonds move (and yes, they do move) in price. If you want to sell bonds, you sell them to your bank's bond department and they will give you a bid for that bond, similar to selling a stock but without the stock exchange. The price that they will give you is determined by a few factors:

Let's say you buy a 10-year Bank of Nova Scotia bond with a coupon of 5% (that means the bond will pay you 5 cents for every dollar they issue) and you buy it on the first day the Bank issues their bond, so you pay $100. You buy $100,000 of this bond, so each year, you get $5,000 in interest (hence the 5% coupon). All is good. However, here's the tricky part. Interest rates go up so 6 months down the road, the Bank of Nova Scotia issues another 10-year bond but this time, the coupon is 6%. What do you think happens to the price of your bond if everyone can get the same company bonds with a higher coupon? That's right. The price of your 5% bond goes down until the yield of your bond (the coupon divided into the market price) equals about 6%. The laws of supply and demand! Why would I want your 5% bond when I can get one that pays 6% from the same company? Odds are if you wanted to sell your bond before it matures (at the end of the 10-year period), you would only be able to get about 85 or 90 cents (or $90,000 of your original $100,000 investment) for your bond. Yes, if you hold your bond for the entire duration, you will likely get your full investment back. The moral of this story though is to not buy long duration (I'd say more than 6 or 7 years) bonds during times of very low interest rates because you know rates are going to rise and when they do, nobody is going to want your bond that has a low coupon. If you do, then be prepared to hold them to maturity if we get rate increases because of inflation.

It's a lot to digest, I know. Feel free to ask questions in the comment section and I will either email you or answer directly.

The other risk of buying bonds is the obvious one: bankruptcy. If the company doesn't have the money to pay you back, then you are out of luck. So think twice when looking at bonds with very high yields (over 10% these days) because odds are that something is not right.

What would I do right now for bonds?
1) Buy short to medium term bonds and be prepared to hold them to maturity. It may not happen this year but eventually, interest rates will rise.
2) Buy good quality. If you aren't comfortable with buying the stock of a company, don't buy the bonds. You can look at government bonds but the yields usually aren't that attractive, although they are normally very safe.
3) Diversify. Just like stocks, it's always good to own a few different bonds in case something unpredictable happens to one of yours. At least you would be insulated.

There is so much more I could tell you about bonds; the world's bond market makes the world's stock markets look tiny. Please feel free to answer questions about this - I'd welcome the dialogue.

Thanks for reading.

Week 3 - Stocks

After last week's post about TFSAs, I thought I should start giving a few ideas for what we can buy in our investment accounts, whether they are TFSAs, RRSPs, non-registered accounts, etc. Since they are at the heart of investing in Canada, I think one of the first things to go over is exactly how public companies are structured at the most basic level; common stock. In the coming weeks, I will touch on other methods of investment, including bonds, mutual funds, etc.

Let's start by considering our own fictitious company. For simplicity's sake, let's say we make the world's best baseball caps and everyone wants them. We are able to make a profit of a hundred million dollars per year. We are on our way to success! Because there are only two of us that own the company (you and me), right now, there are two shares (yours and mine) and for this example, we will say that we are equal partners. The problem is that since our company is privately owned (by us), we don't really know how much our business is worth. We know how much profit we make each year ($50 million each) but that's about as far as it goes.

So, we decide that our cap-making enterprise is big enough that we should sell it. But instead of looking for one buyer (which would be difficult if our company is this big), we decide to take it public, which means splitting our shares into many smaller shares and selling them on a stock exchange. In Canada, we have two stock exchanges: the Toronto Stock Exchange (TSX) and the TSX Venture Exchange, which was formerly the Vancouver Stock Exchange. The Venture is normally reserved for much smaller, more speculative companies.

Since our company is fairly big, we are going to list our shares on the TSX to try and sell them. We decide for simplicity's sake that we are going to divide each of our two shares (yours and mine) into 50 million shares, for a total of 100 million shares. So now comes the tough part. How much do we sell our shares for? If you recall, our business earns $100 million per year in profit, which is $1 of profit per share, since we now have 100 million shares in total. I don't know about you, but I'm not ready to sell this money-making machine for $1 per share, since that means someone who buys it gets all their money back in the first year!!! No sir. We need to sell our business for a multiple of how much profit our business makes. Here comes the good part: on the TSX today, there are companies that sell for as much as 30 times their profit or more!! That means we could sell our 50 million shares each for $30/share or as much as $1.5 billion each in cash money!!! Oh baby!!! The problem is that 30 times profit (or earnings, as it is more commonly known) is expensive. I think to be safe, we will sell our shares at fifteen times earnings; a common multiple for Canadian companies. This means our shares are going to sell for $15 each. Still, this makes our company worth $1.5 billion in total, or $750 million to each of us. Not a bad take for ball caps.

So we go to the TSX to sell our shares at $15 each and people all over the world buy them at that price. People paid a Price/Earnings (PE) multiple of 15 for our company. They deposit cash into their RRSP, TFSA, etc and use that cash to buy our stock.

The good thing for our original buyers is that because our business is so successful and odds are we will earn even more money in the future for our caps, people are actually willing to pay $16 for our stock now! This is known as a bid; the price people are willing to buy our stock for. If you own stock in any company, you can sell it on the TSX at the bid price, provided there is a bid for as much stock as you want to sell.

So what if a friend of yours wasn't one of the people lucky enough to get our stock at the original $15 price but he still wants to buy it? He can go on the TSX and buy our stock at the lowest price that people are willing to sell it for. If you recall, people are already willing to buy our stock for $16 (bid) but if you want to buy it badly enough, you will have to pay what people are willing to SELL their stock for; the ask price, which is always higher than the bid.

For simplicity's sake, let's say the current ask price for our company is $17. If your friend buys stock at the ask price (or the offering price), then the last price our stock traded for was $17. Every stock has these three prices, while the market is open (9:30am until 4:00pm each weekday); the bid (what I could sell my stock at today if I had to), the ask (what I could buy the shares at today if I had to) and the last (what the last price the shares traded at was).

Ideally, we want to buy shares in companies that make a good profit each year, and have good potential to grow their profit in the future. That way, hopefully we can sell our shares for more than we bought them for, down the road. Make sense? You can try it. Here are some easy steps to look for a stock to buy.

1) Go to a financial website (www.google.com/finance is a great one)

2) Enter the name of the company you want to look up in the search bar. You will need to know the stock symbol to look up your company more easily in the future, or if you want to follow it on TV, etc. Stock symbols are normally one, two or three letters, and will sometimes have an exchange code on the end. As an example, Shoppers Drug Mart trades on the TSX. Its symbol is SC-T, or just SC, depending on the website.

3) Once you've found your company and know the symbol, click it and you will see a page that has a bunch of information on it, including names of guys that run the company, price information, and more. If the markets are open, you should see a big bold price, which is the LAST price that the shares traded for. You should also see a bid and ask price. If you look closely, you can also see the price/earnings multiple that these shares are trading for (normally P/E on the websites). That will show you how much you would have to pay for the shares, relative to how much profit they make.

If we are going to buy some stock, we probably want to buy stock in more than just one company, in case something bad happens to our company (new competition in the baseball cap market, fire at the factory, whatever). We want to own stock in many companies so we can try to insulate ourselves against these negative events. We also probably don't want to own stock in too many companies that do the same thing, because if something bad happens to one, it could affect the others. Just think if you owned a portfolio full of stock in US banks in 2008. You may have owned many different banks but they were all in trouble for the same reasons, so your portfolio would have taken a beating. Here are some guidelines for buying stocks, if that's the way you want to go with your investment dollars:

1) Buy stocks in companies that make money, as opposed to lose it. This seems obvious but wait until you see how many of the companies you know out there aren't making money. They could be victims of the poor economy, tough competition or bad management. There are also companies that are losing money today to do research or development to make a profit in the future. These aren't necessarily bad investments but are more risky, since there always is a chance that their work doesn't pay off.

2) Buy lots of different companies. As we talked about, this is called diversification. You will get different answers about what the right number of companies is to own. I think 15-25 is pretty sufficient. Any more than 25 and you're going to start owning too many companies that do the same thing. You would be over-diversified!

3) Take advantage of professional advice. Researching these companies takes a lot of time. A good financial advisor or portfolio manager will know which companies are good ones and be able to follow them once you have purchased the shares. Mutual funds are one way of doing this - we will come to that. Yes, it will cost you - we will come to that, too.

4) Don't fall in love with your stocks! Companies that are great today may not be great tomorrow. Be sure to keep informed about your stocks and how their businesses are progressing.

There is obviously a lot of information about stocks but hopefully you will be able to gain a simple understanding from this piece. I have 52 weeks to elaborate, so more information will follow, including tidbits on dividends, splits, bankruptcy and many other really stimulating topics, if you aren't already falling asleep! In my opinion, stocks are probably the best way to make money investing over the long term. It's picking the right ones that is the tricky part.

Thanks for reading. See you next week.

Week 2 - Tax Free Savings Accounts

So I get the brainwave to start a blog. I didn't think i could wait an entire week to get a few more thoughts on paper... so here goes nothing. The first post with actual information!

If you work in Canada, odds are that you have a Registered Retirement Savings Plan (RRSP) of some kind, whether it's a group plan, locked-in plan or self-directed. Up until last year, this was really the only way to get tax-free growth for your own savings. We do have the RESP to save money for our kids' education but nothing else protected our personal investments from the tax man.

Then, the government threw us a big bone called the Tax Free Savings Account (TFSA).

TFSAs are accounts much like RRSPs. We contribute money to them, which can be invested in a wide range of things (stocks, mutual funds, GICs, etc) and we don't have to pay tax on any interest earned or capital growth. The great thing about a TFSA though is that we can get our money at any time without penalty AND if we have more money for savings down the road, we can recontribute it back into our TFSA. We don't lose the room the way we do if we take money out of our RRSP! Let me give you an example:

I put $5,000 into my TFSA each year (the maximum allowed) for the next 10 years, and it earns a decent return. After 10 years, my TFSA is worth $75,000. I decide that it's time to upgrade to a larger house, so I take my $75,000 and use it for a down payment. With the TFSA, I pay zero tax to take my money. And here's the kicker. The following year, I receive a one-time payment (maybe it was a bonus at work, inheritance, lottery win, etc) of $75,000. With the TFSA, I can actually RECONTRIBUTE the entire $75,000, plus an extra $5,000 since it's the following year. Here are the differences in summary between the two accounts:

RRSPs

- Tax deduction when we contribute

- Tax payable when we withdraw funds from the plan

- At age 71, account must be converted into an Income plan of some kind (RRIF, LIF, etc)

- Maximum annual contributions for 2010 are $22,000, plus any unused contribution room from past years (this is key for a great TFSA strategy outlined below)

- Beneficiaries can be named on the plan to avoid probate fees

TFSAs

- No tax deduction when we contribute, but

- No tax payable when we withdraw funds from the account

- No age limits and no mandatory conversions of the account

- Maximum contribution limit for 2010 is $5,000, plus any unused contribution room from last year

- In future years, the maximum amount is $5,000, plus unused room, PLUS any amount that has been withdrawn from the account in past years

- Beneficiaries can be named on the account to avoid probate fees

So with all that said, here is a great example of how to effectively use a TFSA, if you think you will earn a better employment income down the road. As mentioned, we can take money out of our TFSAs at any time, tax-free. So, if we are only earning $50,000 per year now, why not maximise our TFSA contributions each year until we are earning more money? Then, when we are making the big bucks, we can take all the money out of our TFSA and contribute it to our RRSP, getting a monster tax deduction because the tax rates are higher as our income increases. We should always try to contribute enough money to avoid paying tax at the highest rate. I understand that you might like the idea of a tax refund each year from RRSP contributions, but a little patience can go a long way in the event that you get a raise or a better job down the road. You still get the benefit of tax-free growth on the first $5,000 of savings each year, your unused RRSP contribution room will build up and you can get monster refunds when you are earning more money (getting a higher percentage of your tax back come tax time). Then when your RRSP contribution room is maxed, you can start recontributing to your TFSA to replace what you used for your RRSP.

You can Google "Canada Marginal Tax Rates" to find out how much tax you are on the hook for at your current salary.

Bottom line: everyone in Canada should have a TFSA, often even before we open an RRSP. It has the same great benefits of tax-free growth, while offering the flexibility of withdrawals at anytime.

I'd love to hear thoughts on this or any other. Drop me a line or leave me a comment!

Cheers,

GW

Week 1 - Introduction

It is the year 2010 and I have decided to start a blog (you can tell what one of my New Year's resolutions was). The idea of my blog is that every Canadian will be able to have a better understanding of how to manage their own money. There are many people out there that are willing to take advantage of us when it comes to our financial affairs, thus the saying "a fool and his money are soon parted". I am hoping that these 52 chapters to my blog will give you a better idea of how to make sound financial decisions for yourself or along side other financial professionals.

I will say in advance that I am not perfect, obviously. I have been in the financial services industry for about 7 years, which means there are many others who know more about this stuff than I do. I am an Investment Advisor and Associate Portfolio Manager for a major Canadian financial institution, managing around $100 million for about 200 different families. My clients range from ages 16 to 90, in all different stages of life. This is also my first foray into the world of blogging (or writing, for that matter), so I apologize in advance for any writers' wrongdoings.

I have thought about doing this blog for a long time. I see examples each day of people that are making financial decisions that are simply not thought through. There are more ways than one to plan for the future, I understand that. But there are also many ways that we can make mistakes, take dangerous shortcuts or be taken advantage of, while trying to make these decisions. I will discuss everything from financial products, the different types of investment accounts that we as Canadians have access too, as well as fee structures, commissions, and many topics around investment management and financial planning.

If you have any thoughts of your own or ideas that you would like to see appear in the blog, feel free to drop me a line. The idea here is to get as much GOOD information to our fellow Canadians as possible. It is becoming more difficult to find professionals that we can trust with our affairs. Hopefully this will be a way that I can impart some financial wisdom upon you without you worrying about my motivation.

Next post will be about Tax Free Savings Accounts. These things are a slam dunk and absolutely every Canadian should have one. I will tell you why next week.

If you're interested in keeping tabs on the subjects, be sure to 'follow' me on the page, or subscribe to the blog by email... I'm not sure how this stuff works but we shall see.