The cautious professor

Gary MacMillan

Occupation: Retired Sheridan College business professor

Age:66

Investment personality: Ultraconservative

Portfolio makeup: Bank GICs

A Non-Investing Business Professor

Last October, when the economy and the markets hit the skids, Gary MacMillan felt both secure with his investments and somewhat reassured to have his forecast confirmed. But he's the first to admit that a crash was something that he'd been predicting for more than 10 years. "Back then, the market had been going up and up, but I said, 'Wait a minute. With everyone putting money into mutual funds, it's bound to slow down.' I thought the bubble would burst, told my friends, but no one would listen, and then it happened."

The market did bounce back after the tech wreck, but the latest collapse just reinforces his view. While he believes that, long term, the stock market offers the best return, the recently retired business professor says the risk of investments getting sideswiped is just too high. How He Invests

Mr. MacMilllan's entire portfolio has for years consisted of laddered GICs. These days, all his GICs are for less than two years, as he expects rising interest rates within 10 months. While the U.S. government is trying to keep interest rates down, it won't succeed because of the need to sell Treasuries and other government debt, he says.

His Current View on the Markets

He calls the market's rise this past month a bear rally, saying he's anticipating another big drop due to the money supply tactics of the U.S. "The Federal Reserve is printing money to support Obama's economic plan. The currency is at its end and will drop." He feels there's a real danger of hyperinflation. "And while some argue that inflation is good for stocks, because prices and profits rise, they're phantom profits. That money has to go back to buy ever pricier inputs, and can't go to shareholders."

The New Risk

"Obamanomics has changed all the rules," Mr. MacMillan says. "There's now a brand new investment risk out there. I call it Government Interventional Risk." Simply put, he says, this has turned investing into "a guessing game in a blind alley."

Best Move

Even given today's low rates, Mr. MacMillan says paying off his mortgage seven years ago was a great step. Not only did it boost his cash flow, there was a big psychological upside. "It may not make economic sense, but I just wanted to be debt free."

Worst Move

Despite all the above, Mr. MacMillan does wonder if he should not have tried some riskier investments. "You certainly can learn more by making mistakes. We all takes risks, so why in the world have I not done it with investing in stocks?" Looking back, he realizes he missed out on many market highs - and potential profits - but says these days, he's more than happy to have been on the sidelines.

Advice

"The main investment goal is to protect your financial assets, with your focus on real rates of return. Without that protective philosophy, your desired income streams and hopeful capital gains will eventually go south."

Want to share your strategies?

E-mail tony.martin@sympatico.ca