Wednesday, November 26, 2014

Registered Accounts

I had to sell stocks in my registered accounts to ensure that I have enough money there to cover this year’s withdrawal and withdrawals for the next few years. The market is relatively high and so it is not a bad time to sell. I basically look for stocks with the lowest dividend yield and sell them.

This year I sold Canadian Tire (TSX-CTC.A) and Saputo (TSX-SAP). According to the Globe and Mail, the dividend yield on Canadian Tire is 1.657% and on Saputo is 1.576%. I am putting what money I do not need this year from my registered accounts in 1 year GIC.

I used to have the balance in an MMF, but TD’s Fixed Income Desk told me that TD has a TD Investment Savings Account (TDB8150) with an interest rate of 1.2%. This rate is, of course, better than the MMF of around 0.32%.

I have 3 to 5 years of withdrawals required from my registered account in cash or near cash. Bear markets can last up to 3 years, so it is wise to have at least 3 years of cash in an RRSP account you will be withdrawing funds from. To have 4 or 5 years of cash gives you a margin of safety.

On my other blog I am today writing about Northland Power Inc. (TSX-NPI, OTC-NPIFF) ... continue...

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Monday, November 24, 2014

October 2014 Market Correction

How did my portfolio do in connection with the market correction we had in October 2014? If you have dividend paying stocks, it should not correct as much as the market does.

I look at the TSX Index on August 29, 2014 and the one for October 21, 2014. The numbers were 15,558.17 and 15111.13. So from the end of August 2014 to last Friday, October 21, 2014 the TSX Index is down by 2.87%.

I look at my portfolio on August 29, 2014 and for October 21, 2014. I converted by US account into CDN$ based on the exchange rates of August 29, 2014 and for October 21, 2014. I added back into my account all monies taken out and subtracted any new money. My portfolio is up by 1.09% since the end of August 2014.

I have put into my TFSA account some riskier dividend paying small cap stocks. This account is down by 4.42%. I started this account in 1997. My US account in US$ is down by 2.18% but in CDN$ it is up by 1.24%.

My oldest account, where I have stocks dating back to the early 1980's, is up by 3.07%. I did not start this account until 1986, but I had stocks before then and placed them in this account. My RRSP account, started in 1995 is down by 1.24% and my RRIF account, started in 1998 is down by 0.09%. (I had some locked in pension money and could only access it by an RRIF account.)

On my other blog I am today writing about Keyera Corp. (TSX-KEY, OTC-KEYUF) ... continue...

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Wednesday, November 19, 2014

Money Show 2014 - David Wyss

David Wyss an economist is a visiting fellow, Watson Institute at Brown University. His talk was called "Half-Speed Ahead". This was the last presentation at the Money show.

The US is in year 4 of its recovery. The European debt crisis can spread to the US. The US government is dysfunctional.

Housing is still a problem. There is still a house bubble. House prices got too high and they built too many houses. The only thing to do is to stop building houses and for house prices to drop. Foreclosures peaked in 2013. There is still a pool of underwater houses, but things are moving in the right direction.

The housing bubble was not just in the US. There was housing bubbles in the UK, Ireland and Spain. All 4 Irish banks were bankrupt and needed to be bailed out. Spain did not recognize it had a banking crisis and so now they have large unemployment.

The Fed brought down bond and mortgage rates by buying bonds and mortgages. (They also brought down the Fed interest rate.) The expansion of the central bank's balance sheet happened in the UK and the US. In the EU people cannot walk away from mortgages like they can in the US. However, this does not mean that the mortgages are going to be paid.

Spanish mortgages where not only held by Spanish banks, but were held by German and UK banks also. However, no one is saying who is holding these mortgages. Interest rates in the EU converged in 1999 with the Euro but they are now diverging. German and French banks loaned money to other EU countries.

The US and the UK have bankruptcy rules and so got on the problem right away. So they both are doing better economically. The GDP growth has turned around. However in the EU zone there is no GDP growth and there is high unemployment. The EU is not turning around now. It will be a long hard time for them to get out of their present difficulties.

If you have excessive debt going into a recession, it is hard to get out of the recession. You cannot spend your way out. It is a long slow process to get out. Their drag of weak growth is affecting the rest of the world.

A lot of lower unemployment is because participating rates are lower, people are retiring and children are staying in school longer. The global recovery remains fragile and uneven. In the last recession, Canada did better than the US but now the US is doing better than Canada. The US is stagnating, Japan has problems and China is slowing down. Things are improving, but they are not improving very fast.

China probably has more growth over the next 10 years. Good idea to buy Chinese companies listed on the Hong Kong exchange.

The US$ is still the reserve currency. People are not willing to use the Euro. China would like people to use their currency, but it is not convertible.

In Canada house prices are too high but as long as the economy stays stable they could stay too high for a long time. The house bubble in Canada is smaller than the one in the US. Canadian housing prices could be flat for a long time rather than drop.

China is not as interested in the tar sands oil as it once was and it has shale gas. The Saudi's want to discourage new sources of oil so they are bring the price of oil down.

He thinks that the EU will survive because of politics. Ireland was the first to crash and now it has turn around. There is a need for political will.

On my other blog I am today writing about IBI Group Inc. (TSX-IBG, OTC-IBIBF) ... continue ...

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Tuesday, November 18, 2014

Money Show 2014 - Iain Butler

Iain Butler is an advisor at the Motley Fool. His talk was called "Long Term Investing in a Short-Term World". His slide presentation is here.

Individual investors are slow movers and this can be an advantage over Bay Street. The foolish approach thinks that time in the market will be your greatest natural advantage. They think that timing the market is a fool's game.

Dennis Gartman on BNN said on April 7, 2014 that he sold all his stock was zero exposed to the stock market. On April 14, 2014 he said he was pleasantly long on stocks.

Institutional investors are evaluated every 90 days, so they cannot invest long term. What they do is copy the market index because they are measured against the market index. They are what are called closet indexers. Institutional money is also called the smart money.

The foolish way is to focus on great companies and hold them for the long term. As John Reed writes in his book Succeeding - "When you initially start to research a field, it seems like you need to memorize a zillion things. You do not. Exactly what you require is to identify the core concepts - typically 3 to twelve of them - that govern the industry. The million things you thought you'd to memorize are just different combinations of the core principles."

Iain Butler says there are 4 ways to invest. This is the complete list and 3 and 4 eventually become #1
  1. Unsuccessfully
  2. Long Term (with varying degrees of success)
  3. Short Term (success due to luck)
  4. Short Term (success due to manipulation/fraud)
According to Warren Buffet, time is the most important valuable in investing. Most investor's definition of long term is the time between now and the next bear market. Real estate feels like the best investment only because people hold it for the longest time. You will never have regret over a 20 year investment because you will never have a negative return.

Do nothing are the two most powerful words in investing. The big money is not in buy and selling but in sitting. Dollar cost averaging is boring, but can produce a maximum return. The preference should be with companies that reward shareholders with Dividends and Buy Backs.

A rule of thumb is that is the market has done poorly over the past 10 years; it will do great over the next 10 years. You should have a list of stocks you want to buy and keep it for the time when the market falls. A 10% correction happens once a year.

On my other blog I am today writing about Encana Corp. (TSX-ECA, NYSE-ECA) ... continue ...

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Monday, November 17, 2014

Money Show 2014 - Jimmy Mengel

Jimmy Mengel is the Editor of the Outsiders Club and an Investment Director at the Crow's Nest. His talk was called "Investing after a Crash: Buying Cheap Dividend Reinvestment Plans".

Bubbles:
  • High confidence
  • Lopsided Bullishness
  • Overvaluation
  • Hind sight blindness
The exit rule for bubbles is that you can get out if you panic before everyone else does. The bottom of a bubble is not a 4 year low, but a 10 or 15 year low according to Jim Rodgers. There is a Templeton Rule #10 that says do not panic. Do not rush to sell the next day. Sell before the crash, not after. Templeton has 16 rules of investing.

The only reason to sell a stock is because you want to buy another more attractive stock. After the 1987 crash Warren Buffett bought coke. In 2008 was the time to buy US banks. Return on Bank of America was 450% and on Citibank was 384%.

Why would you use DRIPs? There are no brokerage fees. You can accumulate more shares as the market drops. However, companies are forbidden to advertise DRIPs.

In market crashes think long term. Do not panic. Keep calm and buy stocks you have always wanted to buy.

On my other blog I am today writing about Encana Corp. (TSX-ECA, NYSE-ECA) ... continue ...

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Friday, November 14, 2014

Money Show 2014 - David Stanley

On Saturday, the Money Saver Magazine has presentations filling the whole day. The Firth one was called "Beating the TSX - It Works". This presentation was done by David Stanley.

This presentation is on YouTube starting here. There is also a website talking about David Stanley here. David Stanley says he believes in Share Clubs. There is information on these clubs here.

There is a lot of turmoil in the market, but you do not have to be in turmoil. The market is currently overpriced. The risk premium over bonds is very high. There is an overreaction to Ebola. Interest rates are very low.

Your real return is what you get after inflation. GICs give you safety. Safety can be a factor in how well you sleep at night. You can go talk to your bank manager to get a better 5 year GIC rate. It will be difficult to get the economy to grow with an aging population.

Buttonwood says that future returns from a stock/bond portfolio will be barely positive in the future. (Buttonwood seems to be a blog by The Economist.) Short term will be bad. However, the median and long term will be pretty good. The Canadian economy is in not bad shape. We are back into a secular bull market.

You should read Nassim Nicholas Taleb book called Antifragile: Things That Gain from Disorder. There is an entry for this book in Wikipedia.

We need to buy blue chip stocks; these are stocks that pay dividends. With dividend stock we can take advantage of steady, increasing payments. Dividends will account for 90% of your return. We can also take advantage of compounding with dividend stocks if we use DRIPs or reinvest the dividends. Over the past 10 years the TSXT returned 144.09% and the TSX returned 65.1%.

We can do the same by buying plain vanilla ETFs. There is a site called longrundata.com. This site has a lot of data for investors. (This site only seems to have data on US listed stock.)

He held a portfolio if ENB, TD, BCE, NA, CAR.UN, JNJ, POW, EMA and TA for 15 and had Annual Total Return (ATR) of 12.13%. Annual dividend growth over 5 years was 8.04% and over 10 years was 14.07%. The best sector is TURF that is Telecoms, Utilities, Real Este and Financials. Pipelines are included in utilities.

His theory of beating the TSX is based on Michael O'Higgins' book called "Beating the Dow" or the "Dogs of the Dow". What David Stanley does is use the TSX60 but excludes the former income trust stocks. Note all stocks in the TSX60 are blue chip stocks. He orders the stocks from high to low dividend yield. He takes the top 10 dividend yielders and puts the same amount of money in each stock.

There are disadvantages. If you invest in stocks you have no one to blame buy yourself. There could be dividend cuts and tax code changes. There could be problems with the index itself. For example in 1999, Laidlaw was 94% of the index.

There was an article in MacLean's calling seniors old, rich and spoiled. See the article here. It is easier to make money than to hold on to money. Dividends help to hold on to money. There is less risk and higher returns in passive investing. Get an ETF of Blue Chips stock. You could get low Beta stocks. There are no REITs in the TSX60, so it is a good idea to buy some REITs.

It is a good idea to join a Share Club. Read Ross Grant's book called Destination: Early Financial Independence. It is on Amazon.

On my other blog I am today writing about Chesswood Group Ltd. (TSX-CHW, OTC-CHWWF) ... continue ...

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Thursday, November 13, 2014

Money Show 2014 - Bruce Cappon

On Saturday, the Money Saver Magazine has presentations filling the whole day. The fourth one was called "Travelling without Financial Tragedy". This presentation was done by Bruce Cappon. He works in the travel insurance business.

The first thing than Bruce Cappon brought up was that fact that a lot of people answer travel insurance questions incorrectly and then if they have a claim it is deigned under the misrepresentation clause. You do not just have to be honest, you have to be perfect. You want an insurance product that has a compassion clause or a penalty cap clause.

He spent a lot a time going over sample questions and showing how people can get tripped up. There is no onus on insurance companies to ensure questions would elicit correct responses.

You can have a change in health between the time you apply for insurance and the time you travel. Your claim could be deigned. What you want is a lock in your good health clause rider with your insurance.

You need to check into what you are getting and not just buy travel insurance based on price. He is with First Rate Insurance Inc. and his web site is here. There are a number of related recent article by Bruce Cappon on this site.

On my other blog I am today writing about Cenovus Energy Inc. (TSX-CVE, NYSE-CVE) ... continue ...

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.