Dec 282011

Hope everyone had a good Christmas. I went to the local consumer electronics store (Futureshop) on boxing day and it was packed. I feel bad for the minority who are facing financial difficulties now, but one look at our shopping malls, restaurants, road congestion and it’s hard to find any signs that our economy is slowing down…

There are so many cars on the streets this holiday season. We have a law in this part of Canada that issues a $167 ticket to anyone talking or texting on their phones while driving. But hands free blue tooth is okay because you’re not looking at your phone.  According to the police, 48% of fatal car accidents last year involved distracted drivers. So this is really a moral issue, which will save hundreds of lives each year.

I think this law is a great idea for any State/Province or municipality looking to make some extra money. Imagine how much more in taxes we would all have to pay if the government didn’t have other ways of raising money like using these traffic ticket fines. On a per person bases, BC already issues more than twice at many of these tickets as Ontario. Other provinces should follow us. I’m all for issuing fines if it means saving lives and money.  I’m surprised at how many drivers I see today still holding phones to their ears. If people must use phones while driving, they can buy a cheap head set for talking, or use Siri, if they have her, to send text messages. Driving at 60 km/hr (37 miles/hr) a driver who takes their eyes off the road for just 3 seconds drives the width of a football field, “so even a brief glance at a text message or dialing a cell phone can cause serious injury or death.” ~Solicitor General R. Coleman.

75% of drivers polled in this province, believe that talking or texting on a mobile phone behind the wheel is as dangerous as drunk driving. And most of them support this cellphone/driving law. Some even want the fine to be higher. What’s interesting is 53% said they witnessed others breaking this law “several times a day.” But only 16% admitted to breaking the law themselves in the last year. Hmm, I wonder…

Dec 232011

BMO expects average Canadians to spend $582 on gifts this year. ARG expects Americans to spend $646. I don’t normally see my relatives during Christmas, and I don’t have many close friends, so I’ll be spending lots of time with my parents this holiday.

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They are not materialistic people so for most years we don’t buy each other anything for birthdays or Christmas. I realized from a young age that time is the most valuable commodity. Presents don’t last, unless it’s an experience worthy of being remembered, which can be achieved without using lots of money. I spent about $100 total this holiday on gifts and entertainment. Most of that was for myself :0) My family and some of my friends spent similar amounts. We still maintain our relationships by hanging out once in awhile, but since we don’t buy each other presents we are effectively giving each other savings. Several hundreds dollars worth of savings each. That’s a pretty good gift right there. Plus, no headaches trying to figure out what to get for others. I want blu-ray movies just like anyone else, but the more we receive the more we’re pressured to reciprocate and give back. So I’ll just buy the movies myself. But giving and receiving time is priceless, and can’t be compared or measured.

At the end of the day, it’s the thought that counts. Here are some gift ideas that require more time than money.
-Burn a CD with their favorite tunes
-Bake Christmas cookies
-Knit a pair of mittens for the cold weather
-Print, frame, and give them a picture of themselves
-Make custom greeting cards, bookmarks, etc

Merry Christmas!

Dec 202011

Last week I bought 2 stocks hoping to make a quick profit in the months to come. Short term volatility is not a concern for me. After all, the last stock I chose in November, Cineplex, dropped in price right after I bought it. But today, I am up more than 6% on that investment. Not too shabby, considering that the average stock market is down 6% in Canada (TSX) and down 4% in the US (S&P500;) during the same period.

Silver Wheaton (SLW.TO)
This silver company based right here in Vancouver buys silver from other miners at really cheap prices and then sells them on the market for huge profits. Their operating margin is 74%. They are trading at only 12-13 times future earnings. Very low compared to its historical valuations which has normally been around 20-30 times. There is nothing wrong with the company. It’s still growing. An absolute bargain right now.

Halliburton (HAL.NYSE)
Remember this company? I used them for my previous swing trade to make 8% in just over a month. Very well run company. They provide drilling services to other oil companies. Trading at 7-8 times forward earnings. That’s also really low since it normally trades at around 10-20 times. Very cheap right now compared to its intrinsic value.

My strategy this time:.
-If either stock moves up by 10-15% from what I paid, I will consider selling that name alone, or both.
-If either stock moves down by 10-15%, I will buy more stocks of that company.

That’s it. Very simple plan. This strategy will only work however, if you are confident that the company(s) you choose are leaders in their fields, large enough to withstand any kind of recession, and very likely to be more profitable 10 years from now. Both companies fit those criteria for me. And because they are commodity based stocks, I am also protected from inflation. If oil or metal materials become more expensive, then these stocks will likely increase as well.

Dec 172011

Have you done all your Christmas shopping yet? I know many stocks that are On Sale right now. I’m trying my hand at speculating once again. And now we’ll find out if my last swing trade success was just beginner’s luck.

Why is it a good time to buy now? After all, the VIX (which we used before to successfully time the market) is pretty low right now. However I have another secret weapon up my sleeve which I will share today. Sometimes when I’m bored I would overlap random charts over the stock market to see if I can find forward looking indicators to better my chances at trading. Lately, I have discovered how to use people’s saving habits to predict the future of the markets with 74% accuracy  ( ゚д゚) And I’ve searched all over the internet, so far it doesn’t look like anyone else has realized this yet. How does it work? Here is how much US individuals have been saving over the last 10 years.

As you can see, it’s pretty random for the most part, except maybe in recessionary times (highlighted in gray) when people might save more money because they are uncertain about the future. But there is actually some correlation between how much people are currently saving and future stock market performance. If we overlap the US stock market (S&P; 500 index) over the above graph, we get the new graph below.

What I’ve done is mark all the points where personal savings dipped and rebounded, which I define as going through any kind of a “v” shape. Then from that point in time, find out which way the stock market had gone over the next couple of months. Well out of the 27 times that American’s have bounced off the bottom on saving rates, 20 have resulted in short-term stock market gains (marked by the little green arrows.)

The S&P; 500 has gone nowhere in the last 10 years, (literally 0% change) as of today. You can see on the chart it ended on the same place it started in 2001, Hah ( ゚∀゚). So if the market fluctuates up and down but ends with no net change, then you’d expect random locations along the graph to have a 50/50 chance of being on an up or down trend. But history shows that when our’s savings rate dip, more often than not stocks will increase within 60 days or so. This is good to know for swing trading, which could last for months. I don’t know the reason behind this correlation, but it probably has something to do with less saving means more spending which translates to more sales and earnings for companies. Seems obvious, but I guess it’s not. Only you and other readers of my blog know about this analysis, so let’s keep it between us (^_~)

Finally, if you look at the right side of the graph where the “?” is, you see we have just entered another small “v” dip in savings rate. This marks dip number 28. What color arrow will we get this time? Since probability is in my favor, I’m going to go for it and see what happens.

So earlier today, Friday Dec 16th, I threw about $2,000 into the stock market. But I used the power of leverage to purchase roughly $4,000 worth of stocks via a margin account. I’ll explain how that works in another post. And I’ve split that money between 2 stocks, just like I did last time. Here are the details.

Silver Wheaton Corp (TSE : SLW)  ———- BUY ———> $29.76 x 66 shares = $1964.16 CAD
Halliburton Company (NYSE : HAL) ——— BUY ———> $31.60 x 63 shares = $1990.80 USD

I will write about why I bought these 2 companies next week. It’s past midnight now, too tired to to type any moor.


Dec 152011

New report by the feds shows Canadians now have a debt to income ratio of 153%. Meaning for every $1 someone makes after tax, he or she has $1.53 of debt. We have never seen it this high before. We are now officially more indebted than both the US, and our British friends across the pond. Look at us! We’re finally setting a trend.

The report also mentions our net worth is dropping. Average Canadian households are 2.1% poorer than the previous quarter. Lower net worth, and deeper in debt. What’s the good news? Well even though personal finances are getting worse, our national wealth as a country, which includes corporations, still grew by $88 billion!

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This is why it’s so important to invest in companies (either through stocks or bonds) and prosper with the part of the country that’s actually growing. Businesses are doing great. They have lots of cash in the bank, and can raise money very cheaply and easily. So instead of buying something perishable for Christmas this year, I’m going to buy myself $5,000 worth of companies (stocks/bonds) and get paid a nice income while I wait. In the long run this will probably be one of the best Christmas presents I’ll ever give myself. Consumption makes you poor, but becoming a partial owner (shareholder) of a growing company that makes its money from other people who practices consumption, makes you rich. There is no lack of consumers right now. Holiday shoppers broke records this year. Unexpected high volumes in sales. Cheap stock valuations. What a great investing opportunity. I’m thinking of doing another swing trade soon. Looking at Goldcorp, or Silver Wheaton. But since I don’t have much in savings, I’ll have to borrow some money from the bank again. Yup, that means going deeper into debt. But debt isn’t always a bad thing. I’ll explain that in another post.