Apr 022019
 

Getting out of 21st Century Fox 

Five years ago I wrote about purchasing 26 FOXA shares for $34 USD each. At that time the stock was trading at 20 times earnings, so it wasn’t exactly cheap. However I saw great potential in this company because it had a lot of popular brands and intellectual properties. I had planned to hold this stock for decades. But I didn’t have to.

Fox shareholders approved the acquisition by Disney, and last month I was forced to sell all my FOXA stocks for $1,843 CAD. That’s a tidy 83% return on investment, before even adding on the dividend income I received over the years. 🙂 Plus, there’s no capital gains tax because it was held in my RRSP. Yay!

Overall March has been a really positive month for my finances. All my liquid assets went up in price.

Liquid’s Financial Update

*Side Incomes: = $3,300

  • Part time job =$700
  • Freelance = $600
  • Dividends =$1200
  • Interest = $800

*Discretionary Spending: = $2,400

  • Food = $300
  • Miscellaneous = $700
  • Interest expense = $1400

*Net Worth: (ΔMoM)

  • Total Assets: = $1,340,100 (+8,200)
  • Cash = $12,200 (+1000)
  • Canadian stocks = $171,400 (+800)
  • U.S. stocks = $124,600 (+4000)
  • U.K. stocks = $21,700 (+900)
  • Retirement = $128,800 (+1000)
  • Mortgage Funds = $34,900 (+200)
  • P2P Lending = $34,500 (+300)
  • Home = $367,000 (assessed land value)
  • Farms = $445,000
  • Total Debts: = $411,000 (-900)
  • Mortgage = $188,800 (-300)
  • Farm Loans = $178,600 (-500)
  • Margin Loans = $43,600 (-100)

*Total Net Worth = $929,100 (+$9,100 / +1.0%)
All numbers are in $CDN at 0.75/USD

 

Preparing for Interest Rates to Drop

It’s been several years since the Bank of Canada lowered interest rates. The last cut was in 2015. Central banks around the world dropped rates near zero as a reaction to the global finance crisis in 2008 and rates have been low since. Policy makers expected the economy and rates to rebound back to normal in short order. But they discovered an inconvenient truth to the markets; low interest rates are addictive. Once consumers get a taste of easy credit, it’s very difficult for them to pull back.

Real estate related debt is cheaper in Canada than in the U.S. As a result, on a per capita basis, HELOC balances in Canada were $4,849 in October last year, more than 4 times the $1,080 balance in the U.S. Canadian households have borrowed a lot in recent years, sending our debt to record levels as a percentage of the overall economy.

But debt is a global issue. In China, the government is cracking down on shadow lending which has lead to tightening monetary conditions. According to 2 separate banks, defaults for Chinese corporate bonds have soared in 2018. In the United States total credit card debt has reached a record high. Even without any additional rate hikes in 2019, Americans will spend $122 billion on credit card interest this year, about 8% more than last year. Many people are struggling to get by. I don’t know when the next interest rate change will be, but when it happens it will probably be a rate drop instead of a raise.

 

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Random Useless Fact:

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Lee
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Lee

You really think the rates are due for a drop? I would be surprised if they dropped. Perhaps because I am surrounded by people from an older generation (people who bought houses in the 80’s) that often tell me about their 11-20%-interest rate mortgages, and how lucky we are that the rates have been so low for so long… for this reason I can’t imagine them going down yet (this is based on zero knowledge of economy, just on my own anecdotal evidence). I was super lucky to buy my first home in 2009 and enjoy rock-bottom low rates for the last decade, although simultaneously “high interest” savings accounts have been absolutely pathetic in terms of savings tools. But I have found that with every meager rise in rates, 0.25% here, 0.25% there, the country/media complained and yet we are still sitting at a prime rate of less than 4%! I don’t know what I’m trying to say, other than, just because they haven’t lowered rates in 10 years, doesn’t mean they should. And watching peers and younger folk take on crazy amounts of loans stresses me (and them, eventually) out. Maybe with higher interest rates, the borrowing insanity might… Read more »

Dividend Diplomats
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Great update right there. Your net worth is moving in the right direction. Congrats on the strong realized gain on the Fox sale. I am curious how this company is going to perform. Disney has a boatload of media content now and this Disney+ app is going to provide a serious contender to Netflix and other streaming services. I’m very, very curious what Netflix is going to do without that content. I know it is popular among kids and other age groups.

Bert

Chris CD
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Chris CD

It is because they use 1-ply, that they could afford to pay $71BB. :O) The loss of content form Disney is a concern, but Netflix has been putting out quite a bit of good content on their own. Competition is good though. It will just mean they need to get a little better.
cd :O)

Tyler
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Hey Liquid, the BOC lowered interest rates in 2014 and 2015.