Fiscal Update May 2020 | Oil’s well that ends well

Energy sector bounces back

The human brain can often exaggerate negative emotions in the midst of uncertainty. It’s why otherwise calm drivers are susceptible to road rage behavior. Similarly, a stock market crash can cause investors to fixate on the bad news, lose perspective, and extrapolate recent trends into a dreadful future. Here’s a business headline from mid March.

But this type of thinking, although understandable, can lead to some costly mistakes. That’s why I suggest a more rational approach to managing money. First, we should realize that this time is not different. This isn’t the first worldwide economic shock. And it won’t be the last. Given the assumption that things will go back to normal we next have to look for opportunities in financial markets – where we can find mispriced, long term assets. So when stocks fell 30% earlier this year I suggested it was a time to buy, not sell.

A couple of months ago oil fell to $20/barrel. In the past 70 years this has only happened one other time so it’s a very rare phenomenon. I blogged about investing while the price of oil was unsustainably low. And in March I disclosed buying 1300 shares of Suncor (SU), and 500 shares of Canadian Natural Rss (CNQ) – two of the largest Canadian energy companies.

Today oil has climbed back up to $35/barrel and my combined ROI on those two stocks is 37.3%. That’s a gain of roughly $12,000 in two months. Bear markets don’t happen every year. That’s why when opportunities like this arise, it’s important to pay attention and take action. 😉 I haven’t sold these oil stocks so there’s no realized profit yet. But it’s still nice to see a climbing net worth.

Liquid’s Financial Update May 2020

*Side Incomes: = $4,600

• Part time job =$800
• Freelance = $100
• Dividends =$1300
• Interest = $600
• Rent = $1,800

*Discretionary Spending: = $1,800

• Food = $300
• Miscellaneous = $600
• Interest expense = $900

*Net Worth: (ΔMoM)

• Total Assets: = $1,530,200 (+$19,400) 
• Cash = $53,300 (+5400)
• Canadian stocks = $301,200 (+7,200)
• U.S. stocks = $149,900 (+4300)
• U.K. stocks = $18,900 (+200)
• Retirement = $153,100 (+1000)
• Mortgage Funds = $36,200 (+1100)
• P2P Lending = $36,600 (+200)
• Home = $331,000 (assessed land value)
• Rental Unit = $450,000 (2020 purchase price)

• Total Debts: = $521,800 (-4,000)
• Home Mortgage = $181,800 (-400)
• Rental Property Mortgage = $312,800 (-700)
• Margin Loans = $27,200 (-2900)

*Total Net Worth = $1,008,400 ($20,400 / +2.1%)
All numbers are in $CDN at 0.73/USD

Getting back to normal

Unfortunately Suncor has cut its dividends by 55% since my last purchase. But both SU and CNQ are profitable long term so I will continue to hold these names in my portfolio.

We still don’t know the final outcome and repercussions of this pandemic. The economy is slowly starting to open up again. But life for average folks will lag significantly behind the financial markets. According to the CFIB, half of all small businesses cannot pay their June rent unless the government steps in with more financial aid.

Europe is starting to remove some lockdown measures. Japan lifted all of its national emergency controls last week. As the world cautiously returns to normal there will probably be more unexpected news and economic hiccups. But volatility is part of the process, and the world will get through this one way or another. All we can do as individuals is to manage our own personal finances so that we’ll have a healthy, robust investment portfolio on the other side of this. 🙂

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Random Useless Fact:

Dogs are often good judges of character.