Liquid Independence

Liquid is the main editor of the Freedom 35 Blog.

Jan 072019


Changes in the Financial Markets in 2018

  • Currencies:
  • Canadian dollar weaken from 0.80 to 0.73 USD.
    (Less purchasing power and more expensive imports, such as food from the U.S.)
  • U.S. dollar index up to 96 from 92.
    (Non Americans pay a higher premium to buy U.S. investments.)
  • Stock Markets:
  • Most markets around the world dropped in 2018, especially Emerging and Asian markets.
  • Canadian S&P/TSX stock index fell about 12%
  • U.S. stock market fell about 6%
  • Canadian Aggregate bond index ETF (ZAG) total return = 1.8%

It wasn’t a great way to end the year but on the whole I’m pretty happy with my situation. The last quarter has been the worst for my net worth performance so far. But the good news is I’ve still gained $96K overall in 2018 thanks to a great first half of the year. 🙂 Below is my net worth update for December.

Liquid’s Financial Update

*Side Incomes: = $3,400

  • Part time job =$1100
  • Freelance = $800
  • Dividends =$1000
  • Interest = $600

*Discretionary Spending: = $2,000

  • Food = $300
  • Miscellaneous = $800
  • Interest expense = $1300

*Net Worth: (ΔMoM)

  • Assets: = $1,211,300 total (-14,300)
  • Cash = $20,400 (+600)
  • Canadian stocks = $155,800 (-6800)
  • U.S. stocks = $112,700 (-4700)
  • U.K. stocks = $19,400 (-1000)
  • Retirement = $114,900 (-2500)
  • Mortgage Funds = $34,500 (-200)
  • P2P Lending = $33,600 (+300)
  • Home = $275,000
  • Farms = $445,000
  • Debts: = $418,800 total (-1400)
  • Mortgage = $189,900 (-400)
  • Farm Loans = $180,000 (-400)
  • Margin Loans = $48,900 (-600)

*Total Net Worth = $792,500 (-$12,900 / -1.6%)
All numbers are in $CDN at 0.74/USD

At the end of 2018 my net worth has grown to $792,500. This is a $95,900 increase from the previous year’s end when I had $696,600. It’s not a smooth progression, but I’m grateful to be going in the right direction overall. 🙂

2018 was a bit of a strange year. I lost my job, stocks entered into a bear market, and interest rates climbed 3 times. This series of events has never happened to me before so it’s been fun trying to navigate the new economic landscape.

In terms of what I want to do for 2019, I will be changing my financial strategy a bit. Here are some themes I plan to focus on.

  • Preparing for higher interest rates. Should the Bank of Canada continue to increase rates this year I will be drastically reducing my debt.
  • Buying more bonds. It wasn’t until the recent stock market correction that I truly realize how fixed income investments can keep volatility at bay. Investment grade bonds rated A and BBB currently pay over 4% coupon. It’s not a bad alternative to equities these days.
  • Reassess how I calculate the value of my primary residence. My initial method of using my purchase price + inflation isn’t keeping up with reality anymore. How do you guys value your real estate when calculating your net worth? Do you use the government assessed value, or get someone to come appraise the property?

Random Useless Fact:

Jan 022019

Happy new year, everyone. 1999 was already 20 years ago. That was the year when The Matrix and Star Wars Episode 1 movies came out. Darn, I feel old. 😐

I think the financial markets are in for a very eventful year in 2019 as issues in the economy may expand and bleed into the real estate and bond markets. Here are a few things to consider as we kick off January.

  • According to hedge fund manager Stanley Druckenmiller, since 2010 actual corporate earnings have only climbed 27%. Yet somehow the S&P 500 index has doubled in price. If stock prices are meant to reflect corporate profits then something doesn’t add up. Druckenmiller attributes the gap to buybacks and mergers financed by corporate non-financial debt, which climbed 60% to $9.6 trillion from 2010 to the end of 2018.
  • High yield and leveraged loans are growing. In late 2018 Sen. Elizabeth Warren warned the Federal Reserve’s vice chair that leveraged loans pose an economic threat on scale with subprime loans from a decade ago. “The Fed dropped the ball before the 2008 crisis by ignoring the risks in the subprime mortgage market,” Warren said. Simon Macadam, global economist at Capital Economics, also said leveraged loans, which generally are issued to lower-quality borrowers that already have a substantial debt load on their balance sheets, pose a danger. This has not become a crisis just yet, but I would keep an eye on it.
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Dec 212018

Stock markets are down around the world in December. The Nasdaq Composite which is a barometer for tech companies has fallen 15% so far this month. Top economists and investors have been sounding the alarm for months on an economic recession. A New York Times survey discovered that 48% of business leaders at the Yale CEO Summit expected a recession to strike by the end of 2019. It said this finding was the “direst yet,” and shows just how worried companies are about an imminent recession. 😮

The S&P/500 is already in a bear market, which means it has dropped at least 20% from the last highest point. The Canadian S&P/TSX Composite index is only down 18% since its high point in July. But it could very easily enter bear market territory by next week.

Recently 82% of corporate CFOs surveyed in the Duke Global Business Outlook saw a recession starting before the end of 2020. But nearly half of them believe it will actually occur by the end of 2019.

A little pullback once in awhile is normal. When you have nearly 10 years of financial growth it shouldn’t be a surprise when growth finally decelerates. That’s why it’s necessary to always maintain a recession resistant financial plan. 🙂

The writing has been on the wall for a long time. About a year ago I explained how we are near the end of an economic cycle, and by using some charts, I predicted that the next financial downturn will probably happen sometime between 2019 and 2021. So I’m in agreement with most of the business people surveyed above.

Instead of choosing stocks that are largely recession proof, the best way to protect ourselves from a falling stock market is to own other types of investments such as bonds or prime real estate. Continuing to earn a steady stream of income also helps bolster one’s financial situation. Only 1/3rd of my assets are in stocks. So despite the double digit stock market pullback, my net worth is only down about 1% compared to July.

It is hard to know whether this current trend will continue to push stocks further down, or if we will see a bounce back soon. If I had to guess, I think there is still some time to prepare before things start to look really bad. Here’s a chart that shows the change in corporate income tax the U.S. government earned over the last 50 years. ~Notice how just about every time the line drops below the 0 point and reverses direction we see a vertical grey bar? Well those bars represent times of recession (or shrinking GDP.)

corporate income tax

At this moment the U.S. could already be in the beginning of a recession. We won’t know for sure until the economic data is released many months later. But what we can determine right now is that the line has crossed below 0, and it hasn’t reversed direction yet. That’s why I think the next financial downturn will not be this year. 🙂

But in the meanwhile I am being weary and staying away from buying new stocks. It’s not a good idea to catch a falling knife, as a stock market in decline is most likely to continue falling in the immediate future. So I will be enjoying the holidays sitting on the sidelines. At the same time I am also not selling any of my stocks. And lastly I am continuing to pay down debts, saving up cash, and looking at bonds. 🙂

Random Useless Fact:

Dec 062018

A lot has happened globally in the last few weeks that makes me weary about the growth of the financial markets over the next 1 to 2 years. Inflation in France sparked violent protests. The U.S. federal budget deficit for fiscal year 2019 is projected to be nearly $1 trillion. It will be hard to find borrowers who are willing to buy all those treasury bonds. The 2 largest foreign holders of existing U.S. debt are China and Japan. And both have become net sellers. The economic tension between the U.S. and China is momentarily on hold, but 3 months from now the trade war could escalate.

So what I plan to do going into 2019 is to keep more cash on hand. This will allow me to maneuver more easily as cash is very liquid. If interest rates become too high I will use the cash to pay down my debt. If stocks in general fall into a bear market I will be buying up more shares. 🙂

Liquid’s Financial Update

*Side Incomes: = $3,400

  • Part time job = $900
  • Freelance = $1200
  • Dividends = $900
  • Interest = $600
*Discretionary Spending: = $2,000
  • Food = $300
  • Miscellaneous = $500
  • Interest expense = $1200

*Net Worth: (ΔMoM)

  • Assets: = $1,225,600 total (+1400)
  • Cash = $19,800 (+2300)
  • Canadian stocks = $162,600 (-4500)
  • U.S. stocks = $117,400 (+300)
  • U.K. stocks = $20,400 (-300)
  • Retirement = $117,400 (+2700)
  • Mortgage Funds = $34,700 (+500)
  • P2P Lending = $33,300 (+400)
  • Home = $275,000
  • Farms = $445,000
  • Debts: = $420,200 total (-800)
  • Mortgage = $190,300 (-400)
  • Farm Loans = $180,400 (-500)
  • Margin Loans = $49,500 (+100)

*Total Net Worth = $805,400 (+$2,200 / +0.3%)
All numbers are in $CDN. 



Financial markets are stretched thin. The S&P 500 is still trading relatively expensive at 22x earnings, even after the pullback that started in October. There isn’t much room for growth in equities. Real estate markets around the world are softening. U.S. home building company Toll Brothers warned that the housing market slowed further in November, particularly in California. Home prices and sale volume in Canada, particularly in Vancouver and Toronto are going down. Prices will likely fall further into the upcoming spring. But Canada’s continued trade deficit and high energy prices mean the cost of living will probably climb higher. The theme for 2019 could very well be higher inflation but lower investment returns. If that turns out to be true then I would prioritize paying down debt and acquiring hard assets.


Random Useless Fact:

Nov 232018

Kiplinger made a list of “best” and worst career choices for the next generation of workers. They analyzed 785 popular occupations, considering their pay rates, growth potential over the next decade and educational requirements. The 10 most promising jobs focus on fields that are projected to expand greatly over the next decade and currently offer generous paychecks. Meanwhile the 10 worst jobs tend to pay little at present and are expected to shed positions in the future.

Let’s start with the top 10 best jobs. 🙂

  1. App Developer

    Total number of jobs: 798,233
    Projected job growth over 10 years: 21.6% (All jobs: 8.6%)
    Median annual salary: $97,483 (All jobs: $43,233)
    Typical education: Bachelor’s degree

    “Without a bachelor’s degree, you can break into the tech field as a web developer, a role that typically requires just an associate’s degree to get started and pays a median salary of about $60,385 a year. Also, the number of such jobs is expected to grow 26.5% to nearly 214,850 positions by 2026.”

  2. Computer Systems Analyst

    Total number of jobs: 597,812
    Projected job growth over 10 years: 22.0%
    Median annual salary: $85,080
    Typical education: Bachelor’s degree

  3. Nurse Practitioner

    Total number of jobs: 145,331
    Projected job growth over 10 years: 32.3%
    Median annual salary: $98,288
    Typical education: Master’s degree

  4. Physical Therapist

    Total number of jobs: 226,661
    Projected job growth over 10 years: 30.4%
    Median annual salary: $83,501
    Typical education: Doctoral degree

  5. Health Services Manager

    Total number of jobs: 337,863
    Projected job growth over 10 years: 17.4%
    Median annual salary: $93,294
    Typical education: Bachelor’s degree

  6. Physician Assistant

    Total number of jobs: 103,422
    Projected job growth over 10 years: 28.8%
    Median annual salary: $98,869
    Typical education: Master’s degree

  7. Dental Hygienist

    Total number of jobs: 207,223
    Projected job growth over 10 years: 19.0%
    Median annual salary: $73,141
    Typical education: Associate’s degree

  8. Market Research Analyst

    Total number of jobs: 557,031
    Projected job growth over 10 years: 20.9%
    Median annual salary: $61,816
    Typical education: Bachelor’s degree

  9. Personal Financial Adviser

    Total number of jobs: 251,715
    Projected job growth over 10 years: 23.8%
    Median annual salary: $86,780
    Typical education: Bachelor’s degree

  10. Speech Language Pathologist

    Total number of jobs: 142,715
    Projected job growth over 10 years: 21.0%
    Median annual salary: $73,334
    Typical education: Master’s degree


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