Liquid Independence

Liquid is the main editor of the Freedom 35 Blog.

Nov 092017
 

tl:dr. The answer is yes, Enbridge is a good buy. 🙂

Fair Market Value of Enbridge (ENB) 

Canadian pipeline company Enbridge is currently trading at around $47 per share. But based on Benjamin Graham’s formula for valuing stocks, which I’ve discussed before, the fair market value of Enbridge should be around $62.

Enbridge stock’s EPS is $1.96. The growth rate (g) is 10.5% a year according to Nasdaq.com. And long term high quality corporate bonds currently yield 4.1%, which represents the (Y) variable in the equation above. So we can see that (1.96x(8.5+2×10.5))x4.4/4.1 = $62

$62 per share is in line with what most analysts have determined as well. For example TD Equity Research recently posted a 12 month target of $62 for Enbridge. Here is the full research paper for anyone interested. This indicates that ENB may be oversold right now.

If Enbridge climbs to $62 per share that would be a 37% increase in total return. That’s pretty darn good! 😀 This is why I believe Enbridge is potentially oversold right now and is a good buy. 😀 Over the past decade ENB dividends have increased by 10% annually. Enbridge plans to continue growing its dividends by at least 10% every year through 2024.

Enbridge has one of the strongest economic moats of any company. Since pipelines require a lot of capital and regulatory approval, it’s not an industry where anyone can easily get in. Much like the railway industry, it’s pretty much an oligopoly without much competition.

Continue reading »

Nov 012017
 

This was one of the best months of the year in terms of investment gains. The stronger U.S. dollar and farmland rent income were very helpful for me. Furthermore, Amazon.com reported its financials last week and the results were stronger than expected. AMZN stock shot up 13% that day. Hurray! 😀

Check out the stock market performance since August below. The gains are incredible for just 3 months. 🙂 Dow Jones is up 6.79%, S&P/TSX Composite is up 5.82%, and Nasdaq is up 5.98%. It’s a good time to be long in stocks. 🙂

Liquid’s Financial Update

*Side Incomes:

  • Part-Time = $700
  • Freelance = $1000
  • Dividends = $900
  • Interest = $800
  • Rent = $4700
*Discretionary Spending:
  • Fun = $400
  • Debt Interest = $1300

*Net Worth: (ΔMoM)

  • Assets: = $1,136,400 total (+14,700)
  • Cash = $7,800 (+4200)
  • Canadian stocks = $156,900 (+5200)
  • U.S. stocks = $101,800 (+7900)
  • U.K. stocks = $21,100 (+900)
  • RRSP = $89,200 (+5300)
  • Mortgage Funds = $31,900 (+600)
  • Peer-to-Peer Lending = $21,700 (+200)
  • SolarShare Bonds = $0 (-9600)
  • Home = $270,000
  • Farms = $436,000
  • Debts: = $470,800 total (-3,900)
  • Mortgage = $181,300 (-400)
  • Farm Loans = $186,800 (-500)
  • Margin Loans = $57,700 (+100)
  • TD Line of Credit = $8,000  (-1400)
  • CIBC Line of Credit = $22,000 (-1000)
  • HELOC = $15,000 (-700)

*Total Net Worth = $665,600 (+$18,600 / +2.9%)
All numbers above are in $CDN. 

Last month I mentioned my year end goal was to have a net worth of $675,000. There are two more months to go. I think I can do it. 🙂 I have decided to remove my Solarshare bonds from my asset list to simplify my net worth calculation. Similar to my Ethereum holdings, Solarshare bonds will no longer be in my monthly update going forward.

 

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Random Useless Fact

 

Oct 252017
 

Canada’s trade deficit rose to a disappointing $3.4 billion in August, one of the highest ever recorded. Economists had predicted $2.6 billion, lol. They were way off. Both imports and exports were down, which suggests the entire economy may be in trouble.

It doesn’t help either that Canada’s currency has advanced 7% over the past 6 months, largely due to the 2 interest rate hikes earlier this year. According to insolvency firm MNP, 40% of Canadians fear they will be in financial trouble if rates increase again. And 42% say they are only “$200 or less away from financial insolvency, with little cushion to pay unexpected bills or expenses at the end of the month.” This is troubling news. 😔 Consumers will have to be more careful about how they spend their money going into 2018.

With domestic spending expected to fall, and an extended period of large trade deficits, a slowdown in our growth domestic product (GDP) is inevitable. Canada is essentially buying more stuff than we’re selling, which basically means we’re spending beyond our means and going into debt. Due to these factors, we can expect negative repercussions in the financial markets as well. Slower domestic spending means lower sales for domestic producers and their stock prices.

“Given enough time, investors will realize fewer investment opportunities domestically and begin to invest in foreign stock markets, as prospects in these markets will be much better. This will lower demand in the domestic stock market and cause that market to decline.” ~Investopedia

Economists are anticipating annualized GDP growth of about 2.5% for the third quarter. That sounds too optimistic to me. Given the numbers we have today I would expect a more modest growth rate of 1.6% annualized for Q3, 2017. I guess we shall wait and find out later this year.

It can be difficult to find investments in a slow growing environment. But we can always look for opportunities outside of Canada. 🙂 Afterall, if we search globally, we will likely find more bargains, and probably better bargains, than in any single country. This is why I invested in Germany through Dream Global (DRG.UN) a couple of years ago. Canada’s real estate prices were too expensive, so I looked elsewhere for a bargain, and I found one! Dream Global is a Canadian REIT but conducts most of its business in Germany. Hurra! 😀 If we use the iShares S&P/TSX Capped REIT Index ETF (XRE) as a benchmark for Canadian REITs, then since my purchase in 2015, DRG.UN has outperformed XRE by over 30%. Yay! Property prices in developed countries around the world, including in Germany, have risen a lot over the past 2 year and are no longer cheap. But I believe there are still other undervalued sectors around the world today. 🙂

 

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Random Useless Fact

Muhammad Ali reportedly went 2 months without sex before a big fight, claiming it made him stronger in the ring.

 

 

Oct 182017
 

Knowledge is not enough. It must also be applied.

Good financial advice is easy to come by, but not always implemented effectively. The tips and suggestions on personal finance blogs are, for the most part, pretty generic. Unfortunately most people would read a few articles and quickly become bored of the topic because they don’t get anything meaningful out of them. Only personal finance enthusiasts are committed to read new material about money regularly, because they know how to turn generic advice into a more personalized form of advice that is practical and effective. Let’s look at some examples of this below. 🙂

How to turn generic advice into personalized advice.

A good rule of thumb to follow is to spend less than we earn. Well, okay. That’s great. But this is generic advice. Most people will roll their eyes at something so obvious. To personalize this principle, we can find a way to apply it practically. For example, we can pay ourselves 20% of our income by transferring money to an investment account. This can be automated to re-occur every paycheck period. This insures that we always spend less than we earn. Setting up a systematic rule based approach before we even start to save will improve our odds of success. 🙂

Another generic advice is to look for value when investing. Once again, this is pretty good advice, but not practical. So let’s find a way to personalize it. For example, the capitalization rate of a house in Toronto, Ontario is about 3% which is not a great return on investment. But a similar house near Barrie which is a smaller municipality in the same province can have a cap rate of 4% to 5%. So by simply zooming out and looking at a broader area, we are able to find more opportunities for value. If we search countrywide, we will find more, and possibly better bargains, than in any single city.

My favorite generic advice is don’t put all your eggs in one basket. To personalize this we can determine which different asset classes we should hold in our portfolio, how much of each we should have, and find low cost index funds to satisfy each class. The 100 minus age rule is a good place to start when it comes to determining one’s asset allocation.

Generic advice is good. But personalized advice is always better. Generic advice tells us what to do given a certain situation. But personalized advice shows us how to do it, and how to make a practical plan to tackle any situation. 🙂

Continue reading »

Oct 032017
 

We are now 3 quarters into the year. The S&P 500 and Nasdaq both hit an all time high to close out September. Up here in Canada the S&P/TSX Composite grew by 3.7%. Gross domestic product (GDP) was essentially unchanged, at zero per cent growth in July compared with June, Statistics Canada said last week. I suspect that the slower start to Q3 is indicative of what’s to come for the rest of the year. The good thing is inflation should remain low at sub 1.6%. I wonder if the Bank of Canada raised interest rates too quickly over the summer.

September had turned out to be a great month. A rising stock market raises all boats so my brokerage accounts performed well across the board. I’m quite happy with the outcome. 🙂

Liquid’s Financial Update

*Side Incomes:

  • Part-Time = $700
  • Freelance = $1200
  • Dividends = $800
  • Interest = $600
*Discretionary Spending:
  • Fun = $400
  • Debt Interest = $1300

*Net Worth: (ΔMoM)

  • Assets: = $1,121,700 total (+9,100)
  • Cash = $3,600 (+600)
  • Canadian stocks = $151,700 (+3200)
  • U.S. stocks = $93,900 (+3500)
  • U.K. stocks = $20,200 (+500)
  • RRSP = $83,900 (+1500)
  • Mortgage Funds = $31,300 (-200)
  • Peer-to-Peer Lending = $21,500 (+200)
  • SolarShare Bonds = $9,600 (-200)
  • Home = $270,000
  • Farms = $436,000
  • Debts: = $474,700 total (-4,000)
  • Mortgage = $181,700 (-400)
  • Farm Loans = $187,300 (-500)
  • Margin Loans = $57,600 (-100)
  • TD Line of Credit = $9,400  (-1800)
  • CIBC Line of Credit = $23,000 (-1000)
  • HELOC = $15,700 (-200)

*Total Net Worth = $647,000 (+$13,100 / +2.1%)
All numbers above are in $CDN. 

My year over year net worth gain is $109,500. I plan to continue paying down debt while building up my retirement fund over the next 3 months. By the end of this year I hope to have a net worth of $675,000.

 

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Random Useless Fact