Liquid Independence

Liquid is the main editor of the Freedom 35 Blog.

Oct 312014
 

It’s that time of year again when we encourage kids to go beg for candy at random people’s houses. Yes, because taking candy from strangers when it’s dark outside is exactly the kind of thing we should be teaching children to do. :P Sometimes kids are forced to wear embarrassing costumes because parents think they look cute. Even animals are subject to such abuse. The National Retail Federation estimates that people will spend $350 million on Halloween costumes — for their pets. :lol: Some people make their own outfits, but it’s often more convenient to buy them from stores where the costumes are mask produced. :D

elsa-halloween-drinking-game

The Economics of Halloween

Halloween is big business. In the U.S. alone people anticipate spending an average of $80 this year on decorations, costumes, and candy, according to the National Retail Federation. That’s about 10% more than last year. Altogether Americans are expected to spend about $7.4 billion on Halloween in 2014. Which will be good for the economy. Below is a breakdown of the $7.4 billion U.S. Halloween spending by category.

  • Costumes – 38%
  • Candy – 30%
  • Decorations and Cards – 32%

October 31st is actually the chocolate industry’s most lucrative holiday for sales. More chocolate is purchased for Halloween than for Easter, Christmas, and even Valentines Day.

Chocolate will probably become more expensive in the future. It’s due to limited supply and a growing world wide demand. On the supply side the cocoa plant can only grow in very specific parts of the world, mainly near the equator in West Africa. Two countries in that area, Ivory Coast and Ghana, produce most of the global cocoa supply. It sounds like West Africa is a pretty sweet place to work in. :D But basically the production of cocoa cannot be easily scaled. And on the demand side consumers in developing economies of Asia and Latin American are quickly developing a sweet tooth for chocolate, with sales expected to increase by more than 20% over the next few years.

As global demand continues to increase the world’s largest chocolate manufacturers like Mars, Mondelez, Barry Callebaut, and Nestle have to raise prices in order to maintain their profit margins. Hershey has already announced they’ve increased their wholesale price this year by 8%. The global chocolate market is expected to grow from $83.2 billion in 2010 to $98.3 billion by 2016 at an estimated annual growth rate of 2.7% from 2011 to 2016.

Have a fun night everyone. :) Stay safe. And for anyone who cares, just a friendly reminder to turn your clocks back on Sunday morning this weekend. ;)

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Random Useless Fact:
Many animal shelters won’t allow black cats to be adopted around Halloween, out of fear that they might be sacrificed or tortured during rituals.

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Oct 282014
 

Retirement Number and The Rule of 300

The common question that comes up when people think about retirement is how much money do you need to retire comfortably? This is sometimes known as the retirement number. It’s a dollar figure that essentially represents financial freedom. :) It’s important to realize that there isn’t a precise answer to this question because the retirement number is a moving target that changes all the time. However there is a general guideline that many financial experts use. It’s called the rule of 300.

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The rule works like this. Imagine how much your average monthly expenses would cost if you retired. Then multiply that number by 300. The answer represents how big your retirement nest egg should be before you retire. This idea works because it’s the inverse of the 4% rule. Retirement Number = Monthly Expense x 300

Yay! Now you know how to calculate your retirement number. :) But it’s important to realize this number only points you in the general direction of your investment target. It may be even way off from how much you actually need to quit your job. But at least it gives you a starting point on your journey to retirement.

Why is the Retirement Number important?

By having a rough estimate of your retirement number you can gauge how much longer you still need to save for retirement. There are plenty of retirement calculators on the internet that you can Google. Most of them require you to input some probable assumptions and then they give you a result. But the 3 main factors that determine when you will retire are…

  • Your current retirement savings.
  • Your rate of savings per year.
  • Your expected rate of return on your investments (after inflation.)

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Oct 252014
 

14-10-opportunity-regina

I’ve been very fortunate with my past real estate investments. My Vancouver condo, and farmland near Yorkton, SK have altogether made me over $75,000 in pre-tax capital gains, at least on paper. ;) Not too shabby considering how 5 years ago I still had student loan debt and a negative net worth. :P

Researching a New Investment Idea

Recently I was brainstorming ideas for my next investment. Stocks are pretty volatile these days due to lower commodity prices like for oil, wheat, coal, and base metals. :( Residential properties also seem kind of flaky at this time because we don’t know whether or not the trusted Fed will tighten its monetary policy next year or open the gates to even more quantitative easing. :?  So it’s hard to find under valued assets these days.

However, I was recently browsing the MLS database on realtor.ca, which of course is accessible to the general public. And I came across several listing on the outskirts of Regina, Saskatchewan that caught my attention. These listings are for undeveloped plots of land, near the Regina International Airport (Code: YQR.) The size of each lot for sale varies from 2,000 ft2 (185 m2) to 10,000 ft(929 m2) or more, so they’re large enough to build an apartment or restaurant on. Here’s an example of one of those properties I might be interested to buy.

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Oct 222014
 

14-10-criticism

14-10-jack-ma-at-nyse I recently read an article about two individuals who started with nothing but eventually achieved success because they kept a positive attitude despite receiving a lot of criticism.

Overcoming Criticism

One day Jack Ma invited 24 of his friends to his house to discuss an online business idea that he had. After a 2 hour pitch 23 out of 24 people in the room told him to scrap the idea. They told Jack he didn’t know anything about the internet or how to raise any start-up money. However Jack managed to quickly grow his e-commerce business to become one of the largest in the world, and is even competing with Google, and Amazon. Earlier this year Alibaba became a publicly traded company on the New York Stock Exchange. Alibaba is currently valued at roughly $230 billion. Its founder and executive chairman, Jack, is now worth about $19 billion. This categorically makes him the wealthiest person in China. :D

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Oct 192014
 

Overreaction leads to market turmoil

Over the last several weeks investors saw a 10% correction in the Canadian stock market, and a 9% correction in the U.S. Someone with a $100,000 portfolio invested in index funds could have just lost $10,000. Ouch. :| Is this market sell off justified or is it simply an overreaction to some recent bad economic news? First, let’s review what those news are.

  • The Canadian dollar has dropped to a 5 year low
  • Germany’s economy is weaker than expected
  • The rest of Europe is still in a mess of unemployment and stagnation
  • Last week the Athens Stock Exchange in Greece tumbled more than 6% in one trading day.
  • ISIS is causing havoc in the Middle East
  • Ebola fears

I currently own shares in the Bank of Nova Scotia (BNS.) It’s one of the largest companies in the country and has been around for over 180 years. Over the last month the price of this stock fell 8%. Instead of asking where the stock will go from here, we should instead be asking does all the recent bad news justify an 8% drop in value for one of the largest banks in Canada? My answer is absolutely not. :P It’s important to remember that when we buy a stock we are literally owning a part of that company. This means we, as stakeholders in Scotiabank, are still entitled to split the $6.5 billion profit that the company makes every year, regardless of how the price of BNS shares performs in the short term.

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A lower loonie will likely spur economic growth and will not hurt Scotiabank’s profitability. Europe’s stalled economy is nothing new and Canadian banks don’t lend that much to Europeans anyway. The media has succeeded in sensationalizing the threat of Ebola in the U.S. Yes it’s a terrible disease, and there’s an outbreak in Africa. But Ebola will not hinder businesses in the U.S. and Canada from continuing to rake in profits. Literally more Americans have been married to Kim Kardashian than have died from Ebola – both a terrible fate. :(

For the intrinsic value of Scotiabank to actually fall by 8% substantial circumstances would need to be met, such as major accounting fraud or a 10% national unemployment rate, that would legitimately jeopardize the company’s ability to make money. The recent news is relatively trivial so an 8% correction of BNS shares seems like an overreaction. Imagine selling our stocks now only to see the markets rebound next month and regain all its losses. :|

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