Liquid Independence

Liquid is the main editor of the Freedom 35 Blog.

Oct 012014
 

The American economy is starting to pick up. U.S. stocks have held steady in September, real estate prices are expected to be 7% higher than last year, and second quarter GDP shows expansion :) However the Canadian stock market dropped 4.3%, the price of oil fell $3 per barrel, and the value of the Loonie sank to just 89.4 cents U.S. And yesterday StatsCan revealed that our July GDP was flat :(. A large part of our economy relies on consumer spending. But Canadians simply don’t shop the same way Americans do :?.

14-09-shopping-us-vs-canada economy

Thankfully my finances held up okay in September. I did lose about $5,600 of value in my stock portfolio. :| It’s hard to make money when the entire S&P/TSX Composite Index takes a big hit. However I still managed to end the month with a net worth increase of +$1,400. This is largely due to my rental income which came at the end of the month. I deposited this payment of $5,177 into my bank account. This represents the second and last payment of the year. Phew, if it wasn’t for this payment I’m afraid my net worth would have dropped by several thousand dollars in September. :? But instead I eked out a small gain!

What a coinkydink. ;) Just as I experience a month of stock market decline my farmland investment pulls through for me. :D I decided to use the extra rental money to pay down some of my debt.

*Side Income:

  • Part-Time Work = $500
  • Dividends = $400
*Discretionary Spending:
  • Eating Out = $100
  • Others = $200

*Net Worth: (MoM)chart_14sept net worth graph economy slow down

  • Assets: = $836,000 total (-3,900)
  • Cash = $3400 (+1200)
  • Stocks CDN =$88,700 (-5300)
  • Stocks US = $52,900 (-300)
  • RRSP = $49,000 (+500)
  • MICs = $15,000 (same)
  • Home = $254,000 (same)
  • Farms = $373,000 (same)
  • Debts: = $525,700 total (-5,300)
  • Mortgage = $196,900 (-400)
  • Farm Loans = $204,800 (-400)
  • Margin Loan CDN = $27,500 (-2200)
  • Margin Loan US = $24,900 (+700)
  • TD Line of Credit = $31,000  (-1000)
  • CIBC Line of Credit = $11,600 (-400)
  • HELOC = $18,500 (-100)
  • RRSP Loans = $10,500 (-1,500)

*Total Net Worth = $310,300 (+0.45%)
All numbers above are in $CDN. Conversion rate used: 1.00 USD = 1.12 CAD

Apparently the severe weather in the prairies this year has not deterred farm buyers :) Alberta received a lot of snow. Saskatchewan and Manitoba experienced pretty bad flooding. Yet according to a Re/Max report land prices are still going up.

Land in short supply left “well-financed” Alberta farmers ready to make a deal on short notice, Re/Max said, noting tiled land, for example, sold for as much as $10,000 per acre in southern Alberta, up 20% over the previous year.
~agcanada.com 

In Saskatchewan, prices increased from between $1,500 and $2,000 an acre in 2013 to between $1,800 and $2,200 in 2014. Manitoba saw its price range go from between $1,350 and $1,600 to $1,500 and $2,000.
~bnn.ca

My Saskatchewan farms are currently worth about $1,200 an acre on average. If we assume that report is accurate then even a conservative $100/acre increase would give me a solid $31,000 capital appreciation for this year alone :D

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Sep 282014
 

14-09-Roger-dubuis-excalibur-quatuorWhen most people think about a luxury watch maybe a very snazzy $50,000 Rolex or Omega comes to mind. There are also watches covered in gold and diamond that sell for $200,000 or more. But for an even higher level of refined taste in wearable fashion there are names such as Richard Mille, Greubel Forsey, and Roger Dubuis. These brands have watches that can cost over a million dollars U.S. each.

Watch making isn’t just about sitting around all day making faces :D It’s also serious business ;)

The watch maker Roger Dubuis is located in Geneva, Switzerland (of quartz it is :D ) And it’s behind the Excalibur Quatuor, (right) which costs $1,100,000 8-O

14-09-Roger-dubuis-excalibur-quatuor-break-downThis luxury watch represents the pinnacle of modern science and innovation. The Roger Dubuis Excalibur Quatuor is the product of more than 5 years of research, development, and testing.

Expensive watches made by other watchmakers usually have only one sprung balance, but the Excalibur Quatuor has four that all work in tandem for unprecedented calibration accuracy :)

The Excalibur Quatuor watch is made from nearly 600 distinct parts (left), including 5 differentials, and it has a 40-hour power reserve function that is patented by the Roger Dubuis. All of this analogue technology is housed in a silicon body that is four times stronger than steel, yet weighs much less.

The entire process of putting the watch together from start to finish takes about 2,400 hours. Since each watch sells for $1.1 million, this means the company is getting paid $458 per hour of work, not too shabby :)

Moral of the story: Watch makers make a very decent living :) And they get to make their own hours :D

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Random Useless Fact:

From the edge of space Vancouver and Seattle doesn’t look very far apart. And Bellingham looks like it’s just an extension of Vancouver (click image to enlarge)

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Sep 252014
 

With the recent pull back in the stock market I thought it would be a good time to add a couple of new stocks to my portfolio :) So earlier today I bought 13 shares of Time Warner Inc, (TWX) at $75.69/share, as well as 26 shares of Twenty-First Century Fox (FOXA) at $34.06/share. Both are U.S. companies so I purchased them inside my RRSP using Canadian currency.

14-09-time-warner-fox-stock-purchase

The part I enjoy most about investing is learning how businesses work. By looking through the financial statements and analyst’s reports on large media conglomerates I’ve learned how television programs get funded, how much actors and writers are paid, how advertising works, and many other interesting titbits.

Why Invest in Time Warner Inc

I wanted to invest more money into media and entertainment because this is a relatively stable sector with predictable earnings growth. After some thorough research I have decided to go with Time Warner Inc. Check out the impressive earnings per share (EPS) growth on this bad boy.

14-09-time-warner-eps-growth

Those are some pretty good numbers eh :) Time Warner is most well known by consumers to be the parent company of Warner Bros. Entertainment. But to investors Time Warner represents a collection of highly valued multimedia businesses and brands, not the least of which is HBO :D

14-09-time-warner-hbo

…Which includes HBO on Demand, HBO Entertainment, Cinemax, HBO International (Asia, Europe, Latin America,) etc. About 30% of all households in the U.S. with television service receive an HBO channel. HBO broadcasts in over 150 countries, covering about 114 million subscribers worldwide, wow 8-O

Time Warner also owns Turner Broadcasting System which includes Turner Sports, NASCAR Races, websites like NCAA.com, NBA.com, and other television channels like Cartoon Network, and Adult Swim. It also owns the CNN News Group, which includes CNN.com, CNN Money, and a bunch of other media outlets.

TWX’s total market capitalization is $64 billion, which is about twice as big as BCE (Bell Canada.) Below are some brands, tv shows, and logos that you may already know about, but perhaps didn’t know they belong to Time Warner, or was premiered through one of Time Warner’s distribution channels.

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Sep 222014
 

Have you ever wondered which university degrees provide the best opportunities for financial success? Well a study by the wealth consultancy WealthInsight may have the answer. A ranking was produced by gathering together the academic histories of millionaires around the world. The top field of study is Engineering.

  • 1. Engineering
  • 2. MBA
  • 3. Economics
  • 4. Law
  • 5. (Bachelor’s) Business Administration (BBA)
  • 6. Commerce
  • 7. Accounting
  • 8. Computer Science
  • 9. Finance
  • 10. Politics

Note: This list contains both graduate and undergraduate degrees.

I happen to work with some engineers and I can say most of them are in fact doing quite well financially. Petroleum engineers can easily make six-figures a year straight out of university if they’re willing to work in the oil fields. Software, materials, and industrial engineers, all make above average incomes too.

14-08-engineermodels

The personal finance blogging community also shows categorical evidence that engineers are indeed a financially savvy bunch ;) Tim from Canadian Dream is in his 30s and reveals he makes six-figures a year working as an engineer for a crown corporation. 34 year old Frugal Trader from Million Dollar Journey recently reached a household net worth of a million dollars. Both him and his wife are full time engineers. And Phil, one of the most knowledgeable commentators who read my blog, met his wife in their engineering class at university. He retired in his 40s after reaching millionaire status and is now doing lots of volunteering work.

Of course at the end of the day it takes more than just a degree to become a millionaire. Having certain soft skills and personality traits are important as well. This means we should be efficient, personable, seize opportunities when they arise, and know when to take risks (both professionally and financially.) The point of a degree, above anything else, is about showing an ability and willingness to learn.

Here are what random denizens of the internet had to say about the wealth study.

“Most millionaires I know drive around in old Ford trucks and have jeans with holes in them; not sitting in a park wearing a tux with a top hat.”

“The only real way to become truly wealthy is to engage in something with substantial risk, though often you can substitute some of that risk by exploiting people. And even so, your chances are pretty good that you will lose your pants instead.”

“One of my best friends growing up got kicked out of high school during his junior year. He worked as a plumber’s helper and now owns three plumbing companies and retired eight years ago at age 45.”

Although there are many ways to become a millionaire and retire early, earning a degree in engineering, MBA, or economics seems to be a popular way to do it! However I have tried to go down that path and failed miserably, so it’s not the right strategy for everyone.

 

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Random Useless Fact:

Dilemma is a difficult choice between just 2 options. Trilemma, quadrilemma, and so forth exist for more options.

Sep 192014
 
E-Commerce  Giant

Don’t feel bad if you don’t know what Alibaba Group Holding Ltd does. An Ipsos poll conducted for Thomson Reuters found that 88% of Americans had never heard of the e-commerce company. Based out of China, Alibaba is like a combination of Ebay + Amazon, and is responsible for 80% of all online sales in the world’s second largest economy. Starting today Alibaba’s shares can be purchased on the New York Stock Exchange. This is the largest initial public offering in U.S. history, estimated to raise close to $22 billion for the company. There is a lot of interest in this IPO. Between 35 and 40 financial institutions placed orders for $1 billion or more shares each. Alibaba and its subsidiaries have huge brand recognition in Asia.

14-09-alibaba-brands

With a starting price of $68 per share, the company’s market cap starts at $167.6 billion, making it more valuable than iconic American brands like Walt Disney, Boeing, Amazon, and Ebay. For working or retired Canadians this is great news because the Canadian Pension Plan (CPP) invested $160 million when Alibaba was still private back in 2011 and 2012. Analysts predict that investment has at least tripled in return. Whether the CPPIB will hold the stock after IPO is another question but we shall see. The stock symbol is BABA if anyone is interested :) Expect the trading volume to be huge today.

No to Independence

Yesterday Scotland voted on a referendum whether or not they want to separate from the U.K. 45% said yes, but the majority, 55%, voted for no. I guess Mel Gibson died for nothing. Jokes and politics aside I’ll explain the economic significance of this event. The central government in the U.K. currently gives equalization payments to Scotland which works out to be $2200 per individual. If Scotland had broken off from the U.K. they would lose this income along with other benefits such as financial insurance and economic stability. Banks in Scotland currently hold 12 times the country’s own GDP. If their banking system were to ever fail, Scotland alone would not be able to withstand such financial turmoil. The argument for separation is that Scotland would no longer have to give part of their oil revenue back to the central government in England. The North Sea oil off the coast of Scotland is like the oil sands in Canada. It generates a lot of money, and can easily replace the $2200 given to each person and maybe even more. But the question is what would Scotland do once that oil reserve runs out, which is only a matter of time? The uncertainty of future consequences outweighs the immediate thrill of economic freedom. Similar to Quebec’s referendum in the 1990s, it’s exciting to talk about the idea of independence but at the end of the day cooler heads prevail.

Tuition Inflation

Experts say that if current trends continue, the outlook is gloomy for would-be students in the U.S. as it will be much more expensive to attend college, and more of those that do attend face substantial student loan debts. The current average cost of tuition, room and board at a private non-profit college is $40,917, which is 1.7% higher from the previous year, according to The College Board. If the cost increases at 2% per year, then in 25 years from now incoming college freshmen might expect to spend as much as $68K in today’s dollars for their first year, and about $300K on an entire 4 year program. So heads up to would be parents. Be prepared. Start saving today :)

14-09-student-loan starting out with nothing 5 figure debt, generation forever indebted

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