Jul 312015
 

Oil Producers Languish as Airlines Fly High ✈️

Oil executives sometimes use crude language, especially to describe their disappointment of low oil prices. With the WTI price at around $48 a barrel it’s very difficult for North American oil producers to make a profit. ⛽ The 50% decline in crude price over the last year forced Husky Energy (HSE) to trim capital spending by $400 million earlier this year. Husky’s 2nd quarter profit in 2015 fell to just $120 million, compared to $628 million from the same quarter last year. The entire oil and gas industry is in quite the shemozzle right now.

But not everyone is complaining. The cheap cost of oil has actually provided a lift for airlines. 😀 Companies like Westjet (WJA) use a lot of fuel. In fact about 33% of Westjet’s operating cost is aviation fuel for its planes. In the 2nd quarter Westjet announced its profit was 19% higher than the same quarter in 2014.

Over the long run airlines usually underperform oil companies. However in the last 5 years Westjet shares have increased by about 85%, while Husky shares have been pretty much flat. Does this mean we should dump oil stocks and buy airlines? I think the best plan right now is to continue investing in growing companies and wait it out. That’s pretty much what I’ve done this past month. My biggest winner in July was Amazon.com. $AMZN shares rose 22% over the past 31 days due to higher than expected earnings, and my net worth increased $1,000 via this one company alone. :)

*Side Income:

  • Part-Time Work = $1100
  • Dividends = $500
  • Interest = $200
*Discretionary Spending:
  • Fun = $100
  • Debt Interest = $1500

*Net Worth: (MoM)chart_15july

  • Assets: = $903,600 total (+6200)
  • Cash = $3,500 (+1000)
  • Stocks CDN =$92,500 (-1100)
  • Stocks US = $70,800 (+5700)
  • RRSP = $51,800 (+600)
  • MICs = $15,000
  • Home = $259,000
  • Farms = $411,000
  • Debts: = $507,100 total (-1000)
  • Mortgage = $193,000 (-500)
  • Farm Loans = $200,200 (-500)
  • Margin Loan CDN = $29,900 (+300)
  • Margin Loan US = $26,700 (+900)
  • TD Line of Credit = $25,500  (-500)
  • CIBC Line of Credit = $10,000
  • HELOC = $18,200
  • RRSP Loans = $3,600 (-700)

*Total Net Worth = $395,600 (+$7,200 / +1.85%)
All numbers above are in $CDN. Conversion rate used: 1.00 CAD = 0.77 USD

Asset Breakdown:

Cash: $3,500 – This is the total I have in my checking and savings accounts. I don’t have an emergency fund because I think it will hinder my financial progress.
Canadian Stocks: $92,500 – Includes all the stocks I have in my TFSA, and margin Canadian account. I started buying blue-chip, large cap dividend paying stocks in 2009 and have consistently been adding to my portfolio. The Canadian stock market has had a great run since.
U.S. Stocks: $70,800 – Includes all my stocks in my U.S. margin account.
RRSP: $51,800 – Stocks and bonds in my retirement account.
MICs: $15,000 – Mortgage investment corporation units I hold. MICs are fixed income securities that pay better than bonds, but are relatively less risky than stocks.
Home: $259,000 – The condo I purchased in 2009 and currently live in. It’s value has increased every year thanks to the vibrant Vancouver real estate market.
Farmland: $411,000 – One of my best purchases. Double digit annual return every year since I bought my farmland.

The best cure for low oil prices, is low oil prices. Energy companies have already pulled back capital investments in further oil production due to the diminishing profitability of selling oil right now. This will ultimately lead to a shortage of supply as demand catches up some time in the future. And when that happens crude price will go back up and oil companies like Husky will once again experience high earnings, and Westjet will once again feel the pinch of high fuel costs.

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Random Useless Fact

Last year a programmer spend 2 years worth of his salary to buy 99 iPhone 6s. He arranged them in the shape of a heart and proposed to his girlfriend in the middle of it.

15-07-iphone-proposal-she-said-no

She said no.

Jul 042015
 

Greece is holding a referendum tomorrow, Sunday, on whether or not they want to accept the bailout terms from their creditors. I’m not great at economic forecasts but I feel like the majority will vote yes for better or for worse.

[Edit] The result is out. Greeks voted No, lol. This is why I’m not an economist. [/Edit]

In other news it hasn’t been a very good month for global markets. Both the U.K. FTSE 100 and the French CAC 40 indices are down about 4% for the month of June. But China experienced the most dramatic loss. The Shanghai Stock Exchange Composite Index fell by 25%. Sufferin succotash! 😲 A whole bunch of millionaires in China just lost 1/4 of their wealth in the span of 30 days.

Here in Canada our stock market index dropped 3.5%, not as bad as other countries, but still enough to wipe out any gains it’s accumulated so far in 2015. As a result my net worth is down for the first time in years, lol. This means my portfolio is finally large enough that my change in wealth is determined more by the fluctuations in the market than by my savings rate.

*Side Income:

  • Part-Time Work = $600
  • Dividends = $500
  • Interest = $0
*Discretionary Spending:
  • Fun = $100
  • Debt Interest = $1500

*Net Worth: (MoM)15-06-networthiq_chart

  • Assets: = $897,400 total (-5000)
  • Cash = $2,500 (-2000)
  • Stocks CDN =$93,600 (-1300)
  • Stocks US = $65,100 (-200)
  • RRSP = $51,200 (-1500)
  • MICs = $15,000
  • Home = $259,000
  • Farms = $411,000
  • Debts: = $508,100 total (-4300)
  • Mortgage = $193,500 (-400)
  • Farm Loans = $200,700 (-500)
  • Margin Loan CDN = $29,600 (-1900)
  • Margin Loan US = $25,800 (+100)
  • TD Line of Credit = $26,000  (-1000)
  • CIBC Line of Credit = $10,000
  • HELOC = $18,200
  • RRSP Loans = $4,300 (-600)

*Total Net Worth = $389,300 (-$700 / -0.2%)
All numbers above are in $CDN. Conversion rate used: 1.00 CAD = 0.80 USD

This is why it’s important to understand our financial decisions. Warren Buffett said “if you understood a business perfectly and the future of the business, you need very little in the way of a margin of safety.”

For example, when I look at my assets listed above I know what purpose each line item plays in my financial plan to reach early retirement. I know why I have $2,500 in cash right now, not more, not less. When I look at any of my investments I know why it’s in my portfolio. As another famous investor Peter Lynch once said, “know what you own, and know why you own it.” 😀

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Jun 032015
 

Sell in May and go away. It’s typical for stock markets to fall in May and that’s exactly what happened this year in Canada. Since stocks make up a quarter of my net worth, a 2% decline to the TSX Composite translates into thousands of dollars of paper loss for my investment portfolio. If this was a normal month my net worth would drop. :( But luckily I was paid $4,500 of rent in May. The next time my tenant pays me again will be in October. I also received a small tax return. :) When assets are worth less, it’s nice to have some extra sources of income to make up the gap. :) I used the extra money this month to invest in chocolate.

*Side Income:

  • Part-Time Work = $600
  • Dividends = $400
  • Interest = $200
*Discretionary Spending:
  • Fun = $100
  • Debt Interest = $1500

*Net Worth: (MoM)

  • Assets: = $902,400 total (+3900)
  • Cash = $4,500 (+100)
  • Stocks CDN =$94,900 (-1600)
  • Stocks US = $65,300 (+5900)
  • RRSP = $52,700 (-500)
  • MICs = $15,000
  • Home = $259,000
  • Farms = $411,000
  • Debts: = $512,400 total (-200)
  • Mortgage = $193,900 (-400)
  • Farm Loans = $201,200 (-400)
  • Margin Loan CDN = $31,500 (+2300)
  • Margin Loan US = $25,700 (+500)
  • TD Line of Credit = $27,000  (-1600)
  • CIBC Line of Credit = $10,000
  • HELOC = $18,200
  • RRSP Loans = $4,900 (-600)

*Total Net Worth = $390,000 (+$4,100 / +1.1%)
All numbers above are in $CDN. Conversion rate used: 1.00 CAD = 0.80 USD

I’m planning to shake up my asset column in June by adding a sizeable stake in a renewable energy company. At the beginning of this year I mentioned that one of my goals is to use my money to help make this world more environmentally friendly by investing in green technologies and renewable energy companies. I’ll be blogging more about this topic shortly. So far I can see there is huge potential in this space to make a 10% return or higher. I’m currently in talks with a broker about investing five figures into a clean energy fund for myself. Over the next month or so I’ll let you guys know how things are going and how I plan to earn large returns in this relatively new sector without too much risk. I’m already looking forward to my next net worth update! :)

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Random Useless Fact

15-06-showing-pictures-boys-girls

 

May 042015
 

April has turned out to be one of the best months of the year so far. 😀

-Stock markets climbed roughly 2% in Canada and the U.S. (27% annualized return)
-The bond market is paying higher interest rates. Great for new fixed income investors. :)
-Real estate market continues to stand strong. What bubble? 😛
-Canadian dollar strengthens against other currencies such as the USD & Euro. This means more purchasing power for fellow Canucks.
-FCC released its annual farmland report which states Saskatchewan farmland value increased 18.7% in 2014, more than any other province!

All this growth in the markets simply equates to a $40K+ increase to my existing financial assets. Holy pumpernickel! There has never been a better time to be a diversified investor in the North American economy. 😀

I will be updating my farmland values in this month’s net worth update. As usual I’ll use a 50/50 blend of the CPI inflation rate of the previous year (1.9%) and Farm Credit Canada’s report to revalue my farmland. Thus, the average increase is 10.3% or about $38,000 more!

* Side Income:

  • Part-Time Work = $600
  • Dividends = $600
  • Selling Options = $0
*Discretionary Spending:
  • Fun = $300
  • Debt Interest = $1500

*Net Worth: (MoM)

  • Assets: = $898,500 total (+43,100)
  • Cash = $4,400 (+900)
  • Stocks CDN =$96,500 (+3000)
  • Stocks US = $59,400 (+700)
  • RRSP = $53,200 (+500)
  • MICs = $15,000
  • Home = $259,000
  • Farms = $411,000 (+38000)
  • Debts: = $512,600 total (-2,500)
  • Mortgage = $194,300 (-300)
  • Farm Loans = $201,600 (-500)
  • Margin Loan CDN = $29,200
  • Margin Loan US = $25,200 (-700)
  • TD Line of Credit = $28,600  (-400)
  • CIBC Line of Credit = $10,000
  • HELOC = $18,200
  • RRSP Loans = $5,500 (-600)

*Total Net Worth = $385,900 (+$45,600 / +13.4%)
All numbers above are in $CDN. Conversion rate used: 1.00 CAD = 0.82 USD

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Apr 042015
 

The overall stock market in March dropped a little bit. It appears growth has stalled in Canada due to continuing low oil prices. But thanks to my side incomes I ended the month with a slightly more positive net worth. :) The only new stock I purchased was 100 shares of National Bank, which I blogged about last month. I must make savings a priority during tough economic times because if I lose my job at least I’ll have a financial cushion to fall back on.

Emerging countries have been growing their economies faster than Canada or the U.S. in recent times. One way to profit from this trend is to invest directly in the currencies of those countries. The value of the Chinese currency, for example, should make people in North America pay attention. But instead, too many of us just yuan. 😀

Back in late 2013 I wrote an article about how I had invested in China’s currency, the RMB. I mentioned I would keep everyone posted. So today I’ll give you guys an update. :) Back then I purchased ¥5,000 for $900 CAD. Today, my ¥5,000 is worth $1015 CAD if I convert it back into Canadian currency. It appears my instincts were correct. Wahoo! 😀 I made 12.7% return in 15 months. It’s not a lot of money. But every little bit helps to reach early retirement.

*March Side Income:

  • Part-Time Work = $600
  • Dividends = $500
  • Selling Options = $200
*Discretionary Spending:
  • Fun = $300
  • Debt Interest = $1500

*Net Worth: (MoM)15-04-networth-update-beyond-borders

  • Assets: = $855,400 total (+800)
  • Cash = $3,500 (-500)
  • Stocks CDN =$93,500 (+2600)
  • Stocks US = $58,700 (-400)
  • RRSP = $52,700 (-900)
  • MICs = $15,000
  • Home = $259,000
  • Farms = $373,000
  • Debts: = $515,100 total (+500)
  • Mortgage = $194,600 (-400)
  • Farm Loans = $202,100 (-500)
  • Margin Loan CDN = $29,200 (+2400)
  • Margin Loan US = $25,900 (+100)
  • TD Line of Credit = $29,000  (-500)
  • CIBC Line of Credit = $10,000
  • HELOC = $18,200
  • RRSP Loans = $6,100 (-600)

*Total Net Worth = $340,300 (+$300 / +0.1%)
All numbers above are in $CDN. Conversion rate used: 1.00 CAD = 0.79 USD

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