Mar 062017
 

Dow Jones trading over 21,000 points

It’s only the beginning of March and the stock market indexes are already up 6% to 9% year to date in the United States. The Dow closed over 21,000 points last Friday. Of course hitting new highs is nothing special for the stock markets. But who knows how long this momentum will last.  We have confirmation from the Federal Reserve that interest rates in the United States will increase next week by a small amount. I expect this will cool the financial markets. Afterall, since World War II, 77% of Fed tightening cycles had ended in recession.

It has been a fairly predictable month for myself. I’m slowly collecting passive income while paying down my debts.

Liquid’s Financial Update

*Side Incomes:

  • Part-Time = $800
  • Freelance = $700
  • Dividends = $800
  • Interest = $200
*Discretionary Spending:
  • Fun = $500
  • Debt Interest = $1200

*Net Worth: (MoM)16-12-networthiq_chart-nov

  • Assets: = $1,088,400 total (+5,200)
  • Cash = $1,500 (+400)
  • Canadian stocks = $138,200 (-1000)
  • U.S. stocks = $90,800 (+4900)
  • U.K. stocks = $19,300 (+700)
  • RRSP = $74,900 (-100)
  • Mortgage Funds = $30,600 (+200)
  • Peer-to-Peer Lending = $20,100 (+100)
  • SolarShare Bonds = $10,000
  • Home = $270,000
  • Farms = $433,000
  • Debts: = $494,400 total (-1,800)
  • Mortgage = $184,800 (-400)
  • Farm Loans = $190,900 (-500)
  • Margin Loans = $59,600 (+300)
  • TD Line of Credit = $15,400  (-600)
  • CIBC Line of Credit = $27,000 (-500)
  • HELOC = $16,700 (-100)

*December Total Net Worth = $594,000 (+$7,000 / +1.2%)
All numbers above are in $CDN. 

Lucky me. It was another positive month in general for the markets. I’m very close to $600,000 now. 🙂

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Random Useless Fact:

 Our brains tend to find creative ways to be entertained when we’re bored.

Feb 022017
 

How High Can the Dow Go?

The Dow rose from 7,000 to 20,000 points over the last 8 years. And that doesn’t even account for the dividend payments. By using financial leverage my portfolio managed to outperform the market every year since I started buying stocks in 2009. 🙂 Borrowing to invest is risky. But if I continue to maintain a diversified portfolio of real estate, stocks, and fixed income investments, then it is very likely that my assets will grow overall in value over time. So as long as I can borrow money cheaply I will continue use leverage. It’s all about expected market return vs the cost to borrow. In my previous post from last year I explained how rich people create wealth. Using other people’s money to enhance investment gains proves to be a very effective method. I currently have about $50,000 of available funds remaining before I risk getting a margin call. This gives me quite a large safety cushion. As long as I keep an eye on this number I should be able to withstand the market cycles.

Breaking the 20,000 barrier was a huge milestone for stock investors. But can the Dow Jones continue to climb even higher? The answer may be found in American football. 🙂 Believe it or not the outcome of the Super Bowl game this weekend could have an impact on the stock market’s performance for the remainder of 2017. This idea is known as the “Super Bowl Predictor.” The predictor states that if an original NFL team wins the Super Bowl, then the Dow index will increase over the next year. Otherwise, the stock market will fall. So far this indicator had been bang on every year since 2008, except for one time. So if we want the Dow to hit 20,000 again and continue to grow this year, we better hope the Atlanta Falcons win this weekend. 😀

Anyway, since equity valuations and price/earnings ratios appear to be worryingly high, I decided it’s time to be more cautious with my money. So as I see the growing risk of a bubble forming, I have turned my attention towards alternative investments that do not correlate with the stock market. That’s why today I present a new addition to my asset column.

It’s P2P lending! 😀 Hurray! This makes a total of 10 different asset types I own. And most of them produce a stream of passive income for me! 🙂

Liquid’s Financial Update

*Side Incomes:

  • Part-Time = $900
  • Freelance = $800
  • Dividends = $800
  • Interest = $600
*Discretionary Spending:
  • Fun = $200
  • Debt Interest = $1200

*Net Worth: (MoM)16-12-networthiq_chart-nov

  • Assets: = $1,083,200 total (+33,200)
  • Cash = $1,100 (-700)
  • Canadian stocks = $139,200 (+4100)
  • U.S. stocks = $85,900 (+2700)
  • U.K. stocks = $18,600
  • RRSP = $75,000 (-100)
  • Mortgage Funds = $30,400 (+200)
  • Peer-to-Peer Lending = $20,000 (new!)
  • SolarShare Bonds = $10,000
  • Home = $270,000 (+7000)
  • Farms = $433,000
  • Debts: = $496,200 total (+16,700)
  • Mortgage = $185,200 (-300)
  • Farm Loans = $191,400 (-400)
  • Margin Loans = $59,300 (+300)
  • TD Line of Credit = $16,000  (-700)
  • CIBC Line of Credit = $27,500 (+18,000)
  • HELOC = $16,800 (-200)

*December Total Net Worth = $587,000 (+$16,500 / +2.9%)
All numbers above are in $CDN. 

January has traditionally been a very positive month for my net worth, and this year is no different. This is thanks to the phenomenon called the new year’s bump. I used the average inflation rate of 1.6% to increase my home’s value and rounded the number to $270,000, which is $7,000 higher than the previous year. Stock markets held up well this January, despite a slight pull back over the last couple of trading days.

I will write more about my new venture into the world of peer-to-peer lending in a future post. But it’s basically a fixed income investment in the form of debt financing. Compared to stock market, P2P investments have a low correlation with stocks and are less volatile. However, this doesn’t mean they’re less risky. I invested $20,000 to start. $2,000 came from personal savings, while the remaining $18,000 was borrowed, which is why both my asset and debt have grown this month. I plan to slowly pay down the new debt while I wait patiently for my new asset to grow. This is the same basic strategy I used for all my leveraged investments in the past. 😉

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Random Useless Fact:

It can be quite difficult to tell if a tiger is pregnant, or just fat.

 

Jan 022017
 

The Second Longest Bull Market

Happy New Year! 🙂 I hope everyone had a great 2016. It’s somewhat surreal to see an economy that’s still struggling while the stock market has never been stronger. We are currently living in the 2nd longest bull market in American history, recently surpassing the 7 year streak that spanned 1949 to 1956.

2017 could be the year that we finally see a major market correction. But who knows? Maybe stocks will remain resilient and continue to climb for several more years! After all, the longest bull market ever lasted 13 years from 1987 to 2000.

Chart from http://money.cnn.com/

My goal of reaching freedom 35 means I need to be financially independent by 2022. That’s only 5 years from now! Can the markets continue to move higher until then? Well the 13 year bull market run from 1987 to 2000 shows that it’s indeed possible. 🙂 Like many other millennials, I began investing in 2009 by sheer luck, because that was the perfect time to get into the stock market. Maybe I can deleverage at the right time too, Haha. 😀

Future apoplectic haters will probably say, “Well of course he retired early. Any ninny with half a brain could have borrowed $500,000 to buy stocks and other financial assets between 2009 to 2022 and easily become a millionaire.”

And they would be correct. 🙂 But my question is why haven’t I heard of anyone else borrow $500,000 to invest right now? This is currently the best time of our generation to use leverage to potentially double or even triple our investment gains! Surely I can’t be the only one to see the advantage of borrowing money at 2% to buy and hold strong, reliable, blue-chip stocks like utilities and Canadian banks that have been paying 4% or higher dividends for decades, and are also expected to appreciate in value over the next 5 years. Call me crazy, but I want to get rich sooner rather than later, even if it means taking on a bit more risk. 😀

Anyway, December has been another amazing month for the markets. All stock indexes gained, including my new British equities purchased recently. It’s still very early to tell so I’ll continue to hold my U.K. index ETF, and see how it does over the next year or so.

Liquid’s Financial Update

*Side Incomes:

  • Part-Time = $700
  • Freelance = $900
  • Dividends = $700
  • Interest = $400
*Discretionary Spending:
  • Fun = $300
  • Debt Interest = $1200

*Net Worth: (MoM)16-12-networthiq_chart-nov

  • Assets: = $1,050,000 total (+12,200)
  • Cash = $1,800 (-17,700)
  • Canadian stocks = $135,100 (+5000)
  • U.S. stocks = $83,200 (+3000)
  • U.K. stocks = $18,600 (NEW!)
  • RRSP = $75,100 (-200)
  • Mortgage Funds = $30,200 (+3500)
  • SolarShare Bonds = $10,000
  • Home = $263,000
  • Farms = $433,000
  • Debts: = $479,500 total (-2,600)
  • Mortgage = $185,500 (-500)
  • Farm Loans = $191,800 (-600)
  • Margin Loans = $59,000 (-300)
  • TD Line of Credit = $16,700  (-800)
  • CIBC Line of Credit = $9,500
  • HELOC = $17,000 (-400)

*December Total Net Worth = $570,500 (+$14,800 / +2.7%)
All numbers above are in $CDN. 

Good golly! What a way to end the year. 🙂 Thanks primarily to stock and farmland appreciation, my net worth has increased on average by over $12,000 per month in 2016. That’s totally dope! I can hardly contain my excitement! 😀 It was a gradual and steady process, but I’ve managed to somehow accumulate $350,000 of financial assets over the last 7 years. I wonder what amazing new serendipity awaits for my finances in 2017. 🙂 I guess we shall see. Good luck to everyone in the new year!

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Random Useless Fact:

Stingrays do not use their eyes to hunt for food. Their eyes are above their bodies, but their mouth and nostrils are situated on their underbellies.

Dec 082016
 

Once again North American stocks continue to impress. My liquid net worth (net financial assets) climbed 2.5% over the course of November, nearly $8,000 of gain on its own. Many people including myself thought a Donald Trump win for the presidency would trigger a stock market correction. Although the Dow Jones fell 800 points (about 4%) in pre-market trading the morning after election day, it quickly recovered and went on to hit all time highs in subsequent days in mid November. And just yesterday, the Dow Jones, S&P and transports closed the day at record highs again, climbing more than 1%. What an amazing time to be an investor. 🙂 I feel euphoric! But this is also a time to be diligent because bull markets tend to last 6 to 8 years historically speaking, and we’ve been in this current bull market for 8 years now. Uh oh.

Stock valuations certainly appear to be stretched at this time. The fact that investor’s margin debt is near record highs also concerns me because over-leverage has lead to stock market drops and economic recessions in the past. Investing in the stock market is like toilet paper; sometimes you’re on a roll, but other times you can find yourself in a crappy situation like the crash of 2008. 😄 Nobody can know for sure when the market will peak again, but I decided to take a break from buying stocks in November and paid down some debt. I also contributed $4,000 to my retirement account (RRSP) to buy some Baytex Energy bonds. Overall it was a great month. I hope everyone else enjoyed it as well. 😀

Liquid’s Financial Update

*Side Incomes:

  • Part-Time = $700
  • Freelance = $800
  • Dividends = $500
  • Interest = $200
*Discretionary Spending:
  • Fun = $200
  • Debt Interest = $1200

*Net Worth: (MoM)16-12-networthiq_chart-nov

  • Assets: = $1,037,800 total (+8,300)
  • Cash = $19,500 (-4000)
  • Stocks CAD =$130,100 (+4200)
  • Stocks US = $80,200 (+3800)
  • RRSP = $75,300 (+4300)
  • Mortgage Funds = $26,700
  • SolarShare Bonds = $10,000
  • Home = $263,000
  • Farms = $433,000
  • Debts: = $482,100 total (-2,800)
  • Mortgage = $186,000 (-400)
  • Farm Loans = $192,400 (-500)
  • Margin Loans = $59,300 (-700)
  • TD Line of Credit = $17,500  (-1200)
  • CIBC Line of Credit = $9,500
  • HELOC = $17,400

*November Total Net Worth = $555,700 (+$11,100 / +2.04%)
All numbers above are in $CDN. Conversion rate used: 1.00 CAD = 0.75 USD

I was waiting on a cash refund from a financial institution before investing in any more stocks. The cash was finally returned earlier this week so my plan for December is to purchase 5 figures worth of stocks in Great Britain to take advantage of the low Pound Sterling currency. 🙂 This is exciting because it probably means I’ll be adding another line item to my asset column next month.

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Random Useless Fact:

16-12-bob-marley-money-quote

Nov 072016
 

The Advantage of Asymmetric Risk/Reward

An asymmetric trade is when we have limited downside risk, but a lot more upside return potential. 😀

For example, earlier this year Great Britain held a referendum to decide whether or not it should leave the European Union. There was a 50/50 chance it could go either way. However most investors, traders and political pundits were pretty confident that the UK would vote to remain in the EU. So before the vote on June 23rd, the British financial markets were fully priced for a “stay” result. But when the votes were counted it turned out that they were wrong. So people panicked. Shortly after the vote, the British Pound dropped 15%, and the UK stock market also fell.

The UK referendum represented an asymmetric trading opportunity because if the people had voted to remain in the EU, then nothing much would have happened to the markets. But if they voted to exit, then there would be a large shakeup, which is what actually happened. 🙂

Parallel Opportunity in the United States

The U.S. presidential election on Tuesday this week represents another asymmetric event for the markets. Mainstream news sites and people on Wall St. are signally a 90% or greater chance that Hillary Clinton will win, and Donald Trump will lose. However, based on my own research on alternative news sites it appears to be more 50/50, so I expect the results to be pretty close. 🙂

What this means is the financial markets have already priced in a Hillary win. So there are two outcomes to the election and how it will affect investors over the short term. Below are possible examples of what could happen in each scenario.

  1. Hillary becomes president. No major movement in the stock market. Stocks won’t climb dramatically because almost everyone expected her to win, so it’s already priced in.
  2. Donald becomes president. Many people caught off guard. Sharp negative reaction in the financial markets. Gold goes up US $50/oz. Dow Jones stock index falls by 500 points. $USD loses 5% against $CAD.

To take advantage of this situation, one could short the US dollar or the US stock market, and buy the Canadian dollar or precious metals.

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