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.

Continue reading »

Oct 032016
 

Not So Special 

Around this time last month I proclaimed that I had a million dollar in assets. At first I was really happy about my situation because I thought I was unique. 🙂 But as it turns out, a million dollars isn’t all that impressive in my neck of the woods.

I live in Metro Vancouver on the west coast of Canada. And according to Environics Analytics, the average net worth of Metro Vancouver households rose 7.1% last year in 2015 to reach $1,036,202. Yowzah! 😲

This means I’m only average. Le sigh. 😞 Lol. Actually, I’m even poorer than average because my household net worth is only about half as much as the average around here. I guess I’m not the special snowflake I thought I was, haha.

16-10-vancouver-lambo-white

Rising real estate values have pushed the average net worth of Metro Vancouver households up over $1 million, making it Canada’s first “city of millionaires,” according to a study. ~ CBC article.

According to the CMHC, single women have greatly contributed to the rising cost of homeownership in Canada. Thanks ladies. 😉 A report released last week by Swiss bank UBS said Vancouver is at greatest risk of a housing bubble in the world. But I don’t think that’s true. Property prices here are high, but still affordable for most people.

September was a pretty good month overall. There were no surprises. The market did fall into the red early on. But around the 3rd week of the month stocks began to rally again as investors grew more confident over the Federal Reserve’s sentiment to keep interest rates lower for longer. In the end, the markets finished the month pretty much flat.

I managed to lower my interest rate expense from $1300 per month, to $1200 per month by switching my margin account from TD to IB.

Liquid’s Financial Update

*Side Incomes:

  • Part-Time = $800
  • Freelance = $900
  • Dividends = $600
  • Interest = $0
*Discretionary Spending:
  • Fun = $400
  • Debt Interest = $1200

*Net Worth: (MoM)16-08-fiscal-update-liquid

  • Assets: = $1,012,400 total (+6,200)
  • Cash = $14,900 (+2800)
  • Stocks CDN =$122,400 (+1500)
  • Stocks US = $74,600 (+1700)
  • RRSP = $71,600 (+100)
  • Mortgage Funds = $26,300
  • Venture Capital = $6,600 (+100)
  • Home = $263,000
  • Farms = $433,000
  • Debts: = $474,900 total (-1,100)
  • Mortgage = $186,900 (-400)
  • Farm Loans = $193,400 (-500)
  • Margin Loan CDN = $28,300
  • Margin Loan US = $25,700 (+100)
  • TD Line of Credit = $13,700  (-200)
  • CIBC Line of Credit = $9,500
  • HELOC = $17,400 (-100)

*Total Net Worth = $537,500 (+$7,300 / +1.38%)
All numbers above are in $CDN. Conversion rate used: 1.00 CAD = 0.76 USD

Looking ahead, October is when I receive my rental income from my tenant which is worth about $4,500. So I’m looking forward to deposit that and maybe buy some new investments with the money. 🙂

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Random Useless Fact:

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Sep 052016
 

New Addition to my Asset Column

After blogging about my exciting new investment in a startup company, I’ve decided to categorize this equity holding as a new asset class in my net worth updates. 🙂 High net worth investors are continuing to move their investments into uncorrelated assets such as private companies and I plan to grow my investments using a similar strategy. There is no way to eliminate market volatility entirely, but it’s possible to minimize its effect on my portfolio. 😉

Liquid’s Financial Update

*Side Incomes:

*Discretionary Spending:
  • Fun = $200
  • Debt Interest = $1300

*Net Worth: (MoM)16-08-fiscal-update-liquid

  • Assets: = $1,006,200 total (+6,800)
  • Cash = $12,100 (-3000)
  • Stocks CDN =$120,900 (+1400)
  • Stocks US = $72,900 (+1600)
  • RRSP = $71,500 (-2700)
  • Mortgage Funds = $26,300 (+3000)
  • Venture Capital = $6,500 (NEW!)
  • Home = $263,000
  • Farms = $433,000
  • Debts: = $476,000 total (-1,400)
  • Mortgage = $187,300 (-500)
  • Farm Loans = $193,900 (-500)
  • Margin Loan CDN = $28,300
  • Margin Loan US = $25,600 (+200)
  • TD Line of Credit = $13,900  (-600)
  • CIBC Line of Credit = $9,500
  • HELOC = $17,500

*Total Net Worth = $530,200 (+$8,200 / +1.57%)
All numbers above are in $CDN. Conversion rate used: 1.00 CAD = 0.76 USD

Say hello to my new asset: Venture Capital. 🙂 I think calling it VC is more accurate than private equity. As mentioned in my post from last week, I now have over $1 million in assets! Let’s break down some of the numbers.

  1. Cash holdings decreased because I used some savings to purchase my startup investment.
  2. Both Canadian and U.S. stock portfolios grew.
  3. I purchased $3K of new mortgage funds in my RRSP. I transferred the $3K value from my “RRSP” category into “Mortgage Funds” instead.
  4. No updates to home and farmland values.

Overall August was a pretty good month. For September I plan to invest in some renewable energy. I found an Ontario based company that suits my investor profile, so I’ll explain what my plans are for that in a future post. 😉

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Random Useless Fact:

Smartphone cameras use LEDs for flash.

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Aug 042016
 

Bull Market Continues

July was another fantastic month for stocks! Earnings from technology companies held up to expectations which drove up the Nasdaq composite by 6%. The other major US indexes and even the Canadian stock market increased a bit as well, although it’s hard to understand why since other than the tech sector, most companies had stagnant profits. 😕 Nevertheless, the increase to my investment portfolio is much appreciated as my gross assets are now worth almost $1 million! 😀

Instead of investing in new stocks in July I decided to pay down some of my higher interest debt. This is because I don’t see any good investment opportunities right now. I paid down my TD Line of Credit balance by $5,000. My Line of Credit charges a 4.95% interest rate. This means I receive a guaranteed return on my $5,000, which saves me about $20 a month moving forward. 😀 The dilemma of making new investments vs paying down debt all comes down to interest rates, growth opportunities, and the investor’s confidence. 😉

Making Money on Weed

Also in July, one of the more risky stocks that I reviewed and bought last year, Canopy Growth Corp (CGC), made its transition from the smaller Venture exchange to the larger Toronto Stock Exchange. This is a pretty big deal since it signals that people’s view of cannabis is shifting. CGC shares surged after becoming the first marijuana producer in North America to graduate to a major exchange. Investors who already own CGC don’t need to do anything. Today Canopy Growth Corp is trading at roughly $4 per share. It’s very uplifting to see my speculative buy of 300 CGC shares climb more than 50% already! 😀 As the federal government makes plan to legalize pot for all Canadians in the near future, I have a feeling CGC might reach $5 per share by summer of 2017. But keep in mind that I’m kind of biased because I already have skin in the game. 😉

Liquid’s Financial Update

*Side Incomes:

  • Part-Time = $1200
  • Freelance = $1100
  • Dividends = $700
  • Interest = $300
*Discretionary Spending:
  • Fun = $200
  • Debt Interest = $1300

*Net Worth: (MoM)16-08-fiscal-update-liquid

  • Assets: = $999,400 total (+5,900)
  • Cash = $15,100 (-1600)
  • Stocks CDN =$119,500 (+2900)
  • Stocks US = $71,300 (+2500)
  • RRSP = $74,200 (+1900)
  • Mortgage Funds = $23,300 (+200)
  • Home = $263,000
  • Farms = $433,000
  • Debts: = $477,400 total (-6,500)
  • Mortgage = $187,800 (-500)
  • Farm Loans = $194,400 (-500)
  • Margin Loan CDN = $28,300
  • Margin Loan US = $25,400 (+300)
  • TD Line of Credit = $14,500  (-5000)
  • CIBC Line of Credit = $9,500 (-500)
  • HELOC = $17,500 (-300)

*Total Net Worth = $522,000 (+$12,400 / +2.43%)
All numbers above are in $CDN. Conversion rate used: 1.00 CAD = 0.77 USD

Hopefully by the end of August I will reach 1 million dollars in assets that have financial value. Also, due to the consequences of Britain leaving the E.U., the British Pound has dropped compared to the Canadian dollar. And it fell again today as the Bank of England slashed interest rates to a record low of 0.25% this morning in an attempt to boost its economy. Since I don’t have a lot of UK or European stocks yet I think later this year will be a good time for me to accumulate some more foreign investments across the pond. 🙂 We’ll see how it goes. I’m currently saving up money for a more immediate investment opportunity related to private businesses, which I’ll write about later this month.

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Random Useless Fact:

According to the Pew Research Center, nearly half (49%) of Americans say they have tried marijuana at least once.

16-07-change-subject-high

Jul 042016
 

 New Milestone 

It has been a surprisingly eventful month in the markets. Volatility was high during the last week of June but in the end North American stock markets ended relatively flat. The Dow Jones was up slightly, but the Nasdaq fell. The TSX Comp in Canada dropped by about 1%. However my mining stocks performed really well so they lifted up the rest of my portfolio and I managed to make a 2.65% positive return overall according to my brokerage statement. 🙂 This has pushed my net worth to over $500K for the first time ever!

16-06-june-return-td-bank-monthly

Liquid’s Financial Update

*Side Incomes:

  • Part-Time = $1200
  • Freelance = $1500
  • Dividends = $600
  • Interest = $200
*Discretionary Spending:
  • Fun = $400
  • Debt Interest = $1300

*Net Worth: (MoM)16-05-networthiq_chart-may-2016-freedom35

  • Assets: = $993,500 total (+8,800)
  • Cash = $16,700 (+5200)
  • Stocks CDN =$116,600 (+2500)
  • Stocks US = $68,800 (-700)
  • RRSP = $72,300 (+1800)
  • Mortgage Funds = $23,100
  • Home = $263,000
  • Farms = $433,000
  • Debts: = $483,900 total (-2,500)
  • Mortgage = $188,300 (-400)
  • Farm Loans = $194,900 (-500)
  • Margin Loan CDN = $28,300
  • Margin Loan US = $25,100 (-400)
  • TD Line of Credit = $19,500  (-500)
  • CIBC Line of Credit = $10,000 (-500)
  • HELOC = $17,800 (-200)

*Total Net Worth = $509,600 (+$11,300 / +2.27%)
All numbers above are in $CDN. Conversion rate used: 1.00 CAD = 0.78 USD

A big help in June was the rise of commodity prices. The price of silver increased over 20%. My Silver Wheaton shares gradually went up from $18 to $30 per share over the course of the month. This change alone added about $2,000 of value to my net worth. Next month’s goal is to increase my gross assets to $1 million. 🙂

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Random Useless Fact:

16-06-how-british-people-shower