Mar 042019

Slowing Economy and Rising Insolvencies

It was a pretty good month for stocks. The Dow Jones actually gained 11% during the first 2 months of 2019, its best 2 months in a decade. 🙂

But not everything is looking positive. Bond yields have been falling since December, suggesting slower growth. And the number of Canadians who filed for insolvency rose dramatically last year due to higher interest rates and mounting household debt. 🙁 The Bank of Canada governor Stephen Poloz has stopped hiking rates since October of last year to give debtors some breathing space. But it may already be too late. According to the Office of the Superintendent of Bankruptcy, 125,266 Canadians became legally insolvent in 2018, the second highest number since 2011. The Canadian Association of Insolvency and Restructuring Professionals (CAIRP), which represents 90% of Canada’s licensed insolvency trustees, said Canadian bankruptcies are set to spike in 2019. It appears that some people weren’t aware that there is always a lag between interest rate changes and the impact on household finances.

Overall February was a pretty good month for myself, with an above average net worth increase. This was mostly due to the strength in the financial markets. 🙂

Liquid’s Financial Update

*Side Incomes: = $3,200

  • Part time job =$1200
  • Freelance = $500
  • Dividends =$1000
  • Interest = $500

*Discretionary Spending: = $2,300

  • Food = $300
  • Miscellaneous = $600
  • Interest expense = $1400

*Net Worth: (ΔMoM)

  • Assets: = $1,331,900 total (+10,600)
  • Cash = $11,200 (-600)
  • Canadian stocks = $170,600 (+4400)
  • U.S. stocks = $120,600 (+3700)
  • U.K. stocks = $20,800 (+200)
  • Retirement = $127,800 (+2500)
  • Mortgage Funds = $34,700 (+100)
  • P2P Lending = $34,200 (+300)
  • Home = $367,000 (2019 assessed land value)
  • Farms = $445,000
  • Debts: = $411,900 total (-5600)
  • Mortgage = $189,100 (-400)
  • Farm Loans = $179,100 (-500)
  • Margin Loans = $43,700 (-4700)

*Total Net Worth = $920,000 (+$16,200 / +1.8%)
All numbers are in $CDN at 0.75/USD

The higher cost of debt has personally increased my monthly interest payments. 🙁 However, it has also increased my interest income from certain investments. Hurray for interest rate hedging. 🙂 For example, below is a part of an email I received last week from one of the private mortgage funds I’m invested in.

As interest rates increase and loan losses remain historically low our top-up dividend was growing close to 1%. We are expecting the rate of return to shareholders for the year ending June 30th 2019 to be higher than last year.” – Portfolio Manager of Antrim MIC

I made a lump sum payment towards my margin account to pay down some of my margin loan. I would like to get my total debt balance to below $400,000 by the summer. This is to prepare for future rate hikes that could be coming later this year.


Random Useless Fact:

It looks like someone used a black marker to draw glasses on the left kid’s face.

Feb 212019

Hundreds of millions gone missing affecting 115,000 clients

The country’s most widely used crytocurrency trading platform, QuadrigaCX, recently filed for creditor protection as it had lost access to nearly $200 million in Bitcoin and other cryptocurrencies. Altogether including Canadian cash, the company owes $250 million in assets to its 115,000 customers. Jeebus! 😮

According to statements from his family last month, Quadriga’s 30 year old CEO, Gerry Cotton allegedly died suddenly in December due to complications of Crohn’s disease while traveling in India. Cotten’s wife, Jennifer Robertson, claims her husband was the only person with access to the company’s cold wallets. Cold wallets are similar to savings accounts, used for storing and accumulating currency. On the other hand hot wallets are like checking accounts, used for frequent transactions. People who hold cryptocurrencies often have both. Hot wallets are connected to the internet and are used to facilitate transactions. Quadriga has some of its clients money in hot wallets for liquidity purposes, like when someone wants to withdraw funds. But it keeps most of the assets offline in cold storage, to avoid hacking.

This is roughly how QuadrigaCX's wallets operate.

Cotten basically ran the exchange on his encrypted laptop. He was the sole person responsible for transactions between the company’s hot and cold wallets. And apparently only he knew the passwords and recovery keys to access the cold wallets.

Court documents revealed the company had been recently facing liquidity problems. The website went offline at the end of January and clients can no longer log in to their accounts. Currently the only content on the site is a letter from the company.

Unfortunately any attempts at trying to access Cotten’s laptop to retrieve the keys to the wallets haven’t been successful. But in the latest twist of this unusual story, last week Ernst and Young (EY), the monitor of the QuadrigaCX case, stated that an additional sum of Bitcoin had disappeared from the company. This is because QuadrigaCX “inadvertently” transferred $468,675 worth of Bitcoin to cold wallets controlled by CEO Gerald Cotten, who is supposed to be dead.

Continue reading »

Feb 062019

Markets make a big comeback in January

December 2018 was a terrible time to be long in the stock market. If it weren’t for the brief rally on the last week of the month, the S&P 500 and Dow Jones would have had their worst December since the Great Depression. But suddenly the bulls took over in the following month.

All in all, 2018 was the worst for stocks in 10 years.

Panicked selling at the end of December would have caused someone to miss out on the amazing gains in the first month of this year. It just goes to show that investors should make decisions based on long term planning, and not on emotions.

I didn’t make any big financial moves in January. I deposited $10,000 from my savings into my retirement account but haven’t bought anything with that money yet.

Liquid’s Financial Update

*Side Incomes: = $3,400

  • Part time job =$600
  • Freelance = $500
  • Dividends =$1000
  • Interest = $700

*Discretionary Spending: = $2,000

  • Food = $300
  • Miscellaneous = $900
  • Interest expense = $1400

*Net Worth: (ΔMoM)

  • Assets: = $1,321,300 total (+110,000)
  • Cash = $11,800 (-8600)
  • Canadian stocks = $166,200 (+10400)
  • U.S. stocks = $116,900 (+4200)
  • U.K. stocks = $20,600 (+1200)
  • Retirement = $125,300 (+10400)
  • Mortgage Funds = $34,600 (+100)
  • P2P Lending = $33,900 (+300)
  • Home = $367,000 (+92,000) (New 2019 assessed land value)
  • Farms = $445,000
  • Debts: = $417,500 total (-1300)
  • Mortgage = $189,500 (-400)
  • Farm Loans = $179,600 (-400)
  • Margin Loans = $48,400 (-500)

*Total Net Worth = $903,800 (+$111,300 / +14.0%)
All numbers are in $CDN at 0.74/USD

Real Estate Value Adjustment 

In my previous net worth update I received some feedback in the comments about how other people value their homes. I bought my apartment 10 years ago. My old method of purchase price + annual inflation doesn’t accurately depict the market value of my apartment anymore. So I’ve decided to use the government assessed land value of my property, which gets updated in January every year. Most recently for 2019 my home’s land value is $367,000 according to BC assessment. So that’s what I’ll do every year from now on. 🙂

After updating my property’s value to better reflect current market conditions, I’m quite pleased to find out that my net worth is now $903K. I’m looking forward to reaching 7 figures soon. 😀

Continue reading »

Jan 242019

Putting Household Debt into Perspective


Canadian households currently owe more than $2 trillion. Our average debt to income ratio increased to 170%, making us number 1 among the G7 countries. 🙂

But do we actually have too much debt? Well perhaps not. Comparing Canada to the G7 group conveniently omits other highly developed countries. Australia’s national broadcaster claims its country has a household debt to income ratio of 200%. And reports of Netherlands, Denmark, and other Nordic countries are even higher than that! So in reality Canada is far from being the most indebted country in the world.

The cost of borrowing also affects the degree to which people will go into debt. For example, in the U.S. a typical mortgage today would cost about 4.5%. But in Canada you can get a mortgage for only 3.0%.  If the debt is cheaper to service then people will be naturally inclined to borrow more. 🙂

There’s a whole slew of other economic, legal, and political variables that make it nearly impossible to accurately compare household debt from one country to another. These kinds of comparisons would never be published as a scientific study because you have to correct for way too many variabilities. But they make for intriguing headlines nonetheless. 🙂

Continue reading »

Jan 072019


Changes in the Financial Markets in 2018

  • Currencies:
  • Canadian dollar weaken from 0.80 to 0.73 USD.
    (Less purchasing power and more expensive imports, such as food from the U.S.)
  • U.S. dollar index up to 96 from 92.
    (Non Americans pay a higher premium to buy U.S. investments.)
  • Stock Markets:
  • Most markets around the world dropped in 2018, especially Emerging and Asian markets.
  • Canadian S&P/TSX stock index fell about 12%
  • U.S. stock market fell about 6%
  • Canadian Aggregate bond index ETF (ZAG) total return = 1.8%

It wasn’t a great way to end the year but on the whole I’m pretty happy with my situation. The last quarter has been the worst for my net worth performance so far. But the good news is I’ve still gained $96K overall in 2018 thanks to a great first half of the year. 🙂 Below is my net worth update for December.

Liquid’s Financial Update

*Side Incomes: = $3,400

  • Part time job =$1100
  • Freelance = $800
  • Dividends =$1000
  • Interest = $600

*Discretionary Spending: = $2,000

  • Food = $300
  • Miscellaneous = $800
  • Interest expense = $1300

*Net Worth: (ΔMoM)

  • Assets: = $1,211,300 total (-14,300)
  • Cash = $20,400 (+600)
  • Canadian stocks = $155,800 (-6800)
  • U.S. stocks = $112,700 (-4700)
  • U.K. stocks = $19,400 (-1000)
  • Retirement = $114,900 (-2500)
  • Mortgage Funds = $34,500 (-200)
  • P2P Lending = $33,600 (+300)
  • Home = $275,000
  • Farms = $445,000
  • Debts: = $418,800 total (-1400)
  • Mortgage = $189,900 (-400)
  • Farm Loans = $180,000 (-400)
  • Margin Loans = $48,900 (-600)

*Total Net Worth = $792,500 (-$12,900 / -1.6%)
All numbers are in $CDN at 0.74/USD

At the end of 2018 my net worth has grown to $792,500. This is a $95,900 increase from the previous year’s end when I had $696,600. It’s not a smooth progression, but I’m grateful to be going in the right direction overall. 🙂

2018 was a bit of a strange year. I lost my job, stocks entered into a bear market, and interest rates climbed 3 times. This series of events has never happened to me before so it’s been fun trying to navigate the new economic landscape.

In terms of what I want to do for 2019, I will be changing my financial strategy a bit. Here are some themes I plan to focus on.

  • Preparing for higher interest rates. Should the Bank of Canada continue to increase rates this year I will be drastically reducing my debt.
  • Buying more bonds. It wasn’t until the recent stock market correction that I truly realize how fixed income investments can keep volatility at bay. Investment grade bonds rated A and BBB currently pay over 4% coupon. It’s not a bad alternative to equities these days.
  • Reassess how I calculate the value of my primary residence. My initial method of using my purchase price + inflation isn’t keeping up with reality anymore. How do you guys value your real estate when calculating your net worth? Do you use the government assessed value, or get someone to come appraise the property?

Random Useless Fact: