Jul 272017
 

A recent poll from Harvard University points out that 51% of young adults between 18 and 29 years of age do not support capitalism. 🙁 Only 42% said they support it. Of course the results of these kinds of surveys are not easy to interpret. Capitalism doesn’t have the same meaning for everyone. One explanation for the outcome could stem from the fact that not all millennials understand what capitalism is. They may be frustrated with crony capitalism or corporatism, which is rampant in the world today. But those are not the same as capitalism.

The idea of capitalism simply means a free market system where individuals have the rights to personal property and the enforcement of their contracts. 🙂 That’s it. Another survey that included people of all ages found that only respondents who are at least 50 years old supported capitalism for the most part. Older people understand that capitalism works well because government intervention was measurably less in North America before the 70s so there were less lobbyists and public bailouts. The ratio of government employees to the general population in the United States has grown under Obama and Bush.

It’s ironic that the cohort most against capitalism is generation Y. They of all people are most dependent on the advantages offered by the free market system. 🙂 Millennial don’t really care about government pensions or public health insurance all that much. But they will be become very upset if you take away private services like Facebook, Amazon.com, Netflix, or any of Google’s services (Google Search, Gmail, etc.)

Popular TV personality Jim Cramer once created the acronym FANG. It represents 4 of the most popular and best-performing technology companies on the stock market. FANG stands for Facebook (FB), Amazon (AMZN), Netflix (NFLX) and Google (GOOG) (GOOGL), which has now become Alphabet.

Last week I purchased 8 shares of Facebook at $164 each. 🙂 It’s a U.S. stock and doesn’t pay a dividend, so for tax purposes I bought it inside my TFSA at TD. Year to date all the FANG stocks have returned at least 25% to investors. Yay! I already had the other 3 stocks so by picking up FB I now have a full FANG portfolio. 😀 Amazon has grown to a market capitalization worth half a trillion dollars as of writing this post!

Millennials in general may say they don’t support capitalism. But they sure spend a lot of money, time, and attention helping some of the most capitalist entities in the world become even more profitable. As the saying goes; actions speak louder than words. And the trend is clear. For the sake of my financial goals I will continue to invest in large tech stocks and trust the free-market will provide growth over the long run. 😉

 

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Random Useless Fact:

Carrots were originally white or purple. Then a yellow carrot appeared through mutation and the familiar orange carrot we see today was bred from it.

 

 

Jun 222017
 

The Largest Name in Retail Continues to Grow

Amazon.com (AMZN) recently announced it’s taking over the trendy supermarket chain, Whole Foods. At the beginning of this year I wrote an article which included a prediction that this would happen. Maybe Amazon’s CEO Jeff Bezos got the idea from reading my blog. 🙂

Whole Foods sells healthy, organic products. Most items in the stores can be expensive, but  if you want to grab a quick and healthy lunch, you can buy half a pizza for $7 CAD, which isn’t bad. I remember my first time visiting Whole Foods. I didn’t really know what it was so I had no idea what’s in store. 😉 But after going in I quickly understood why the retailer attracts so many yuppies and hipsters like myself. Shopping there is an experience. 😀

This acquisition is a very good deal for both companies. Whole Foods Market Inc has been suffering from declining same-store sales year after year. Whole Foods stock (WFM) peaked in 2013 and has been falling every year since. 🙁 So it needs a larger company to help turn things around. Amazon has already been experimenting with grocery stores since last year with its Amazon Go project. The idea is consumers can walk into a store, buy the food they want, and leave without lining up or checking out. The in-store scanners do everything automatically so people can just walk out of the store and get charged the correct amount. It’s a really neat concept, but the service is only in the U.S. for now. By merging with a grocery chain, Amazon can expand its grocery business, and can also transform unused Whole Foods real estate into Amazon warehouses. 🙂

Whole Foods stock is up about 25% in the last 5 trading days and now sits at $43. Amazon stock is now at $1,002 per share. I like shopping with both retailers, and I look forward to see how they collaborate.

Disclaimer: I own 10 shares of AMZN, and no shares of WFM.

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Random Useless Fact:

 

Jul 182016
 

Advantage of Long Term Thinking

There’s an advantage in the business world for thinking long term. If a company only makes short term goals then it will be forced to compete with many other businesses in the same industry. It doesn’t take a lot of foresight or planning to run a company for 1 or 2 years, so that’s what a lot of other competitors will do. But if a company is willing to invest in a longer period of time, such as 5 to 10 years, then it will gain a competitive edge because there are fewer companies that set those kinds of lofty goals. 🙂

For example McDonald’s owns the real estate of its fast food restaurants. Leasing might be cheaper in the beginning, but owning property directly is more profitable in the long run.

New video games that take a long time to create, such as the Grand Theft Auto franchise or The Elder Scrolls series are typically released once every 5 years or so. Not many game studios spend 5 years developing a single product so these types of games will often have less competition in their genre, and receive more favorable critic and user reviews due to their quality than other franchises which have a much shorter development cycle, such as Call of Duty.

16-07-gta-long-term-screen

Netflix would have higher earnings if it focuses more on near term profit and not spend so much cash on creating new original content. But from a long term perspective its executives have decided that investing in additional content with more market penetration is better for shareholders in the long run, because there’s not a lot of other streaming services with that level of long term dedication to their brand. But Amazon.com is another company that thinks long term.

Continue reading »

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 = $396,500 (+$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.

Sep 152013
 

The results of the latest National Household Survey was published by Stat Can. The survey represents people’s income and household situation in 2010.

toonies-coins

The data shows that more than 95% of the 27.3 million Canadians aged 15 and over received some form of income in 2010 which totaled $1.1 trillion. The study also points out that over half of all investment income reported in the country was received by only the highest 10% of earners. This suggests that if we want to make a lot of money, we better maximize our investments 🙂

The top 10% of Canadians made $80,400 or more. To be in the top 5%, we needed at least $102,300. And the top 1% required $191,100, nearly seven times the national median income.

Private pensions were received by 59% of seniors and the median annual amount was $11,700. However, the younger generations of today will probably not have the same luxury. By the time Generation Y reaches retirement I expect private pension benefits to be $6,000 or less in today’s dollars 😕 And that’s if we’re lucky enough to have a pension. All the more reason to save and invest while we’re still young 😀 To learn more about income levels across Canada and the rest of the world, see my new income page.

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In other news, my blog was featured in this weekend’s Saturday weekend review on Canadian Budget Binder 😀 Thanks Mr. CBB and welcome all new readers.

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Lastly, I have an acquaintance who is in the business of buying and selling computer games. Right now he is looking to buy games from Amazon.com but since he’s Canadian he can’t buy them on that site. So he’s looking for someone in the US to partner with and is willing to pay $5 above the purchase price 🙂 I think this is a great opportunity for any US reader looking to make some easy side income. If you’re interest, tell me in the comments below and I’ll let my acquaintance know. Continue reading »