Nov 102016
 

What Canadians Need to Know About America’s Next President

People from all around the world were anxious going into the 2016 U.S. presidential election. Sometimes it felt like the two frontrunners were throwing more shade at each other than discussing real issues that actually matter.

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Some pundits warned that if Donald Trump becomes the next president, there will be hell toupee. 😄 In the end, Trump won and will become the 45th U.S. president. And since he is replacing Barack Obama, I guess you can say that orange is the new black. 😀

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But before anyone freaks out, I don’t think Donald Trump will ruin the economy like some critics say he will. It’s important to put things into perspective. So here are some things to consider for Canadians about our finances and investments in the short to medium term. 🙂

Donald Trump on Canada/U.S. Trade

We know that Donald is willing to be protectionist in order to create more jobs for Americans. He also wants to renegotiate NAFTA. But this shouldn’t have any large impact on trade between our 2 countries. Scott Sinclair, a senior researcher with the Canadian Centre for Policy Alternatives says that “most of Canada’s free trade with the United States is locked in through World Trade Organization (WTO) rules, and doesn’t apply to NAFTA. Furthermore, anti-trade policies will also hurt the U.S. economy. Just compare the living standards of insular versus free-trade countries around the world. Since Donald will be judged, at least in part, by the performance of the economy, I don’t expect any drastic changes to Canada/US trade agreements. I also think programs like NEXUS aren’t going anywhere. Cross border shopping has way more benefits than drawbacks for the U.S.

Donald’s anti free-trade position seems to be more about an anti-Mexico sentiment, so I don’t think he’s out to purposefully tarnish the relationship between Americans and Canucks. But if he does impose new tariffs on goods moving across our border, then the impact to Canadians will depend on where we live. About 50% of trade in British Columbia is now done with countries other than the U.S. It has been a deliberate effort of the provincial government over the past 12 years to divest away from Canada’s largest trading partner. However, 80% of Ontario’s trade is with the U.S. so people in Ontario will be hit harder. Alberta’s trade is nearly all dependent on the U.S. The province has diversified its economy over time, but it’s still heavily dependent on oil and gas today. Donald wants to ramp up fossil fuel production in the U.S. which would likely keep energy prices lower for longer. Trade is only a part of the much larger economy. But it would be prudent for Albertans to prepare for an extended recession just in case. 🙁

Currencies and Interest Rates

Our loonie will likely stay lower for longer if the U.S. doesn’t import as much Canadian goods anymore. The value of a country’s currency depends on how productive its people are. Less trade with the U.S. means slower economic growth for Canada. This is also why the Mexican Peso dropped 10% after the election. But a lower Canadian dollar may actually help us gain back some manufacturing jobs, and make it more profitable for exporters to sell their goods. This boost in tourism and exports could make up some losses from any negative anti-trade effects. The FED in the U.S. may also take longer to increase its country’s interest rates.

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Mar 012016
 

Last week I visited Cuba. I went with friends and family and we were all Havana great time. Unfortunately the hotel we stayed at, like most places around the area, doesn’t have Wi-Fi so I did not use the internet for a whole week. Last week’s blog posts were scheduled in advance.

I had a great time staying in Varadero and visiting Havana. I saw many old vintage style cars and hot rods. During my vacation I also learned a bit about the country’s economy.

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As one of the last communist countries in the world, Cuba is dominated by state-run enterprises and Marxist-Leninist ideologies. Most of the means of production are owned and operated by the Communist Party of Cuba. Naturally most Cubans who work are employed by the state.

Cuba’s economy uses 2 currencies; the CUP peso is worth about US $0.06, and the convertible CUC peso is pegged to the US dollar at a conversion rate of 1 to 1. The CUP is used by the country’s residences, and the CUC is only used by tourists and foreign visitors like myself.

A big part of Cuba’s economy is exporting sugar, tobacco, fish, fruits, coffee, potatoes, rum, and minerals such as nickel. In 2013 its nickel reserves were estimated at over 7% of the world’s total. Sherritt International, a Canadian company that I’m invested in, operates a large mining facility on the east side of Cuba.

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The other large and growing industry in Cuba is tourism. Over 2.5 million tourists visit Cuba every year, predominantly from Ontario/Quebec Canada and Europe, generating more than US $2 billion of economic activity. Cuba’s own population is only about 11.2 million.

The average income in Cuba per person is about US $30 per month. Outside of tourist hot spots a Cuban denizen can expect to live comfortably on a monthly salary of just US $100 a month. 😀 Local Cubans don’t need a high income to survive because housing and transportation costs are relatively low and they all receive free education, health care, and food subsidies.

Although communism has its advantages it ultimately doesn’t work well in the long run. When a market isn’t allowed to be competitive it will fall behind other countries in terms of technology, infrastructure, and productivity. For example, most Cuban household still don’t have access to internet in 2016. Another problem with a planned economy is that it thwarts economic mobility. Income inequality is often cited as a major problem in North America. But at least children who are born into poverty in the U.S. still have a better chance to climb the social economic ladder than poor children in Cuba.

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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. 🙂 Side hustles are important during tough economic times because if I lose my full time job at least I’ll have a financial cushion to fall back on. One of the more popular forms of making extra income is through online surveys. They don’t take too much time and you even get free products to review sometimes.

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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Mar 242014
 

In ancient Rome, the Denarius currency started out as a 4.5 gram coin made of almost pure silver. But over time the amount of silver content in the coin was reduced to just 2%. The Denarius had become almost worthless thanks to inflation and had to be replaced by a new currency, the Argenteus.

In the 17th century the colonial currency suffered the same fate. The famous English economist Adam Smith criticized colonial currency in his work, The Wealth of Nations. The inflationary nature of the currency, he wrote, was a “violent injustice” to the creditor; “a scheme of fraudulent debtors to cheat their creditors.” A creditor is someone who lends money to someone else. In 1775, the colonial pounds were replaced by a Continental currency, which of course also failed.

In 1794 the first American dollar was minted 🙂 These were made from almost pure silver. But they are no longer produced today. And starting in 1965 American quarters were minted with a combination of copper and nickel, which replaced the original silver content.

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Jan 072014
 

Last year I wrote a post about how to invest in foreign currencies and how I personally bought a lot of U.S. dollars and Chinese Yuan. Luckily those decisions are already paying off 🙂 $USD gained against $CAD in 2013, and the Yuan is now trading higher than when I bought it. Don’t worry if you didn’t pull the trigger last year because today I will tell you about another investment opportunity in the currency markets. It is the Zimbabwean dollar 😀

14-01-cheapmoneyzwdA long time reader recently asked me about it, so I thought I’d share my views. Initially the Zimbabwean dollar was worth more than the U.S. dollar at 1 ZWD = 1.47 USD in 1980. But the $ZWD quickly began to lose its value. Inflation rose to 32% annually by 1998. Hyperinflation was out of control by 2008 at 11,200,000% annually, Ay Caramba! 😯 Finally in 2009 the Zimbabwean dollar was suspended indefinitely. Today, the country officially uses $USD, €EUR, £GBP, and the South African rand as acceptable currencies.

I bought some $100 trillion Zimbabwe banknotes on eBay in 2012 for only $4 CDN each! But since Zimbabwe banknotes are no longer being printed, finding them is becoming difficult as the currency becomes more rare which ironically is sending its value back up due to shortage. I bought more in June 2013 at approximately $5 each, including shipping. A few months later in October Anne from Unique Gifter mentioned these $100 trillion notes were selling for $6 each. Finally I checked once more earlier this year, 2014, and the cheapest ones I found were selling at $9 each. Goodness gracious. Look at that trend! I’m making a higher return (percentage wise) from these Zimbabwean dollars than from the stock market! I predict these same notes will be worth $25 each in a couple more years 😀 Financial independence, here I come! Below is a picture of some $ZWD banknotes I purchased last year.

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