Aug 172017

Holding some cash for emergencies or opportunities is a sound idea. But having too much cash sitting around instead of putting the money into investments can be financially unwise.

Like most things in life, there is a cost component to cash – which is that cash usually produces lower returns than other asset classes such as stocks or bonds. One advantage of holding cash is to deflect volatility in a portfolio. But with a longer time horizon investors can manage volatility by using fixed income vehicles instead of cash. Long term corporate bonds from large, stable companies such as Enbridge pay 3.5% or higher annual returns, easily beating the interest earned in a savings account. ūüôā

According to investment management company, BlackRock, people who have allocated their money towards cash or cash equivalent assets actually lost purchasing power in the past. The value of their savings slowly whittled away at 0.8% per year on average between 1926 and 2014. This gives a whole new meaning to cash poor.

Holding cash for one or two years isn’t a big deal because the loss is very small. But over time it can build up to significant loss of buying power. The longer the investment time horizon, the less cash investors should consider holding. For a multi-decade horizon and high return objectives, which is the strategy I’m personally using, having excess cash savings would be a liability because it produces negative real returns. Sometimes the risk is not being aggressive enough with our investment plan and losing out on easy gains.

According to a survey by State Street’s Center for Applied Research, globally retail investors are holding 40% of their assets in cash. Uh oh. If someone has 60% of their portfolio in bonds, and the rest in cash then they could be making zero progress with their portfolio after inflation and tax.

If I’m sure I won’t touch my money until I retire, then I should take advantage of my long time horizon. This is why I don’t keep more than 1% of my net worth in cash, unless I’ve earmarked savings for a large, specific purchase. ūüôā


Random Useless Fact

May 192016

Triple Digit Returns on Currency Investment

There are lots of ways¬†to make money in the world. It’s up to us investors to find them. ūüėČ A couple of years ago I blogged about my investment in Zimbabwean dollars. I purchased¬†some¬†uncirculated¬†$100 trillion Zimbabwean banknotes¬†on the internet and paid¬†CAD $5¬†for each one. ūüôā


Back then I even made a prediction¬†that these notes would be worth $25 each in 2016. Boy was I wrong, lol. It’s now been about 3 years since I purchased my¬†investment. Here are some recent¬†ones that actually sold on eBay within the last day!


Holy mackerel! ūüėÄ Each of my Zimbabwean banknotes is¬†worth over CAD $60 today. That’s at least¬†1,200% return on investment in just 3 short years. Financial independence – here I come! ūüėÄ If the people who¬†read my previous blog post purchased 15 or 20¬†of these notes, then they could sell their investments today and be thousandaires! ūüôā

Due to runaway hyperinflation what you can buy for a Zimbabwean dollar these days is absolute non-cents. Around the year 2000 the government enacted a policy to redistribute land and resources. Foreign capital stopped flowing into the country. As a result the Reserve Bank of Zimbabwe printed huge amounts of money to pay for labor and services. The¬†value of the Zimbabwean dollar dropped due to an oversupply of currency and prices began to rise. By 2008 prices of food and other goods were literally doubling every 24 hours! At its highest point the annual inflation rate was 230,000,000%. Savers were wiped out. And businesses didn’t know how much to pay their employees or charge customers because there was no price stability, including for labor. All this turmoil caused the country’s GDP to fall 18% in¬†2008. By 2011, about¬†72% of the country’s population lived below the poverty line.¬†If the¬†first president of Zimbabwe, President Banana, was still alive today, he would probably be very upset by all damage his successors have done to the¬†nation’s economy.¬†(yes, that’s his real name)

The Zimbabwe currency was abandoned by most people in 2009. Since then the country has stopped printing the currency, and consumers have been using the U.S. dollar and the South African Rand to conduct financial transactions. Last year the government decommissioned the Zimbabwean dollar completely and anyone who still had some could exchange it for American dollars at the official exchange rate set by the government: $1 USD = $35,000,000,000,000,000 ZWD, lol.

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May 022016

My net worth increased $64,000 so far in 2016 

Goodness gracious me! ūüėÄ That’s even more than my annual gross salary. Maybe I should quit my full time job already.¬†Haha.

But here’s the caveat. My net worth is measured in dollars. So I’m¬†only¬†becoming richer relative to the local currency. But as we shall discuss¬†below, currency depreciation can be a real PITA. ūüėõ Policy makers from around the world are covertly initiating inflation to see which country can print the most money to improve their economy’s competitiveness. But by doing so, the devastating¬†knock-on affects will financially destroy millions of lives in the years¬†to come.

Higher Living Expenses in 2016

If you’ve purchased car tires before you are probably familiar with inflationary pressures. Inflation has been fairly¬†high in 2016 so far. The government won’t admit it for political reasons, but¬†regular folks like you and I have most certainly felt the effects of rising expenses in¬†our wallets.¬†Over the last year nearly all types of spending¬†in Canada¬†have become¬†more expensive.


Crude oil was trading at US $35 per barrel when the year started, but now it’s just over¬†$45, a 29% increase. Coincidentally¬†the price of silver bullion has also increased by 29% over the same 4 month period. The price of oil affects the price of many consumers goods, not the least of which is food, due to transportation costs. And since we use silver in photography, x-rays, solar panels, mirrors, cars, medicine, smart phones, and other consumer electronics, we can expect higher costs in these related fields moving forward.

Then there’s the largest monthly expense for most people – housing. The most recent S&P/Case Shiller index shows that U.S. home prices in February grew 5.3% year over year. I don’t even have to mention how crazy hot the Canadian real estate market has been lately. ūüėõ CREA forecasts the national average price this year will probably¬†increase by 8%.


So house it going on the west coast?¬†you might ask.¬†Well let’s just say February was a record-shattering month for home sales in British Columbia, with a 45%¬†increase in volume compared to a year ago.

How Investors Hedge Against Inflation

A few years ago I wrote a post detailing¬†how prices of different goods¬†increased 100% to 200%¬†between 1990 and 2010. But if we were to store¬†our net worth 20 years ago in¬†real tangible assets such as oil, land, fixed properties, silver, and profitable businesses, instead of simply holding on to money or “savings,”¬†then we could keep all¬†of our purchasing power.

The reality is that life doesn’t cost more over time. In the 1990s if we needed fuel, we could buy 2 or 3 barrels of oil with 1 ounce of silver. Today in 2016, we can still pretty much do the same thing. On the other hand, buying oil with dollars would cost us 150% more today than in 1990. In other words, the costs of time, labor, skills, commodities, goods and services, which are all things that have intrinsic¬†value, tend to stay fairly constant across multiple generations for the most part.¬†But it’s the currency that is usually the clear outlier and it tends to lose value over any extended period of time.

One way we can hedge against inflation is through investing.¬†Here are some¬†choices that I’ve made in the past that have made 2016 one of my best years so far!

  • Buying precious metals stocks:¬†I own metal mining stocks such as¬†Goldcorp (G) and Silver Wheaton (SLW) which have outperformed the general stock market recently. But I’m in no way a good stock picker. ūüėõ The Market Vectors Gold Miners ETF (GDX) on the NYSE¬†is an index fund that tracks the performance of global gold mining firms that are publicly listed in the U.S. This ETF has climbed 88% year to date!¬†So anyone who holds¬†a basket of gold/silver stocks or owns this GDX fund should be dancing on cloud nine right about now. ūüôā
  • Buying physical commodities: I occasionally¬†purchase silver and gold directly from the Royal Canadian Mint and bullion exchanges. For example, about half a year ago I bought a 100 oz silver bar¬†which has appreciated in value since then. ūüôā I also practice earning¬†silver wages, which basically means¬†I make a portion of my money in silver¬†to diversify my income. I’m not¬†suggesting everyone should go out and do this too. I’m just saying from my personal experience this has been profitable¬†for me.
  • Buying farmland: My¬†down payment was less than 15% so this¬†amplifies my return on investment by¬†many folds.¬†Canadian farmland prices have grown on average by 10% last year, which boosted my¬†net worth by more than $30,000 as I’ve explained last month.
  • Buying real estate: I purchased a condo here in Vancouver when many people warned of a real estate bubble. Maybe they’re right, maybe they’re wrong. All I know is Vancouver condos have increased in price by 10% over the last year, adding over $25,000 to the market price of my property.

As we can see all these investments represent¬†real, tangible assets that have economic value, and therefore do not suffer at the hands of inflation. Everyone wants to know the secret to investing. But it’s really quite simple. All we have to do is look at historical patterns in the economy¬†and apply common sense. ūüôā Piece of cake, right?

Liquid’s Net Worth Update

My investment¬†income is really starting to grow now thanks to 7 years of compounding. I received $360 in interest payments in April between my Air Canada bonds and Antrim MIC. Plus I made $720 in dividend income from my stock portfolio. That’s nearly $1,100 of passive income that I made without any effort. ūüôā

*Side Incomes:

  • Part-Time =¬†$800
  • Freelance = $700
  • Dividends =¬†$700
  • Interest = $400
*Discretionary Spending:
  • Fun =¬†$300
  • Debt Interest = $1300

*Net Worth: (MoM)16-04-stock-fiscal-update-networth

  • Assets:¬†= $971,900 total¬†(+23,900)
  • Cash = $5,200¬†(+2700)
  • Stocks CDN =$113,900 (+3800)
  • Stocks US = $65,600 (-3800)
  • RRSP = $68,100 (-1000)
  • Mortgage Funds = $23,100 (+200)
  • Home = $263,000
  • Farms = $433,000 (+22,000)
  • Debts: =¬†$487,500 total¬†(-2,800)
  • Mortgage = $189,200 (-400)
  • Farm Loans = $195,900 (-500)
  • Margin Loan CDN = $28,300 (-100)
  • Margin Loan US = $24,500 (-1400)
  • TD Line of Credit = $20,600 ¬†(-400)
  • CIBC Line of Credit = $11,000
  • HELOC = $18,000

*Total Net Worth = $484,400 (+$26,700 / +5.83%)
All numbers above are in $CDN. Conversion rate used: 1.00 CAD = 0.79 USD

Stocks were pretty much flat in April. But my net worth increased by over $26,000 mostly due to the updated farmland value. The most recent FCC assessment report shows Saskatchewan farmland value rose 9.4% in 2015. The average inflation rate (CPI) in Canada in 2015 was about 1.4%. To be on the conservative side, I have adjusted the farmland value on my net worth statement by taking the average of these two figures, which is 5.4%, or an increase of about $22,000.

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Dec 102015

The Advantages of Inflation

Today I¬†want to¬†share one of my biggest secrets to success. I will explain how I generate¬†$5,000 of value a year in passive wealth creation using my mortgage and other loans. It’s automatic, hassle free, hidden from my friends and the government, and is completely legitimate. ūüôā

The Destroyer of Credit

Everyone¬†knows that inflation¬†drives up the cost¬†of living and lowers the value of money. Thanks to inflation you don’t even need to have¬†expired bread¬†for your dough to be worthless. ? But here’s what some people may not know about inflation.¬†Since money is so closely tied to debt, when our money loses value via¬†inflation, so does our debt. ūüėÄ


Think about it this way.¬†Let’s say we owe¬†the bank¬†$100. After a year, if we¬†haven‚Äôt touched the principal, then our $100 balance owed will have less¬†purchasing power, assuming a positive inflation rate. Since¬†$100 will be worth less in the future than today, our debt balance will become easier and easier to pay off as time goes on. ūüôā

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May 102015

Some folks believe earning a higher income is a valid excuse to submit to lifestyle inflation. But I don’t think lifestyle should necessarily be tied to active income because job security is a fickle pickle.¬†However¬†with a strong framework of growing passive income, a little lifestyle inflation is not only acceptable, but I would even recommend it because YOLO. ūüėÄ Due to the recent tailwinds of increasing investment gains and asset prices it appears I’m ahead of schedule by 1 year to reach financial freedom¬†by my 35th birthday. Since my ultimate goal is to live a balanced, resourceful, and meaningful life, I have decided to succumb to lifestyle inflation and increase my expenses.

Changes to my budget:

ItemOld Monthly BudgetNew Monthly Budget
Eating Out$25$50
Internet + Phone + Entertainment$75$100

Overall I’m now spending $100 per month more than I was back in 2010. This is not a major change to the way I spend money, but it allows me to enjoy the present a little bit more while not sacrificing too much of my financial security in retirement.¬†The way I conduct my budget is I set an expected target, such as my $150/month for groceries. The target is more of a guideline than a strict limitation. Sometimes I spend less, other times I spend more depending on what I buy and how often I eat out.

Here are my thoughts behind the 3 categories.

  • Grocery: Since food inflation has been higher than the average consumer price index over the years I’ve decided to increase my grocery bill to $150 per month. Some people might think $150 is not enough, but it all depends on where you shop. A few years ago I blogged about buying some staple foods from Safeway for about $17.¬†That’s enough produce to¬†last me for probably 1 or 2 days. Then I walked half a block down the street to another grocery store and purchased the same food for literally 1/3 of the cost. I’ve uploaded pictures with receipts for proof. The economics of this situation needs explaining
    Since it’s been 3 years since writing that article, I think the same basket of goods would probably cost about $20 at a Safeway or equivalent big box store today due to the ever increasing price of food. How much can the same $20 buy at one of the smaller independent stores I go to? Well I recently went to a small grocer to find out. 15-05-persia-food-groceryIt’s called Persia Foods located in North Vancouver¬†if anyone is curious. Below is¬†a picture of everything I bought. It actually came out to $21.07 but you get the idea. There is enough produce here to last me for an entire week. (click image to enlarge.) ¬†15-05-persia-foods-grocery-receiptI’ve also blogged before where I get cheap meat, other sources of protein, and grains. Last month I bought nearly¬†4¬†lbs of ribs in a West Vancouver supermarket for less than¬†$8, and it took me several days to eat through¬†it all. 15-05-lifestyle-inflation-food-ribs-osakaThe point is it’s¬†perfectly reasonable to eat well on¬†$35¬†per week for an individual adult, which works out to $150 per month. Of course if people are buying all their groceries from Safeway then they can expect to pay $300/month or more for essentially the same diet. But that’s their choice. ūüėõ
  • Eating Out: By increasing my restaurant budget to $50/month I can spend more time to¬†socialize with friends. ūüôā
  • Internet + Phone + Entertainment: A couple of things happened here over the last year. I finally upgraded to a smart phone earlier this year. No more flip phone for me lol. So¬†I upgraded my cellular package to include a data plan. I also subscribed to Netflix which is¬†an additional $9/month. So¬†I’m paying $25 more for telecom services now than before.

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