Nov 042019
 

I hope everyone had a good weekend. Many people turned back their clocks 1 hour marking the end of this year’s daylight saving time. But time wasn’t the only thing that fell back. Economic growth in the U.S. pulled back to just 1.9% for the 3rd quarter of 2019, lower than the previous 2 quarters. Last month I wrote about anticipating this GDP number, and warned that if it continues to fall (which it did) then we may be close to a U.S recession. The Canadian economy is also in trouble, managing to eke out a 0.1% gain in the latest month.

Yet somehow the U.S. stock market reached an all time high at the end of October. Senior citizens must be thrilled to see their retirement funds performing so well. 😀

So economic output is slowing down, but investors have never been more optimistic – pushing stocks to record highs. How does this happen? It’s basically the result of the U.S. Central Bank’s monetary policy. In late October the Fed lowered interest rates again, trying to stimulate the overall economy. However, all it did was push investors to buy stocks over bonds because bonds now pay lower interest/returns. But a higher company stock price doesn’t improve business hiring, productivity, or employee salaries. The average American worker doesn’t see any direct benefit from the Fed’s monetary stimulus. Only Wall St. does.

The result is a diverging economic reality between two worlds; the working class that’s just one paycheck away from financial ruin, and the investing class who continues to see growing asset prices. Over the last 10 years, the S&P 500 gave investors about 13% annualized return. So the fact is if someone put $1,000 into a low cost index fund in October 2009, then today he would have $3,400 – assuming he reinvested the dividends. Wow. And all this required zero effort on the investor’s part. Amazing. 🙂

So the lesson here is simple. Focus on investing your savings, and be patient. Investing is like cooking a juicy steak; the less you touch it the better. Working hard at a job can only get you so far. But the real secret to financial success is to leverage the Central Bank’s policies, and invest in a diversified portfolio to build wealth the easy way. 🙂

Although October was a good month for stocks, I had a major expense (property tax payment for my farms) that stifled my savings. In the end, I was able to grow my wealth by $8,300 for the month. Not bad, but I didn’t reach the $1 million net worth milestone I was aiming for. Oh well. Better luck in November. 🙂

 

Liquid’s Financial Update

*Side Incomes: = $5,400

  • Part time job =$600
  • Freelance = $400
  • Dividends =$1200
  • Interest = $500
  • Farm rent = $2,700

*Discretionary Spending: = $3,700

  • Food = $300
  • Miscellaneous = $2,100
  • Interest expense = $1300

*Net Worth: (ΔMoM)

  • Total Assets: = $1,384,500 (+7,000)
  • Cash = $9,100 (+300)
  • Canadian stocks = $195,100 (+2400)
  • U.S. stocks = $134,900 (+1400)
  • U.K. stocks = $21,900 (+500)
  • Retirement = $137,700 (+1900)
  • Mortgage Funds = $37,100 (+200)
  • P2P Lending = $36,700 (+300)
  • Home = $367,000 (assessed land value)
  • Farms = $445,000
  • Total Debts: = $385,100 (-1,300)
  • Mortgage = $186,100 (-400)
  • Farm Loans = $162,400 (-500)
  • Margin Loans = $34,800 (-200)
  • Line of Credit = $1,800 (-200)

*Total Net Worth = $999,400 (+$8,300 / +0.8%)
All numbers are in $CDN at 0.76/USD

This will probably be the last year I pay property tax for my farmland. I have been in contact with a realtor in Saskatchewan, and have already instructed him to list both my farms for sale. 🙂

Agricultural land has not been immune to the wider real estate slow down across the country. But there does seem to be some interest in my farms so far. In terms of market pricing, my realtor says I can probably expect to sell my farmland for about $446,000 in 2019. That’s pretty close to the farmland value I’ve already been using to calculate my monthly net worth so I will stick with my existing number for now.

Farmland values have had a great run in Canada, but slowing economic growth, trade barriers, and changing local conditions suggest to me that it’s time to reduce my exposure to Canadian farmland.

 

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Random Useless Fact:

Oct 012019
 

Tight Race Ahead

In a few weeks Canadians will vote for a Prime Minister to lead the country. Who knows what kind of chicanery will ensue. According to the CBC poll tracker, which aggregates all publicly available polling data, the Conservatives hold a narrow lead over the Liberals. Looks like it’s going to be a close call. 😮

canadian poll for 2019 election

Financial markets are always uncertain right before an election because policy changes can drive consumer incentives and business decisions. During the past quarter leading up to this month’s election the stock market has seen lower volumes of trading. Many companies put off hiring and investing until they know which political party is going to win.

Meanwhile south of the border, the United States economy is slowing down. Its 2nd quarter GDP growth dropped to 2%, down from 3% from the previous quarter. Manufacturing data also shows weakness and poor sentiment about businesses. Business earnings growth estimates have dropped from 7.6% last year to just 2.3% now. As a result the U.S. central bank dropped interest rates by 0.25% last month. This is good news for people who have floating rate debt in US dollars like myself. 🙂 So now my investment expenses are slightly lower than before.

Markets were slightly positive in September bumping up my net worth to $991K. It’s nearly at the $1M mark. 🙂 Below are my financial results ending September 30th.

Liquid’s Financial Update

*Side Incomes: = $2,700

  • Part time job =$700
  • Freelance = $400
  • Dividends =$1200
  • Interest = $500

*Discretionary Spending: = $2,200

  • Food = $400
  • Miscellaneous = $300
  • Interest expense = $1300

*Net Worth: (ΔMoM)

  • Total Assets: = $1,377,500 (+4900)
  • Cash = $8,800 (+1200)
  • Canadian stocks = $192,700 (+3200)
  • U.S. stocks = $133,500 (-1800)
  • U.K. stocks = $21,400 (+700)
  • Retirement = $135,800 (+1000)
  • Mortgage Funds = $36,900 (+300)
  • P2P Lending = $36,400 (+300)
  • Home = $367,000 (assessed land value)
  • Farms = $445,000
  • Total Debts: = $386,400 (-3,300)
  • Mortgage = $186,500 (-400)
  • Farm Loans = $162,900 (-500)
  • Margin Loans = $35,000 (-400)
  • Line of Credit = $2,000 (-2000)

*Total Net Worth = $991,100 (+$8,200 / +0.8%)
All numbers are in $CDN at 0.76/USD

Another month is in the bag. 🙂 The Canadian dollar got stronger which is both good and bad. On one hand Canadians have stronger purchasing power globally so we can buy more things for cheap. But on the other hand our assets outside the country are worth less when converted back into $CAD.

 

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Random Useless Fact:

The hamburger got its name from a cut of beef in Hamburg, Germany, and doesn’t contain any ham.

Sep 032019
 

Gold and Silver Outshine the Equities Market

Stock markets fell in August across North America and Europe in general. 🙁 But there is a silver lining. Precious metal companies managed to do quite well. A couple of months ago I explained why silver is a great investment for 2019, and how it’s more undervalued than gold. I disclosed buying 300 shares of Wheaton Precious Metals (WPM) in July because I thought the price of silver would continue to rise. Thankfully it did. My net worth today is $2,000 higher because of that one investment decision. 🙂 Hurray!

Besides WPM I also own shares in Newmont Goldcorp (NGT.) If I didn’t have so much silver and gold related assets in my portfolio my net worth surely would have dropped in August. But diversification saved the day and I managed to grow my wealth by $4,100.

Gold had been in the dumps for several years since 2013. Its price dipped to a low of US$ 1060/oz in 2016. However things are looking very different now. Since the start of this year gold’s price has grown by 21%. It’s one of the best performing asset classes of 2019 so far, currently trading at $1548/oz. But silver has performed even better at 24% return year to date. The price of silver had a large rally last week and is now sitting at $19.17/oz. 🙂 Precious metals are making a comeback this year, due to more dovish monetary policies worldwide and the uncertainty of the U.S. and China trade war.

 

Liquid’s Financial Update

*Side Incomes: = $2,700

  • Part time job =$900
  • Freelance = $400
  • Dividends =$1000
  • Interest = $400

*Discretionary Spending: = $2,200

  • Food = $400
  • Miscellaneous = $300
  • Interest expense = $1300

*Net Worth: (ΔMoM)

  • Total Assets: = $1,372,600 (+600)
  • Cash = $7,600 (+2100)
  • Canadian stocks = $189,500 (+300)
  • U.S. stocks = $135,300 (-1600)
  • U.K. stocks = $20,700 (-800)
  • Retirement = $134,800 (+200)
  • Mortgage Funds = $36,600
  • P2P Lending = $36,100 (+400)
  • Home = $367,000 (assessed land value)
  • Farms = $445,000
  • Total Debts: = $389,700 (-3,500)
  • Mortgage = $186,900 (-400)
  • Farm Loans = $163,400 (-400)
  • Margin Loans = $35,400 (-700)
  • Line of Credit = $4,000 (-2000)

*Total Net Worth = $982,900 (+$4,100 / +0.4%)
All numbers are in $CDN at 0.75/USD

I have been an advocate of gold and silver since 2011, suggesting everyone should have at least a little bit of each in their portfolios. The value of my 1 kilogram Arctic coin has held up nicely in Canadian dollars. I have been slowly buying more bullion over the years at lower prices than today and stashing them away.

Continue reading »

Aug 062019
 

Much like raising horses, financial markets are at their best when they are in a stable environment. 😀 But when the economy starts to show signs of weakness, officials may step in to ease the situation. One way they do this is by making money cheaper to borrow.

July was an okay month for stocks. But the bond market was where all the action took place. 🙂 A couple of weeks ago I blogged about buying the long term bond etf (ZLC.TO) because I thought interest rates were about to fall. Luckily that was a pretty good move. A week later, for the first time in over a decade, the Federal Reserve actually lowered rates in the U.S. This means that rates in Canada may fall later this year as well. Long term bond funds increase in value when interest rate falls because existing bonds in those funds pay more money than newly issued bonds. The price of ZLC is already up 2% since last month. It also pays 4% interest every year. 🙂

My income was pretty good in July, and quite a bit higher than this time last year. Since interest rates are dropping I decided to increase my financial leverage a little bit. I borrowed $6K from my LoC to buy some new commodity stocks which I discussed in a previous post. I plan to pay back the debt before the end of the year but keep my investments for many years. 🙂

Liquid’s Financial Update

*Side Incomes: = $2,900

  • Part time job =$800
  • Freelance = $300
  • Dividends =$1000
  • Interest = $700

*Discretionary Spending: = $2,200

  • Food = $400
  • Miscellaneous = $400
  • Interest expense = $1300

*Net Worth: (ΔMoM)

  • Total Assets: = $1,372,000 (+19,000)
  • Cash = $5,500 (-2000)
  • Canadian stocks = $189,200 (+12600)
  • U.S. stocks = $136,900 (+6100)
  • U.K. stocks = $21,500 (-200)
  • Retirement = $134,600 (+1600)
  • Mortgage Funds = $36,600 (+600)
  • P2P Lending = $35,700 (+300)
  • Home = $367,000 (assessed land value)
  • Farms = $445,000
  • Total Debts: = $393,200 (+4,800)
  • Mortgage = $187,300 (-400)
  • Farm Loans = $163,800 (-400)
  • Margin Loans = $36,100 (-400)
  • Line of Credit = $6,000 (new)

*Total Net Worth = $978,800 (+$14,200 / +1.5%)
All numbers are in $CDN at 0.76/USD

 

I’m less than $22K away from a million dollar net worth. Wow. 🙂 One more month of positive stock market returns and I may just hit it by the end of August. Even though many experts warn of a U.S. recession by 2020, it wouldn’t be a good idea to try and get out of stocks before a bear market hits. Simply holding on to good businesses can be very profitable over time.

Technically, falling interest rates don’t just benefit bond funds – it’s also good for the stock market. But things are looking less certain with global trade disputes, and the elections coming up. I think we may see a small stock market correction before more stabilization in 2020. But who knows. In the meantime I still like the precious metal sector. I think gold and silver will finish 2019 really strong. 🙂

 

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Random Useless Fact:

Social media companies monetize their user’s personal information.

Jun 032019
 

There’s an old saying about sell in May and go away that highlights the historical underperformance of the stock market during the summer months compared to the generally better performance during the other half of the year. If investors use the sell and May and go away strategy, they would sell their stock portfolio in May, and reinvest everything again in the fall. Some people find this strategy more rewarding than staying in the market throughout the entire year.

This old adage does have some historical evidence backing it up. And it’s certainly relevant today if this year is any indication. Most stocks in my portfolio fell in May, as did other people. U.S. stocks were hit the hardest. It was the worst May since 2010. Even my European index fund dropped a few percentage points.

The beginning of a correction?

It’s hard to say if the stock market will continue to slide further going forward. But I don’t believe selling shares is a good strategy right now. Instead I continue to believe that a basket of medium term bonds can help provide stability in a portfolio when the stock market has no clear trend. The BMO bond fund I wrote about last month is one example of this simple approach. It climbed in value during May when most stock funds experienced a loss. If the equity market continues to fall throughout the summer, at least I’ll have some bonds to help counteract that negative impact. 🙂

Another winning asset class last month was cryptocurrency. 🙂 Bitcoin’s value jumped 50% to roughly $8,500 US per coin. I sold all of mine a couple of years ago but this is great news for anyone who still holds BTC or altcoins.

stock investors eyeing bitcoin and cryptocurrency jealous girlfriend meme

Although my investment portfolio took a net loss last month, I received a lot of extra income. I collected $5,300 in rent. I also received about $4,000 from the government. This is because last year I worked 5 different jobs. Each one had deducted too much payroll and income tax from my paycheques because they all assumed I was only working for them, and that I was going to be employed year round. Well I’m no longer working at 3 of those jobs anymore so that’s why I was owed some tax credits. 🙂

Overall my net worth remained pretty much unchanged from the previous month.

Liquid’s Financial Update

*Side Incomes: = $7,900

  • Part time job =$700
  • Freelance = $300
  • Dividends =$800
  • Interest = $800
  • Farm rent = $5300

*Discretionary Spending: = $2,400

  • Food = $400
  • Miscellaneous = $700
  • Interest expense = $1300

*Net Worth: (ΔMoM)

  • Total Assets: = $1,335,200 (-18,000)
  • Cash = $2,600 (-8800)
  • Canadian stocks = $171,100 (-3900)
  • U.S. stocks = $125,400 (-6400)
  • U.K. stocks = $21,800 (-700)
  • Retirement = $131,300 (+1000)
  • Mortgage Funds = $35,900 (+500)
  • P2P Lending = $35,100 (+300)
  • Home = $367,000 (assessed land value)
  • Farms = $445,000
  • Total Debts: = $392,400 (-17,900)
  • Mortgage = $188,000 (-400)
  • Farm Loans = $165,700 (-12500)
  • Margin Loans = $38,700 (-5000)

*Total Net Worth = $942,800 (-$100)
All numbers are in $CDN at 0.74/USD

 

I was able to renew my farm loan in May. But the interest rate went up and the best I could get was 5.04%, which is a bit higher than I expected. So I decided to make a lump sum payment of $12,000 towards the balance. I also paid down some margin debt in anticipation of a potential major stock market correction. Luckily I had enough savings in my bank account to pay down these debts thanks to the abundance of income that I received during the month.

If investments don’t go down once in awhile there wouldn’t be opportunities to buy on the dips. 🙂 But hopefully things will be better in June.

 

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Random Useless Fact:

According to HuffPost, men and women generally have different types of dreams.

Men’s dreams tend to consist of:
Strangers, success or failure
Sex with unknown partners
Physical aggression
Cars and roads
Violence
Shorter dreams
Less color
Competition

Women’s dreams tend to consist of:
Family members, relationships
Kissing, flirting with someone, or sex with someone known to the woman
Verbal aggression
Emotional expression
Loss of loved ones
Longer dreams
More color
Conversation