Feb 022017
 

How High Can the Dow Go?

The Dow rose from 7,000 to 20,000 points over the last 8 years. And that doesn’t even account for the dividend payments. By using financial leverage my portfolio managed to outperform the market every year since I started buying stocks in 2009. 🙂 Borrowing to invest is risky. But if I continue to maintain a diversified portfolio of real estate, stocks, and fixed income investments, then it is very likely that my assets will grow overall in value over time. So as long as I can borrow money cheaply I will continue use leverage. It’s all about expected market return vs the cost to borrow. In my previous post from last year I explained how rich people create wealth. Using other people’s money to enhance investment gains proves to be a very effective method. I currently have about $50,000 of available funds remaining before I risk getting a margin call. This gives me quite a large safety cushion. As long as I keep an eye on this number I should be able to withstand the market cycles.

Breaking the 20,000 barrier was a huge milestone for stock investors. But can the Dow Jones continue to climb even higher? The answer may be found in American football. 🙂 Believe it or not the outcome of the Super Bowl game this weekend could have an impact on the stock market’s performance for the remainder of 2017. This idea is known as the “Super Bowl Predictor.” The predictor states that if an original NFL team wins the Super Bowl, then the Dow index will increase over the next year. Otherwise, the stock market will fall. So far this indicator had been bang on every year since 2008, except for one time. So if we want the Dow to hit 20,000 again and continue to grow this year, we better hope the Atlanta Falcons win this weekend. 😀

Anyway, since equity valuations and price/earnings ratios appear to be worryingly high, I decided it’s time to be more cautious with my money. So as I see the growing risk of a bubble forming, I have turned my attention towards alternative investments that do not correlate with the stock market. That’s why today I present a new addition to my asset column.

It’s P2P lending! 😀 Hurray! This makes a total of 10 different asset types I own. And most of them produce a stream of passive income for me! 🙂

Liquid’s Financial Update

*Side Incomes:

  • Part-Time = $900
  • Freelance = $800
  • Dividends = $800
  • Interest = $600
*Discretionary Spending:
  • Fun = $200
  • Debt Interest = $1200

*Net Worth: (MoM)16-12-networthiq_chart-nov

  • Assets: = $1,083,200 total (+33,200)
  • Cash = $1,100 (-700)
  • Canadian stocks = $139,200 (+4100)
  • U.S. stocks = $85,900 (+2700)
  • U.K. stocks = $18,600
  • RRSP = $75,000 (-100)
  • Mortgage Funds = $30,400 (+200)
  • Peer-to-Peer Lending = $20,000 (new!)
  • SolarShare Bonds = $10,000
  • Home = $270,000 (+7000)
  • Farms = $433,000
  • Debts: = $496,200 total (+16,700)
  • Mortgage = $185,200 (-300)
  • Farm Loans = $191,400 (-400)
  • Margin Loans = $59,300 (+300)
  • TD Line of Credit = $16,000  (-700)
  • CIBC Line of Credit = $27,500 (+18,000)
  • HELOC = $16,800 (-200)

*December Total Net Worth = $587,000 (+$16,500 / +2.9%)
All numbers above are in $CDN. 

January has traditionally been a very positive month for my net worth, and this year is no different. This is thanks to the phenomenon called the new year’s bump. I used the average inflation rate of 1.6% to increase my home’s value and rounded the number to $270,000, which is $7,000 higher than the previous year. Stock markets held up well this January, despite a slight pull back over the last couple of trading days.

I will write more about my new venture into the world of peer-to-peer lending in a future post. But it’s basically a fixed income investment in the form of debt financing. Compared to stock market, P2P investments have a low correlation with stocks and are less volatile. However, this doesn’t mean they’re less risky. I invested $20,000 to start. $2,000 came from personal savings, while the remaining $18,000 was borrowed, which is why both my asset and debt have grown this month. I plan to slowly pay down the new debt while I wait patiently for my new asset to grow. This is the same basic strategy I used for all my leveraged investments in the past. 😉

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Random Useless Fact:

It can be quite difficult to tell if a tiger is pregnant, or just fat.

 

Jan 022017
 

The Second Longest Bull Market

Happy New Year! 🙂 I hope everyone had a great 2016. It’s somewhat surreal to see an economy that’s still struggling while the stock market has never been stronger. We are currently living in the 2nd longest bull market in American history, recently surpassing the 7 year streak that spanned 1949 to 1956.

2017 could be the year that we finally see a major market correction. But who knows? Maybe stocks will remain resilient and continue to climb for several more years! After all, the longest bull market ever lasted 13 years from 1987 to 2000.

Chart from http://money.cnn.com/

My goal of reaching freedom 35 means I need to be financially independent by 2022. That’s only 5 years from now! Can the markets continue to move higher until then? Well the 13 year bull market run from 1987 to 2000 shows that it’s indeed possible. 🙂 Like many other millennials, I began investing in 2009 by sheer luck, because that was the perfect time to get into the stock market. Maybe I can deleverage at the right time too, Haha. 😀

Future apoplectic haters will probably say, “Well of course he retired early. Any ninny with half a brain could have borrowed $500,000 to buy stocks and other financial assets between 2009 to 2022 and easily become a millionaire.”

And they would be correct. 🙂 But my question is why haven’t I heard of anyone else borrow $500,000 to invest right now? This is currently the best time of our generation to use leverage to potentially double or even triple our investment gains! Surely I can’t be the only one to see the advantage of borrowing money at 2% to buy and hold strong, reliable, blue-chip stocks like utilities and Canadian banks that have been paying 4% or higher dividends for decades, and are also expected to appreciate in value over the next 5 years. Call me crazy, but I want to get rich sooner rather than later, even if it means taking on a bit more risk. 😀

Anyway, December has been another amazing month for the markets. All stock indexes gained, including my new British equities purchased recently. It’s still very early to tell so I’ll continue to hold my U.K. index ETF, and see how it does over the next year or so.

Liquid’s Financial Update

*Side Incomes:

  • Part-Time = $700
  • Freelance = $900
  • Dividends = $700
  • Interest = $400
*Discretionary Spending:
  • Fun = $300
  • Debt Interest = $1200

*Net Worth: (MoM)16-12-networthiq_chart-nov

  • Assets: = $1,050,000 total (+12,200)
  • Cash = $1,800 (-17,700)
  • Canadian stocks = $135,100 (+5000)
  • U.S. stocks = $83,200 (+3000)
  • U.K. stocks = $18,600 (NEW!)
  • RRSP = $75,100 (-200)
  • Mortgage Funds = $30,200 (+3500)
  • SolarShare Bonds = $10,000
  • Home = $263,000
  • Farms = $433,000
  • Debts: = $479,500 total (-2,600)
  • Mortgage = $185,500 (-500)
  • Farm Loans = $191,800 (-600)
  • Margin Loans = $59,000 (-300)
  • TD Line of Credit = $16,700  (-800)
  • CIBC Line of Credit = $9,500
  • HELOC = $17,000 (-400)

*December Total Net Worth = $570,500 (+$14,800 / +2.7%)
All numbers above are in $CDN. 

Good golly! What a way to end the year. 🙂 Thanks primarily to stock and farmland appreciation, my net worth has increased on average by over $12,000 per month in 2016. That’s totally dope! I can hardly contain my excitement! 😀 It was a gradual and steady process, but I’ve managed to somehow accumulate $350,000 of financial assets over the last 7 years. I wonder what amazing new serendipity awaits for my finances in 2017. 🙂 I guess we shall see. Good luck to everyone in the new year!

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Random Useless Fact:

Stingrays do not use their eyes to hunt for food. Their eyes are above their bodies, but their mouth and nostrils are situated on their underbellies.

Dec 192016
 

2016 is turning out to be a spectacular year for equity investors. 🙂 The Canadian S&P/TSX index is up 17% year to date, while the Dow Jones index in the United States is up 14%. Wow! That’s impressive even by historical standards. The markets have done an excellent job of beating expectations lately. 😀 We could even see the Dow hit 20,000 points before December 31st if we’re lucky.

December is usually a good time to re-examine our investment portfolios and see if there’s any adjustments we need to make to our asset allocation or general financial plan. Personally, this last quarter has been quite eventful for me as I’ve contributed over $30,000 in new investments. As of now here is a breakdown of all my assets and liabilities. 🙂 Everything has been rounded to the nearest $1,000 in $CAD.

Net Worth At a Glance

Assets by Account/Type: 
$19,000 – TFSA at Canadian Western. Private mortgage fund.
$47,000 – TFSA at TD. Mostly income trusts.
$14,000 – Cash trading account at TD. Mostly stocks.
$86,000 –  RRSP at TD. Bonds, U.S. equities, and MICs + REITs.
$170,000 – Margin Account at IB. Mostly dividend stocks.
$10,000 – SolarShare bonds.
$263,000 – Primary residence.
$433,000 – Farmland.
Total Assets = $1,042,000

Liabilities:
$186,000 – Home Mortgage
$192,000 – Farm Mortgage
$58,000 – Margin Loan
$17,000 – TD LOC
$17,000 – HELOC
$10,000 – CIBC LOC
Total Liabilities = $480,000

Total Net Worth = $562,000 🙂

Farmland still makes up a rather large piece of the pie chart. I can’t complain that my farmland went up 10% in value, but I would like to see my stocks and fixed income allocation increase to create a more balanced portfolio.

Last year in December 2015, my farmland represented 44.6% of my asset allocation. This year it has gone down to 40.3% so I am making progress. But it is still not enough. I have to stay focused on my goals and make changes to my situation. As George Bernard Shaw once said, “The people who get on in this world are the people who get up and look for the circumstances they want, and if they can’t find them, make them.”

So in 2017 I plan to buy more fixed income assets and dividend paying stocks to increase my relative position in those liquid asset classes. 🙂

Below are some more details about my various investment accounts.

Continue reading »

Dec 082016
 

Once again North American stocks continue to impress. My liquid net worth (net financial assets) climbed 2.5% over the course of November, nearly $8,000 of gain on its own. Many people including myself thought a Donald Trump win for the presidency would trigger a stock market correction. Although the Dow Jones fell 800 points (about 4%) in pre-market trading the morning after election day, it quickly recovered and went on to hit all time highs in subsequent days in mid November. And just yesterday, the Dow Jones, S&P and transports closed the day at record highs again, climbing more than 1%. What an amazing time to be an investor. 🙂 I feel euphoric! But this is also a time to be diligent because bull markets tend to last 6 to 8 years historically speaking, and we’ve been in this current bull market for 8 years now. Uh oh.

Stock valuations certainly appear to be stretched at this time. The fact that investor’s margin debt is near record highs also concerns me because over-leverage has lead to stock market drops and economic recessions in the past. Investing in the stock market is like toilet paper; sometimes you’re on a roll, but other times you can find yourself in a crappy situation like the crash of 2008. 😄 Nobody can know for sure when the market will peak again, but I decided to take a break from buying stocks in November and paid down some debt. I also contributed $4,000 to my retirement account (RRSP) to buy some Baytex Energy bonds. Overall it was a great month. I hope everyone else enjoyed it as well. 😀

Liquid’s Financial Update

*Side Incomes:

  • Part-Time = $700
  • Freelance = $800
  • Dividends = $500
  • Interest = $200
*Discretionary Spending:
  • Fun = $200
  • Debt Interest = $1200

*Net Worth: (MoM)16-12-networthiq_chart-nov

  • Assets: = $1,037,800 total (+8,300)
  • Cash = $19,500 (-4000)
  • Stocks CAD =$130,100 (+4200)
  • Stocks US = $80,200 (+3800)
  • RRSP = $75,300 (+4300)
  • Mortgage Funds = $26,700
  • SolarShare Bonds = $10,000
  • Home = $263,000
  • Farms = $433,000
  • Debts: = $482,100 total (-2,800)
  • Mortgage = $186,000 (-400)
  • Farm Loans = $192,400 (-500)
  • Margin Loans = $59,300 (-700)
  • TD Line of Credit = $17,500  (-1200)
  • CIBC Line of Credit = $9,500
  • HELOC = $17,400

*November Total Net Worth = $555,700 (+$11,100 / +2.04%)
All numbers above are in $CDN. Conversion rate used: 1.00 CAD = 0.75 USD

I was waiting on a cash refund from a financial institution before investing in any more stocks. The cash was finally returned earlier this week so my plan for December is to purchase 5 figures worth of stocks in Great Britain to take advantage of the low Pound Sterling currency. 🙂 This is exciting because it probably means I’ll be adding another line item to my asset column next month.

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Random Useless Fact:

16-12-bob-marley-money-quote

Dec 012016
 

More Millionaires 

The best way to make a lot of money is to work for the mint. 😄 But even if you don’t, chances are your finances have been improving. About 25,000 Canadians became millionaires in the past year according to a report released last week by Credit Suisse. The bank claims that there are currently 1,117,000 individual adults with net assets exceeding US $1,000,000. 😀 We normally see studies of Canadian millionaires based in $CAD, but this study uses $USD to define millionaire status. These kinds of wealth studies are telling, but they tend to underestimate real net worth because participants may forget, or choose not to disclose particular assets such as their precious metals, art, collectables, jewelry, etc. Many of these items such as gold can be acquired anonymously with no paper trail. I think the real number of millionaires is quite a bit higher.

Based on its forecasts in the growth of Canada’s GDP and equity market capitalization, Credit Suisse expects the number of millionaires to increase by 50% to 1,680,000 in 2021. I hope one of those new entrants will be me. 🙂

But 2021 is still five years away and a lot can happen since then. I believe low interest rates are the main cause of asset price inflation which has resulted in so many new millionaires in recent years. But a pull back could be right around the corner. Let’s take a look at history.

16-12-snp-500-index-chart

Between 1988 and 1990 much of the world was in recession with riots breaking out in the UK. 10 years later between 1998 and 2000 we had the Asian financial crisis and the dot-com crash. 10 years after that between 2008 and 2010 we had the great recession with the Lehman and AIG panic, and European banking crisis. They say history doesn’t repeat itself, but it rhymes. And I am certainly seeing a pattern here. 🙂

Continue reading »