Fiscal Update August 2019 – Gold Makes a Comeback

 Fiscal Updates  12 Responses »
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.

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Fiscal Update July – U.S. Rate Drop

 Fiscal Updates  4 Responses »
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.

Fiscal Update May 2019 – Time to Sell?

 Fiscal Updates  10 Responses »
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

Fiscal Update April 2019 – Accumulating More Bonds

 Fiscal Updates  11 Responses »
May 062019
 

Another Strong Month for Stocks

The age of monetary tightening is on pause, at least for now. Central banks have pumped the brakes on increasing interest rates. This has been great for the U.S. and Canadian stock markets, which have both hit new highs in April. But does that mean it’s time to sell and take profits?

Probably not. It’s really hard to predict market movements, and record high stock prices can continue to climb higher before starting to fall. So I’ve opted to go for another strategy; Park some savings in bonds and wait for a better opportunity to jump into stocks again. 🙂

So at the end of last month I used about $25K of my cash savings in my RRSP to purchase 1500 units of BMO Mid Corporate Bond Index ETF (ZCM.)

It has a 3.2% yield, so I shall be earning an additional $67/month of investment income going forward. Not a big change, but better than nothing. 😀 The cash in my RRSP to make this investment came from my old work pension. I transferred the money to my personal retirement account after I was let go.

Liquid’s Financial Update

*Side Incomes: = $2,800

  • Part time job =$700
  • Freelance = $500
  • Dividends =$800
  • Interest = $800

*Discretionary Spending: = $2,300

  • Food = $400
  • Miscellaneous = $500
  • Interest expense = $1400

*Net Worth: (ΔMoM)

  • Total Assets: = $1,353,200 (+13,100)
  • Cash = $11,400 (-800)
  • Canadian stocks = $175,000 (+3600)
  • U.S. stocks = $131,800 (+7200)
  • U.K. stocks = $22,500 (+800)
  • Retirement = $130,300 (+1500)
  • Mortgage Funds = $35,400 (+500)
  • P2P Lending = $34,800 (+300)
  • Home = $367,000 (assessed land value)
  • Farms = $445,000
  • Total Debts: = $410,300 (-700)
  • Mortgage = $188,400 (-400)
  • Farm Loans = $178,200 (-400)
  • Margin Loans = $43,700 (+100)

*Total Net Worth = $942,900 (+$13,800 / +1.5%)
All numbers are in $CDN at 0.75/USD

 

I’m not selling any stocks because despite the uncertain direction in the relatively volatile equity market I’m still earning nearly $1,000 in dividends every month, and I don’t want to sacrifice real dividend income for a hypothetical crash that may not happen in the near future. So it makes sense to buy some fixed income assets such as the corporate bond fund, ZCM. My intent is to hold ZCM for the 3.2% annual interest income. Then sell this fund, and replace it with stocks once the stock market goes into a correction. 🙂

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Fiscal Update March 2019 – Disney Buys Fox

 Fiscal Updates  8 Responses »
Apr 022019
 

Getting out of 21st Century Fox 

Five years ago I wrote about purchasing 26 FOXA shares for $34 USD each. At that time the stock was trading at 20 times earnings, so it wasn’t exactly cheap. However I saw great potential in this company because it had a lot of popular brands and intellectual properties. I had planned to hold this stock for decades. But I didn’t have to.

Fox shareholders approved the acquisition by Disney, and last month I was forced to sell all my FOXA stocks for $1,843 CAD. That’s a tidy 83% return on investment, before even adding on the dividend income I received over the years. 🙂 Plus, there’s no capital gains tax because it was held in my RRSP. Yay!

Overall March has been a really positive month for my finances. All my liquid assets went up in price.

Liquid’s Financial Update

*Side Incomes: = $3,300

  • Part time job =$700
  • Freelance = $600
  • Dividends =$1200
  • Interest = $800

*Discretionary Spending: = $2,400

  • Food = $300
  • Miscellaneous = $700
  • Interest expense = $1400

*Net Worth: (ΔMoM)

  • Total Assets: = $1,340,100 (+8,200)
  • Cash = $12,200 (+1000)
  • Canadian stocks = $171,400 (+800)
  • U.S. stocks = $124,600 (+4000)
  • U.K. stocks = $21,700 (+900)
  • Retirement = $128,800 (+1000)
  • Mortgage Funds = $34,900 (+200)
  • P2P Lending = $34,500 (+300)
  • Home = $367,000 (assessed land value)
  • Farms = $445,000
  • Total Debts: = $411,000 (-900)
  • Mortgage = $188,800 (-300)
  • Farm Loans = $178,600 (-500)
  • Margin Loans = $43,600 (-100)

*Total Net Worth = $929,100 (+$9,100 / +1.0%)
All numbers are in $CDN at 0.75/USD

 

Preparing for Interest Rates to Drop

It’s been several years since the Bank of Canada lowered interest rates. The last cut was in 2015. Central banks around the world dropped rates near zero as a reaction to the global finance crisis in 2008 and rates have been low since. Policy makers expected the economy and rates to rebound back to normal in short order. But they discovered an inconvenient truth to the markets; low interest rates are addictive. Once consumers get a taste of easy credit, it’s very difficult for them to pull back.

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