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.

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.

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Random Useless Fact:

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

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
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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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A lot has happened globally in the last few weeks that makes me weary about the growth of the financial markets over the next 1 to 2 years. Inflation in France sparked violent protests. The U.S. federal budget deficit for fiscal year 2019 is projected to be nearly $1 trillion. It will be hard to find borrowers who are willing to buy all those treasury bonds. The 2 largest foreign holders of existing U.S. debt are China and Japan. And both have become net sellers. The economic tension between the U.S. and China is momentarily on hold, but 3 months from now the trade war could escalate.

So what I plan to do going into 2019 is to keep more cash on hand. This will allow me to maneuver more easily as cash is very liquid. If interest rates become too high I will use the cash to pay down my debt. If stocks in general fall into a bear market I will be buying up more shares. 🙂

Liquid’s Financial Update

*Side Incomes: = $3,400

• Part time job = $900
• Freelance = $1200
• Dividends = $900
• Interest = $600

• Food = $300
• Miscellaneous = $500
• Interest expense = $1200

*Net Worth: (ΔMoM)

• Assets: = $1,225,600 total (+1400)
• Cash = $19,800 (+2300)
• Canadian stocks = $162,600 (-4500)
• U.S. stocks = $117,400 (+300)
• U.K. stocks = $20,400 (-300)
• Retirement = $117,400 (+2700)
• Mortgage Funds = $34,700 (+500)
• P2P Lending = $33,300 (+400)
• Home = $275,000
• Farms = $445,000

• Debts: = $420,200 total (-800)
• Mortgage = $190,300 (-400)
• Farm Loans = $180,400 (-500)
• Margin Loans = $49,500 (+100)

*Total Net Worth = $805,400 (+$2,200 / +0.3%)
All numbers are in $CDN. 

Financial markets are stretched thin. The S&P 500 is still trading relatively expensive at 22x earnings, even after the pullback that started in October. There isn’t much room for growth in equities. Real estate markets around the world are softening. U.S. home building company Toll Brothers warned that the housing market slowed further in November, particularly in California. Home prices and sale volume in Canada, particularly in Vancouver and Toronto are going down. Prices will likely fall further into the upcoming spring. But Canada’s continued trade deficit and high energy prices mean the cost of living will probably climb higher. The theme for 2019 could very well be higher inflation but lower investment returns. If that turns out to be true then I would prioritize paying down debt and acquiring hard assets.

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Random Useless Fact: