Jul 052014

It’s not easy being an investor these days. We’re facing higher taxes. We’re being vilified by the media, and we often feel distanced from our friends and families because of our life choices. The struggles we face are real 😐 but our voices have not been heard. Below are several examples of first world investor’s problems.

The Crude Reality

During the last couple of weeks the price of crude oil (WTI) fell slightly. As I’ve disclosed before I own many oil companies like Suncor and Crescent Point Energy. These businesses make more money when the price of oil is higher. So sadly my stocks have been going sideways these last couple of weeks.

14-07-oilglass firs world problems

Of course no one else is complaining because gasoline prices at the pumps fell slightly in recent weeks. But the lower oil price is really hurting my potential profits. Crescent Point shares are only up 12% year to date, and Suncor is only up 22%. How will I ever get by on these dismal returns? 😛

Choosing Sides

Last month the Federal government conditionally approved the Enbridge Northern Gateway pipeline project. This is great news for Enbridge investors. But most of my co-workers and friends are upset about Ottawa’s decisions. They don’t think the pipeline should be built, and they represent the majority. According to some sources, 80% of B.C. residents are opposed to this project.


So now I’m torn. I care about the environment as much as my friends do, but I also want my investments to do well. I can’t talk to anyone about this because I haven’t told my friends that I’m an Enbridge shareholder. I don’t want to risk the political backlash. I just avoid conversations if this topic comes up. And I have to make up excuses to not join my pals in anti-pipeline protests, which looks like fun. Being an investor really puts a damper on my social life, and I have to miss out on fun activities with my friends because otherwise I’d feel like a hypocrite 🙁

Exploiting Your Friends

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Nov 062013

In 2003 oil was $30/barrel but today in 2013, it’s about $95/barrel. There are many factors that determine the price of oil like inflation, supply bottle necks, conflicts in the middle east, global economic growth, etc.

Some people complain about the high price of oil today because it has tripled over the last decade. I guess it all depends on how you look at the price 🙂 Even with the high taxes we have for gasoline in BC, it still only costs about $1.25 for 1 liter of gas (0.26 US gallons.) By burning this gasoline in an efficient combustion engine it can generate the power to move my car 10 kilometer on the road (6.2 miles.)

But before oil was discovered people would move things around the old fashioned way; manual labor 🙂 So if we didn’t have any oil we could alternatively get 3 people to push my car 10 km instead. It would probably take them 6 to 7 hours total, including breaks in between because these guys are unionized 🙂 That’s the equivalent of roughly 20 man hours. If minimum wage is $10/hr then that’s equivalent to at least $200. And we haven’t factored in energy costs yet. 1 liter of gasoline contains about 8,200 calories. That’s equal to 15 Big Macs 😯 If you’re pushing a car for that long then you better be eating something 😕 And food, or fuel for people, costs money. Plus driving a car is a lot quicker than pushing it. And time = money. So after considering all these factors, $1.25 for a liter of gas at the pump is a bargain 😀 13-11-dubaicity

Most of the wealth and luxury in the world today would not be here if it wasn’t for oil and other hydrocarbons. Petroleum production and pumping oil out of the ground only started about 100 years ago. For over 99% of our human history people relied only on basic forms of energy like muscle and firewood. If folks from the medieval times could see how people today live they would be completely flabbergasted (゜o゜) Most of us are living like kings compared to them. But not even kings could travel from Canada to the Bahamas in just a few hours, or watch movies on a giant screen in an air conditioned theater, or have access to penicillin, or eat anything they want even if it’s not in season 😉 So if our ancestors could see us today, we wouldn’t look like kings at all. We would look like Gods!

We are truly lucky to have oil in our lives, but we can’t take it for granted. There will come a day when the rate of oil production will stop increasing. When that day comes oil will certainly be a lot more expensive than today. So as usual, the best plan to hedge ourselves financially is to own the means to produce the assets that the world needs.

Low risk investors can look at pipeline companies, such as Enbridge or TransCanada, which do relative well in recessions.

Medium risk stocks include large integrated oil companies like Suncor, Chevron, Royal Dutch Shell, etc.

Investors with a higher tolerance for risk can look at oil and gas servicing companies like Schlumberger, Calfrac, or Halliburton.

Disclaimer: I have shares in ENB, SU, CVX, HAL

Feb 082013

Highest Debt Level Ever
Credit bureau TransUnion released their quarterly report recently on the credit history of 25 million Canadians. They’ve found that excluding mortgages, we each owe on average $27,485 of debt, which is up $1,500 from last year and a record high. The average balance owing on a Line of Credit (LOC) grew by 2.6%, installment loans (such as my farm loan) grew by 6.7%, and car loans were up by 8.9%. I don’t think it’s a big deal though. It’s true that our debts are $1,500 more than last year, but according to StatCan our earnings year-over-year has also increased by 3.2%, or roughly $1,500 so everything balances out 😀 No surprise then to also note that delinquency rates are declining, meaning less people are defaulting on their payments :0)

weekend business, Canadians taking on a lot of debt

Photo by Ryan Remiorz , THE CANADIAN PRESS

What does this mean for you? It depends on how you’re using your debt. I’m borrowing over $15K more from my LOC and margin account than last year. Not counting my mortgage I have over $150,000 of debt today. Most people are scared to take on debt, but using the right kind of debt at the right time can be a very useful tool. I couldn’t have increased my net worth by $12K last month if I didn’t have all this debt to leverage my investments. But on the other hand, if I had bought a new car and taken on a car loan then that would actually negatively affect my net worth. So again, it all depends on what constitutes your debt and what you’re using it for.

With the success of their iPads and iPhones, Apple have been making billions of dollars in profit every month. Currently they have about $137 billion of cash sitting in the bank, including short term investments. This is the biggest cash pile of any company in the United States. And it’s not doing anything productive or profitable for the company. They currently have a dividend of roughly 2.2% but an activist investor, David Einhorn, who manages a hedge fund and holds a lot of Apple stocks, is encouraging Apple to give more money back to shareholders. This can be done by either increasing the dividend, or offering preferred shares with a higher yield, but don’t allow for company voting rights. I’m in favor of more dividends, so we’ll wait and see what Apple decides to do 🙂 Many investors are chasing after yield, if Apple gives in to these demands then I might just buy some more Apple shares. Who knows, maybe one day I’ll even accumulate enough for them to DRIP haha (^▽^) half joking there.

The Oily Bottleneck
We pump out a lot of oil and gas in Canada but we lack the infrastructure to get these products to the proper markets. This isn’t a new problem but a research paper out of Calgary suggests there is a 2 to 5 year window for us to get our resources to the Asian markets, otherwise we’ll be at a huge disadvantage. Countries in southeast Asia want our oil and will pay us the proper market price for it. But currently we sell close to 100% of our crude to the US at a 45% discount. You’re welcome America 😛 Canadians are losing out on $100 million of oil sales every day 🙁  Think about the tax revenue generated from that alone, and all the healthcare, education, or paying down the national debt we could do with all that money if only…

Frenemies everywhere
A new season of The Real Housewives of Vancouver started airing this week. It’s a bit ironic because the individuals portrayed in the show are often more fake than real. It’s pretty entertaining though, especially if you happen to live in Vancouver and recognize a lot of the shooting locations 😀 You can learn a lot about personal finance from the show, like how being excessively rich can come with excessive drama and consequences.

weekend business real housewives of vancouver

Blog roundup – Personal finance and other interesting articles from around the web
The Dividend Guy has a nifty chart that lists some popular Canadian stocks and when the go ex-dividend
Frugal Rules on how he makes use of wish lists and is giving away $500 on his blog
Modest Money on how to be frugal on valentines day
Passive Income Pursuit on how being laid off from work has taught him a very important lesson about life

Jan 102013

ONE of the easiest ways I’ve learned to make money is to take action when others are complaining about something. There is often a silver lining to every financial problem, and learning how to take advantage of that can bring you much reward 🙂 Here are 4 common financial problems I hear people complain about almost every day and my solution to each one.

The problem: Housing prices too expensive.

What other people do: complain they can’t afford to live in the city anymore.
What you can do instead: Offer financing or buy real estate. Take Vancouver as an example. It’s land size is not getting any bigger, but the population will continue to expand. The following tables show the development of the number of inhabitants according to census data of Statistics Canada.

13_01_populationgrowth Financial Problems


The Greater Vancouver Area currently has about 2.2 million people. The population is expected to grow by 30,000 new residents each year, or 1.2 million residents by the year 2041, for a total population of 3.4 million according to a residential growth projections report by Metro Vancouver (report in PDF format.)  So based on common sense, even if housing prices fall this year and next, they should in the long run still go up because of growing density. The only way city space would be less valuable decades from now is if we see zero population growth and zero inflation, which is highly doubtful.

Some people say they can’t afford to buy a house. But nobody is forcing them to buy a million dollar bungalow right away. New home owners can start small and slowly work their way up. My down payment was only $15,000 for the two-bedroom condo I bought in 2009. I plan to purchase larger properties over time as I build up equity. Besides, if prices are “too expensive” today how will people ever afford homes in the future when population density and demand will be even greater?

Offering real estate financing is another way to benefit from the housing market, especially if you don’t have a lot of money to put down. You can lend money to a home buyer like a mortgage so they pay you interest instead of a bank. This can be done through a private mortgage or a mortgage investment corporation. Higher real estate prices just means more wealth for me because I have exposure to that market 😀 No complaints here.


The problem: Oil prices too expensive

What other people do: Complain they’re getting gouged by oil companies and they can’t afford to drive anymore
What you can do instead: Buy oil and gas companies. As it becomes harder to find and extract oil from the earth, prices will probably be higher 10 years from now than today using common sense. Most oil companies pay dividends to shareholders. A lot of them have a history of growing their dividends because their profits are growing over time as gasoline prices go up at the pumps. Every year for the last 4 years I’ve been investing thousands of dollars into Suncor, Exxon Mobil, Chevron, and other oil businesses. I was getting paid $10 a month in dividends from these companies in 2009. But with sheer sticktuitiveness and persistence, as well as ALL of these companies raising dividends in the last few years, I am now getting $81 a month in dividends from them collectively. Oil companies are now paying me MORE money, than I’m paying for gasoline every month 😀 No complaints here.

The problem: Food getting more and more expensive

What other people do: Complain how food inflation should be added to the CPI and how they can’t afford to eat as much anymore.
What you can do instead: Buy a farm or invest in agriculture. Historically farmland prices tend to out inflate food prices. When consumers pay for their food at the store eventually some of it or most of that money goes back to the farmers or producers of the food. So common sense tells us that if you own the means of production, or at least the land it’s being produced on, then you are in a pretty good position. Last year I bought a farm in Saskatchewan and rented the land to a farmer to grow his crops. Over time if the price of soft commodities increase, then I will increase the rent, and I’ll use that extra money to buy even more farmland. The farmer will still make lots of money too so everyone’s happy 😀 No complaints here.

The financial problems: Slow wage growth and stagnant career

What other people do: Blame their employer for underpaying them. Complain their taxes are too high.
What you can do instead: Invest and become rich. I spent the last several years saving at least a third of my gross income from working 2 jobs, and slowly investing that money to build up dividends and other passive income. 13_01_passive_history income Financial Problems

Investment income such as dividends or capital gains are also taxed at a much lower rate than ordinary salary. And ANYONE can do it, even if you don’t have a lot of savings to start investing. A modest $500 can buy you some mutual fund and give you exposure to the financial markets 😉 $2,000 can buy you more than 100 shares of the index fund XIU. $5,000 is enough of a down payment to buy a small farm, and $10,000 for a small one-bedroom apartment.  It DOES start off slow though and will be a decade before most people will see any noticeable results. But the year 2023 WILL come to pass, so when it does, common sense tells us people who starts investing today (in 2013) will most likely be in a much better position financially, than those who don’t. I estimate that in roughly 10 more years, my personal investment income combined with the salary from my full time job, will bring my total annual income to over $100,000 while lowering my average tax rate at the same time, just like how the rich do it 😀 No complaints here.

The solution to so many of our everyday problems in life are sometimes right in front of our eyes. A lot of it as you’ve seen is just common sense. We can complain like everyone else around us and do nothing about it, or take action and pave a better future for ourselves. Choice is yours folks 😉

Random Useless Fact:  Sometimes looks can be deceiving. Either that or eating healthy and exercising isn’t as good for the body as people say it is.

13_01_health_women Financial Problems


Jan 052013

Lower Unemployment
Last year ended very positive for the Canadian job market.  In December we hired 40,000 new workers and the unemployment rate dropped to 7.1%, it’s lowest point in four years! This number affects both confidence in the stock market, and housing prices.  Hope we can continue helping our unemployed and under-employed friends in 2013 and get the number even lower.



Precious Black Gold
The oil industry made a big announcement this week and it’s going to benefit Canadians! A group of companies including Suncor, Chevron, and Exxon Mobil, have said they will start a major offshore project in the Hebron Oil Field, near St. John’s Newfoundland and Labrador. This project will create thousands of jobs which won’t just help those employed in the oil and gas industry, but also the local economy in NL  and other nearby provinces. Not only that but the provincial government will also likely be getting some sort of royalty (~_~) from this new project. This is much needed news for people on the east coast as Newfoundland and Labrador’s unemployment rate is 11.5%, the highest in the country!


The companies lead by Exxon plan to spend $14 billion extracting the oil but costs could go up higher. There’s an estimated 700 million barrels of oil in this field. At today’s oil prices if they manage to drill up all the oil they can sell it for $63 billion. Pretty good deal for them.  How can the average person benefit from this new announcement? A few ways. 1) Invest in local companies in St. John’s 2) Invest in oil companies  3) Learn skills to work on offshore oil rigs.

disclaimer: I’m a shareholder of Exxon Mobil, Chevron, and Suncor stocks. In the last week all 3 stocks have gone up in price! I also have Trican and Halliburton stocks. They are oil services companies and provide equipment and expertise to help energy companies actually drill the oil out of the ground from hard to reach areas, such as offshore 😀 This is why I love investing. Large multinational energy giants love to make money and are really good at doing it. Anyone can invest in them today and benefit from their profits in the future :0) Readers, if you don’t already own some oil companies what are you waiting for?