May 022016
 

My net worth increased $64,000 so far in 2016 

Goodness gracious me! 😀 That’s even more than my annual gross salary. Maybe I should quit my full time job already. Haha.

But here’s the caveat. My net worth is measured in dollars. So I’m only becoming richer relative to the local currency. But as we shall discuss below, currency depreciation can be a real PITA. 😛 Policy makers from around the world are covertly initiating inflation to see which country can print the most money to improve their economy’s competitiveness. But by doing so, the devastating knock-on affects will financially destroy millions of lives in the years to come.

Higher Living Expenses in 2016

If you’ve purchased car tires before you are probably familiar with inflationary pressures. Inflation has been fairly high in 2016 so far. The government won’t admit it for political reasons, but regular folks like you and I have most certainly felt the effects of rising expenses in our wallets. Over the last year nearly all types of spending in Canada have become more expensive.

16-05-inflation-cost-of-living-canada

Crude oil was trading at US $35 per barrel when the year started, but now it’s just over $45, a 29% increase. Coincidentally the price of silver bullion has also increased by 29% over the same 4 month period. The price of oil affects the price of many consumers goods, not the least of which is food, due to transportation costs. And since we use silver in photography, x-rays, solar panels, mirrors, cars, medicine, smart phones, and other consumer electronics, we can expect higher costs in these related fields moving forward.

Then there’s the largest monthly expense for most people – housing. The most recent S&P/Case Shiller index shows that U.S. home prices in February grew 5.3% year over year. I don’t even have to mention how crazy hot the Canadian real estate market has been lately. 😛 CREA forecasts the national average price this year will probably increase by 8%.

16-05-home-price-canada-crea-forecast

So house it going on the west coast? you might ask. Well let’s just say February was a record-shattering month for home sales in British Columbia, with a 45% increase in volume compared to a year ago.

How Investors Hedge Against Inflation

A few years ago I wrote a post detailing how prices of different goods increased 100% to 200% between 1990 and 2010. But if we were to store our net worth 20 years ago in real tangible assets such as oil, land, fixed properties, silver, and profitable businesses, instead of simply holding on to money or “savings,” then we could keep all of our purchasing power.

The reality is that life doesn’t cost more over time. In the 1990s if we needed fuel, we could buy 2 or 3 barrels of oil with 1 ounce of silver. Today in 2016, we can still pretty much do the same thing. On the other hand, buying oil with dollars would cost us 150% more today than in 1990. In other words, the costs of time, labor, skills, commodities, goods and services, which are all things that have intrinsic value, tend to stay fairly constant across multiple generations for the most part. But it’s the currency that is usually the clear outlier and it tends to lose value over any extended period of time.

One way we can hedge against inflation is through investing. Here are some choices that I’ve made in the past that have made 2016 one of my best years so far!

  • Buying precious metals stocks: I own metal mining stocks such as Goldcorp (G) and Silver Wheaton (SLW) which have outperformed the general stock market recently. But I’m in no way a good stock picker. 😛 The Market Vectors Gold Miners ETF (GDX) on the NYSE is an index fund that tracks the performance of global gold mining firms that are publicly listed in the U.S. This ETF has climbed 88% year to date! So anyone who holds a basket of gold/silver stocks or owns this GDX fund should be dancing on cloud nine right about now. 🙂
  • Buying physical commodities: I occasionally purchase silver and gold directly from the Royal Canadian Mint and bullion exchanges. For example, about half a year ago I bought a 100 oz silver bar which has appreciated in value since then. 🙂 I also practice earning silver wages, which basically means I make a portion of my money in silver to diversify my income. I’m not suggesting everyone should go out and do this too. I’m just saying from my personal experience this has been profitable for me.
  • Buying farmland: My down payment was less than 15% so this amplifies my return on investment by many folds. Canadian farmland prices have grown on average by 10% last year, which boosted my net worth by more than $30,000 as I’ve explained last month.
  • Buying real estate: I purchased a condo here in Vancouver when many people warned of a real estate bubble. Maybe they’re right, maybe they’re wrong. All I know is Vancouver condos have increased in price by 10% over the last year, adding over $25,000 to the market price of my property.

As we can see all these investments represent real, tangible assets that have economic value, and therefore do not suffer at the hands of inflation. Everyone wants to know the secret to investing. But it’s really quite simple. All we have to do is look at historical patterns in the economy and apply common sense. 🙂 Piece of cake, right?

Liquid’s Net Worth Update

My investment income is really starting to grow now thanks to 7 years of compounding. I received $360 in interest payments in April between my Air Canada bonds and Antrim MIC. Plus I made $720 in dividend income from my stock portfolio. That’s nearly $1,100 of passive income that I made without any effort. 🙂

*Side Incomes:

  • Part-Time = $800
  • Freelance = $700
  • Dividends = $700
  • Interest = $400
*Discretionary Spending:
  • Fun = $300
  • Debt Interest = $1300

*Net Worth: (MoM)16-04-stock-fiscal-update-networth

  • Assets: = $971,900 total (+23,900)
  • Cash = $5,200 (+2700)
  • Stocks CDN =$113,900 (+3800)
  • Stocks US = $65,600 (-3800)
  • RRSP = $68,100 (-1000)
  • Mortgage Funds = $23,100 (+200)
  • Home = $263,000
  • Farms = $433,000 (+22,000)
  • Debts: = $487,500 total (-2,800)
  • Mortgage = $189,200 (-400)
  • Farm Loans = $195,900 (-500)
  • Margin Loan CDN = $28,300 (-100)
  • Margin Loan US = $24,500 (-1400)
  • TD Line of Credit = $20,600  (-400)
  • CIBC Line of Credit = $11,000
  • HELOC = $18,000

*Total Net Worth = $484,400 (+$26,700 / +5.83%)
All numbers above are in $CDN. Conversion rate used: 1.00 CAD = 0.79 USD

Stocks were pretty much flat in April. But my net worth increased by over $26,000 mostly due to the updated farmland value. The most recent FCC assessment report shows Saskatchewan farmland value rose 9.4% in 2015. The average inflation rate (CPI) in Canada in 2015 was about 1.4%. To be on the conservative side, I have adjusted the farmland value on my net worth statement by taking the average of these two figures, which is 5.4%, or an increase of about $22,000.

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Oct 222015
 

Purchasing a 100 Oz Silver Bullion

Gold and silver may not be good investments, but I consider them to be a form of currency because they store financial value that can be easily exchanged for goods, services, or other currencies relatively quickly. 🙂

The idea of sitting on cash to stay safe and secure sounds innocent enough. But that’s only if we isolate the discussion to one domestic country. Today the world economy is more connected than ever before. Due to low commodity prices Canada’s economy isn’t as productive as it once was. This drives down the price of our currency because global investors are less confident in our productivity. Over the last year the Loonie has lost 20% of its value relative to the $US.

This affects Canadian’s ability to trade with other countries because it makes importing goods like fruits and gasoline from the U.S. more expensive. 🙁 However, those who held some silver as a substitute for the Canadian currency during this time would have kept most of their purchasing power. That’s because the price of silver has increased 13% over the past 12 months when priced against the Canadian dollar. 😉

So earlier this week on Tuesday I went out to my local bullion dealer and bought a 100 ounce silver bar for $2,241 CAD. The shape reminds me of an iPhone 6 Plus, except the silver is almost 3 times thicker measuring 2 cm (3/4 inch) thick. And it weighs about 3.11 Kg (6.86 lb,) which is literally 18 times the weight of an iPhone 6 plus, lol. Who needs the gym when you can workout at home with silver? 😛

15-10-100oz-royal-canadian-mint-silver-bullion

This highly purified block of silver was produced by the Royal Canadian Mint. The front of the silver bar shows the RCM signature stamp and the year it was produced (2011,) along with a serial number. The bar is also engraved with the weight of silver in it, and the purity of the metal. 🙂 RCM is known for its quality and its brand is recognized worldwide. There is some clear scratching and general wear on the bullion, but nothing too noticeable. Overall I give this purchase 8/10. 🙂 Great product. A+ experience. Would buy again! After taking some pictures I’ve stored the bullion in my safety deposit box at my bank. I don’t plan to sell it until I retire, or run into some kind of emergency.

Last year I blogged some step by step instructions on how to convert one’s wages into physical silver. This 100 oz bar I purchased represents about 4% of my income for this year. So instead of making 100% of my money in Canadian dollars I’ve essentially divested 4% of cash earnings into precious metals. I’ve also converted about 16% of my income this year into U.S. dollars and bought U.S. stocks. 😀 Diversification isn’t only about asset allocation. It’s about a holistic financial perspective, including currency considerations. 😉

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Jul 092012
 

I like to invest in precious metals, both on the stock side, as well as in bullion. Lately I’ve noticed the price of silver has been under-performing relative to gold.  The price of gold today (about $1600/oz) is pretty much the same as it was 12 months ago.  But silver on the other hand went from $37/oz a year ago to $27/oz today. That’s a pretty big drop (O_o) Since I know that the value of either ore (^_^) can’t decrease indefinitely, I think now would be a good time to increase my silver exposure.

So a few days ago I picked up 3 silver coins at the local bullion exchange (VBCE) in downtown Vancouver. They weigh 1 ounce each. These beauties can be purchased by anyone. Just contact your local bullion dealership. You can also buy them from an online broker these days, or ask me for further details. If you don’t care for the maple leaf design you can also purchase regular silver bullion for practically the spot price of the metal. For readers south of the border, you can buy the American Silver Eagles instead.

It can be argued that precious metals (gold, silver, palladium, etc) aren’t real investments because they don’t generate any returns, and the price of these metals are largely based on speculation. But the reason I like to own physical silver is because it’s really shiny and fun to hold and look at. Plus it’s a hedge against inflation. And I personally believe there is a fundamental element of supply/demand that affects it’s price because silver is an essential component in the making of cell phones, cameras, mirrors, cars, solar panels, computers, laptops, TVs, and a bunch of other necessities for the modern society.

image credit: dailyreckoning.com

Bullion: A piece of high quality, relatively pure, gold or silver coin, bar, or sometimes ingot.
Spot Price: The current market price of a commodity if the trade was done immediately.
Palladium: A rare, metal element (Pd) with similar properties as platinum. It is mostly used in catalytic converters.
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Random Useless Fact: In 2007 the government made a huge gold coin that weighs 100 kilograms (220lb). Back then 100 kg, or 3215 oz of gold was worth $2 million. Today it’s worth $5.1 million.