I hope everyone had a good weekend. Many people turned back their clocks 1 hour marking the end of this year’s daylight saving time. But time wasn’t the only thing that fell back. Economic growth in the U.S. pulled back to just 1.9% for the 3rd quarter of 2019, lower than the previous 2 quarters. Last month I wrote about anticipating this GDP number, and warned that if it continues to fall (which it did) then we may be close to a U.S recession. The Canadian economy is also in trouble, managing to eke out a 0.1% gain in the latest month.
Yet somehow the U.S. stock market reached an all time high at the end of October. Senior citizens must be thrilled to see their retirement funds performing so well. 😀
So economic output is slowing down, but investors have never been more optimistic – pushing stocks to record highs. How does this happen? It’s basically the result of the U.S. Central Bank’s monetary policy. In late October the Fed lowered interest rates again, trying to stimulate the overall economy. However, all it did was push investors to buy stocks over bonds because bonds now pay lower interest/returns. But a higher company stock price doesn’t improve business hiring, productivity, or employee salaries. The average American worker doesn’t see any direct benefit from the Fed’s monetary stimulus. Only Wall St. does.
The result is a diverging economic reality between two worlds; the working class that’s just one paycheck away from financial ruin, and the investing class who continues to see growing asset prices. Over the last 10 years, the S&P 500 gave investors about 13% annualized return. So the fact is if someone put $1,000 into a low cost index fund in October 2009, then today he would have $3,400 – assuming he reinvested the dividends. Wow. And all this required zero effort on the investor’s part. Amazing. 🙂
So the lesson here is simple. Focus on investing your savings, and be patient. Investing is like cooking a juicy steak; the less you touch it the better. Working hard at a job can only get you so far. But the real secret to financial success is to leverage the Central Bank’s policies, and invest in a diversified portfolio to build wealth the easy way. 🙂
Although October was a good month for stocks, I had a major expense (property tax payment for my farms) that stifled my savings. In the end, I was able to grow my wealth by $8,300 for the month. Not bad, but I didn’t reach the $1 million net worth milestone I was aiming for. Oh well. Better luck in November. 🙂
Liquid’s Financial Update
*Side Incomes: = $5,400
- Part time job =$600
- Freelance = $400
- Dividends =$1200
- Interest = $500
- Farm rent = $2,700
*Discretionary Spending: = $3,700
- Food = $300
- Miscellaneous = $2,100
- Interest expense = $1300
*Net Worth: (ΔMoM)
- Total Assets: = $1,384,500 (+7,000)
- Cash = $9,100 (+300)
- Canadian stocks = $195,100 (+2400)
- U.S. stocks = $134,900 (+1400)
- U.K. stocks = $21,900 (+500)
- Retirement = $137,700 (+1900)
- Mortgage Funds = $37,100 (+200)
- P2P Lending = $36,700 (+300)
- Home = $367,000 (assessed land value)
- Farms = $445,000
- Total Debts: = $385,100 (-1,300)
- Mortgage = $186,100 (-400)
- Farm Loans = $162,400 (-500)
- Margin Loans = $34,800 (-200)
- Line of Credit = $1,800 (-200)
*Total Net Worth = $999,400 (+$8,300 / +0.8%)
All numbers are in $CDN at 0.76/USD
This will probably be the last year I pay property tax for my farmland. I have been in contact with a realtor in Saskatchewan, and have already instructed him to list both my farms for sale. 🙂
Agricultural land has not been immune to the wider real estate slow down across the country. But there does seem to be some interest in my farms so far. In terms of market pricing, my realtor says I can probably expect to sell my farmland for about $446,000 in 2019. That’s pretty close to the farmland value I’ve already been using to calculate my monthly net worth so I will stick with my existing number for now.
Farmland values have had a great run in Canada, but slowing economic growth, trade barriers, and changing local conditions suggest to me that it’s time to reduce my exposure to Canadian farmland.
Random Useless Fact:
Congrats on a great month.
What are your plans for the proceeds of your farm?
Keep it as cash? Pay off the condo? Buy a rental?
I will probably use the money to buy a rental property in Vancouver. 🙂
Congrats on the great month. Definitely, trying times for farmers trying to get their crops to markets outside our borders.
That’s one of the reasons I want to sell. The return on investment will be low if farmers don’t earn much income. The recent good news is that China lifted its ban on Canadian pork and beef today. 🙂 But who knows how things will change in the future.
At least in the city the vacancy rate is so low you can choose your tenants. And renters work in various industries. The diversification helps because if your tenant loses his job and has to downgrade and move out, you can rent your property to someone else who’s still willing to pay a high rent.
But farmland is different. If political issues limit the exporting potential of Canadian crops then pretty much all farmers will make less money. It’s a very concentrated part of the economy.
So close! $600!! November it is then, what are you planning to do to celebrate?
Once I reach $1,000,000 I plan to splurge by going to to my favourite restaurant and then eat some cake. 🙂
I hit my personal target yesterday. One day after turning 33 years old. Now my portfolio is worth 500k €. Talk about a birthday present!!
Congrats jukka. Best birthday present ever. 🙂
Great Month for you Liquid
Just $600 missing to change your status. You might have hit the target yesterday (Nov 4) with market rally.
You can be debt free once you sell your farmlands. Soon, we will have a debt free millionaire .. Congrats Liquid.
Thanks Arun. I would have hit the target yesterday but the mortgage payment at the beginning of the month held me back. I’m getting paid at the end of this week though, so it might happen then. 🙂
Congrats on almost reaching your milestone. So close! Farmland is an interesting investment that I’ve never considered. I hope the sales go through smoothly for you.
Thanks Chrissy. I’ll keep everyone updated. 🙂
Love your post. It’s really amazing & helpful too. I like the way you explained everything. Thanks for sharing such knowledgeable content . Keep sharing 🙂