Sunday, December 30, 2007

The Secret to Tax-Free Living

After reading this article in the Globe Investor Magazine, it's no wonder why Canadian investors like Derek Foster like dividend paying stocks so much...

The secret to tax-free living
How to leverage the dividend tax break

Globe Investor Magazine, Nov. 21, 2007

THAT OLD SAW ABOUT death and taxes being inevitable is only half true: If you live in Canada, you can earn a tidy five-figure income without paying any tax. And you won't have to open an offshore bank account or work a single job under the table, because it's perfectly legal in the eyes of the Canada Revenue Agency.

How is this possible? Dividends.

Though the CRA is greedy when taxing employment and interest income, it's uncharacteristically generous when it comes to dividends of publicly-traded Canadian corporations. By taking advantage of the dividend tax credit, an investor with a sizable nest egg can live off the dividend income without sending a penny to Ottawa. Here's how.

Suppose you've worked hard, saved diligently and have a million dollars. You decide to invest the money in a portfolio of dividend-paying Canadian stocks that yields 4.5%. Let's further assume the $45,000 in dividends that rolls in every year is your sole source of income. Now, let's examine what happens to those dividends at tax time. The first thing the CRA does is apply a "gross up" to the dividends. Specifically, it multiplies the $45,000 by 1.45, for a total of $65,250. This is your taxable income. So far, things look pretty bad, right? The CRA is making it appear you earned more money than you actually did.

Including the basic personal exemption, your federal tax owing would be about $10,550. But-here's the key-because you're earning dividend income, you qualify for the generous dividend tax credit, which equals the grossed-up amount multiplied by 18.97%, or $12,375. Now for the best part: Subtract $12,375 from $10,550 and what do you get? That's right, a negative number! Translation: You don't owe any tax to the CRA. And because provinces offer their own dividend tax credits, depending on where you live you might not have to pay any provincial tax either.

In Ontario, for example, it's possible for an individual to earn up to $48,000 in dividends without forking over any federal or provincial tax, apart from a $600 Ontario health premium. In British Columbia dividend tax credits, an investor can earn up to $66,000 essentially tax-free, according to Michael Smith, an analyst with National Bank Financial. And the tax-free thresholds are set to rise over the next few years as provinces boost their dividend tax credits.

Though the tax-free dividend strategy is powerful, few people know about it, Smith says. "I've shown it to at least a dozen people in the financial industry-portfolio managers, investment bankers, analysts. Basically, they all say, 'Wow!'"

It's especially appropriate for retirees with significant savings and no other sources of income.
Now, let's look at what would happen if, instead of earning dividend income, you invested the $1 million in a bond or guaranteed investment certificate that yields 4.5%. Because interest is taxed at full marginal rates, if you live in Ontario you'd end up paying $9,050 in tax on $45,000 of income.

From a tax perspective, dividends are the clear winner. But dividends are at--tractive for another reason: Many companies-including banks, insurers, pipelines and utilities-raise their payouts once a year or more. Manulife Financial, for example, has hiked its dividend at an annual rate of about 25% over the past five years.

A bond or GIC, on the other hand, pays a fixed amount of interest. If you can stomach some volatility in the stock market and have a long-term investing horizon, dividends are the better choice, in my books.

That's why, for my own portfolio, I buy nothing but dividend stocks with rising payouts.

JOHN HEINZL is an investing reporter and columnist with The Globe and Mail's Report on Business.
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Saturday, December 29, 2007

2008 Resolutions

As a follow-up to the previous post of my biggest regrets of 2007, I hope to learn from those mistakes as I set my goals / resolutions for the upcoming year. So without further adieu, here are my goals for 2008 in no particular order:

  • Take advantage of the financial stock slump to pick up some dividend-paying Canadian bank stocks to increase my dividend income.

  • Set stop-losses and stick to them no matter what happens.

  • Stay away from companies I don't understand or even pretend to understand (i.e. the entire biotech industry).

  • Finally establish a plan for my RRSP and invest the cash that is currently just sitting there.

  • Let my winners fly until the trend is broken.

  • Take advantage of any extra cash in my portfolio for quick wins.

  • Earn higher capital gains than in 2007.

  • Stick with bigger, well-known names for a minimum of 80% of my stock portfolio.

  • Take advantage of season trends in certain stocks / sectors.

  • Start buying quality stocks if and when I hear the mass media and regular folks on the bus discussing the collapse of the market.

  • Reach a net worth of $300k in liquid assets (cash / stocks / mutual funds + RRSP).

  • Get a promotion at work.

  • Exercise at least 30 minutes a day, 3 times a week.

  • Find Miss Right For Me (probably a long shot, but I'll throw it in there anyways).

Thursday, December 27, 2007

Biggest Regrets of 2007

With 2007 quickly coming to an end, I thought it would be appropriate to reflect on my investment activities for the year and come up with a list of my biggest regrets of the year:

  • Thinking that I was smarter than the market.
    The most explicit example of this would be Timminco (TIM-T). I had become aware of this stock when it was trading in the three to four dollar range. At that point, I had done some preliminary research on the company and determined that it was too expensive. Perhaps more importantly, in retrospect, is the fact that I had also read that silicon (the main future driver for this company) would soon be replaced by other elements in newer solar power technologies. With that in mind, I thought this stock was over-hyped. TIM ended the day at $21.91. Enough said.

  • Not investing in stocks in clear uptrends like I had in 2006.
    This cost me dearly by missing out on some impressive gains this year.

  • Missing my chance to re-enter / add to positions during the August meltdown.
    Between being pre-occupied with my new job and not having the guts to go all-in when the casino is burning down, prevented me from making over forty percent in several of my favourite stocks.

  • Not letting my winners fly until the trend is broken.
    Cashing in my profits too early resulted in not getting the full benefits of the rise of stocks like Thompson Creek (TCM-T), Hanfeng (HF-T), Migao (MGO-T), Oilexco (OIL-T), and Silvercorp (SVM-T) amongst others.

  • Not cutting my losses early enough.
    Call it my abundant optimistic outlook on life or stupidity, but by not having an exit strategy when things go wrong resulted in my losses killing most of my gains this year. Thanks for nothing Nova Uranium (NUC-X) and Liponex (LPX-T).

  • Not taking advantage of seasonal trends like I had earlier noted to myself.

My next post will be on my goals / resolutions for 2008. Stay tuned!

Monday, December 3, 2007

What happens when someone makes a mistake

and a BIG mistake at that?

Well, in the case of Thompson Creek's trading activity today, the stock gets halted.

The following issues have been halted by Market Regulation Services (RS):
Issuer Name: Thompson Creek Metals
TSX Ticker Symbol: TCM
Time of Halt: 12:59 EST
Reason for Halt: To clear erroneous orders and to restore fair and orderly market
For further information: Market Regulation Services Inc., (416) 646-7299

Trading resumes in:
Issuer Name: Thompson Creek Metals Company Inc.
TSX Ticker Symbol: TCM
Resumption Time: 13:12 EST
For further information: Market Regulation Services Inc., (416) 646-7299


Here's the intraday chart to provide some insight as to what happened:


and the 1 year chart just for kicks:


Apparently, orders were actually undone according to at least one Stockhouse Bullboard poster so I question the accuracy of these charts in demonstrating today's activities. But these charts may cause trading software to trigger interesting recommendations and transactions in the days to come... let's see how it plays out.

And on a side note: Wouldn't it be nice to have an undo button on your trading platform?

Wednesday, November 28, 2007

Having a Second Job without Working

What would you say if you were able to make a few extra bucks two or three times a week on top of your regular job without working?

If you're like me, you'd probably ask where you can sign up!

Well, with the recent major swings in the market I think it would be possible to accomplish such a feat fairly easily by taking short-term positions (ie. daily, overnight) on stocks that are experiencing a fair amount of volatility lately.

Now, I'm not talking about investing in a highly speculative stock that will cause you to lose sleep over or an illiquid, cow-pasture stock that you'll have to convince your neighbour is the next big diamond mine just so you can sell your stake... I'm talking more about the big boys. You know the ones: The guys on the main index with all those shares freely flowing from one hand to the next with recognizable names that just happen to be the ones you wouldn't mind owning for the long-term in the event things don't go quite according to plan.

Surely, you would have to take commissions into consideration with such a strategy but wouldn't it be nice to make an extra 100 bucks a day or so by just buying and selling a blue-chip stock within a few hours or days?

And oh yeah, don't forget that capital gains are taxed at only half the rate of your regular job's income.

Just something to keep in mind while you keep your treasure chest on the sidelines during these volatile days on the market...

Sunday, November 25, 2007

How the Market Really Works

Since it's Grey Cup Sunday, here's a funny skit that provides an explanation of the ingenuity of the financial markets at work...





Too bad it's true!

Tuesday, November 20, 2007

How Call Options Work

If you've ever been curious as to what the heck "Options Trading" is all about, Preet from WhereDoesAllMyMoneyGo has written an excellent three-part series on the subject at Million Dollar Journey:

How Call Options Work I - The Basics

How Call Options Work II - Examples

How Call Options Work III - Call Option Writing

Sunday, November 18, 2007

Highest Cash Levels in Years

After updating my spreadsheets this weekend, I can safely say that I haven't had such a small percentage of funds held in stocks in years.  My portfolio is currently approximately 87% cash. Looking at the charts of stocks on my watchlist, I can't say that I see anything very intriguing to invest in so I'm either going to have to wait from the sidelines or expand my horizons.  I've missed out on the big bounce from the August lows but at this point in time, I see a lot of stocks as being 'tired' and ready to rollover.  That being said, we're well into the month of November, which anectodally is the start of the run-up to the RRSP-buying season. Time will tell what happens. 

Saturday, November 17, 2007

McInerney's Assessment

It's always interesting to read up on new ways to assess companies based on their fundamentals. Brian Milner's article, "RIM: out of the stall zone?", discusses Francis McInerney's methodology.
What follows is an excerpt from the article:

Mr. McInerney has developed an innovative means of assessing which companies are likely to exceed even the wildest expectations of the market while others are destined to bitterly disappoint and still others are at risk of squandering huge leads over rivals.

Dedicated followers of his analysis would have jumped on the Apple bandwagon long before it got overcrowded, embraced Google, Comcast and Intel, been wary of Nokia and Microsoft and steered well clear of the likes of Viacom, News Corp., Alcatel-Lucent, Ericsson and the auto makers. They also would have understood why retail giant Wal-Mart continues to brush aside all challengers and why Dell is no longer able to do the same.

But the Canadian expatriate had never subjected RIM to his rigorous formula, an oversight he vowed to correct at the behest of The Globe and Mail.

What he discovered was less than flattering, although by no means a disaster in the making.

RIM started the current fiscal year with a lousy grade of C- from Mr. McInerney, managing director of New York-based North River Ventures. But it has since improved markedly.

“It had a high velocity of capital – operating earnings as a percentage of enterprise value [equity plus long-term debt] – but a mediocre velocity of cash.”

The latter describes how fast a company can turn sales into cash, which is a simple way of assessing how efficient it is at managing its working capital. Those that excel at it get better information at a faster rate from their customers, can afford to take more risks and are more likely to sustain profits.

To measure cash velocity, Mr. McInerney's equation takes days of sales in receivables, adds them to days of inventory and subtracts accounts payable turnover.

Of course, there is more to it than that. After determining how effective a company is in managing cash, capital and the flow of information, he applies an algorithm to come up with grades from A to F, although he doesn't bother with an E.

“After you hit D, there's just no point,” he laughed.

In RIM, Mr. McInerney discovered a relatively slow organization with a strong rate of return.

Michael Dell used to describe such companies as pools of cash waiting for smarter competitors to come along and siphon off their profits.

RIM had a profile similar to Nokia's, which has made them both vulnerable to such predation, Mr. McInerney said. “Companies like this are in my risk zone.”

But in the first six months, RIM slashed inventory days to 21 from 33 and receivables to 57 days from 69. Payable turnover was down to 25 days, indicating that RIM has tightened its supply chain and cleaned up its operations. Its grade is now a more respectable B.

“During the first half, management appeared to have realized how vulnerable it was and seemed to get religion,” Mr. McInerney opined. “If it can get to an A- by the end of the fiscal year, this will indicate a major turnaround. The stock will be a keeper.”

The top-rated companies have closer to 10 days worth of inventory and no more than a month of receivables. Dell, for example, had about five days worth of inventory at its zenith, and its direct-sales business model enabled it to collect from customers before paying suppliers.

The next quarter will tell the tale for RIM, Mr. McInerney said, warning that the company is now in what he calls the stall zone. Why? Because it's much easier to slide backward at this level than it is to improve the fundamentals.

How well you manage the demands of the future depends on the number of cash wait states in your business. McInerney has developed proprietary wait state metrics to gauge your management's ability to navigate the future. You can calculate your company's Management Grade by entering your numbers at their web site.

If his North River Management Grading System throws you an A, you have one of the best performing companies in your sector. If you come up with a C, or worse, you have deep structural problems that you must address immediately. You don't want to tell shareholders after their earnings have evaporated that you got North River's Management Grade F, for free, and did nothing about it!

Monday, November 12, 2007

IBM Takes Over Cognos

Cognos has long since been considered a takeover candidate in the highly-consolidatory business intelligence software industry and it finally happened today as IBM announced its intentions to purchase the company in an all-cash deal.

FP Trading Desk notes that Cognos showed deviant trading behaviour in days ahead of IBM takeover:

Cognos shows deviant trading behaviour in days ahead of IBM takeover

Ottawa-based software maker Cognos Inc. (CSN/TSX, COGN/NASD) said on Monday it agreed to be purchased by IBM (IBM/NYSE) in an all-cash deal of US$58 per share. But in the two days before the US$5-billion deal was announced, Cognos shares rose 9.5%. The stock closed at $45.69 in Toronto trading Wednesday, before rising to end the week at $50.02.

Measuredmarkets' analysis shows deviant behaviour trading in Cognos shares on Nov. 8 and 9, despite any major news from the company. However, it has long been considered a takeover candidate.



Measuredmarkets Inc.'s Early Warning Service alerts investors to when a stock’s trading pattern changes significantly from its normal behaviour. The trading analysis covers nine time periods, examining closing price, total volume and the number of individual trades. It surveys the NYSE, NASDAQ (National Market), AMEX and TSX, and is available at measuredmarkets.com

Saturday, November 3, 2007

Upcoming TSX Index Rebalancing

I have always wondered what kind of performance boost a stock gets when it's added to an index. One would think there would be extra demand for such a stock and hence a higher share price but from what I recall from casual observation, this is not always the case. So as a bit of an experiment, let's make a note of the likely candidates and revisit these stocks at year's end to see how they performed.

On November 2nd, The National Post's FP Trading Desk noted that:

Ahead of the December 2007 rebalancing of the S&P /TSX composite index – due to be announced by Dec. 14 and to take effect after markets close a week later – CIBC World Markets analyst Yin Luo is making his predictions as to what some of the changes may be.
QLT Inc., Angiotech Pharmaceuticals Inc., Cyries Energy Inc. and Ballard Power Systems Inc. are the four members of the benchmark index consider likely to be removed, based on data as of Oct. 30.
Meanwhile, nine companies meet the criteria for addition, Mr. Luo said in a research note. These include Allen-Vanguard Corp., Canadian Hydro Developers Inc., Canaccord Capital Inc., Mega UraniumLtd., Gold Eagle Mines Ltd., Gateway Casinos Income Fund, Timminco Ltd., Absolute Software Corp, and Sandvine Corp. European Goldfields Ltd. is also on his watch list for potential candidates for addition.





Chartgame

As an avid investor, you've probably wondered how well you can predict the future performance of a stock. Perhaps, you've heard a thing or two about technical analysis but believe it's fruitless or you think you're a TA-expert, but don't feel comfortable placing your own money on the line.

Well, now there is a great time-lapse stock trading game called Chartgame where you can test your stock prediction strategies.

When playing Chartgame, the web site will present you with a random historical stock chart of an actual large cap (S&P 500) security, without telling you which company and time period the chart represents.

You are then given the opportunity to reveal the stock chart one day at a time, selecting to "buy" or "sell" the stock at various times. After a maximum of one year is played for the security, the actual name of the company, and what time period the graph was for is revealed, and you move on to another stock chart for an unknown company and time period.

You are rated on how much gains you made over how many days invested. The computer compares you to a strategy of "buy and hold" on the stocks played. Your goal is to beat that.

This a great game to sharpen your trading skills with actual historical stock charts. It is straight-forward as it simply provides you with the stock chart, daily stats, and associated volume so you don't have to be an expert in moving averages, bollinger bands, etc. to play the game. This may be a bit too simplistic for TA-experts but for the average-Joe investor like me who likes using simple technical analysis techniques to help predict future stock performance, Chartgame is an excellent way to improve your skills.

If you have time this weekend to test your skills (and/or luck) in the market, I recommend you give Chartgame a try.

Wednesday, October 31, 2007

Good News from our Sponsors

Some of you may have noticed the new 'sponsors' displayed on the right hand side of this blog.

I encourage you to check them out as some of them have recently introduced great promotions.

Questrade, the online discount brokerage, offers a number of free trades and great commission rates. If you feel inspired to join this firm, please use the Referrer ID 'TRADER' (without the quotes) when filling out your Questrade application form.

Chapters Indigo also announced some price cuts to reflect the value of the Canadian Dollar.

You can also check out my list of recommended books on topics like Personal Finance, Real Estate, and Job Hunting by visiting my book store.

And while on the topic of blog features, you can subscribe to this blog with your favourite RSS feed reader by clicking here.

Sunday, October 28, 2007

Living Small

How much room do you really need to live in?

Well, if you come up with a figure like 300 square feet, then this house is for you.



According to Radu's blog, Toronto's smallest house is up for sale for approximately $600 per sq. ft.

Saturday, October 27, 2007

GStock

Would you trust a supercomputer to perform stock trades on your behalf?

Well, you don't have to go that far but you can have one help you with your analysis. GStock is a virtual supercomputer formed by many computers calculating a huge amount of investment strategies to give you timely buy and sell stock picks.

The site covers over 4,000 large and mid-sized US traded stocks. I just came across this site so I decided to give it a shot. Unfortunately, it doesn't currently cover several of the US stocks on my watchlist so I was disappointed but if you invest in American equities, you might want to check it out to see if your stock is covered.

Exit Strategies

After examining my trading activities over the past few years, I've come to the realization that my main downfall is the lack of an exit strategy in the event that I'm wrong in my analysis. I've been hesitant to place stop loss orders in the past since I suspect brokerages take advantage of such orders to grab 'cheap' shares. Nevertheless, stop losses can play an important role in limiting your downside.

I recently heard a trader say that you should have a minimum 2:1 reward-to-risk for every trade you enter so you only have to be right half the time to break even. Of course, that's easier said than done but placing stop loss orders are a great way to force you to stay the course with your trading system and getting rid of some of the emotions involved in trading.

Another thing that has limited my gains is selling my winners too early. When I enter a trade, I have a target sell price in mind. That's all fine and dandy but what happens when it hits that target? That's right, I usually sell it. Like they say, you can never go wrong taking a profit but sometimes I'm right and I sell at or near the peak while other times, the share prices goes through the target price and the really big returns just begin.

In addition to being sure to limit my losses going forward, I'm going to have to develop a more concrete exit strategy. I have a few ideas that come to mind that I will have to refine over the next few weeks but while I do that, I'd also be interested in hearing about your strategies.

Friday, October 26, 2007

Price Drops Across Canada

With the steep rise in the value of our Canadian Dollar, the media is having a field-day filling up the news hour with stories about cross-border shopping and the question as to when prices will finally drop in Canada to reflect the Dollar's strength.

Sure, prices in Canada should eventually drop but somehow I doubt they will drop to American levels. In fact, I suspect U.S. prices will increase to those levels currently found in Canada so be sure to take advantage of the "deals" across the border if you have the opportunity to do so.


Useful Links for Cross-Border Shopping:
How to Import Vehicles into Canada
Tax Exemption for Cross-Border Shopping


In other news, the Government of Canada recently launched a website to inform families of recalled food and children’s products.

Tuesday, October 16, 2007

S&P/TSX Canadian Dividend Aristocrats Index

Standard & Poor's launched a new index to track Canada's most consistent dividend-raisers.

The S&P/TSX Canadian Dividend Aristocrats Index is composed of Toronto Stock Exchange listed Canadian companies that have increased dividends annually for at least seven years. The index consists of 35 stocks, with each stock weighted based on its indicated dividend yield of each component stock.

The index includes all of Canada's six big banks except CIBC, which didn't increase its dividend in 2003.

S&P stated that based on back-testing, the index has produced yields ranging from 3.1 per cent to 4.2 per cent over the past five years.






Sunday, October 14, 2007

The Lazy Investor - Part 2

Every since Derek Foster's Stop Working: Here's How You Can book hit store shelves in 2005, there have been critics of his early retirement strategy and questions surrounding its feasibility and the luck involved.

To follow-up on my previous post, The Lazy Investor - Part 1, in which I reviewed Foster's latest book, The Lazy Investor: Start with $50...and no Investment Knowledge, I thought it would be appropriate to present an interesting article I came across a few days ago that helps answer some of those questions.

Ellen Roseman's October 10th article in the Toronto Star provides some additional insights after her discussions with Foster.
What follows is an excerpt of Roseman's article, "Retiree, 34, helped by windfalls":

Last Thursday, he drove from his suburban Ottawa home – where he lives with a stay-at-home wife and four young children – and pulled out a stack of paper.

These were all his discount brokerage mailings going back to 1999. But since they weren't filed – or even unfolded – I wasn't going to sort through eight years' worth of transactions.

Meanwhile, the statements didn't tell the whole story. His investing career started in 1990, when he was 20. (He's now 37.)

Luckily, he'd prepared a summary. So, here's what I can tell you about Foster's strategy.

While he talks about saving and investing $200 a month over 12 years, that's just a baseline or minimum amount. He also added some windfall money (such as income tax refunds, GST credits, Christmas commissions while working at retail jobs and a pay-equity settlement).

He started with mutual funds, but now holds only dividend-paying stocks and income trusts. He's looking for companies whose products you use every day and whose shares you can hold forever.

Over time, he traded less and less. But in 1996, he borrowed money from his broker to buy Philip Morris, the U.S. tobacco manufacturer. Despite a $60,000 gain in a year, he sold the shares, fearing the company was vulnerable to lawsuits, and bought them back again later.

Still fond of leverage, he has more than $130,000 worth of stock bought on margin in his account (about 25 per cent of its current value).

He's been buying U.S. stocks that have become cheaper because of the falling U.S. dollar, such as Bank of America, Johnson & Johnson, Pfizer, Starbucks and Wal-Mart.

Why use borrowed money? Doesn't that make his strategy more risky? Well, Foster needs a tax break. His self-published books have brought in $150,000 in revenue he'd like to offset. (Interest paid on an investment loan is tax-deductible.)

And, as a self-described "control freak" who makes up his own mind, he's not afraid to take big stock positions. For example, he owns 1,000 Wal-Mart shares, now worth $45,000 (U.S.) and 700 J&J shares (worth $46,000).

Gutsy and confident, skeptical of conventional wisdom, Foster is not a typical investor. But he doesn't pretend to be. "Retiring at 34 is exceptional, as I state in my book," he says.

"However, this strategy is the surest way to early retirement without undue risk, and if readers follow this strategy and retire 10 to 15 years earlier than they thought, it's a success."


Lazy Investor STOP WORKING

The Lazy Investor - Part 1

Self-proclaimed as Canada's youngest retiree, Derek Foster recently published his second book on his 'no thinking strategy.' I had a chance this weekend to read his latest book, The Lazy Investor: Start with $50... and no Investment Knowledge so here's a quick book review.

Compared to his first book and national bestseller, Stop Working: Here's How You Can!, Foster concentrates his efforts this time on describing how to start investing in dividend aristocrats with a small amount of cash through DRIPs and SPPs. Foster takes you through the steps to acquire that all important first share and also provides different strategies to help teach your children about the importance of money. The book also provides an update on Foster's investments and thoughts on the future of income trusts.

While I found the original Stop Working book more inspirational (probably because it introduced me to new investment strategies at the time), I would still recommend The Lazy Investor for Canadians interested in learning about investment / early retirement strategies that you probably will never hear from the so-called "financial experts."

Derek Foster's two books would make an excellent Christmas gift for anyone you think might benefit from learning a thing or two about personal finance.

Lazy Investor STOP WORKING


Click here for "The Lazy Investor - Part 2"

Friday, October 12, 2007

The Fed is Irrelevant

Jim Rogers, author of Hot Commodities: How Anyone Can Invest Profitably in the World's Best Market, was recently interviewed on Bloomberg and stated that the Fed is irrelevant.  This obviously caught the anchorwoman offguard. If you want a good laugh while listening to some good financial insights, take a few minutes out of your weekend to watch it.

Thursday, October 11, 2007

Breaking Even on SLW

Today's jump in Silver Wheaton passed through my exit price target that I set a few weeks ago.


So I am now out of SLW and I didn't lose any money on a 'bad' trade that was based on emotion as expressed in my initial post on the subject stock.

This sale continues the trend of late for me. The strategy hasn't fared too well for me but it has allowed me to grow my war chest should a dip occur as I suspect it will in the next few weeks. In fact, the start of that dip might be today at many of the Canadian stocks on my watch list surged forward in the morning only to collapse in the afternoon. SLW happened to take part of this market activity as shown in the intraday chart below.

Saturday, October 6, 2007

File Sharing with Pando

With this being Thanksgiving, you will probably snap a few photos of friends and family when you get together this long weekend. But how do you share all those photos?

One of the easiest ways that I've found to do this is with a little piece of software called Pando.

Just download and open up Pando, enter your friend's email addresses, drag over the folder with your photos, videos, and other files (up to 1 GB at a time), and click on send.

No more worries about emails bouncing back for exceeding your friend's inbox limit.
Best of all, it's a free download.

Happy Thanksgiving!

Saturday, September 29, 2007

TED Spread

Brian Milner wrote a great article regarding a possible indicator of the next financial crisis:

When will the next financial crisis hit?
by Brian Milner
September 28, 2007 at 6:56 PM EDT

As the U.S. dollar plumbed new depths yesterday against the euro and other major currencies and woes stemming from the U.S. mortgage mess continued to mount, the question in the marketplace was not if, but when the next major financial crisis would hit.

To which we would add: Will we have enough warning to take cover from the coming storm? And what form should that shelter take?

It's certain that we can't rely on central bankers or other government officials to clue us in. Most are still reassuring the public that all is right with the world and that there will be little economic spillover from the turmoil in the credit and currency markets.

Two days after Bank of Canada governor David Dodge said that the beleaguered credit market was getting back to normal, the central bank showed that the situation is anything but normal when it poured nearly $1-billion into the money markets to stabilize rates.

Dealing with a separate credit issue, the European Central Bank had to provide another €3.9-billion in emergency lending to meet the borrowing needs of banks this week, which means they couldn't get the cash at a reasonable rate from other banks.

That's a bad sign, because if anyone knows whether a financial institution is harbouring buckets of bad mortgages and other junk among its supposedly high-quality assets, it's another bank.

There's a way for investors to measure this lack of confidence called the TED spread, which has largely fallen into neglect in recent years.

Mention this gauge of financial system health to a bunch of MBA students today and they are apt to look perplexed. Some may even wonder why you're talking about bed linens.

All of which upsets Donald Coxe to no end.

“It was my guiding light,” says the esteemed author and global portfolio strategist with BMO Financial Group. He credits it with keeping his job on Wall Street 20 years ago when he used it to correctly forecast the 1987 market crash.

And Mr. Coxe insists that it still has considerable value today, despite vast changes in the global financial system in recent years.

The TED spread originally was the difference between interest rates on three-month futures contracts for U.S. Treasuries and Eurodollars with identical expiration months. The higher the spread between T-bills and Eurodollar rates the greater the perceived risk of defaults. U.S. Treasuries are considered risk free, while Eurodollar rates reflect the risk that lenders won't get paid back.

The Chicago Mercantile Exchange dropped T-bill futures this past summer due to lack of interest, leaving dedicated TED followers to rely on the less precise comparison of cash bills to Libor (London inter-bank offered rate). But it still does the forecasting job, as the summer's events proved.

Before the credit crunch hit with full force, the TED spread was at a benign level of about 0.40 per cent. But it soared to a high of 2.40 in August, a level not seen since 1987 crash, and stood at 2.15 the day of the big meltdown. It soon fell back to the 1.30 level, before creeping back up. Yesterday, it clocked in at close to 1.45. So it comes as no surprise to the shrinking band of TED fans that central banks would still be facing crunch issues.

“If the banks aren't sure a bank can meet a claim, they stop advancing money to each other and the TED spread jumps,” Mr. Coxe says. “So it tells you when it is that the banks don't trust each other.”

The world of financial liquidity has changed dramatically in just a few short years. Today, there are other huge pools of international capital denominated in yen and euros, which, collectively, dwarf the eurodollar market for seekers of short-term capital. Neither existed during the last major credit crisis nearly a decade ago. Another twist is the ability of traders to move millions electronically into other currencies at blinding speeds.

But for all that, if the good old TED spread widens again beyond, say, 1.75, it's a safe bet that the system has yet to repair itself.

The TED is not going to be the only alarm bell that goes off if things spiral out of control. Others to watch include the Japanese yen strengthening, gold prices skyrocketing and U.S. financial stocks plummeting. But if the TED takes off, it will definitely be time to lower the lifeboats.

Thursday, September 27, 2007

One More Hiccup?

Came across this blog entry today:

One more hiccup before the rally
Leonard Zehr, today at 2:21 PM EDT

Ron Meisels’ charts are telling him to expect another market down leg that may be less severe than the August sell-off but could take some time to run its course. “Just in time for the usual start of the late- October/early-November year-end rally,” he writes.
The main reason for another swoon is that sentiment in mid-August never reached extreme proportions because after a couple of days, the consensus suggested it was just another buying opportunity. “Markets bottom on fear, not greed,” he warns.
When markets complete the latest negative wave, he predicts a new bull market could take flight, lasting through 2008 and possibly the first half of 2009.
His current sectoral reading has energy “selectively positive,” as stocks such as Canadian Natural Resources Ltd., Petro-Canada, Imperial Oil Ltd, EnCana Corp. and the more speculative Connacher Oil & Gas Ltd. have all held their ground, despite the August sell-off.
In materials, Barrick Gold Corp., Agrium Inc. and Teck Cominco Ltd. are “targeted significantly higher,” while insurers “look much better” than the banking sector.
Consumer staples are still a “major disappointment,” as Loblaw Cos. Ltd. and George Weston Ltd. are hitting multi-year lows, he adds.

I also have this feeling and will probably wait until November before dipping my toes in the market in a big way (unless some great deals come up). Unfortunately, I got out of my Chinese fertilizer plays way too early but I didn't fare too badly with my other recent sells of Agnico-Eagle and Rogers. We'll see how October shapes up...

Monday, September 24, 2007

"True" Yield

Leonard Zehr of The Globe and Mail posted the following article:

Going beyond dividend yield
Leonard Zehr, today at 8:50 AM EDT

Take the dividend yield and subtract the three-year compounded annual growth rate of shares outstanding. What you’re left with is “true yield,” which provides a “more comprehensive measure of how firms return capital to shareholders,” contends UBS strategist George Vasic.

By his reckoning, there are only nine stocks in the TSX composite index, with a dividend yield 1.5 per cent, a true yield of 3 per cent, no share dilution over the last three years, five consecutive dividend increases with growth of greater than 10 per cent and a payout ratio of less than 50 per cent.

They are: Methanex Corp., National Bank of Canada, Canadian National Railway Co., Manulife Financial Corp., Canadian Imperial Bank of Commerce, Bank of Montreal, Bank of Nova Scotia, Sun Life Financial Inc. and Royal Bank of Canada.

Friday, September 21, 2007

Par

It finally happened! $1 CAD = $1 USD.

Tuesday, September 18, 2007

More Selling into Strength

Well, I did it again. I sold my shares in Hanfeng today.


As with my other recent transactions, I still believe Hanfeng is a great company but a ~40% rise in just over a month makes one wonder what the risk-reward ratio is at this time.

Had I been less occupied at work and quite honestly, had more guts, I would have made a killing in the past month with some of my stock picks as I had some extra cash available to invest. Oh well, another lesson learned: when markets are tumbling, be sure to put in stink bids to take advantage of that one day when everything collapses completely and bargains are abound.

Hopefully, I can re-establish a position at a lower price later this year.

Thursday, September 6, 2007

Selling into Strength

Continuing my recent theme of selling some of my holdings into strength and in the process, redefining my portfolio, I took advantage of today's gold rally to sell my Agnico-Eagle shares.


Agnico jumped 9.67% today as gold jumped 2% (according to Kitco). I still believe that Agnico is a great company and has excellent prospects going forward but it's another one of those stocks that has had a huge jump since hitting a low of $36.68 on August 16th; that almost 39% in three weeks!

By selling these shares, I have reduced my precious metals exposure. This might not be the brightest move as gold and silver tends to perform best at this time of year. That being said, I still hold Goldcorp and Silver Wheaton; both of which, had good days, as well today.

I intend to utilize the cash from this transaction to finance a future investment that will help diversify the assets in my stock portfolio.

Friday, August 31, 2007

Migao - Too Much, Too Soon?

Migao has bounced back nicely since its recent low of $5.51 during that wild session on August 16th.


In two weeks' time, the share price has jumped back up to $7.82; that's almost 42% in two weeks! For this reason alone, I decided to sell my Migao shares today and wait for a re-entry point later this year. We'll see how this decision turns out.

Tuesday, August 28, 2007

Check Your Brokerage Account Regularly

The recent security breach at online brokerage firm, TradeFreedom Securities Inc., re-emphasizes the importance of checking your account activities on a regular basis, even if you are a passive investor. I would suggest logging in at least once a week just to make sure nothing fishy is happening and report any irregularities right away.

Another Reason to Check Your Lottery Tickets

If you play the lottery, you should always check your tickets manually as this news story identifies a potential issue with automated lottery checkers.

Saturday, August 25, 2007

VOIP to Cut Cell Phone Rates

Although I don't have a cell phone, I found the following article interesting:

New firm uses VOIP to cut cell phone rates

Fri Aug 24 2007
By Geoff Kirbyson

A Vancouver-based next generation mobile company is hoping to carve out a niche in the long distance cellular market by offering voice over Internet protocol calls for just pennies a minute.

Bill Tam, CEO of EQO, which is pronounced "echo", said it developed its technology because long distance charges on mobile devices are still sky-high compared to those on land lines.

EQO's service, which was launched across the country Thursday, charges 2.6 cents per minute for long distance calls in Canada and to 30 other countries. It also offers free instant messaging using a number of different platforms, including MSN, AIM, Yahoo!, Google Talk, ICQ and Jabber.

In order to use EQO, users have to go to the company's website, download its application to their wireless device and click on an EQO icon when making a long distance call.

"Consumers already have cell phones," said Tam. "We said, 'let's do it in software so they don't have to buy another piece of equipment.'"

Eamon Hoey, a Toronto-based telecommunications analyst, said EQO is playing in the same space as Yak Communications and Gold Line.

Thursday, August 23, 2007

Blog Roll Suggestions

Over the next few weeks, I'll be establishing a 'blog roll,' listing my favourite Canadian personal finance blogs.

If you feel that your blog is a valuable information source for Canadian investors, feel free to leave a comment with your URL and I'll check it out. If I agree, I'll place it on the roll.

You can also nominate other PF blogs that you believe Canadians shouldn't live without.

Monday, August 20, 2007

Holding on Tight

The good news is the cash in my portfolio is growing, percentage wise (at least); the bad news is that it's at the sake of my equities! The hemorrhaging has stopped temporarily... hopefully, for good!

I'm holding on tight to my hard-earned cash as I'm still not comfortable in investing in some of the discounted stocks on my watch list. Although they have present good buying opportunties. I have a sneaky suspicion that we will see another downdraft in the weeks and months to come, and we might not recover from this downtrend until November.

Hopefully, I'm wrong and the worst is over... but just in case I'm right, I'm taking this time 'away from the market' to identify some stocks that I'd like to get my hands on and decide if I should average down on the stocks I currently own. I'm also trying to figure out how much of my cash position should be devoted to each of these two strategies.

Once I've identified these stocks, I will try to determine their long term support levels and place a low-ball bid that just might happen, should the worst case scenario actually occur.

The volatility of late presents excellent daytrading opportunities to make quick cash but my work obligations make it impossible for me to partake in any such activities. As such, the long term view of stocks must take precendence in my portfolio at this time.

Wednesday, August 15, 2007

What to Do?

With the markets tumbling left, right and center, and several of my major holdings taking massive hits today, the question now is should I be buying more of the same stocks (like Agnico-Eagle Mines, Hanfeng, Migao, Silver Wheaton, Thompson Creek Metals) or try investing in one or two new stocks for a quick flip if the markets decide to turn around or just watch from the sidelines until things settle down a bit?

If only I had a larger war chest for times like these...

Tuesday, August 14, 2007

Volatility

Until these volatile trading sessions stop their daily routine, there won't be any reason for the markets to recover back to their recent record highs. I say this because unless you are a long term investor, there is very little reasoning behind holding onto a stock in these uncertain times, after they make 5-10% profit intraday with the expectation that they can buy or short the stock for another quick 5-10% gain that same day or the next.

When we finally see daily intraday ranges of a maximum of one or two percent on individual stocks then maybe, just maybe, we'll see a return to the upside or maybe, it just will be the calm before the hurricane...

It will be interesting to see if this quarter's earnings of the TSX Group will benefit from the market volatility and associated record trading volume of recent days.

Saturday, August 11, 2007

Positive End to the Week?

Interestingly enough, the TSX Composite Index rallied in the last hour of trading on Friday, as shown in the intra-day chart below, ending the day down only 11.73 points.


Over the past few Fridays, the Index had collapsed in the final few hours of the day as traders apparently did not want to maintain positions over the weekend. What changed their minds this week?

Looking at the three-month chart of the Index below, the last two lows had very similar 'bars' with closes near the top for the day. I believe these are also referred to as 'hammer candles' if one were to examine them on a candlestick chart. This type of hammer is a sign of a potential change in a downward trend.


After the past few rough weeks, any upswing, even if only temporary, would be welcoming and might present an excellent opportunity to make new positions in quality stocks and/or lower cost averages on recent investments.

Wednesday, August 8, 2007

Rogers - No Signal

After watching my paper profits slip away on my Rogers shares over the course of the past few weeks, I sold my holdings today not because the company's fundamentals changed but because I feel that the market will be very volatile over the next few months (perhaps until November) and believe that I can pick up the shares at a lower price in the weeks to come.


Well, with Rogers closing at $46.51 today, so far I'm right! Though with the number of shares I owned, that's not a big deal in the grand scheme of things. Nonetheless, you can never go wrong taking a profit.

I believe that over the next few months I will be taking profits when I can and hopefully, buying shares at lower prices on a number of stocks on my watch list.

Monday, August 6, 2007

$60 Oil?

Michael A. Berry had some interesting comments regarding the future fate of oil in his Morning Notes today. I have included the entire commentary below so nothing is taken out of context.

"WE NEVER LEARN
If I were a cynic I would suggest that it would be in everyone’s best interest for oil prices to fall. Fortunately I am not cynical. However the DOW Transports, one of Richard Russell’s favorite indicators, cratered on Friday and broke through support levels. Railroad shares were down by 5% across the board on weak transport prices. One might draw the conclusion that the US economy is cooling, from these data.

This AM my very good friend Dennis Gartman notes that oil players are beginning to “delta hedge” their positions. Thinking back to October 1987 I remember a miracle product called Portfolio Insurance. The idea behind portfolio insurance was that you never had to pay a put option premium because you could easily (too easily it turned out) short the stock index futures to create a delta neutral position. Adjusting the short stock index futures position was of necessity a continuous process to maintain the delta neutrality or the hedge. But the magic was that institutions did not pay an options premium. Dennis points out, correctly, in his Gartman Letter, this AM, that the Saudis have suggested they are “OK” with $60 oil. WTI oil is trading down from its high of $78 to $74 as I write this AM.

A little reprise from the energy squeeze would be welcome to most of the people who have a hand in managing our world. Mom and Pop are scared. There is rampant fear based on the potential for a severe credit contraction. Lower interest rates won’t help that occurrence. Many think this has further to go. My point is this as the price of oil falls – if it falls a lot – the delta neutral hedges will be continuously adjusted to reflect the new spot prices. This can only be accomplished by selling more oil futures contracts. But IF the futures fall to a discount (through selling) with respect to the spot then the spot price is further dragged down and the cycle will repeat. It is a process that can create a meltdown. It is also a process that has the potential to move the spot price. Remember that these futures contracts can be settled in cash (rather that “in kind”) and we all know that there is plenty of cash around.

This sequence is precisely what occurred in October of 1987. There is a sure way to get those oil prices to $60. Let’s see how this plays out. Naturally if such a scenario were to occur you could expect to see many of the oil stocks falling in line with the price of the spot. One significant difference exists today. We are not talking about the S&P500 today. We are talking about a physical commodity, oil, which is in great demand everywhere in the world, even Iran. Perhaps we will find out what oil is really worth."



Saturday, August 4, 2007

Corn

So I went to the local farmers' market today and couldn't believe the price of corn this year; six bucks for a dozen!

The three dollars that I have become accustomed to paying for a dozen for as many summers as I can remember now gets you six cobs of corn.

It's no wonder that China will shift its dependence from corn to sorghum, cassava and sweet potato plants to make bio-fuel in the next five years.

Sunday, July 29, 2007

Cottage Ownership

On a beautiful Sunday like today, one can easily imagine how nice it would be to own a cottage on the lake. Not only would a waterfront cottage be a great place to unwind on the weekend, but it could eventually be my principal retirement residence and in the meantime, act as a potentially significant cash flow generator.

With this in mind, I picked up a copy of The Cottage Ownership Guide by Douglas Hunter since it is promoted as being the guide to how to buy, sell, rent, share, hand down and retire to your waterfront getaway.

Well, I must honestly say that this book definitely fits its billing! The book definitely covers all aspects of cottage ownership with special commentary about the unique aspects of ownership in Canada and the United States.

I'll share just a few of the many insightful tips mentioned in the book when looking for your ideal cottage:

  • Check the cottage association's newsletter and/or minutes of its annual general meeting for the latest news
  • Get in contact with the lake association or ratepayers' group (The Federation of Ontario Cottagers' Association maintains a list of groups in the province)
  • Obtain the lake's history of algae blooms (apparently, once a lake had experienced a bloom, the odds were 50-50 that it would have another) and any measures taken to control their reoccurence
  • Find out how much the water level changes
  • Is the property on a flood plain? (Lists for each province and territory are available online)
  • Where does the sun set?
  • Which way does the wind blow?
  • Is road access available year-round?
  • Is the road private or public? Who pays for its maintenance?
  • Do the neighbours rent out their cottage?
  • Get a well record created by a licensed driller
  • Is there a grandfather clause for zoning regulations?
  • Check the survey to see if there is a shoreline road allowance? If so, you don't own your waterfront, and that your deck and boathouse and maybe even your cottage are encroaching public land. You can usually purchase the road allowance from the municipality.
  • Check for other road allowances (like concession or sidelot) and restrictive covenants and easements
  • What are the permitted public uses for the shoreline in front of private property in your area?
  • Where does the waterfront end and the lake begin? ("In the common law of both Canada and the U.S., the furthermost limit of private shoreline property is considered to be the high-water mark (though some title deeds describe ownership extending to "the water's edge" or "the low-water mark"). Local regulations, for instance, may require a setback from the water's edge measured in relation to the high-water mark. And how is the high-water mark determined? From historic date drawn from observed water heights or, lacking that, by inspecting the shoreline for physical signs.")
  • Are there any limitations to construction, renovations or expansions?
The book also discusses taxes and how to reduce the 'buy-now, build-later tax hit.'




I have no problems recommending The Cottage Ownership Guide to anyone considering an investment in a cottage or waterfront property.

Saturday, July 28, 2007

Awful Times to Invest

A look at John Hussman's July 16th weekly market comment of a 'A Who's Who of Awful Times to Invest' brings attention to the following dates:

"December 1961 (followed by 28% market loss over 6 months)
January 1973 (followed by a 48% collapse over the following 20 months)
August 1987 (followed by a 34% plunge over the following 3 months)
July 1998 (followed abruptly by an 18% loss over the following 3 months)
July 1999 (followed by a 12% loss over the following 3 months)
December 1999 (followed by a 9% loss over the following 2 months)
March 2000 (followed by a 49% collapse in the S&P over the following 30 months)

The defining characteristics of these instances were:

1) price/peak-earnings multiple above 18
2) 4-year high in the S&P 500 index (on a weekly closing basis)
3) S&P 500 8% or more above its 52-week moving average (exponential)
4) rising Treasury and corporate bond yields

Depending on how we define the interest rate trends, we can include two additional historical instances of these conditions:
October 1963 and May 1996, both closely followed by 7-10% corrections.

One more instance completes the list: July 2007."

It will be interesting to see if this week's market downturn is the start of a much larger correction.

Wednesday, July 25, 2007

Naked Short Selling

A controversial article published in the Wall Street Journal shed some light on the concept of naked short selling. The article prompted Senator Bennett to raise the topic of naked short selling on the U.S. Senate Floor.
I doubt that anything will come out of this but perhaps a few more people are now aware of this loophole in our electronic marketplace.

Tuesday, July 24, 2007

Time to Load Up?

After the TSX Index dropping 400 points today, is this a buying opportunity or the early days of a major correction?

1 Year Chart:


Today:

According to Roma Luciw, "The TSX tumbled 400.17 points or 2.75 per cent to 14,068.16, its biggest one day drop since the big crash of 1987. But in those days, the Toronto index stood at about 3,200."

From today's chart, there was no real bounce back up leading me to think that there may be more to come on the downside. Almost all the stocks on my watch list took a major pounding today with some charts breaking down completely. It will be interesting to see how the market reacts tomorrow.

For future reference, the HBP 60 Bear+ ETF (HXD-T) was up 5.7% today.

Sunday, July 15, 2007

Power Vampires

While documentaries like An Inconvenient Truth and The Great Global Warming Swindle (watch Part 1 of 8 below) attempt to endorse or criticize (respectively) the theory that mankind is responsible for global warming, one thing is for certain: you can save a lot of money by doing a few simple things around the house to conserve energy.




The Carbon Buster's Home Energy Handbook: Slowing Climate Change and Saving Money reveals North America's best kept investment secret: that the highest rates of return can be found not at your bank but in your home. The book systematically analyzes costs and evaluates which measures yield the highest returns for the environment and the pocketbook. The Handbook is filled with ideas to reduce energy costs.

Here are a few things that I found particularly interesting:

The city of Lindas in Sweden built 20 terrace houses with excellent windows, better insululation, and an air-to-air heat exchanger. These features added about $7,000 to the cost. However, they were able to dispense with the heating system altogether, at a savings of $4,000. This leaves a net cost of $3,000 for the extra insulation, and a simple payback of under four years, and free heating for the remainder of the life of the house. More information about project's design can be found in this PDF file.

Ever wondered how much electricity an appliance actually consumes? Well you can use a Kill-A-Watt meter to determine it. For those of you living in Ottawa, you can borrow one of these meters from the Ottawa Public Library.

Solar ovens use concentrated sunshine to cook food. Apparently, you can buy fancy solar ovens for as much as $250 or you can build your own for as little as 20 bucks to give it a try.

By now, you're probably wondering why I titled this post 'Power Vampires.'

The handbook describes 'Power Vampires' as electrical devices that continuously draw power from your power outlets, even when not supplying any useful service. Those power adapters (black power bricks) you can find all over your house draw power even when the item is not in use. For example, even though a halogen desk lamp's bulb is rated at 20 watts, the total lamp consumption is 25 watts, since the power brick draws 5 watts. Over the course of a year, the lamp will consume more power while it's off than while it is on.
Your home can have numerous power vampires lurking: TV's, cable boxes, modems, satellite receivers, VCRs, DVD players, computers, cell phone chargers, battery chargers, night lights, etc. Any equipment that stays warm after it has been turned off for a while is most likely a power vampire as well.
The Handbook states that a recent study found that these vampires accounted for 5-20% of total power consumption, even exceeding the traditionally highest user (the fridge) in some homes. The simplest way to get rid of these power leechers is to unplug them when not in use. More convenient are power bars in which you can lay one or more of these bricks to rest.

The Carbon Buster's Home Energy Handbook: Slowing Climate Change and Saving Money is a good light read that is very reasonably priced and could save you hundreds if not thousands of dollars. It would be particularly useful for anyone thinking of incorporating some creative energy conserving techniques in their new home.

Corrupted Floppy Disk

From time to time, I might highlight a software program that I find really useful. In most cases, I'll only suggest freeware but in today's post, I'll recommend a handy shareware program that saved my day...

I was really shocked to find out that my computer wouldn't recognize my most important floppy disk yesterday after it was working fine just the day before. As always, I inserted the disk into the floppy drive and tried opening it up but to my surprise, it told me that the disk was not formatted and asked if it should format the disk. Hmmm, let me think.... NO!!!!

Now this floppy disk contained all my personal finance spreadsheets and of course, I didn't have a backup. Just my luck!

Tip #1: Always, make a regular backup of your important computer files.

So I started downloading a whole bunch of floppy disk recovery programs that I could find and just my luck, none of them could recover the three spreadsheets I was most concerned about. How typical, was that? And the funny thing was, each program was able to recover a different file.

Tip #2: When using file recovery software, try more than one program if you don't succeed the first time.

Without any luck, I called up a friend to see if he had any ideas. My luck had finally turned! He recently had a similar issue with his computer and bought Active@ File Recovery. So I went over to his place and gave it a shot, and it was able to recover everything. Sweet!!

This leads me to Tip #3: If all other file recovery attempts fail, try Active@ File Recovery.

Thursday, July 12, 2007

Silver Wheaton (SLW-T)

I tried out my brokerage's automated telephone trading system today and ended up investing in Silver Wheaton (SLW-T). Now, I must admit that I let my emotions affect my limit purchase price on this one as I've missed out on some pretty amazing trades so far this month due to being low limit prices and I wasn't going to miss out on this opportunity.

As you can see on the three-year weekly chart below, an ascending triangle has formed which would suggest a ~$20 target price if the current breakout continues in the weeks and months ahead.

I must admit that the target price is very optimistic but I've seen stranger things happen.

Background info: 100% of Silver Wheaton's revenue comes from the sale of silver. Having silver purchase contracts with five separate mines, the Company expects to sell approximately 15 million ounces of silver in 2007, growing to 23 million ounces by 2009. It also trades on the NYSE as SLW.

The closing silver bid /ask on Kitco was $13.09 / $13.13.
Silver Wheaton's closing price today was $14.83 on the TSX.

Wednesday, July 11, 2007

Automated Telephone Trading

Frustrated by not having the ability to adjust my stock limit orders to current market conditions via the web at the office, I did a little poking around on my discount brokerage's web site and discovered that they offer an automated telephone trading system to place trades, monitor current orders, and obtain account information amongst other things via a toll-free number.

This is great news! I should now be able to keep track of my orders during my breaks at work or when I'm away from my computer during my vacation.
As if I didn't think of this sooner?
Oh well, it's too late to do anything about it now.
But hey, at least I'm aware of a handy tool going forward!

Tuesday, July 10, 2007

Interest Rate Hike & The Big5

The Bank of Canada raised its key interest rate to 4.5 per cent, the first increase in more than a year, and said more rate hikes may be needed to dampen inflation.

Just for reference sakes, here's how the Big Five banks performed today:

+0.23% Bank of Nova Scotia

-0.01% CIBC

-0.39% Bank of Montreal

-0.43% Royal Bank of Canada

-0.70% TD Bank

Just my Luck

Boy oh boy... am I disappointed... a bunch of the stocks on my watch list are heading significantly higher and higher everyday for the past week or so and each day, I set prices to buy in at but they never get filled. A few others confirmed patterns that would signal a buy in my books but once again, I'm a bit too late :( They're at a price point now where the risk/reward ratio makes we a bit uncomfortable.

If only I had access to a trading system that would allow be to 'buy Stock X if it goes above $Y'?
If anyone is aware of a Canadian discount broker offering such a service, please let me know.

So now I'm in a bit of a pickle, do I continue to watch these stocks amass higher valuations and wait until they come back down (if ever); bite the bullet and purchase them at the market price at the opening (something I've told myself I would never do after getting badly burned several years ago); or set a limit price right around today's closing price and hope for the best once again?

When I've chased stocks in the past in similar situations and surely enough, I would finally get it. Just my luck though, it would be a major top and I'd then wait weeks, if not months, to break even.

Before I make my decision, I think I'll have to sleep on it tonight....

Monday, July 9, 2007

Stronger Loonie = Cheaper Wine

A few weeks ago, I posted a comment about how Canadians are getting ripped off thanks to our strong Canadian dollar. Well, today I ran across an interesting news story stating that the cost of some wines is set to drop in Quebec as the province's liquor board (the SAQ) adjusts its standard exchange rate used to buy wholesale European exports. The liquor board will adjust retail prices on affected products starting July 25th.

According to the article, "The Euro's value has dropped by 9.7 per cent against the Canadian dollar in recent months" so it will be interesting how much of those savings will be passed onto the consumer.

I'm not much of a drinker but I thought I'd pass along the news for those of you who live in Quebec or close enough to make the trip over to 'la belle province' for some potentially cheaper wine.

Sunday, July 8, 2007

Should I Invest in Fording Canadian Coal Trust?

So I started looking for potential income trusts to invest in my RRSP and came across this interesting two year chart for Fording Canadian Coal Trust (FDG.UN-T):


It looks like a very nice bottom forming with a potential $50 target based solely on the chart (if it can break the $40 mark). It is currently yielding 7.2%. I was initially very excited in finding such a pattern in the making (as I have seen this type of pattern fulfill itself many times and I have benefited from it a few times as well) but as I researched the company further, my gut feeling was telling me that I should watch this one from the sidelines.

First off, their quarterly distributions have fluctuated and dropped quite significantly recently ($1.40 in 2006 Q1, $1.00 - Q2, $0.80 - Q3, $0.95 - Q4, $0.65 - 2007 Q1 & Q2). Since I am looking for something with a steady (and hopefully, increasing distribution over time), it doesn't really fit the criteria I set for myself for my first ever income trust investment.

I also came across a recent analyst report that suggested that Fording was overvalued compared to its counterparts. Since I know nothing about any type of coal (let alone, metallurgical coal) I really have no clue if demand for this type of coal will increase going into 2008 as some 'experts' have suggested. Just another reason for me to stay away.

On the other hand, some have suggested that Fording could be taken over. This speculation has probably been one of the key drivers in the increase in share price recently.

Taking this all into consideration, I'm going to stick with my gut feeling on this one and look elsewhere for a place to park my RRSP dollars. It will be interesting to see how this one turns out.

FDG.UN closed at $35.88 on Friday.

Showtime for Gold Stocks?

Based on stories I've heard recently, gold apparently starts rallying during the summer months (typically in August) on a historical basis. Is it possible that gold mining stocks are finally going to start recovering?

One of my two gold mining stocks, Agnico-Eagle Mines (AEM-T), appears to have recently reversed its uptrend as illustrated in the chart below.


The second gold mining stock in my portfolio is Goldcorp (G-T). As you can see from the chart below, it hasn't convincingly broken out of its downtrend just yet


Although AEM looks tempting, I doubt I'll place any additional funds in these two gold stocks as I've had more success investing in other sectors. I believe every portfolio should have exposure to gold just in case the gold bugs are right but at this point in time, I am comfortable with my portfolio's weighting in gold. I see these two stocks as long-term holds and expect that they will be taken over one day. That being said, I might invest in another gold stock if I see an opportunity for a quick gain.

Kitco currently has a bid / ask price for gold of 652.50 / 654.00.