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.

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.

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.

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.

Income Trust Articles

Here are some very well-written articles I've recently come across regarding income trusts:

How To Pick High-Caliber Income Trusts

How to Pick Income Trusts: its in the numbers

How To Pick Business Trusts

How To Pick Pipeline Trusts

Canadian Real Estate Investment Trusts

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.