Canadian Personal Finance Blog

Eight two cents a Litre for Gasoline in Ottawa

Last night I was astounded and thought, “What a difference six months makes”, when I filled up my van with 50 litres of gasoline and it cost me $41.00 . Six months ago that exact same amount would have cost me over $60.00 . The dramatic drop in the price of gasoline in the past few weeks has been astounding and now I wonder whether this is the anomaly or whether what happened in the past year with the price spike is the anomaly. My guess is gasoline prices are going to be manipulated a great deal over the next 10 years and we will all be paying for it.

Remember to check gas prices in Ottawa at Ottawa Gas Prices.

I am not sure what the price of fuel is in Toronto, however, if I make a round trip there, these prices could mean a savings of over $70.00, which is significant, and shocking.

I am now very curious to see what the Consumer Price Index will reflect with this price drop, in the next month or two. What will this deflationary drop of a major consumable do to prices? What will it do to all of those new projects in the Resource Industries, now that gas is cheap? What was the break even price for extracting gas from the tar sands again?

It was Oil Prices All Along

More interestingly there was an article this week that blames sky rocketing oil prices for the economic collapse (in the Financial Post). Jeffrey Rubin from a Chief Economist at the CIBC stated:

“By any benchmark the economic cost of the recent rise in oil prices is nothing short of staggering, a lot more staggering than the impact of plunging housing prices on housing starts and construction jobs. And those energy costs, unlike the massive asset writedowns associated with the housing market crash, were borne largely by Main Street, not Wall Street, in both America and throughout the world.”

Other economists disagree like Frank Atkins from the University of Calgary who said:

“The inconsistency in his story is that he had oil prices going to US$200 and the TSX going over 15,000,” Mr. Atkins said. “He did not have in his original speech oil prices destroying the economy.”

I think I agree with Mr. Rubin somewhat, but I think the housing collapse in the U.S. helped out as much as oil prices to create a “Perfect Economic Apocalyptic Melt Down”.

Congrats President Obama

Interesting results in the Presidential race in America the question most Canadians are going to ask is, is he really going to re-open the North American Free Trade Agreement (NAFTA)? I really hope not, unless it would be to make trade even fee-er. In these interesting economic times, I would think the last thing anyone wants to do is restrict trade in any direction, but then again, if it somehow appears to create American jobs, that may be exactly what happens.

Quebec Election Cometh

Just when you get bored with politics, Quebec his about to announce another election, and will the Separatism Leviathan appear to scare the rest of Canada? Who knows, but if Quebec politics is one thing, it is most certainly not boring! Stay tuned this could get interesting again folks.

Ontario a Have Not Province

For the first time ever Ontario will be receiving equalization payments from the Federal Government and everyone is having a good laugh about it. The more interesting part of the equation is that Newfoundland and Labrador are now a “Have” province, and will be paying into the system more. This certainly is a changing financial landscape here in Canada.

Carnivals

• Living Almost Large is hosting the 37th Carnival of Money Hacks where my post I Should Divorce My Wife is mentioned.

Buy Low and Sell High is the trite advice that any moron will give you about the stock market or any other major purchase, but the more important question is “What is the Bottom?“.

The better question is, “Is now the bottom?”, and as usual my non-committal answer is, “It depends”.

Is it the bottom for IBM? Most likely it is near the bottom for them, they have announced good numbers, have a sound business model and look like they have a plan for the next five years, and the same can be said for companies like Cisco too, since they have such a large monopoly in their area of high tech.

Is Google at the bottom? I have no idea, since I still have no idea how Google can be worth that much, but that is my opinion as a High Tech Skeptic (maybe an honorary title, but well deserved). I don’t believe there business model and I have no confidence in how they make money, aside from Advertising. 

Is Nortel at the bottom? I asked that same question when the stock was at $90 in 2000, so you can guess what my answer might be today as well (given they are at $0.19 compared to that $90, today). Remember what Garth Turner said in my post “And He’s An Expert?”

Are Canadian Banks at the bottom? Hard to tell, some seem to be, TD Canada Trust and RBC seem to be near bottom, as does BMO, but CIBC’s continued exposure to the mess in the states makes them a little more interesting too. I have invested in banks in the past week, just for disclosure sake as well.

Please do not take these opinions as advice, they are simply me stating my opinion, you should (as always) make your decisions with as much information as you can and should consult reputable sources for this information as well.

Hopefully these depressed stock prices will hang around ’til the new year, that would be a great time to open a TFSA and then take advantage of lots of growth in a sheltered account like that (wouldn’t it?).

Buy Equities, Warren Buffet Says So

Is that reason enough to go out and buy equities? I have no idea, however it is interesting that Warren Buffet is saying in an article in the New York Times “Buy American I am” that he is putting his personal money into U.S. equities now. 

The article does have a Canadian Financial Angle as Mr. Buffet points out here:

Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

Anybody who quotes Wayne Gretzky can’t be wrong, can they?

Then again, some might say “Equity Investment is the Devil’s Work!“, only time will tell who is right.

Back to our Musical theme, one of my favorite Supertramp Albums is a good title for the Financial world right now.

Crisis? What Crisis?

Let us recap of some of the things destabilizing our financial world this week:

The Subprime interest rate debacle in the U.S. is tainting and affecting (effecting) pretty much any financial institution world wide. Why? No good reason in most cases, just a lot of “What if?” statements being made. This smells of the S&L scandals of the 80’s.

• The infamous Chinese toy recalls, seems every day something made in China (not just food any more) is being recalled, and this will effect the Chinese economy, but it will also effect the American companies that sub-contracted to China and didn’t keep close tabs on production (shame on you guys, you need to keep your eye on the product).
• The subprime’s direct problem which is the “collapse” (not really) of the American housing bubble and the ensuing economic issues and ripples that this will cause, oh dear this is going to be an interesting one!
• The Canadian dollar is taking a pounding as well, and is dropping like a stone.

Crisis? Should we all just smash open each other’s skulls and eat each other’s brains? Um, no, calm down, relax and read this very good article from the Globe: A 10 Step Recovery Plan for Panicked Investors . Go outside, enjoy the sunshine relax.

As a stock market neophyte, I tend to not act on my “hunches” much, and I think in the long run that will be a very good thing. Most of us remember the “if I’d just bought Cisco in 1989″ or the “if I’d bought Mitel in 1980″, however, do you remember if you thought, “Boy that Bre-X looks like a good investment”? If you are honest you most likely thought that at some time (hopefully you didn’t act on it, and if you did, maybe you made a little money, who knows).

Stock market investment is comparable to legalize gambling a lot of the time, especially the way some folks try to do it (get in fast, get out fast, don’t do much research). If you are investing in companies or industries that you do not understand, you are asking for trouble (to paraphrase Warren Buffet). Now if all you know about is Renaissance History, then maybe investing is NOT where your money should be in the first place, however, most of us have a little more sophistication than that.

You must also understand how the stock market works, the tools that are available to you and that any and all money you put into the market can be lost (the chance of this is not the same for every stock, but money in the stock market is not real until you sell whatever you own). I had many friends who were Millionaires in the late 90’s on paper (i.e. the value of the stock they owned was worth that), and some were even foolish enough to borrow money on the basis of this, and when the stocks fell (remember I am in High Tech, so they FELL), a lot of them were in very dire circumstances. The cash and tangible assets you have (i.e. money in bank and safe bonds as well as your house) is what you are worth, what you have in the stock market is what you MIGHT be worth, if you cashed in at that very moment. It’s a subtle difference, but one you need to understand.

I am trying to say, you have some amazing resources on the net to research about stocks and how to trade and what to trade (I’ll tell you how, I am not telling you what, because I am an idiot when it comes to picking “winners” (I have been known to be able to pick the loser in a one horse race)). Check out these sites to learn more about what you should be trading, but learning and studying is the important part, after all it is your money, correct?

Good Investing Sites

• Canadian Capitalist
• Investor Geeks
• Dividend Guy
• Invest Intelligently
• Crunch Money

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