Canadian Personal Finance Blog

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.

About 8 years ago, my wife and I bought something at Colonial Furniture, and paid it off on lay away using a “no interest” plan of some kind. At the end of the period, when we finally paid off this bill, we had made a mis-calculation and over paid the bill by about $4.56, but nothing has ever happened with this positive balance (I have not bought anything there since).

The stupid part of this is that every month since I paid off this bill I receive a balance statement telling me about my positive balance. If my caculations are right I have received about 90 of these notices, and this must have cost somewhere near $40.00 in postage for Colonial, to tell me about my positive balance.

Every month I get this invoice and every month I scratch my head wondering why they do it. In other instances where I have had a positive balance, I have simply received a cheque to return the balance to zero, but not here. 

Rocky Financial Roads

Given the complete implosion that seems to be happening in the United States, I continue to get from friends articles about the impending end of civilisation as we know it. My opinion is that this whole thing are ripples from the ill-conceived “Sub-Prime Mortgage” fiasco in the states, and my guess is there are more ripples to be felt, which hopefully will not cause too many more days like Wednesday.

My portfolio is not doing too badly, but I do see some stocks that may never recover and one of them being Nortel . It is now down to $2.76 but if you take out the reverse stock split the stock is actually worth $0.276 (Canadian), and they continue to sell things off to get money.  I hold a little Nortel in one trading account, mostly because I never got around to selling it, and now it isn’t even worth selling (I’d spend more on the trading fees, than I would get from the sale).

Is this “correction” a buying opportunity? I think some time soon it will be, if not right now, but remember to do your homework and don’t just “buy because I think it is on sale”, because if you had done that with Nortel in 2002, you’d have been mistaken. Do the homework, investigate the company, make sure their financials are sound and the company is sound as well.

Lock It Up

Debit Fraud Follow Up

Some excellent comments yesterday about my article about Debit Card Fraud . I think I will be going more towards a cash based purchase system to remove some of this risk, but a few commenters mentioned using a credit card instead, since your liability is limited. 

While this method may work for a lot of people, I don’t think it is for me, since a few years back we tried this with a PC Financial Mastercard, to get money back on our groceries. Due to some bad tracking by me, I ended up with a ballooning credit card balance that scared me, so we ended up paying off the card quickly and then going back to using the debit card.

Those were the happy thoughts told to me one day at Church. The minister giving the sermon, worked with homeless people and such, so his view might be a little stunted, but that was the point of his statement, “We are all three pay cheques away from living on the streets”.

Is this really the case? Well that all depends on the debt burden that you carry.  If you suddenly had no means of income, but you didn’t have any debt to pay off, you’d simply need money to pay your day to day expenses that may be manageable or controllable. If you are carrying a large credit card debt load, and have minimum payments to make, then your issues are far more complicated and you must find ways to pay spiraling debt as well.

Am I three pay cheques from living on the streets? I don’t think so, I have a fair amount in RRSPs and such, and I also have some savings, but I also have a debt load that does worry me, and given the renewed vigour I have been given from reading good books like: Smoke and Mirrors , I think that is my goal is to kill my debt load while I can.

BCE & Nortel Both Cutting

The news is full of job cuts at BCE as they head towards privatization, and there was the renewed cutting announced by Nortel at the start of the year as well, which may mean some dark times ahead in the High Tech World as well. Hope those folks aren’t three pay cheques away from the streets.

Telus and BCE can both enjoy a new class action suit against them as well for their new texting surcharges. That won’t help BCE, that’s for sure.

Interest Rates Hover

The Bank of Canada kept one of it’s key rates (the overnight rate) the same yesterday in response to a shakier Canadian Economic view. This means interest rates have flattened for now, and may well be heading back up very soon.

To quote them directly:

Three major developments are affecting the Canadian economy: the protracted weakness in the U.S. economy; ongoing turbulence in global financial markets; and sharp increases in many commodity prices.

Turbulence is never a good thing and I think the bank is reflecting that in it’s monetary policies, by holding interest rates steady.

For someone like me, it suggests that now is the time to start paying down debt, because we may have hit the bottom of the interest rates market, and rates going up is going to mean more money that will have to be spent on Debt Reduction due to interest charges (all my debt is carried in variable interest rate debt vehicles).

Kindred Spirit

Larry MacDonald’s blog is one that I read every day, and I was heartened to see that he and I are not only friends in the N.C.F.B.A. but we are kindred spirits in terms of Nortel’s stock. Larry did an excellent Update on Where Nortel Stands currently.

I was particularly touched by the last paragraph in the post:

So where is the stock going? Despite recent price action, there seems to be an improvement in expert opinion and fundamentals. Still, the situation remains speculative. And add a grain of salt to my update – I’m a long-suffering Nortel investor whose holdings are down 70%.

Glad to know that I am not the only financial blogger with scars from this stock.

TD & BMO Banks Continue to Slide

Both TD and BMO stock have been sliding and as I have said I am not sure what the bottom is, but I am starting to think this is going to be a buying opportunity (for me) very soon. I buy these stocks for straight dividend value and the fact that banks treat their customers very badly, yet the customers keep coming back.

Please take the above paragraph is me meerly navel gazing and guessing, I have no real insight about these stocks, but am interested to hear if anyone else has any opinions on my statements and TD and BMO.