Canadian Money Review

a sucker's rally?

noreply@blogger.com (The Canadian Money Reviewer) — Thu, 27 Mar 2008 01:45:00 +0000

an interesting quote from Business Week today (which speaks by itself!):

Stocks: Beware the Sucker's Rally

Have equities finally hit bottom, or is the market's recent rebound a trap for overeager investors?

Jim Leech "I think fear has just moved so far" (Globe and Mail -Derek DeCloet)

noreply@blogger.com (The Canadian Money Reviewer) — Sun, 23 Mar 2008 23:54:00 +0000

Derek DeCloet from the Globe and Mail interviews Jim Leech ("To the public, he may be best known as the private equity deal maker who snagged BCE last year, or perhaps as the new head of the Ontario Teachers' Pension Plan") who is saying that people might be overeacting to the current economical bad news.

I would tend to agree with him except for one thing: the current extent of the credit mess is not fully known yet and many more surprises might lurk ahead. It might be prudent to use these opinions as a starting point for resuming investing in the market (which a lot of people I know have stopped doing "until things get better") but buying by small chunks over a period of time. If the markets go up, then you will still profit and if they go down, then you have money left to buy stocks on sales ...

renewing my mortgage: shopping for the best rate

noreply@blogger.com (The Canadian Money Reviewer) — Sun, 16 Mar 2008 14:02:00 +0000

I've been lucky to get a 4.49% 5 years fixed mortgage rate about 5 years ago. As I'm due to renew in August, I'm starting to follow the rates closely since I should be able to lock one in soon (in April). The last time I talked to my mortgage broker, before the recent 0.5% drop in rates, the best I could get was 5.7%. I also checked with my current lender, MCAP, and they would offer 5.8%. I'm pretty sure they will match the rate if my broker asks them. I'll have to check again to see if these rates have dropped. I'm not a big fan of variable rates especially since I've seen how some were stung by those over the last 5 years.

This post should also serve as a reminder not to renew automatically with your current institution but shop around to get the best mortgage rate ...

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Who is your mortgage provider? Are you satisfied with them? Have you shopped for rates recently?

no TFSA?

noreply@blogger.com (The Canadian Money Reviewer) — Sat, 15 Mar 2008 01:52:00 +0000

Larry McDonald tells us why we might never see TFSA in action ... I like his idea of reduced income tax insteas. The only thing I like about TFSA is that it rewards investors instead of spenders...

too much snow in Canada: no more shovels!

noreply@blogger.com (The Canadian Money Reviewer) — Fri, 14 Mar 2008 11:59:00 +0000

I know a few people who tried to buy a shovel recently only to find that all stores seem to be sold out. I had the same experience when trying to buy a snow roof rake. So I went browsing on the good old Internet and found the Sno-Knife. I've ordered it and I will try it on my roof where snow has accumulated to 4 feet high in one area! I'll let you know if it works well or not.

gas prices keep going up!

noreply@blogger.com (The Canadian Money Reviewer) — Thu, 13 Mar 2008 00:04:00 +0000

Gas prices are going up again... Although I don't regret buying my all wheel drive car (very useful and safe this past winter!), I wish the automakers would speed up the switch to more fuel efficiency and make all cars hybrid for example. That would probably bring prices down because of economy of scale. Then fuel efficiency would be less of a choice between safety and economy.

how to lose an advertiser in 30 days

noreply@blogger.com (The Canadian Money Reviewer) — Wed, 12 Mar 2008 12:47:00 +0000

Redflagdeals will not be a sponsor anymore ... I think their cost per click was too high with this site. Which makes me realize that a lot of the advertisers on Google Adwords must not be getting their money's worth either ...

Thanks to Redflagdeals for the opportunity trying out this new ad concept ... back to just Google ads.

ps: don't be sorry for me, I am really not doing this for money :-))

RESP bill: the conservatives don't want it!

noreply@blogger.com (The Canadian Money Reviewer) — Wed, 12 Mar 2008 00:01:00 +0000

the conservatives are trying their best to kill the bill ... after playing nice with the Senate, they are now making it an election matter

I try to avoid political statements, but let's just say they won't get more sympathy from me after that ...

[update] RESPs on steroids!

noreply@blogger.com (The Canadian Money Reviewer) — Fri, 07 Mar 2008 01:33:00 +0000

A pretty amazing private bill was voted today in Parliement by all parties (except the Conservatives in power!). It basically gives a tax break for RESP contributions up to 5000$ a year. I've had a quick look in the Canadian PF blogosphere and didn't see that fact reported much. It's amazing because:

It's another good news after the recent big TFSA announcement.
It's a bill promoted by a backbencher MP
It was approved by the opposition without the ruling party's consent
It will help promote more investment in education
It's another tax break we are getting (the GST cut being another example)

update (March 7): Tories want the senate to stop the bill!

follow-up on contractors in Ottawa: Tony's snowblowing finally charged for fraud

noreply@blogger.com (The Canadian Money Reviewer) — Thu, 06 Mar 2008 01:56:00 +0000

A quick update on Tony's snowblowing on CFRA. I had talked about that company in this earlier post. The police has charged them with 34 counts of fraud. It's comforting to see that the bad guys do get caught sometimes.

new federal budget: a huge gift for investors

noreply@blogger.com (The Canadian Money Reviewer) — Wed, 27 Feb 2008 03:00:00 +0000

Canadian Capitalist has the primer on the new federal budget windfall available in 2009:

Tax-Free Savings Account (TFSA)

His take on it:

My personal opinion is that the TFSA is a vast improvement over any half-baked scheme to defer capital gains.

My take on it? It's a great measure for investors with fresh money to invest. I'm not sure what it does for low income families. I'd be curious to see what measures in the budget were targeted for low-income families if any.

Business Week: Top International Dividend Paying Companies

noreply@blogger.com (The Canadian Money Reviewer) — Sun, 24 Feb 2008 16:02:00 +0000

Business Week has come up with 20 stocks of international companies (that trade as ADR) with good dividend payments.

Here's the list (go to their site for details):

Allied Irish Banks	AIB
AstraZeneca	AZN
AXA	AXA
Banco Bilbao Viscaya Argentaria	BBV
Banco Santander	STD
Barclays	BCS
Chunghwa Telecom	CHT
Diageo	DEO
Enel	ENSTY
France Telecom	FTE
Genesis Lease	GLS
ING Groep	ING
Lloyds	LYG
Nissan Motor	NSANY
Royal Dutch Shell	RDSA
Sanofi-Aventis	SNY
Taiwan Semiconductor	TSM
Telecom Italia	TI
Telefonica	TEF
Total	TOT

Bank of Montreal announces 325M$ write-down ; more bad news for the banks

noreply@blogger.com (The Canadian Money Reviewer) — Wed, 20 Feb 2008 03:57:00 +0000

The banks debacle is definitely not over. BMO just announced a 325M$ write down. My guess at this point is that other banks will announce new write downs in a not too distant future.

That coupled with more and more recession talk in the US does not spell good news for short term investors. Long term value investors will see a good opportunity to buy stock on rebate ...

Going back to the article, here's a scary quote on how BMO is playing the SIV game:

Bank of Montreal also said it would provide financial support capped at $11
billion for the structured investment vehicle Links Financial, and as much as
€1.2 billion, or $1.77 billion, for Parkland Finance. The assets of both SIVs,
which sell short-term debt and invest the proceeds in higher-yielding
securities, have been reduced since July 31.
"Rather than putting the SIV
issue behind it, today's announcement sets the stage for it to migrate onto
BMO's balance sheet over time," a Blackmont Capital analyst,. Brad Smith, said
in a note, in which he downgraded the stock to "hold" from "buy". "This action
increases the potential for additional losses should asset sales prove more
challenging than currently anticipated."

I took the jump: a whole new layout for the blog: tomatoes and flowers welcome :-)

noreply@blogger.com (The Canadian Money Reviewer) — Mon, 18 Feb 2008 03:19:00 +0000

After having changed my blog title, I've finally switched my layout. I hope it looks cleaner and helps readers find that they want fast as well as make it easy to read the posts.

What do you think?

Are you suffering from a bad case of mental accounting?

noreply@blogger.com (The Canadian Money Reviewer) — Sat, 16 Feb 2008 05:35:00 +0000

Thanks to The Canadian Money Reviewer for the opportunity to guest post. My handle is Free@45 and I mostly write about Educational Technology topics but have been firmly focused on finance, financial goals and wanted to share a few tidbits about what I have learned.

Is Mental Accounting Negatively Impacting the Growth of Your Investment Portfolio?

I have recently enjoyed the book “Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons From The New Science Of Behavioral Economics” by Gary Belsky and Thomas Gilovich. One of the many interesting topics that were covered in the book was the idea of “mental accounting.” The concept outlined by Richard Thaler in 1980, attempts to describe the process whereby people code, categorize and evaluate economic outcomes. Mental accounting theorists argue that people group their assets into a number of non-fungible mental accounts.

Let me try to explain how I understand the concept and how this might be helpful or harmful to you:

So you receive a $5000 inheritance from your grandmother who grew up in the depression. You stick the inheritance in an account that is very low risk – say a GIC or High Interest Savings account because you feel that your grandmother wouldn’t have taken on higher risk with that money, so you shouldn’t either.

Another example is putting money inside an account that is mentally accounted for as a vacation fund. You put $300 there, month after month, over a year; all the while carrying a Credit Card loan of $2000 @ 18.5%. If you had not mentally accounted for this money as a vacation fund, you could pay off the credit debt and then start saving for the vacation.

Mentally accounting for money in the last two examples leads to both an ultra-conservative approach to investments and an inefficient debt repayment strategy. How might mental accounting help you?

Well, I am a recent convert in saving for bigger purchases, rather than using consumer debt to pay for them. Don’t buy it if you can’t afford to pay for it right away. We don’t carry any significant consumer debt, a couple hundred on a Capital One (Prime + 0.9) credit card. This was not always the case, but we have worked hard in order to make it the case. My family is in maternity leave mode, but before our second child was born, we calculated what type of money we would need for the extended maternity leave and were able to save it. So when my wife goes back to work we should not have any consumer debt that had helped pay for the maternity leave. It also means we will be able to shift back into investment mode when my wife starts working full-time again.

Having calculated our retirement numbers for age 45, 50, 55 it gives us a financial goal to aim for. It also helps us to determine what amount that we would need to invest in order to achieve these numbers. I don’t think we need to squirrel away every dollar into investments, if we are incurring significant consumer debt to do it. Also, we need to balance the needs of today against future needs.

Now, if I were take mental accounting at face value this last example could follow along the first two examples as a conservative use of money that could be better directed into a riskier investment with a better return, subtracted from the rate of interest from a line of credit. Still, I need to create a balance, and as long as our investments are on track, why not save for those big purchases? It might also help avoid over spending, which can easily occur when buying using credit. This might balance out any gains made from a riskier investment.

Maybe you have a different interpretation of mental accounting? Love to hear your opinion.

Reference: "Mental accounting - Wikipedia, the free encyclopedia." Main Page - Wikipedia, the free encyclopedia. 14 Feb. 2008

Photo courtesy of charlie_cva

Thanks for reading Canadian Money Review

Moneysense top Canadian mutual fund for this year: good for your RRSP and for your conscience?

noreply@blogger.com (The Canadian Money Reviewer) — Thu, 14 Feb 2008 16:25:00 +0000

The top rated Canadian Equity Mutual fund this year in the Moneysense Honor Roll 2008 is "Ethical Canadian Dividend Fund". They have a 5 years annualized return of 'only' 19.12%, but they top the chart with a risk-adjusted return of 34.01%. What caught my attention is that it's an 'ethical' fund. Is it just a fluke or is there a new trend with socially responsible investing that could be leveraged to get better returns?

Here's the fund description found in Morningstar:

"The investment objective of the Fund is to maximize returns primarily through a combination of dividends and capital growth from Canadian companies. The Fund follows a socially responsible approach to investing. The fundamental investment objective may only be changed with the approval of a majority of unitholders at a meeting called for that purpose."

web of frauds (part 2)

noreply@blogger.com (The Canadian Money Reviewer) — Wed, 13 Feb 2008 04:02:00 +0000

I've written recently about a site that copies my blog to generate adsense traffic. The funny thing is that since I wrote the post and contacted the registrar (Namecheap) of the fraudster (STREETSTOCKINFO), the offending site has removed all my content and switch to some Chinese newspaper! Now I've found another copycat: www DOT whytradeoptions DOT com . I've contacted Namecheap.com again since they were helpful last time. If that does not work, I'll try the Google DCMA complaint process.

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thanks for reading Canadian Money Review

web of fraud! do any of you bloggers know something about this?

noreply@blogger.com (The Canadian Money Reviewer) — Mon, 11 Feb 2008 02:22:00 +0000

I found an amazing web of fraud this weekend: there is a site that is only dedicated to copying all my blogs and that adds the keywords 'online stock trading' to the posts. The site is "www DOT streetstockinfo DOT com" . I guess they are trying somehow to trick the search engines. By digging some more, I've only found that it is a privately registered site. I've written to the domain registrar to see if they can do anything about. The real scary part is that I've searched references to that site and found "fdafct DOT org" pointing to it (and the domain registration email from that site is not valid). And looking up that last site returned tons of links. So there is a web of fraudulent links out there.

Have you ever experienced anything like this? Is there anything one can do about this?

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thanks for reading Canadian Money Review

Save some money: How to be an instant handy man around your house (thanks to MensHealth magazine)

noreply@blogger.com (The Canadian Money Reviewer) — Sat, 09 Feb 2008 16:24:00 +0000

I've always been lucky and had my father and some friends to help me out with house repairs. I say lucky, because as you all know, a plumber can be very expensive (as are his colleagues in other fields). Maybe though it's time that I switch my keyboard for a hammer! Where do I start? I found this interesting article in MensHealth describing 16 quick tips to fix many things in a house. They're not all good tips (why did they throw one about wireless routers?) but they're worth a look ...

My favorite tip from the list:

Fix a hole in drywall
1 Cut a square or rectangle at an easy-to-measure size—like 5 by 5 inches—around the hole with a utility knife, says former Sex Pistols front man John Lydon, who knows a few things about punching (and fixing) walls. Be sure to expose half the width of the closest stud.

2 Cut a new square of drywall to fit. Screw the patch onto the stud, and cover the cracks with a piece of joint tape. Coat the entire work area with a thin sheet of joint compound.

3 When dry, sand the area with a fine-grit sandpaper and apply paint primer over the patch. If you still see seams, coat with more compound and sand again.

Globe and Mail mutual funds suggestions for your RRSP

noreply@blogger.com (The Canadian Money Reviewer) — Sat, 09 Feb 2008 16:15:00 +0000

Rob Carrick, from the Globe and Mail, talks about seven mutual funds that are good for your RRSP in the current market. Have a look at their MER though before buying them! Also, remind me in a year from now to have a look at their performance compared to the indexes ...

On a related note, in the last issue of Moneysense, you can find the top rated mutual funds for this year. One of the big names actually missing this year is CHOU RRSP which I had bought on their recommendation several years ago. Just another reminder that past performance does not guarantee future performance. In a next post, we'll have a look at a few of their picks for this year.

new sponsor for this site! good for charity!

noreply@blogger.com (The Canadian Money Reviewer) — Fri, 08 Feb 2008 22:42:00 +0000

I'd like to welcome RedFlagDeals.com as a new sponsor to this site! I will be using these new revenues to sponsor more Kiva charity projects for the time being. If you have any opinion on this, please comment ...

Kiva: personal micro-loans to Third World countries (update)

noreply@blogger.com (The Canadian Money Reviewer) — Tue, 05 Feb 2008 03:33:00 +0000

This might not be news to many of you, but I found out about KIVA today. This is a site that allows you to give micro-loans (as low as 25$) to small entrepreneurs in poor countries. That will help them start their own business and become self-sufficient. I find it's a great way to use your money for charity since it's a much more permanent way to help people. The best thing is that when you get your money back, you can actually help other people with that same money! You don't get interests, but I think helping other human beings get a decent life is worth the 4% you're losing from your high interest account. I'm going to browse projects to see where I could get a small 25$ to work to test the concept. The default rate seems very low but I'm always careful when trying out new stuff like that.

[Update: you can see which project I am helping on the right side of my main blog page under the header "my Kiva projects"]
[Update 2: I've lent to four projects ... I'll keep you updated on how it goes!]

Contrarian investing and the Manulife Investor Sentiment Index (good for your RRSP?)

noreply@blogger.com (The Canadian Money Reviewer) — Wed, 23 Jan 2008 00:03:00 +0000

In this time where you are thinking about investing in your RRSP as the market is sinking, you might wonder what strategy to use ... although there's no clear direction, I think there's something about contrarian investing that is appealing. Contrarian investing could simply be defined as buying when everybody is selling (panic in the market) and selling when everybody's buying (exuberance in the market). One tool to identify trends before they show up in stock prices (i.e. to help sell before everything tanks for example) might be using the Manulife Investors Sentiment Index. This is only a theory and use it at your own risk!

First of all, it is currently hard to figure out where to invest, so if you need to contribute to your RRSP, you can simply make cash contributions and wait for the good time to buy.

Here's a very rough and amateur timeline of the Investors Sentiment (IS) level compared to the value of XIU (simple low-fee index ETF to buy Canadian stocks):

2000, the index reaches 35 before the tech bubble crash and then goes to 11 after the crash (in December 2001) ... XIU was around 44$ in March 2002 just as the IS index was going back up close to 21.
July 2007, the IS index is at a near record high (highest since 2000) of 31 and XIU is around 84
September 2007, XIU is around 81 and the IS is pulling back at 20 from it's recent high of 31
December 2007, the IS index goes back to 27 as XIU is still around 81
Today XIU is at 74 (I couldn't find the IS index value since it's only released quarterly)

It's obviously very hard to draw conclusions from this. One conclusion I'd like to propose though is that when the Investor Sentiment Index is at an historic high ( close to the 35 of 2000 ) for some period of time, it's a clear sign that the crowds are over-excited about the market and it's an ideal time to sell. And when the IS index goes to a low (let's say close to the post tech crash of 11), then it might be a good time to buy. I'll update you on the index in March and we'll see if it might be a good time to jump in the market or if it's better to hold. Something to note as well, is that the press releases seem to lag the actual polling time which does not help tracking the current situation.

Disclaimer: this is only a personal theory and not an investment strategy. Market timing is risky and you could lose a lot of money by buying or selling any stocks based on this. If you are not already a seasoned investor, please ignore this post!

If I were only that smart!

noreply@blogger.com (The Canadian Money Reviewer) — Sat, 19 Jan 2008 16:02:00 +0000

I was looking forward to the post I made in June last year about selling stocks to pay my mortgage faster and figured I looked pretty wise when I said:

"and also being concerned about the current heights of the stock market, I decided to act"

I wish I could say for sure that I had seen the current downturn coming, but I obviously had no idea. I didn't know when it would be and how bad it would be. That said, there was a feeling of over-excitement in the market and the investor sentiment was at a very high as well. The problem is that I'm not sure what conclusion to draw other than the usual contrarian one : sell when people are buying and buy when people are selling!

Note that it's also easy to predict problems too long in advance like I reported on investor sentiment in December 2006 .

The Cost of Baby Diapers

noreply@blogger.com (The Canadian Money Reviewer) — Sun, 13 Jan 2008 14:49:00 +0000

It's pretty incredible how many diapers a baby goes through in his early months. The cost of it has transformed us in coupons "clippers" :-) . One place where I found "easy" coupons is on save.ca, a convenient online coupons site that mails you the coupons you've selected. We've also been scouting the weekly fliers, but I can't believe how much paper is wasted with the amount we receive each week. I've also found, but not tried, a site where people discuss rebates and exchange coupons!

Since you're asking, we're using the Pampers Swaddlers which really do a good job at preventing nuclear explosions spills! They do happen do be amongst the most expensive (except if you go with the organic types!).