I have been stunned by the level of interest in what I have been doing financially. In fact, I am a bit embarrassed by the level of interest. So, I am dusting off this blog again and setting up the general instructions for those who want to follow what I do.
A few disclaimers (sort of). Normally, I am very careful. I don’t like recommending anything. The reason is two-fold. On the one hand, it is lousy to say I am looking to buy something and then the next day you find reasons to believe it’s a dog. That happens. It looks bad on me. But, more importantly, my second is that fear someone might take an action and then find out it was a poor choice. However, I can’t see a way to lay this out without using real life examples. Please note: when I write that down, I am telling what I am looking at and why. Things may change. If the circumstances change substantially, then play with caution. Sometimes, the circumstances even get better, if so that’s great. If I say XYZ company looks like a deal at $49 and then it falls to $48...simply put, that’s an even better deal (unless something substantial has changed in the company. I will explain more about this later.
Second, I can’t be held legally responsible for a recommendation. My blog was based on “coffee chat”, the idea that happens all over the world where one guy says, they are buying oil and another guy says they are thinking about buying Research in Motion (RIM). No person attacks someone for what they were doing and if it’s helpful another person might use they “free tip”. I have no system to sell. I have no book to write. I make not a dime out of anything I am putting forward here. I have worked in the past as a broker and financial planner and am aware that certain recommendations may not match one’s level of risk, experience, tax considerations, and income needs.
So, here goes:
Back when I was in grade 5, I used to love watching illusionists. They would do cool slight of hand tricks, and I would stand amazed. In fact, as the years went on I would drop by local magic shops, and buy little pocket tricks. Each trick would have some sort of “gimmick”, a magnet, a lever, a hidden switch, a lead weight or something which would make the action lead to what would not be the normal result. If I practiced the “system”, I could make the flow create the illusion. It was fun. It’s still fun today.
However, as time went on, there would be other illusionists who would like to “talk shop” about a trick and I would show them the “gimmick”. The illusion is over. The mystery is done, but now they know how to pull off the trick.
In short, that is what I am going to try to accomplish here. I will show “The trick”, and when you see it, you are likely not to be impressed. It isn’t magic…sometimes it’s not even interesting.
Hint 1: Debt
“I owe, I owe so off to work I go”
Cute bumper stick, but in reality, that is what we do. We go to work because we have bills to pay. We have to supply the basics of life, but more then that we often are trying for much more then that. We aren’t just living, we are trying to have a lifestyle that we enjoy.
Again, I mentioned that I was a financial planner. As I would sit down with clients, I would find the people on the other side of the desk were vastly different people. Some seniors would own their house, family nearby, don’t like to travel, good health and modest needs. These people would live very comfortably on the money they received on Old Age security (OAS), Guaranteed Income Supplement (GIS) and Canada Pension Plan (CPP). In fact, some people would actually get more money each month then they needed. They were savers, and lived modest.
On the other side, I had clients who lived large. They were elderly people who had to remain doctors and lawyers, and business owners long after they have lost their heart for it. They could easily retire but their lifestyle was such that they needed more income. These people couldn’t even “squeak” by on $10,000 a month. They just couldn’t handle such a lifestyle cutback.
I am not making an condemnation on either one. However, if we have debt, we have to increase our income to afford the debt.
If you make mortgage payments of $1000 a month (I know that’s not a very high mortgage payment), but we have to make that much money (after taxes) just to have a home. The name mortgage even implies a lifetime burden: mort- “death“, gage- “contract”
So, my first step in “doing the trick” is being debt free. If you want to retire, it is very difficult to do so with debt. Make radical efforts to get rid of debt. If you have a mortgage, talk to your lender about ways that are set into the system to pay off early without penalty. Generally, there are ways to be rid of a mortgage early, but most people don’t understand how to do it.
Do you have unsecured debt (Visa, Mastercard, Company cards, etc.) move heaven and Earth to make that disappear. There is almost no benefit from it and more often then not these are purchases on assets which go down in value (toys).
The advice is simple…perhaps a bit too simple. It’s the kind of advice our grandparents would give, but the truth is still good for today.
In my world, when I finally had no debt and a paid for house, I realized that I no longer needed to be a financial planner. My last job (Financial Planner at Bank of Montreal) averaged for people in that role about $100,000 a year. No mortgage, no debt…I could take a job at ¼ my salary, no stress and still have almost no problem making ends meet. It wasn’t a full solution, but it sure made my world a lot easier. I urge you to look at your world and see what you can do to build yourself the same freedom.
Proverbs 22:7 The rich ruleth over the poor, and the borrower is servant to the lender.
Couple other quick hits:
What’s in my portfolio right at this moment:
Symbol: Name
SLV- iShares Silver Trust 400units
CVX- Chevron Corporation USL 200 shares
USO- United States 12 Month Oil Fund, LP 200 units
Cash: $4,763.25
Why: I bought the silver first because there is momentum in the market. If you look at a chart of what’s happen with silver it’s tough not to see it as a positive movement. I also thought the silver market might turn on me, so I sold a Call option on it that will expire this weekend. The Call option paid me when I sold it and the Silver will be taken away from me at a profit this weekend. The Call served to insulate me in case of a swift market down turn. Not perfect plan, but it worked.
Why is silver moving up? Generally hard assets move when the faith in fiat paper is diminished. Simply put, the US govt is unstable and people are looking for stability. This is the story for gold and silver…perhaps other metals like copper as well, but I don’t trade that because the public doesn’t care much about the other metals.
Why CVX? I wanted something other then just hard assets. I traded stocks for years and still have a soft place for that. I chose Chevron because oil was doing well. Also, I was sitting on too much cash and wanted to make even a modest return on my “sitting money”, so I bought CVX and then sold a call that was near the money. The call gave me money when I sold it, but Chevron went down a bit. So, my call will likely expire worthless. (That’s great). I got paid to do nothing. I will likely hold CVX until it becomes profitable ($200 profit) and sell it. If we get within a week of the May expiration date, I may sell another Call. We’ll see. No reason yet to sell for a loss.
USO- is oil and been rising constantly. This is based on volatility in the mid-east. I am looking eventually at a target of oil near $200 a barrel, so unless there is massive peace in the mid-east, or some major change I will buy oil when it drops a little and sell it when it goes up. I take small bites ($200). Also sold an option on oil, it’s out of the money, but could move “in the money” if today is a big day for oil. The Call was just free money on holdings I already had, so I don’t care what happens for this call. Best case would be selling off the oil and then, a good drop on Monday so I could buy it back.
Final remark:
The classic date is dinner and a movie. If a husband learns to cook, and can rent a movie from the local video store, this turns the whole system into a very affordable adventure.
Here’s my breakdown:
Dinner for Julie and I at -2nd Ave grill, Saskatoon without wine $35 plus
tip. (wine add $10-25 more)
Movie at local theatre, Galaxy 2nd Ave- Saskatoon $11.25 each ($22.50 plus treats $10-15)
Parking: $4.00 after 6:00pm
Babysitting: I have teens, so I would generally pay $15 much less then a
regular babysitter.
Total: aprox. $94...again, we can choose a different restaurant, or go to
dollar theatre, but you can see a $100 is no surprised for a date.
I can do the same supper and watch a movie I rent from the local store on our DVD player in our room after the kids go to bed. The whole thing is done for less then $20. Just keep that in mind.
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