Lessons Learned From Bay Street

Lessons Learned From Bay Street

This is a guest post by The Financial Canadian. 

I recently completed a 4-month job stint at a Bay Street bank in Toronto.

I consider myself extremely fortunate to have had this opportunity. After living in rural New Brunswick for my life to date, this move was full of changes – both personally and professionally.

Bay Street is a really mysterious place for those who haven’t experienced it. I’m happy to report that it’s a wonderful place.

Nelson and I have been in discussions for some time now about a guest post, and we thought it would be cool to write about lessons learned on Bay Street.

One lesson I’m writing about today is about the culture of Bay Street (a pleasant surprise!), and the others are about investing in general.


Lessons Learned on Bay Street

Lesson #1 – It’s not like the Wolf of Wall Street

The world of banking gets a bad rap from many people. And perhaps rightly so – after the financial crisis of 2008 resulted in millions of people defaulting on their mortgages and losing their homes, it’s not surprising that people are salty about it.

Banking also has a reputation for being tough on it’s employees, getting them to work insane hours. The media portrays bankers as individuals prone to substance abuse, who never spend time with their families and are workaholics by nature.

I’m happy to dispel these myths.

First of all, at the firm I worked at I can genuinely say that the employees worked for the best interests of their customers. Other than perhaps your doctor, there are few business relationships that require as much trust as those that are financial in nature. The employees on Bay Street take this responsibility seriously..

With regard to the work-life balance, this too was much better than the media portrays it. The hours were very normal for an office job. I was scheduled 8:30-5 every day, and though I often left a bit later, it was never extreme nor enforced. The office was generally empty by 6:00. Sure, there were evenings where I stayed until 8 or 9 at night, but they were rare, and often unnecessary – the work could have waited until the next day, but I was so caught up in it that I lost track of time. One of the side effects of loving your job.

I worked with a group of great people, and our environment was nothing like what is portrayed in the media. The work environment was excellent, and I felt supported and encouraged in my growth. Friends at other firms reported the same. So my first lesson – Bay Street is not the dog-eat-dog world that you see in the movies.

Lesson #2: The Butterfly Effect Is Real

but·ter·fly ef·fect
  1. the phenomenon whereby a minute localized change in a complex system can have large effects elsewhere.

In layman’s terms, the butterfly effect is the theory that a single event, no matter how small, has the potential to change the world around it forever.  This applies to the world of investing too – the intelligent investor will make use of all the details, no matter how small, before committing any money to an investment opportunity.

One of the biggest things that changed about my investing over this summer was my attention to detail. Instead of making investment decisions based on an article from the Motley Fool or CNBC, I learned to really dig into the financial statements of a company. I no longer invest in companies whose business I don’t understand.

When I look back at the way I used to invest, it seems very near-sighted. It’s amazing to me how little I considered the facts before I would make an investment.

For example, if I was considering an investment in TD Bank, the old Financial Canadian might have said:

  • “They are one of the biggest companies in Canada, so they must be doing something right.”
  • “Canadian banks are known to be profitable and low-risk investments.”

Now, my approach is much more granular, and I consider objective facts, like:

  • TD has demonstrated excellent EPS growth in recent years.
  • Their expansion into the US leaves plenty of room for further growth in a new market.
  • The potential for an interest rate hike from the Federal Reserve will increase TD’s Net Interest Margin in their US operations, boosting the bottom line
  • Their exposure to oil & gas loans is lower than the rest of the Big 5 Banks, reducing credit risk in the current oil downturn.

See the difference? By accounting for all details while making investment decisions, we can simultaneously reduce risk and increase return.


Tangerine is offering new customers a fantastic deal. Become A Client And Earn Triple Interest Of 2.40% For Six Months! Plus, earn up to $50 in bonuses just for signing up. Interest on your savings is a good thing. 

Lesson #3: Building a Network Is Key

This summer I had the pleasure of working with a tremendous group of investment professionals who were experts at their trade. I consider many of them to be among the smartest people I know.

As smart as they are, none of them know everything. But through their craft and through their personal endeavours, they have all spent years building a network of people they can rely on.

This network is extremely valuable.If a well-connected person ever stumbles upon a question that they don’t know the answer to, they will know someone that does.

So how do you build a network?

Well first of all, being genuinely nice is a great way to start. As well, don’t be shy! Reaching out to people cold (whether it’s through email, LinkedIn, or what have you) is a great way to meet new people and I’ve personally made great connections this way.

After seeing the importance of networking first-hand this summer, I wrote a full post about successful networking tips. Give it a read!

Lesson #4: Investing is About Numbers

This blog is quantitative by it’s very nature. Investing itself is also very quantitive, at least when it’s done properly.

This might seem very obvious, but this summer took it to another level for me.

This summer I learned all about valuation metrics, Microsoft Excel, Discounted Cash Flow models, and all kinds of other applications of mathematics and statistics to the world of investing. Since business is communicated through financial statements, and financial statements are composed of numbers, then it only seems natural that quant skills are important.

Equally as important as being able to calculate these numbers is the ability to interpret them. Investing is just as much an art as it is a science, and this summer I made great progress in developing the “gut instinct” that is necessary in a successful investor.

Concluding Remarks

Having the opportunity to work a stint on Bay Street was one of the best things that’s ever happened to me.

I’ve learned so much about investing, living in the big city, and all sorts of other things.

One day I hope to make it back.

Readers, did any of this surprise you about Bay Street? Let me know in the comments section!

The Foreign Buyer’s Tax is a Terrible Idea

The Foreign Buyer’s Tax is a Terrible Idea

Let me begin this article by reminding you kids that I think Canada has a massive real estate bubble and it should be something that concerns us. Back in 2012 I even went as far as shorting Canada’s banks (using options) as a way to bet on this. This investment didn’t go well.

And if you read my stuff over at Motley Fool, I’ve probably written at least a dozen articles in the past year alone pointing out various concerns about the market. I firmly believe anybody investing in Toronto or Vancouver real estate is setting themselves to lose a metric assload of money. That’s more than an imperial assload, btw.

I also that we should be doing things to attempt to pop this bubble, and to their credit, governments have been trying. Mortgage insurance has become more and more strict as the years have passed, although many still believe it’s far too lax. Certain cities have set up land transfer taxes to make buying all the more expensive. And apparently even banks are getting in on the act, slowing lending to markets they feel are overvalued.

Oh, the restraint.

And yet, even though all those changes were implemented to make it harder for folks to buy property, the two big markets are like my rockin’ dance moves, refusing to quit. What gives? What was happening?

For many observers, the blame rested at the feet of one group of people, and that’s the damn immigrants. They felt the same way Moe Szyslak felt about the immigrants. Take it away, Moe.


Oh man Frinkiac is my favorite thing ever.

So they reacted in a very predictable way. After years and years of getting upset that rich Chinese and Middle Eastern folks were showing up and making houses unaffordable, British Columbia passed a special 15% foreign buyer’s tax on any property in the province not purchased by Canadian citizens.

The many problems with the foreign buyer’s tax

For an issue that governments have apparently been studying for years and years, the B.C. government sure did botch the passing of this bill.

The biggest mistake made was making the bill effective immediately. When the foreign buyer’s tax was passed, it was passed with no implementation period. That means even if a foreign national bought a house three months before and was set to close on it in a couple days after the bill passed, these folks would be forced to pay the foreign buyer’s tax.

Put yourself in that person’s shoes for a minute. You decide to make a decision that involves spending the better part of a million bucks. Everything is going fine and then all of a sudden some bureaucrats sign a bill and you’re looking at an extra hundred grand that you have to pay. You’d raise all sorts of hell, and rightfully so.

It’s not that governments can’t change the rules, because of course they can. But they have to change the rules in a fair way. That includes not making people who entered into a transaction in good faith pay tens or hundreds of thousands in a tax they never agreed to.

A seller can’t go back and demand extra cash from a buyer in the middle of a transaction. They’re bound to that contract. Governments should follow the same rules.

Why are we targeting foreigners?

I’ve heard all the arguments, and they all have a variation of the same theme. Foreign money pouring into Canada is the reason why house prices are so high. Vancouver is dominated by Chinese money, while Toronto has been a haven for Middle Eastern oil cash.

There’s a certain amount of truth to that, I’ll admit. I’ve been to both Vancouver and Toronto, and it doesn’t take a genius to see how multi-cultural both of those places are. It’s obvious foreign money is propping up real estate markets in those two cities.

But at the same time, Canadians are playing a huge role in prices in those cities as well. So many otherwise smart people are putting all their eggs in the real estate basket, buying a place before they feel priced out of the market forever. Low interest rates are helping landlords buy up supply that gets rented out for peanuts. And population growth to both centers is robust as tens of thousands of Canadians move to the largest centers each year.

In other words, foreign buyers are the tipping point, but we’ve done most of the heavy lifting ourselves.

One of the great things about Canada is we have a free economy. Americans, Brits, Chinese, or anyone else is free to invest in our market, own a company, or buy real estate with very few limitations. Hell, you can even buy your way into Canada (Quebec only, but still) for the low cost of $800,000 and a net worth of $1.6 million.

We roll out the welcome mat for foreigners when its convenient for us and make them the scapegoat when we decide they’ve taken advantage of the rules. We’re happy to accept their money when it suits us and then we slam the door shut (and disparage the crap out of them) when they have the audacity to want to invest in our country.

And yet, with more and more anti-children guys like me out there, Canada is going have to rely heavily on immigration to grow our economy and pay for our massive social obligations.


It comes down to this. Canada has done all sorts of things to make buying houses easy for the average family. Mortgage default insurance is (relatively) cheap and banks regularly give 25-year old borrowers loans of 20 times their original investment with nobody batting an eye. Millions of Canadians feel they have a right to buy an affordable home in our most popular markets.

And yet when foreigners want a piece of the same action, we think it’s okay to slap a foreign buyer’s tax on them and only them.

Ultimately, I do not believe putting restrictions on foreign cash is a way for an economy to get ahead. If we want to cool down certain housing markets, we should do so by putting the same rules in place for everybody.

Weekly Linkfest #5

Weekly Linkfest #5

I decided to go on a solo road trip this weekend to visit some friends, a trip that for the most part was highly enjoyable. It’s nice to see people who only exist as email contacts for the other 51 weeks of the year.

The only bad part? The hotel’s fire alarm went off at 4:30am.

Because it was 4:30 and the last thing I wanted was to leave my comfy bed, I delayed leaving. I just assumed it was a false alarm. I couldn’t smell any smoke or see anything. And if people were evacuating my floor, they were doing it with the volume and intensity as mice.

But the alarm persisted for five minutes and then ten, so I finally roused myself and started the difficult process of putting on pants. I got dressed, headed to the front desk, and saw a half dozen firefighters just milling about. That was all I needed to see; I turned around and went back upstairs using the elevator this time.

I’m not usually in favor of the death penalty, but I am for whoever pulled that fire alarm.

Link Time

These are the articles I liked this week.

1. Let’s start things off with by far the most bizarre article I read this week, on Meat Loaf’s fantasy sports prowess. The man is either the greatest fantasy sports player of all-time or one of the great liars. Either way, it’s an article worth a few minutes of your time.

2. Over at Money We Have, Barry Choi points out that choosing the correct mortgage adds up to tens of thousands of dollars in savings over a 25-year term. By spending a little more time picking out the right loan, you can have a huge impact on your overall finances.

3. You know how everyone says the income of the average worker continues to be stagnant? Well PK at Don’t Quit Your Day Job actually crunched the numbers, and came to a slightly different conclusion.

4. Oddball Stocks continues to be one of my favorite value investing blogs. His latest post is on the information edge needed by active investors to be successful. He argues this edge doesn’t need to be as large as one would think.

5. Over at Half Banked, Desirae points out that having a blog is basically just a bill of expense. Okay, not really, but to be halfways successful in the niche you do have to spend a couple of bucks.

6. Speaking of mortgages, Canadian Mortgage Trends tells about some potential bad news for homeowners starting in 2017. It looks like mortgage insurance premiums will go up. I guess y’all will just have to do what everyone has been telling you all along and put 20% down.

7. Over at Boomer and Echo, Robb has some really simple advice to millennials. Just start investing already, dammit. And while you’re at it, move out of your parents’ basement.

Fun somewhat related fact: while talking to a friend on Friday he told the story about a house developer who built seniors condos. And he said he doesn’t build any one bedroom condos anymore. The reason? Because many seniors want an extra bedroom for their kids/grandkids to have the option to move into. Apparently this happens all the time.

8. Nomad Capitalist has some feelings about recent immigration changes brought in by a previous government, and he’s no fan. In between that bill and recent taxes that make it prohibitively expensive for a foreigner to purchase a place in Vancouver, it would be easy for immigrants to get the wrong impression.

Stuff Nelson wrote

As a reminder, you can hire me to write for your blog, newspaper, or poorly-Xeroxed newsletter. Hit the ol’ contact me page to get the ball rolling. 

1. Do you want to invest in the electric car revolution but aren’t sure which company will profit? I propose an alternate solution over at Motley Fool Canada.

2. Home insurance when you have a pool is a little more tricky than normal. I give you all the deets over at Lowest Rates.

Tweet of the week

This really deserved more than one like.

Have a good week, everyone.

Want to Invest in Real Estate? Go to New Brunswick

Want to Invest in Real Estate? Go to New Brunswick

It’s no secret I’m not a fan of investing in Canadian real estate as a whole. It’s also no secret that I smell like rotten apples.

There’s just no return from most markets. If I were to buy a downtown condo in Toronto right now, I’d be getting about a 4.5% return on my investment before expenses. That’s a whole $18,000 per year for $400,000 invested. That doesn’t include stuff like property taxes, maintenance, vacancy, or other operating expenses that come up.

By the time I pay the interest on my 2.49% mortgage (if I’m lucky), I’m barely making anything. That’s no way to invest in real estate. Which is why I suggested a better way of just leveraging to buy REITs.

But some of you insist on owning physical property, and I can certainly see the logic behind it. One of the biggest advantages is the ability to depreciate the value of a rental by about 4% each year. Depreciation is an expense but it doesn’t actually get charged. It affects profit but not cash flow.

Let’s look at a simple example to better explain the concept.

Profit: $10,000
Depreciation: $2,000
Net profit: $8000

Cash flow from the investment: $10,000

You’re basically paying tax on $8,000 worth of profits but keeping the cash flow of $10,000 in tax. This adds up over time.

Depreciation isn’t a total free lunch, however. You have to pay it back when you sell. Capital gains are figured out on the depreciated cost, not the actual cost.

Where to invest?

Anyhoo, let’s move away from stupid accounting and get into the meat of this post. If you’re looking to invest in Canadian real estate, where should you do it?

We can eliminate a lot of big cities right off the top. Cap rates in most cities with over 500,000 people in Canada are terrible. There’s just too many people buying houses in these markets, which is keeping prices up.

That’s why so many people are renting. When you have a landlord subsidizing your apartment, renting makes all kinds of sense.

Fortunately, there are a few markets where a landlord can make some money. Let’s take a look at the first:


Ah, Moncton. The place so boring I literally don’t know the first thing about it.

It doesn’t matter what I know about it, because the place is filled with real estate that actually offers some interesting returns. As an example:


You’d be surprised how many ads don’t bother to list the damn rent each unit gets. Especially listings from real estate agents. “What a great investment! I’m not going to tell you the returns though, you’ll just have to trust me! And if there’s a group of people we know are the MOST trustworthy, it’s real estate agents! WHEEEE!”

Anyhoo, let’s crunch some some numbers, bitches:

Purchase price: $120,000 (I have good negotiating skillz)
Rent: $16,200 per year
Various operating costs: $4,050 per year
Net operating income: $12,150
Cap rate: 10.1%

And that ain’t bad, kids.

Or to put it another way:

Down payment (assuming 20% down): $24,000
Net operating income: $12,150
Mortgage interest (on 2.49%): $2,490
Cash flow: $9,660
Return on invested capital: 48.3% (before taxes)

Another example? Don’t mind if I do…

More New Brunswick

What is it with New Brunswick’s real estate? Are the buildings being held up by roaches and popsicle sticks?

Anyhoo, here we go:


A Realtor that actually breaks down the revenue and expenses? BE STILL MY HEART.

I guess it’s once again number crunching time, bitches:

Purchase price: $92,000
Net operating income: $13,013
Cap rate: 14.2%

That’s succulent. We haven’t seen returns that good from real estate since that time I told y’all to become trailer park slumlords.

And to make the place look even more exciting, here’s your return on invested cash:

Down payment: $18,400
Net operating income: $13,013
Mortgage interest (at 2.49%): $1,832
Cash flow: $11,181
Return on invested capital: 60.8%

If y’all need me, I’ll be sprawled out on the fainting couch. I’m going to need a breather after seeing that.

After at least an hour dicking around on Kijiji looking for better choices, it’s official. New Brunswick is the place to invest in real estate. Nowhere else in the country even gets close.

Cutting Cable Is a Terrible Decision

Cutting Cable Is a Terrible Decision

This is going to sound really dumb after reading the title, but hear me out. OH GOD WHY WON’T YOU ALL GIVE ME A CHANCE?!?

Here at Chateau Financial Uproar, we currently don’t have cable. We have a Netflix subscription Vanessa pays for out of the allowance I give her each month ($46 and not a nickel more) and I enjoy watching the odd baseball game from MLB.TV. I’m too cheap to pay for a subscription to that particular service, so I use my buddy’s account.

I then used his password to hack into his email account, where I responded to a Nigerian price. Turns out that one was legit, and he is now a millionaire.


Anyhoo, cutting cable isn’t such a hard sacrifice. We just turn on Netflix and go to town if we’re in the mood to watch TV. If I want to watch a sporting event like the NFL, I’ll either go to a friend’s house or just find a stream online. This isn’t really a problem because I so rarely watch games.

I’ve cut my television watching to virtually nothing, in other words. I might watch two or three hours of TV a week, choosing instead to spend my leisure time reading books for free, looking at stupid gifs on Reddit, or throwing things at my cat so it’ll leave me the hell alone. I guess I’ve also been trying to spend more time with actual people rather than what I did previously, which was mostly brooding and yelling at teens to get off my damn lawn.

Speaking of stupid gifs, here is my favorite one.


I guaran-damn-tee you at least one squirrel was harmed in making that gif.

Cutting cable

If you’re like me and you just stop watching TV, then by all means. Cancel your cable and never go back.

Where I have an issue is with folks who end up cutting cable and then don’t decrease their television usage. These people want to have their cake and to eat it too. They desire the ability to watch TV almost like normal without paying any of the associated cost.

Related: How to get (nearly) free TV

They’ll do a number of things to get that sweet free TV. Installing an antenna is usually their first step, a move that gets them anywhere from two to about ten free channels over the air. They’ll rave about the quality of the picture. Because hey, the only thing better than HD is free HD, amirite?

Except unless you live in a very specific part of Southern Ontario, you’re only getting a handful of channels for free over the air at best. And even then, who cares? You’re getting CBC for free. That network shows four shows and twenty hours a day of highly entertaining test patterns.

CBC, right now. Go ahead and check.

CBC, right now. Go ahead and check.

Call me when I can get HBO for free. I’ll get excited then.

The next step is usually getting one of those Android boxes that are preloaded with all sorts of ways to get pirated TV shows, movies, pornography, and probably the feed to your neighbor’s nanny cam. In theory, these boxes can give somebody access to a whole internet worth of media. It’s a cutting cable orgasm in a plastic box.

Reality is a whole lot different, though. I’ve talked to a few people who got these boxes, and it’s the same refrain over and over again. They’re great at first, but then access to the media starts getting taken away as hosting sites and apps are shut down by the Feds. Within a few months people have abandoned them because it takes more time to find an episode of The Big Bang Theory than it does to watch it.

And then when you do find a stream, the picture quality is hot garbage. I went through this while living in South Korea a couple years back when I wanted to watch the Super Bowl. I was able to find a stream online and use my Chromecast to watch the game on our provided TV set. But the picture looked like blurry ass. The TV could handle 1080p. The picture quality was about 6p.

And if that’s not enough, the damn feed buffers every 14 seconds, magically right when DREAMY Tom Brady was about to throw a pass. Remember when Seattle lost that Super Bowl on that dumb passing play on the goal line? What I remember is Twitter losing their minds and then my slow-ass stream telling me what happened twenty seconds later.

Life is too short to watch crummy streams and trying to figure out where you can find the latest episode of your favorite show.

TV value

When you think about it, TV is terrific value. Where else can you get hours of entertainment for $2 or $3 per day?

Yeah, a certain amount of TV is trash. But come the hell on. There’s a reason why The Bachelor is still on the air after 5,203 seasons. It’s because people eat that crap up.

Readers like to belittle TV watchers as slack-jawed yokels, barely able to stop drooling over themselves long enough to watch the latest episode of Grey’s Anatomy. Meanwhile, readers are buying cheap romance or mystery paperbacks that are just as consumable as the latest Hollywood blockbuster. And at least some TV watchers are watching PBS.

If you get value from TV, go ahead and keep your package. And if you don’t, then start cutting cable with all the gusto of Taylor Swift being crazy. But as it exists today, free or nearly-free streaming options have a lot to be desired. If you value your time–and you should–then just pay the damn cable bill.