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Nelson Smith

Freelance writer. Contrarian investor. Watcher of baseball. Owner of financialuproar.com. At least my mom thinks I'm funny and/or handsome.

May 222015
 

Oh boy kids! You know it’s exciting when I start cracking out the exclamation marks!

The year was 2010. I was more single than a Kraft cheese slice, stuck in a job that I didn’t particularly enjoy. Instead of working, I’d spend hours reading my favorite personal finance blogs, constantly thinking that I could do a better job than those dumbasses. I don’t know if I succeeded, but I think I’ve outlasted every single one of them.

So I started my own personal finance blog. Fun fact: Financial Uproar was almost Financial Aisle, which is a pretty stupid name. I think there might be a Financial Aisle WordPress blog out there if someone wants to find it. Fun fact 2: the fact that this blog’s initials are F and U is purely a coincidence. I briefly entertained the thought of starting a Financial Uproar podcast, just so I could call it Financial Uproar Chuckles and Kicks.

NO, YOU’RE IMMATURE.

And now I’ve made it to 1,000 posts. Can you believe it? I’ve also written approximately 750 more for other sites, which is fourteen different kinds of amazing. At 800 words per post, that’s 1.4 million words. That’s the length of War and Peace 2.5 times over, but I’m guessing it had more dick jokes.

I thought about ways to celebrate this joyous occasion, like hiring a marching band or strippers, but those were either out of my budget or just plain not a good idea. So instead, we’re going to go through the top 10 Financial Uproar posts of all time. For those of you who are new around here, I suggest you warm up your clickin’ finger.

10. The Financials of Payday Loan Companies — If you’ve spent more than a minute and a half reading other financial blogs, you’ll notice a hatred of payday loans. I’m more on the fence about the whole thing. Sure, they suck, but they exist for a reason. It’s a really risky business to give dirtbags unsecured loans.

I took a look at the financials of the largest publicly-traded payday lenders. And surprise, the business wasn’t nearly as lucrative as everyone assumes.

9. Financial Literacy Should Be Your Own Responsibility — Every personal finance blogger thinks we should teach finance in school. None will acknowledge that we already do, and yet people are still terrible at it. I attempt to figure out why.

8. A Behind The Scenes Look At Dragons Den — They actually invited me to a taping of the hit show. They were mad because I revealed what ends up on the cutting room floor.

7. Finance Fox is a Dirty Plagiarizer — Long time readers will remember this one. It turns out another PF blogger plagiarized dozens of his peers for years before anyone caught on. Like only I can do, I made fun of him about it. Not surprisingly, it was my most controversial post ever, culminating in legal threats (but not from who you think!).

6. My Experience With World Financial Group — This is by far my most popular post, getting anywhere from 4000-6000 page views each month. It’s up to 483 comments, most of which tell me that I’m all wrong about World Financial Group. If you have a spare hour, go through them. They’re extra hilarious.

5. Buy Assets Instead of Going to College — This is pretty much my MO. It’s a step-by-step guide on how I turned the money set aside for my college education into assets that pay me every month to own them, even almost 15 years later.

4. 30 Life Lessons Learned in my First 30 Years — Here’s another fun Nelson in a nutshell post. I weigh in on all sorts of crap, everything from failure to wasting time.

3. F— You, I’m Short Your House — At the time, probably the best piece of analysis I had ever done. It was more than 3,000 words on why the Canadian housing market was in a bubble, and how you could short it. And yet, I turned out to be wrong — at least for now.

2. Guest Post: Tips For Maximizing Your Life While Paying Down Debt — Although I totally ripped off the idea for this post from an old Control Your Cash article, I think it might be one of the funnier pieces I’ve ever done. If you’re a debt blogger sympathizer, you probably won’t like it.

1. Money is Not Greater Than Love — Even though I lucked out and ended up with a lady who is as into money as I am (pro tip: just exclusively hit on PF bloggers if you want one of those), I think us as a group are a little too obsessed with making sure our potential mate is as financially savvy as we are. That’s bad.

And that’s it. There are some of you who have read just about every post, which really makes you question how much time y’all have on your hands. But seriously, thanks to everyone for reading, commenting, following, and Liking my posts. Nelson of five years ago couldn’t have possibly imagined how blogging would end up changing his life.

Here’s to another thousand posts.

May 202015
 
A house much nicer than anything I can afford, apparently.

A house much nicer than anything I can afford, apparently.

I’m back, bitches.

Back in Canada, that is. After cutting my Korean adventure a couple of months short for reasons I will TAKE TO MY GRAVE, I’m back in Canada with my lady friend. You may know her as Vanessa, but I don’t. To be honest, I’ve barely learned her name. She’s either “sweetcheeks,” “toots,” or “get me a sandwich.”

Yeah, that last paragraph is getting me a punch to the kidneys.

Anyhoo, now that we’re back, we have plans. We’ve picked a nice community to settle down in, and are in the process of starting some fun new stuff. I’m not sure y’all will ever hear about it because, frankly, I hate all of you. Okay, not true, it’s just something that’s more local in nature.

As part of deciding to settle down, we have decided to buy a house. Yes, I know, that I’m the same guy who has made the argument that your house isn’t an investment and the guy who actually shorted the real estate market via the banks. But hey, you gotta have a place to live, and I like the freedom of having my own place. If I want a sex dungeon in the basement, I’m putting in a sex dungeon, dargbloomit! Like I said in the house isn’t an investment post, as long as you view your house as a store of value only, buying isn’t so bad.

So the lady and I decided to go looking.

 

It wasn’t just as simple as the two of us getting house horny. We’re looking in rural Alberta, a place where oil’s decline has been felt hard. We kept tabs on the market while in Korea, and for months it seemed like most of the same houses lingered on the market. And I’ve even been hearing stuff about how both CMHC and Genworth are making it more difficult for anyone in Alberta to get financing. These are all music to a buyer’s ears.

We’re on about month five of the oil bear market, so I figured that there might be some desperate sellers out there. Combine that with the stuff I mentioned above, and I was thinking that it might be time to start making some deals.

Yeah, I was wrong. Sooooooooooo wrong.

We found a grand total of 18 houses that were in our price range, between $200,000 and $250,000 (remember, this is a small town). Some where ones I only liked, while others were on Vanessa’s wish list. Because I’m a glutton for punishment, I told our Realtor we might as well knock them all off in one day. I figured that we’d find 3-4 out of the 18 that we were interested in, and then go from there.

The first surprise was when we met her at the office. She told us that out of the 18 we identified, three would be unavailable because they already had accepted offers. That left us with 15, another one which had an offer on it that morning.

Okay, so we go off to see the places. I’ll spare you the details of each, and instead give you guys the highlights. Reasons for passing on these places included:

  • Obvious water damage in the basement
  • A slant so bad that it felt like you were downhill skiing
  • A house with shag carpet and the oddest smell you can imagine
  • The bottom two feet of drywall ripped out because of flooding
  • A house with a giant bong on the coffee table
  • Mold in the basement
  • A hump in the concrete so big that the owners cut out the metal support posts to ensure the whole house didn’t bulge up
  • And etcetera

Out of the 15 listings, we found two we actually liked the inside of, but were in crummy neighborhoods. And they were the two houses that were above our $250,000 threshold.

So what now?

There was one house that had a decent enough upstairs and just needed some work downstairs, including new carpet throughout and some paint. It probably needs some other work too, but we felt like it had good bones, y’know? It was right at the top of our price range, but we need a place to live. So we submitted an offer at 0.5% under the asking price. Fingers crossed!

Just kidding. I actually threw up in my mouth a little typing that last paragraph. Here’s what we’re really doing.

First off, we’re not looking at places until the market slows down again. I’ll be damned if I’m going to compete with somebody who’s just looking at how much it costs each month with a down payment from mommy and daddy burning a hole in his pocket. When asked, I told our Realtor that I wasn’t interested in getting email updates. I’ll probably delete the app from my phone. Getting involved in a market like this tends to only end badly.

One of the reasons why I like small towns is because the cost of living is so much lower than large cities. By shelling out a quarter of a million on something that has serious issues, I’m falling into the same trap as the average homebuyer in Toronto or Vancouver. Those of you in larger centers will scoff at me not wanting to pay $300,000 for something I view as reasonable, but the whole reason why I want to live in a small town is so I don’t have to pay 300 large for a g.d. house. I refuse to accept that this is the “new reality,” or whatever is the buzzword surrounding this insanity.

I wanted to come back and find a nice place to settle down. It looks like that’s not going to happen, at least for a little while. But if I’m patient and values fall 10-15%, I’ll put anywhere from $30,000-$50,000 in my back pocket. For that much money, I think I’m okay with renting for a while longer.

May 182015
 
graduates

“We’re not wearing anything under these robes.”

Oh hey, new graduate.

Congratulations on finally getting yo’ ass a diploma. I know it’s probably attached with an assload of student loan debt, but hey. At least you finished. Imagine being that guy who has a bunch of debt and works at Starbucks who doesn’t even have his degree. At least you have bragging rights.

You might not remember, but delivering these messages is kind of a tradition around here. I did one in 2013, which urged you all to pay off your debt at all costs. I followed it up last year with another one, which said that y’all should work smart and take alternate paths. I’m sure they were all forwarded to dozens and dozens of grads, where they were promptly ignored because if there’s a group of people who think they know it all, it’s 22-year old college grads.

So let’s keep the party going. After the last four years of being circle jerked in your little protective bubble, frankly, you all could use a little cold water splashed on you.

Let’s get the basics out of the way first. You know how all your teachers and guidance counsellors and your mommy and daddy told you that all you needed was your degree and you’re all set? Yeah, that’s not true. Sure, having that degree helps, but at this point all it really shows employers is that you’re capable of making it through school.

Your first job will suck, which is exactly what should happen. Brenda from accounting will be a major c word, and you will totally get passed up for promotions that you deserve. The office hot chick/funny guy will get perks like you cannot believe, while Bill Lundbergh shows up at your desk four times per day bitching about TPS reports.

Oh, you’re going to avoid all that? By going to work for a start-up? Don’t make me scoff. There are a million startups out there that think they’re reinventing the wheel who have found some venture capital guy with more enthusiasm than brains and a bunch of investor cash. It’s all a giant bubble and it’s all going to end badly.

At least none of you think you’re the next Zuckerberg, right? Oh God. Look, don’t even think about it. Somebody who has never held down a full-time job has no business starting their own company right out of college. You’ve already raised money? Just give it to me, and we’ll light it on fire together.

Look, I know you’re full of piss and vinegar and probably some recreational drugs, but the real world doesn’t work like that. If you want to show the world you can build a better do-dad, go and learn the ropes while somebody is paying you. Become a really good employee before you even think about going out on your own. Get a promotion or two under your belt first, and then we’ll talk.

I know that you want to change the world, or start doing really cool things. And hey, maybe you’ll get around to it. But graduate, you gotta stop being so damn impatient. The world is a really difficult place, and chances are you’re lazy. Besides, I’m pretty sure most super achievers didn’t get a B in intermediate statistics. Oh, sorry, a B+.

At a minimum, your first decade in the workforce should be spent trying to learn the ropes. I’ll be 32 in about six weeks, and let me tell you from experience that most 22-year olds don’t know a damn thing. And if you’re 18, I suggest shutting your mouth for a few years and just listening to the grown-ups.

Sure, Bill Gates accomplished a lot during his 20s. So did Elon Musk and that Zuckerberg guy. Fine, I’ll give you those. But there’s no way you can compare yourself to them. Let’s temper expectations a little. They’ve already gotten four hours worth of work done, while you’re procrastinating by reading this blog post. And by setting your expectations too high, you’re all but ensuring a lifetime of disappointment and failure.

For the next five years, here’s what I want you to do.

One, put your head down and work. You’re young and have the energy. If work doesn’t give you the chance to exchange extra hours for extra money, start a side hustle. Instead of the side hustle aiming for the stars, do something practical. Don’t try to invent the next Snapchat. Do ref sports, or something else from this list.

Secondly, learn everything you can about the world around you. Sacrifice time you’d normally spend with your bros and crack open a book or ten. Your bros are probably dumb anyway.

And finally, I want you to embrace the ordinary. Accept the fact that you’re not gonna change the world. Accept the fact that you’re mostly average. Accept the fact that, like most people, you’re going to value time with your family more than you do work.

By tempering expectations, you’ll create a life where you celebrate accomplishments instead of getting down on yourself because things haven’t happened as quickly as you’d like. But most importantly, you’ll create the temperament to just keep chugging along.

Warren Buffett made 99% of his wealth after his 50th birthday. So did Sam Walton, Ray Kroc, and millions of other successful people. Do you think they lamented how they were 29 and still hadn’t accomplished all their dreams? Do you think they had a “quarter life crisis”? Hell no. They were out working. They were doing the little things that get no credit.

You have to be incredibly lucky to change the world. But to get rich, have a great career, or do some cool stuff, there’s not a lot of luck involved. You just have to do the right things every day, and repeat them for decades. Most people just can’t pull that off, which is why they’ll only be mediocre for the rest of their lives. Conquer this impatience and realize things take time and an assload of work. Once you figure that out, the sky truly is the limit.

May 152015
 
If you don't pick him to sell your house, he will hit you.

If you don’t pick him to sell your house, he will hit you.

If you ever want to get a Canadian riled up, don’t bother mentioning hockey, maple syrup, poutine, Tim Hortons, curling, or anything else Americans normally associate with their neighbours to the north (I spelled neighbors the Canadian way because I’m a better Canadian than you. TAKE THAT, HARPER.).

Instead, just mention real estate commissions.

I actually did this one day, and got the following responses.

“My house sold in a week, and I paid $10,000 in commission. I estimate my Realtor made at least $1,000 per hour. I hate him more than it is physically possible to hate another man.”

“My Realtor passed a three-week course for $1,200 and now makes more than I do. Naturally I want to murder him and feast on his brains.”

“I can’t talk. I’m actually going to jail for murdering my Realtor. I’m looking at 25 to life, but it was totally worth it.”

Yikes, I gotta start hanging out with less violent people.

These opinions are pretty mainstream when it comes to Canadians, except without the murder parts. Just about everyone thinks Realtors get paid too much. Will this ever change? Join me as I blindly speculate without any basis in reality. It’s pretty much a normal post.

Why are commissions so high?

There are a number of reasons why Realtors do well, including:

  • Pretty much a monopoly when it comes to the MLS system

 

  • A cartel-like attitude when it comes to discount competition

 

  • The large number of part-time agents need high commissions to survive

 

  • Offices are expensive, and depend on commission split agreements between the brokerage and agents

 

  • Even though 95% of buyers end up going to MLS, Realtors are forced to spend on other marketing materials even though they make very little difference

 

  • The Big 3 (Remax, Century 21, and Royal LePage) take a lot of fees just to fly the colors

 

  • Folks are flaky and will often waste an agent’s time with unreasonable requests

There are probably more reasons, but that’s enough. We’ve made our point.

Essentially, real estate commissions are expensive because they’ve always been expensive. The entire business model is built around getting paid a certain amount. Think of it this way – if you were selling 10 ends per year (that’s Realtor talk for half of the transaction), would you rather get paid $4,000 each time, or $2,000? At a regular rate, you can make a living. At a discount rate, you’re hitting up the Early Retirement Extreme guy for dumpster diving tips.

And then there’s the discount brokerages. Essentially, they’re volume houses, just looking to replicate the same model but make up the difference by doing more transactions. I’m not sure that’s the ideal strategy either.

Here’s the way I look at it. If you own a $2 million home in Toronto or Vancouver, you’re not using a discount real estate brokerage. You’re happy to pay the fee, because it’s not that big of a deal to someone who can afford millions for a place to live.

If I ran a discount brokerage, I’d continually remind people that I cut costs so I could pass the savings to them. I’d share office space with a some other professional company, and point it out to clients. I’d enter into arrangements with mortgage brokers and insurance guys to pay me for referrals. I’d cut the amount of swag given to people to nearly zero. I’d pull up to listings in my ten-year old car. I’d try my best to communicate to customers that we were making sacrifices to keep their fees low.

Is there potential to lower fees?

There’s always potential to lower fees. Hell, there’s even potential that the Toronto Blue Jays make me their starting center fielder even though I can’t run very fast and wouldn’t have a hope of catching up to a major league fastball. But I don’t think either option is very likely.

As you probably remember, the Competition Bureau told the Canadian Real Estate Association that discounters should be allowed access to the MLS system just like regular brokers. The discounters seized that opportunity and have made progress, but they’re nothing more than an inconvenience at this point. The only brokerages that are shaking because of a discount competitor probably sucked in the first place.

There’s still a huge majority of agents that have every reason to keep your commissions high. That’s slowly changing, but not at a speed quick enough to make the naysayers happy.

Plus, the whole system almost reminds me of a perpetual motion machine of crap. Customers think Realtors get paid too much, so they’re flaky as all hell and will decide to fire a Realtor because they have funny shoes. Realtors get pissed off when this happens and feel justified in charging the high fees and making people sign Buyer Representation Agreements. And the cycle repeats itself.

At this point, I’m not optimistic that real estate rates are going to go down anytime soon. The discounters are making progress, but it’ll take at least another decade before anyone will get excited. I think entering a stage of the market where prices go down will help the discount guys, and I think that some will figure out how to change the model in their favor. But for the most part? Don’t hold your breath. Maybe try selling your house yourself?

May 112015
 
"HERE'S GRANDMA."

“HERE’S GRANDMA.”

I suppose I should start this out explaining what a reverse mortgage is, huh? Or I could just do what I normally do, hire a bunch of monkeys to type until we get something that approximates English. Hey, it worked for Shakespeare. Or not, like I paid attention in science class.

Anyhoo, let’s talk a little about reverse mortgages, which, as the name implies, are like a regular mortgage, except backwards. FINANCIAL UPROAR: KEEPING YOU ON YOUR TOES SINCE 1932.

Let’s say your grandma is 74 years old, and even though she’s quite the looker for her age, the old dudes just aren’t showering her with cash. Yeah, apparently men do get smarter as they age. So grandma needs about $500 per month in order to supplement her pension.

She has a few options. She could cash out some savings and buy an annuity, which will guarantee her a certain amount of cash flow each month for a certain period of time. She could sell the house and use the proceeds to either invest or just slowly spend. Or she could even hit up her kids/grandkids, but nobody over 70 wants to do that. That’s pretty much admitting you’re a failure.

None of these are perfect solutions. Annuities are fee-riddled products and that cash flow goes away as soon as grandma kicks it. Selling the family home is something that no senior wants to be forced to do. Besides, moving is a pain in the ass when you can actually carry your own things.

So what’s the solution? For some seniors, it’s a reverse mortgage. Grandma puts her house up for collateral, and the mortgage company will give her $500 per month. This lasts for 1-5-10 years (or until grandma borrows up to 40-50% of the value of her house) while interest keeps accumulating. These days, the interest rate on a reverse mortgage is five or six percent annually.

Say she keeps this up for a decade. After ten years, grandma will have taken $60,000 worth of equity out of her house, and will owe in the neighborhood of $70,000 total once we add up all the interest. (That could be off, but like hell I’m going to calculate it to the penny)

That’s pretty much it. Reverse mortgages are a pretty simple product. Does that mean you should invest in them?

Investing in reverse mortgages

I won’t bury the lede. I think investing in reverse mortgages is a good idea over the next decade or two. There are millions of potential customers coming down the pipeline, thanks to the glut of baby boomers getting ready to retire.

Like with any sort of lending business, you’d have to be picky about who you’re forwarding money too. The biggest reverse lender in Canada has the following requirements, which I’d recommend you adhere pretty closely to:

  • The minimum age is 60, with 65 strongly preferred
  • Must own their home outright
  • Maximum of 5% of the home’s value paid out each year
  • Once the homeowner hits 40% of the value of the house, they’re cut off

(Note: these might be slightly off. I’m going by memory here and the company is tight-lipped about lending standards. Help me out, anyone with more info.)

And that’s about it. They’re pretty simple products.

The next step is to find seniors who need cash. There are a variety of different ways you could do this, including advertising in newspapers (seniors actually read the classifieds, so I’d start there), spending time at the places where old folks hang out, and hitting up the people in your community who run seniors’ support services. You could probably do well at the hospital too, but that’s a little weird even for a guy like me.

There’s another way, and that’s approaching a mortgage broker. Sure, you’ll have to pay them a fee to get the deal in the first place, but that’s not bad in the scheme of things. You’ll also have to offer a slightly better deal than the leader in the field, whether that be looser lending standards or a reduced interest rate. Or, you could pledge that you’ll approve deals in 8 hours with only a minimum amount of paperwork. Remember, mortgage brokers want the deal of least resistance.

In an era where GICs and government bonds are paying peanuts, getting 3% above prime on a reverse mortgage is a pretty attractive rate for the fixed income part of your portfolio. Doing second mortgages – which I’ve advocated before – is scary at this point in the housing cycle, at least in Canada. As long as you stick to borrowers with a fully paid off house and you’re firm about when to cut them off, the market could crash 25% and you’d still be in a pretty comfortable spot.

I like the idea, and will pursue it when I get back to Canada. If I do find somebody interested, I’ll let you guys know how it went down, assuming I haven’t given up this terrible blog for something infinitely more rewarding, like playing Ants in the Pants or admiring my collection of Alf pogs. He’s back guys…in pog form.

May 102015
 

The lady friend and I went to Hong Kong last weekend, and let me tell you guys something. It was a hell of an experience.

I basically pictured Hong Kong as London, but with more Asian people. It would be a cosmopolitan city filled with high-tech wonders, really shiny office towers, and the best dining in the vicinity.

Yeah, there were pockets of great stuff. The downtown shopping area was about as nice as you’d expect. The subways were clean and efficient. The place was filled with western restaurants, which was a nice treat after my time here in Korea. There were also a ton of jewelry stores, because apparently the Chinese have a thing for gold. And communicating was a breeze because everyone knew English.

But hot damn, Hong Kong has really become a Chinese city. The older places needed a fresh coat of paint and a good pressure wash. The whole place reeked of cigarette smoke (hot damn, do they smoke there. It’s unbelievable), sweat, and shame. There’s really no industrial district, so I saw plenty of workshops located next to grocery stores next to a place that sells shark fins. What a strange setup.

I dunno, maybe it’s because I’m sick of traveling, but I thought I would enjoy it more. I can’t say I regretted my decision to visit, but I was a little disappointed in the city. For a place that gets mentioned alongside New York, London, and Tokyo, I wasn’t too impressed.

Macau is pretty nice though. It was more what I imagined Hong Kong to be. You know how everyone is saying the gambling market there is weak? I can confirm it. Sure, it was Monday afternoon when I was there, but the high roller areas of the casinos were deserted. And there’s another $20 billion in developments being built. Yikes.

Song I like and therefore you should too

In honor of the NDP’s landslide victory in Alberta’s election, WE’RE ALL DOOMED. Or something like that.

QUICK EVERYONE RUN BACK TO SASKATCHEWAN THEY ACTUALLY LIKE CAPITALISM.

The Office quote

Michael: Sometimes I’ll start a sentence and I don’t even know where it’s going. I just hope to find it along the way.

Post you might have missed

Because I am a vigorous young go-getter, I have 2/3rds of next week’s blog posts already completed. It is the most ahead I think I’ve ever been, and that therefore makes me more impressive than Spiderman’s pet turtle. You’d think he would have a spider, but he does not.

Anyhoo, here’s a fun post on how exactly your credit card makes money. Preview: you do not actually owe money to Visa or Mastercard. You do, however, owe me $20. Please send it to Korea, cash only. They’ll know what to do with it.

Nelson’s so funny

This is a very legitimate question and I want to know the answer. Does anyone have Flo Rida’s email address?

The more you know

Wiki my pedia’s media, Funkmaster Flesh. Yeah, I talk rap now. What of it?

Angel Katherine Reece[1] (born November 4, 1983)[2] is an American professional wrestler, better known by the ring name Hailey Hatred. Originally debuting in July 2002, Hatred worked for several years for various promotions in both the United States and Mexico, before moving to Japan in late 2010. In 2011, Hatred made her breakthrough to the top of Japanesejoshi puroresu with the JWP Joshi Puroresu promotion, holding the Daily Sports Women’s Tag Team, IMW Hybrid Fighting,JWP Openweight, JWP Tag Team, TLW World Women’s and TLW World Women’s Tag Team Championships simultaneously. During 2012, Hatred began working more regularly for Ice Ribbon and in November 2012 once again held six different titles; the IMW Hybrid Fighting Championship, the International Ribbon Tag Team Championship, the Reina World Tag Team Championship, the Remix Pro Women’s Championship, the TLW World Women’s Championship and theTriangle Ribbon Championship. Reece has been inactive from professional wrestling ever since leaving Japan in August 2013.

Well. I have literally nothing to follow that up with. What a bizarre find.

Kevin O’Leary’s stock pick

kevin-olearyEach week current BNN personality and Shark Tank investor Kevin O’Leary is kind enough to give us his favorite stock pick.

Thanks Nelson. This week for my stock pick I’m going with Coca-Cola, because it’s been around for a million years and pays daddy a nice dividend. Have I ever mentioned how I like dividends or referring to myself as daddy in the third person like some sort of weirdo?

Nasty business, this whole ordeal of the NDP winning in Alberta. It’s going to DECIMATE industry in the province. All oil drilling will stop. Corporate taxes will go up to 101%. The government will nationalize everything from power plants to the Calgary Tower. It’s going to be the worst kind of terrible.

Look, just put me in charge. I’ll cut taxes to zero, not charge the oil companies a dime in royalties, and sell off everything that isn’t bolted down. As for your new Premier, don’t worry about her. I’ll take her out back and give her a couple of shots to the back of the head with a full bottle of O’Leary’s finest. She won’t know what hit her.

Babe loosely related to finance

From the Wikipedia theme earlier, it’s Hailey Hatred!

stacy-keibler

Just kidding.

It’s actually Stacy Keibler, who is much sexier than the small guys who share her last name. Trust me, you do not want to see ol’ Hailey.

Time for links

Let’s start things off with a piece from Seeking Alpha, which is a really important message I think more investors need to hear. Instead of limiting your search to a few select large-cap stocks, you should focus more on buying what’s cheap. Or, as the old saying goes, “there’s no such thing as bad assets. Only bad prices.”

Vanessa thinks emergency funds are dumb. Oh, Nelson, you’ve taught her well. Read what she did when she ran into an “emergency” and needed cash.

Did you know that you could be sitting on millions of dollars that your forgetful ass forgot all about? Okay, probably not. But maybe you have a couple hundred bucks sitting in a bank account somewhere that you forgot about. Boomer and Echo gives you the deets on how to track that cash down.

Over at Young and Thrifty, a man who used to go by the pseudonym “Teacherman” wrote a piece how advanced education (at least, in his experience) wasn’t worth it. COME TO THE DARK SIDE KYLE YOU’LL LIKE IT HERE WE HAVE NACHOS.

Over at Moneygeek, Dr. Choi (and not a medical doctor either, he’s a fancy LEARNIN’ DOCTOR) throws cold water on my love affair with preferred shares. As always, he brings up excellent points and you should listen to him.

Don’t Quit Your Day Job goes back to basics this week, reminding people how important just how important it is to shop around for big purchases, like your mortgage.

Over at Lowest Rates, I give some fun tips on how to get the best out of a multiple offer situation when buying a house. Tip #1: don’t bother.

Over at Motley Fool, I write my sappiest post yet, which is investing lessons my mother taught me even though she doesn’t know jack about investing.

I also wrote about what the NDP victory would mean for Alberta’s energy sector, which ended up in the Financial Post. Does this make me a real journalist now? My mother says…no. AND EVEN AFTER I WROTE NICE THINGS ABOUT HER.

The folks at Sustainable Personal Finance paid down $110,000 in mortgage debt in 14 months, which is a pretty impressive feat. During that time I went to a couple of baseball games and played that hill racing game on my phone, which is pretty much equivalent, right?

Ten links? That might be my best ever. Well done, people I always link to.

Have a good week everyone.

 

May 082015
 

Approximately one year ago, I aroused both your eyeballs and Pituitary glands with a fun post about stock market facts. These facts were incredibly important to anyone who is looking to invest in the stock market, or maybe for impressing people at dinner parties. Do people still go to dinner parties? I was invited once, but then got kicked out when I tea bagged the appetizer meatballs.

Anyway, that post was fun, so lets do another. This one is on fun facts about the currency market. Stay tuned for next week, when we do fun facts about YOUR MOM (Fact #1: she’s hot!).

1. The currency market is larger than the stock and bond markets, combined. This seems like a lot, but in reality it’s only 10% of the size of size of Chris Christie’s ass. Just kidding Chris your ass is very slim. We don’t want to offend anyone here folks.

2. Options for travelers to exchange currency include banks, airport kiosks, and that guy that everyone knows who always has thousands of dollars in multiple currencies but totally doesn’t deal drugs.

3. Before the Euro, both Switzerland and France had currencies that were different, but yet were both called the Franc. Switzerland finally called dibs in 1993, which lead to the creation of the Euro.

4. In 2013, more than $5 trillion was traded per day in the currency market. Or, as we here at Financial Uproar call it, chump change.

5.  Investors can take out loans when playing the currency market, up to $20 for every $1 invested. Anyone who plays the market without that kind of leverage is generally thought of as kind of a wuss.

6. Currency was invented back in 19382 BC, when (Annoyed Grunt) and (Perplexed Grunt) told (Caveman C) that “GODDAMN IT WE DON’T WANT TO TRADE FOR BARK IT’S LITERALLY EVERYWHERE.”

7. If the movies have taught me anything, it’s that carrying currency in a briefcase is a good idea with absolutely no potential downfalls. A sack with a dollar sign on it is also a good idea.

8. Slang words for dollars include bucks, cash, doneros, cashola, moolah, scratch, Benjamins, bread, cheddar, smackers, greenbacks, dead presidents, and, of course, spandex.

9. In Germany in the 1920s, the value of its currency went down so quickly that eventually it cost millions of Marks just to buy a loaf of bread. In the currency market, this is referred to as MAYBE DON’T LOSE THE WAR, BITCHES.

10. The currency market is closed on the weekend, mostly because it likes to get REALLY bombed every Friday. It does not appreciate you judging it, you have no idea what its home life is like.

11. The currency of South Africa is called the Rand, which was totally named after Ayn Rand. Or maybe it’s Rand McNally.

12. Just like with the stock market, a person who trades your currencies for you is a currency broker. Yes, he will make you broker! That’s an example of a very fun and unique currency market joke, copyright Financial Uproar 2015.

13. There is no actual currency exchange location, but rather a market made up largely of banks who just mostly trade among themselves. Hidden inside that market are a bunch of trolls, who do all of the physical trading. Or maybe it’s computers.

14. You are allowed to trade currencies while not wearing pants, but you cannot if you’re not wearing a shirt. Come on Scott, nobody wants to see that.

15. Technology exists where you can trade currencies while on the phone, possibly while on the can. Man, what a time to be alive! Nothing bad could arise from this.

16. When betting on a currency, investors totally get “bonus points” if they call it first, especially on Twitter. Ironically, these bonus points are not actually awarded in currency, but for some reason currency traders don’t seem to mind.

17. In Russia, the currency market is located in Putin’s basement. Every now and again he sends a bear downstairs, just to shake things up a little.

18. For the most part, the currency market’s job is to facilitate imports and exports. It’s not as glamorous as the stock or even bond markets, but AT LEAST IT HAS A JOB DEBBIE, GOD. STOP HASSLING ME. FRANK DOWN THE STREET DOESN’T EVEN WORK.

19. New so-called “cryptocurrencies” are entering the mainstream, like Bitcoin, Dogecoin, and Crazy Gold Nuts Except on the Internet. You can even use Bitcoin ATMs when you want to exchange your Bitcoins for regular currency that non-crazy people will take.

20. In South Korea, the currency is called the Won. Which is kind of ironic, considering they have lost approximately 3872 wars to Japan over the last millennium.

21. Thanks to technological advances, many currencies are now made of plastic instead of paper. The U.S. $1 bill is still made of paper, mostly because plastic feels too cold when you stick it in the stripper’s thong.

There you have it kids, 21 fun facts about the currency market. This is the perfect post to print out and leave by the can, so go ahead and do that.

May 062015
 
Not pictured: Satan

Not pictured: Satan

Last week, Twitter was all, uh, atwitter, about Royal Bank increasing its bank fees. Some of the changes which go into effect on June 1st include:

  • If you use up your free monthly debits (raised from 10 to 12), you’ll have to pay a fee to pay your mortgage, car loan, or any other loan automatically taken out of your account. That fee is from $2-$5 per transaction
  • If you have a kids or student account, this fee is $1
  • Seniors now have to be 65 to qualify for discounted banking packages. The previous age was 60

Related: See how Vanessa holds a mutual fund with a 2.46% annual fee to get free banking.

Basically, these fees mostly affect the $4 per month account, which people have been using and then getting for free by having two of a credit card, mortgage, or investments with the bank. That’s exactly why Vanessa ended up buying that mutual fund with a 2.46% MER, to save that monthly fee.

Here’s what gets me about this whole thing. It’s really easy to maintain free banking, even by staying at Royal Bank. All you need to do is stay under the minimum of 12 transactions per month by putting everything on your credit card, and paying it off at the end of the month. It’s easy, and you’ll earn rewards from your credit card at the same time.

But instead, we get comments like this, from an anonymous Globe and Mail reader:

There are some very uncharacteristic yet refreshing waves of discontent appearing amongst the usually calm waters representing the Canadian investor.

Personally I am loving the sudden backbone exhibited by shareholders on the say-on-pay issue. Gone are the days when the AGM is stacked with insiders, fund managers and other biased fart-catchers. Gone are the days when entrenched major shareholders and pension funds simply rim the bum of the Board and endorse whatever it recommends.

And now banking fees are under the microscope. Well … it is about time. Banks today are being paid by their customers more and more for doing less and less. This is a fact and it is beyond dispute.

Not gonna lie guys, I’m pretty impressed he properly hyphenated the fart-catchers bit.

I’ve talked before how it’s stupid to care about bank fees. Rather than getting pissed off about losing a few bucks a month, I’d recommend everyone get busy earnin’ so they’re in a position where they don’t care about a lousy bank fee. So let’s not talk about bank fees anymore.

Instead, let’s talk about RBC is inadvertently teaching us something really important about marketing and business with these new fees.

Worst customers

Because we haven’t had one of them in a while, let me tell you a story about my days selling chips. This one is about my worst customer.

He ran a small convenience store an a village of about 200 people. The chip display was immediately across from the cash register, so he’d look at it, every single day. If he ran out of hickory sticks early, he’d complain constantly the next time I was there. So I’d give him extra hickory sticks, and then he’d run out of something else. He responded by asking for extras of everything, even though a full 20% of items were in danger of going outdated. (I was allowed 1% of sales as outdates) Since everything was a guaranteed sale, he didn’t care about outdates at all. So we’d argue about it, constantly.

It got to the point where going there was a chore. Wal-Mart sold $3-$4k worth of chips every week, with almost no headaches. This guy sold $100. When I left, I heard that the next driver fired him as a customer. In hindsight, I probably should have done the same thing.

Anyway, the point is this. Every business has crummy customers. To deal with them, you have a couple of choices. You can either a) suck it up or b) fire them.

By raising their fees, Royal Bank is telling all their worse customers to hit the road without actually telling them.

Anyone with a brain and an internet connection knows that Canada has several banks with very little in the way of fees. They offer a trade-off of no fees for reduced service. Most financially savvy people are okay with this, so that’s the direction they go.

But for some people, this isn’t good enough. They want the benefits of having a branch they can drop into to complain, without paying to do so. I can see why people want this; but I can also see how these are money-losing customers from the bank’s perspective.

Each time they increase fees, a certain amount of freeloaders head on over to Tangerine or PC Financial. Many other potential freeloaders complain, but stick around. What a great way to fire your worst customers without actually doing it.

The other nice thing about this is from the other banks’ perspective. Now they’re free to raise fees, conveniently offering the excuse that they’re just doing it because of RBC.

If you’re the kind of customer who has had a meeting with someone in a bank somewhere about free banking, you are a bad bank customer (especially if you have a credit card you pay off each month and no mortgage). I won’t begrudge you for wanting to get something for free, but at least understand that there’s a reason behind this that isn’t just OMG ROYAL BANK IS GOUGING US SOMEONE CALL ELLEN ROSEMAN.

And better yet, if you think the banks are really screwing over customers, maybe you should buy shares. Seems to me like a company that charges outrageous fees should be a pretty good investment.

May 012015
 

If you’re a homeowner in Canada over the age of 50, chances are you’re sitting on a pretty nice chunk of change. Provided, of course, that you actually paid off your mortgage and didn’t squander your equity on whatever it is the kids like these days. Maybe stickers.

So what should you do with it? Fear not, little old one. We here at Financial Uproar (read: one pantsless guy and a laptop) have put together a little guide that helps you make the decision of what exactly you should do with all that stored up home equity. Let’s have a closer look at some options.

Nothing

Ah, the lazy choice. I like the way you think, imaginary person.

Many baby boomers are in the position where they don’t have to do anything. They’ve fully funded their retirement accounts over the years, and are sitting on liquid investments worth somewhere in the six to eight figure range. They’ve got an entirely different retirement problem, deciding how to best spend the money. Many won’t bother, having gotten used to decades of frugal living. Naturally, their grandkids will squander it in about 14 seconds after Grandma kicks it from emphysema.

That’s a nice spot to be in, since you can grow old without needing to sell the house to raise cash. All Grandma needs is a strapping young lad to cut the grass, and she’s in business.

Second mortgage

Another option is to take out the ol’ second mortgage.

The best time to do this is when you’re a little younger and and still have time to go before you retire. You can borrow against the house, invest the borrowed proceeds, and use the dividends to pay the interest off. Then you can buckle down and pay back the principal. Sure, it’s a bit of a risky move — especially at a market top — but risk is something you gotta take if you’re fifty and don’t have a whole bunch in the ol’ RRSPs. Are y’all tired of me saying ol’ yet?

If you’re in the market for a second mortgage in Mississauga, get clickin’. You could even use the cash to move away from Mississauga. Yes, this makes sense. No, you can’t ask me how.

Reverse mortgages

Think of a reverse mortgage like being a second mortgage, except instead of paying it back, they pay you until you move to an old folks home or the home care nurse finds you in the basement, whichever comes first.

Finance types tend to hate them, but I don’t think reverse mortgages are so bad. I’m not really sure the elderly have any sort of obligation to take care of their adult kids. So if you can turn home equity into a nice stream of income, who cares what happens to the equity of the house? Chances are the place was paid off years ago anyway.

Yes, there are more effective ways to access the equity, like selling the place and either downsizing or renting. But seniors don’t want to leave their house. Moving is a pain in the ass when you can’t carry your own things. Plus, downsizing means making a lot of difficult decisions about what to keep and what to toss.

Downsizing to a condo

This will become a more popular choice as baby boomers get older. People will have these gigantic houses and no kids around, so they’ll move into a nice condo with a balcony and live happily ever after. Freeing up some home equity helps too.

The only real issue is ownership costs of a condo. Depending on the unit, you’re looking at being forced to shell out anywhere from $250-$750 per month on condo fees. Most of those fees you’d end up paying anyway, but based on the numbers it can end up being a better deal for retirees to sell and then rent a place.

Sell and rent

Here’s what I’m talking about. Say you owned a place worth $600,000, after commissions and closing costs. You sell it, and move into a condo worth half as much, with condo fees and taxes of $750 per month. You’ve freed up $300k in equity, which could spin off $12,000 per year in cash flow at 4%. Not bad.

But at $750 per month in required fees, you’re looking at $9000 in payments each year, which eats up most of that $12,000 in cash flow. It helps, but it’s not exactly an ideal situation.

Renting could be a better option. Say you can rent an apartment in a seniors only facility for $1,000 per month, which includes everything. Based on investing the whole $600,000 and getting a 4% return, you’re looking at additional cash flow of $24,000 per year, while only paying $12,000 in rent.

And before you scoff and say those numbers aren’t realistic, realize that a) subsidized seniors’ housing is everywhere in Canada and b) it’s up to each person to see what deals they can get. Hypotheticals, yo.

What should you do?

I dunno. Figure it out yourself.

I’m partially to the selling and renting option, since I’m a believer that the next decade isn’t going to be great for Canadian real estate. But this is a complex situation; it’s best to consult some people about it who are smarter than me.

Some information in this post was provided by Canada Wide Financial, which provides second mortgages in Toronto and GTA. 

May 012015
 

Here in Canuckistan (that’s what I call Canada as long as Harper is in charge, says a crazy person) we have a pretty sweet existence. Health care is both bountiful and free, and is sometimes administered by sexy nurses. Spring is here, which means we can temporarily forget about how winter crushes our soul for nine ten fourteen months of the year. Lousy Smarsh weather indeed.

But there’s one thing that’s eluded Canadians for years, and I’m not talking about the pronunciation of aboot. We just haven’t been able to get into the peer-to-peer lending game.

Blame the feds, mostly. In the U.S., just about anyone with a pulse and a few extra bucks can scour the peer-to-peer websites looking for somebody who needs some cash. If the borrower writes a convincing enough sob story and/or offers a good enough interest rate, they’re in business. Most of the time, the lender even gets paid back. Finally, the system works!

In Canada, it’s not so simple. Here you need to be an accredited investor to get into the game, which means you have to either have a net worth of $1 million or an income of more than $200,000. And I know you personally are richer than an oil tycoon’s ex-wife, but not all of us are sitting on that kind of coin. So nobody has really gotten into the business, at least in a measurable way. It’s hard to do when the pool of investors is small.

That’s changing, thanks to a company called Grouplend, which is finally bringing peer-to-peer lending in Canada.

It’s a pretty easy process, at least from a borrower’s perspective. You head on over to the site, tell them how much you need (a minimum of $1,000 to $30,000), answer a few more questions, give a blood and urine sample (surprisingly easy to do over the internet), and the fancy software they have analyzes it all and spits out an interest rate, anywhere from 6.3 to 17.5%.

Next, they’ll ask you for some documents, which is really where I should have made the blood and urine sample joke. All you need to do is take a picture of them with your phone, and you’re in business. If you’re quick, you can have your cash in as little as 24 hours.

It’s not quite that simple, of course. You gotta earn at least $30,000, have a year’s worth of credit history, and a decent credit score to boot. Also, you’re outta luck if you live in Quebec, Nova Scotia, or Saskatchewan, but those places suck anyway. And I would know, I’ve been to two of them for approximately ten days.

It’s not really designed for somebody who’s getting a car loan or wants to buy a house. It’s more of a thing for someone paying off credit card debt or starting their own business without the ability to finance themselves.

That’s pretty much it. If that’s something that you might be interested in, go have a gander.

Can I invest in it?

In a word, maybe.

Even if you’re an accredited investor (and if you are, what are you doing here?), Grouplend has all the capital they need at this point. I know, I was disappointed too.

But they’ll probably need more capital in the future. If you head on over to their website, you can find out how to get put on a waiting list for when they need funding for future loans. I have no idea what interest rate they’d pay or anything like that–or, frankly, even if it’s a good idea–but I think it’s interesting enough to mention.

And that’s about it. I don’t usually do stuff like this, but I think the idea is pretty neat. And hey, it beats payday loans.