Nelson Smith

Apr 182014

There are approximately 700 old posts in my archives, each bigger and badder than the last. So every Friday, I’m going to present one of those old ones instead of something new. Enjoy, new readers. Old readers can go straight to hell. 

Frankly, a full 99% of frugality tips on the internet are crap. Buy store brands and don’t drink lattes? NOBODY HAS EVER THOUGHT OF THAT BEFORE. And yet, there are still all sorts of blogs (with way, way, more visitors than mine, dammit) that continue to spew these nuggets of wisdom, kind of like that college kid after his first kegger. Yep, that was a vomit joke.

Luckily for all of us, you’re not going to get that crap here at whatever blog it is I’m writing on. I’ve been on so many I’m starting to lose track. I know that frugality can only take you so far, so I barely gloss over the subject. I’m much more turned on by building wealth (well, that and boobs) so I choose to spend my time talking about that. I like to think I’m on a journey to becoming wealthy, and I hope you’re all along for the ride. Pile in, there’s plenty of room in the back.

The fine folks at Control Your Cash have summarized this philosophy much better than I ever could, using only 4 words: buy assets, sell liabilities. Damn them and their succinctness. I like to refer to it as thinking like a wealthy person. Once you change your mindset to ours, building wealth becomes relatively easy. You find a way to save money every month and then repeat it until you wake up one day and not have to worry about money anymore. Like a lot of things in life, it gets easier the longer you do it.

But here’s the thing: frugality plays a part in that equation. Unless your last name is Gates or Buffett, you’d better be paying attention to where you spend money, since most of us don’t have the limitless resources those people do. So we do what enterprising people do – things like shopping for sales, not eating out every night and so on. We don’t do these things because they’re terrific frugal tips. We do them because they’re easy. They’re the low hanging fruit of the frugality world. Nobody is waiting for you at the end of a home cooked meal with a gold star, because only a moron would expect one.

With a few minor exceptions, there’s nobody that focuses on frugality tips that save serious cash. We all laughed at my Dad’s crapbox car, but who’s having the last laugh? Us, or the guy who literally saved HUNDREDS of thousands of dollars over a 40 year span by not having a car payment and paying next to nothing in repairs? Nice work saving 38 cents on buying the generic macaroni and cheese. Forgive me if I don’t get all motivated about it.

Frugality is kind of like hitting on that girl you like. You should be able to do it without someone holding your hand because that’s what adults do when they want a relationship (Or just to get laid). Does someone really deserve a hearty congratulations for using common sense?

You know what’s a special kind of fun? When frugality bloggers start tackling the extra income equation. They have all sorts of ideas for earning extra cash, each worse than the last. Babysitting? Cutting grass? Walking dogs? OH BOY. SIGN NELLY UP! Those jobs can be performed by anybody, which is exactly why you should avoid them. How much would it suck to be replaced by a 13 year old?

All those jobs are perfect examples of someone who’s limited in their thinking. From their perspective, money can only be earned one way – exchanging time for work. We all make the majority of our money this way, so it’s easy to fall into this trap.

It’s just too bad it’ll never get you wealthy.

If you take anything from this post, make it from this point on. The previous 8 paragraphs? Crap. There was even a vomit joke in one. Gross.

A small minded thinker gets a part time job over the weekends, earning a few hundred bucks a month. Someone who looks at things a little differently will spend their spare time working too, but at something that creates value for someone other than their employer. A small minded person will look at sharing a 2 bedroom place with their friend in order to save $650 per month. Someone who gets the big picture rents out his basement for the same amount, both making money for doing next to nothing and getting a renter to pay for the purchase of an asset. A small minded thinker has $10k sitting in some savings account somewhere, even though that represents like 20% of their portfolio, reserved for some catastrophic event that’s unlikely to happen, instead of taking at least a little risk with that cash. (Just a little. Relax.) A small minded thinker avoids debt like I avoid watching Glee, because they’re scared senseless of some debt monster somehow rising up and beating them into submission.

Life is not without risk. Every time you cross the street, (jaywalking is so badass) or approach that person you’ve admired from afar, you’re taking a risk. Without taking on risks though, it is next to impossible to amass significant wealth. Borrowing to buy a house, for example, generally works out pretty well for people. Every time I rent out my basement to a new person I’m taking a small risk that they might be a grade A dirtbag. I keep renting it because I know that I will profit from this exchange over the long term.

Frugality is trying to accomplish the same thing, but without the risk. There’s no worst case scenario if you don’t like generic brand cheese slices. You just admit defeat and move back to Kraft Singles. If you spend 11.5 minutes cutting coupons, you have a very specific idea of how much you’ll stand to benefit from the exercise. When you focus on making more (ideally without working a whole lot more) you create a little bit of uncertainty, which adds that level of risk.

If you limit your thinking, you will limit your potential. Don’t do that. Start thinking like a wealthy person.

Apr 172014

These days, it’s probably the best time in history to be born without a penis. Women are free to choose any path they’d like, a privilege really only granted over the last generation. Women can have all the casual relations they’d like, with minimal consequences. Women are buying houses and making all sorts of other large decisions without having a partner. A woman is more likely to have a university education. And so on. And yet, we still have a gender pay gap.

Only 5% of the 500 largest companies in America have women in charge. Women are still punished for taking time off to have children. And, as has been famously stated, they have to put up with an injustice that would piss off any of their male counterparts, making 77 cents on the dollar for doing the same job.

So naturally, the ladies are pissed. They’ve taken their fight to the Facebook and the Twitter and wherever else the gals hang out. Maybe Pinterest? I dunno. But is the statistic even true? Do women really make 77% of men for doing the same job?

Related: that time I gave the ladies career advice.

In my experience, the answer is a firm no. In fact, I’ve never encountered a boss say such a thing, even privately. (And I heard those same bosses say some offensive things) I’ve never met a woman who could legitimately say she was paid less than a man without a good reason. I’ve met many women who think they’re better qualified than more experienced male coworkers, but I’ve met many men who think the same thing.

So I took a little closer look into this infamous 77 cents on the dollar statistic. And the weakness leaps out immediately. It comes from 2010 U.S. census information which simply divided the total income earned by women divided by the number. The census did the same thing for men, compared the results, and declared a huge gender pay gap.

But anyone with functioning grey matter can see the problem with that. Many women self select jobs that are part time, or lower paying, or offer more flexibility because they want the choice to stay at home and raise children. Women also tend to self select into jobs that focus on humanities and other such skills, jobs which tend to be high on security and low on advancement opportunities. More than three quarters of teachers are women. More than 91% of nurses are women. More than 70% of human resources professionals are women, even though HR people are the worst. Sorry ladies.

Meanwhile, men dominate construction (91%), oil and gas (96% in the field, not counting office employees), transportation (77%), and manufacturing (72%). These jobs are tougher, physical jobs, and they tend to pay pretty well, at least in my neck of the woods. They’re also industries with higher highs and lower lows, which would explain why men’s unemployment tends to be higher.

So if that’s the case, what’s the actual wage gap, controlling for some of these factors? There are differing opinions, but let’s take a look at four. took a look at the numbers, and found that there were all sorts of professions that paid women largely the same as their male counterparts. They also found that men tend to work longer workweeks than women, which would also skew the results. They wouldn’t throw out an actual number, but were pretty clear the 23% gap is bunk.

Consad research did some work on this for the U.S. department of Labor. Consad’s findings that once you controlled for all the different variables, the pay gap was more like 5-8%.

The St. Louis Federal Reserve did a similar study, and concluded that the gross gender pay gap was just 16.5%, and once you accounted for all the factors, the real gap was just 3.6%.

And finally, one more. The American Association of University Women concluded the real gap between wages for male and female university grads was just 6%, not the 18% gross number.

Now that we’ve put the 77 cents on every dollar myth to rest, allow me to present a theory on why the remaining gap remains. It’s simple. Women are crummy at negotiating.

It’s partially a society thing, since we label men who push for more money as assertive and women who do the same as bitchy. That needs to end, but it’ll only end as women become more comfortable with it. Hiring managers who have the company’s bottom line in mind are going to lowball potential hires. That’s the way business works.

The statistic is popular because it’s an easy explanation as to why a woman’s career isn’t taking off in the way she’d like. She’s not struggling because work is hard, she’s struggling because men are plotting to keep the whole gender down. It’s an easy and important lesson for anyone reading, regardless of their genitals. Chances are, you’re just mediocre at your job. It takes hard work to be good. Most people don’t want to do it. Just find a way to exceed expectations, and you’ll get promoted. No matter what your gender.


Apr 152014

I come from a long line of entrepreneurs. My grandparents on my mother’s side of the family own a business. My parents own a business, even though it’s my dad who does all the work. My sister owns a business and you could even argue this blog is a business, albeit a kinda crappy one. If I wanted to work in the family business, I’d have plenty of choices.

And yet, I’ve neglected to be involved in all of them. I help out every now and again, mostly to help people who are in a jam and make sure I don’t get kicked out of the will, but I don’t really have an active role. I’m a pretty nice guy when you promise me money at some point.

But wait, astute readers are saying, wouldn’t participating in the family business be a way for me to end up with even more money? I’ve had more than one opportunity to participate. Family members tend to give the next generation a pretty good deal on the business if the kids continue it, my family included. So why was I a chip guy instead of getting into business with a family member? Let’s look at the pros and cons.

If you do decide to go into the family business, the advantages are obvious. You’ll be working with people you know the best, so at least you won’t have any surprises. You’ve generally got a pretty good idea of how dad will react when he gets mad. If he’s a yeller at home, chances are it’s going to be twice as bad at work. Try not to cry when he makes fun of your shoddy work.

You’re also looking at family functions turning into quasi-work events. Depending on how close you are to your family, this could either be good or bad. Other family members won’t appreciate this, unless they’re in the business too.

How about some of the bad stuff? Cause there are a few issues if you decide to get into the family business.

What happens when things go horribly wrong? Nobody goes into these types of things thinking about the worst case scenario, but it happens. One day you might get tired of Uncle Si’s stupid one liners around the duck call building table, and tell him to piss off forever. That’s gonna make the next family dinner and Phil and Kay’s house pretty awkward, even if you love Jesus and good ol’ American values.

There’s no doubt that even a successful business arrangement can bring stress to a family. It can lead to a situation where the business does well, but nobody wants to hang out afterwards. Is it really worth a successful business if you can barely tolerate your family in the meantime?

And then there’s the jealousy involved among siblings who don’t join the family business. Two brothers join dad’s house construction company, the third doesn’t. The company does well and the third brother struggles a little. Don’t you think there’s going to be some resentment there, even though all brothers probably had the same chance to join the business? People tend to blame others for their problems.

One of the main reasons why I didn’t join any of my family’s businesses is I was looking for my own path. I thought that if I joined the family business, I’d always be my dad’s son, and not Nelson, doer of his own things. Even though I know I could have gotten sweetheart deals to take over, I thought it would be better if I shaped my own path. I have no problem if you take help from your parents – I sure did – but there comes a limit to that generosity.

Do I think you should join the family business? If it’s something you’re passionate about, knock yourself out. If you’d just end up building houses anyway, you might as well work with the old man. But if you’re just doing it because grandpa is giving you a sweet deal to continue things, I’d recommend forging your own path.

Apr 142014

What is? A fund? Sounds fun. I’m here all week. Because I’M IN VEGAS SUCKAS. (Gets drunk, tackles a cop, everyone laughs because it’s Vegas)

Just in time for the market to melt down completely, it’s the Financial Uproar fund, which I really should call the FU fund. Nah, that seems a little offensive. So the Uproar fund it is.

The fund is simple. It starts out with $100,000, all in cash. Positions are added as I buy stocks in real life. I can’t cherry pick and choose investments for the fund based on stocks I’ve bought before. It’ll be a concentrated fund, never having more than 20 stocks in it, but will most likely peak at just 10 or 12 different positions. Stocks will be chosen on my contrarian values. I’m looking at stocks that are beaten up, have potential for spectacular recoveries, that have great balance sheets, and can hopefully beat the market over time.

I think I can, but I’ve been lax at tracking my results. That’ll change. Each stock will get a writeup as I buy it, disclosing the price I paid, what percentage of the fund it makes up, and a real time buy or hold ranking on a separate page on the site. Just scroll up and you’ll find it.

We’ll do quarterly updates on the fund, probably starting in July. Feel free to mock me if my stocks go down.

Before I get into the first position for the fund, remember my disclaimer which I haven’t cracked out in a little while, but here goes: If you buy shares in a company because some guy on the internet did, you are a moron who deserves to lose their money. Do your own research. 

Okay, onto the stock I bought for the fund. ARE YOU READY KIDS? I’M MORE JACKED THAN THE ULTIMATE WARRIOR DOING A PRE-MATCH INTERVIEW. Except, you know, not so much now.

Purchase Reitmans (TSX:RET.A)

  • Number of shares bought: 2,000
  • Price paid: $6.295
  • Percentage of fund: 12.60%
  • Target price: $15.75

(Shares in Reitmans were purchased twice, half at $6.48 per share and half at $6.11. Purchase price is adjusted based on getting a dividend from the first half.)

Reitmans is a classic deep value play. They’re a retailer of women’s clothing under several different banners, each catering to a certain subsection of the market, including maternity, plus-size, and professional wear you’d wear to work. They have almost 900 stores in total. Same store sales numbers have been negative lately, due to a bunch of factors, including crappier selection at Smart Set (the company’s chain catering to younger women), expansion into the U.S. building stores inside Babies-R-Us locations which flopped miserably, and the emergence of Target in the Canadian market.

Latest earnings weren’t terrible. The company tumbled to a small loss in the most recent quarter – which did beat analysts expectations – and posted same store sales weakness of 2.8%. The stock popped on the news, briefly touching the $6.48 level I first paid for the name. It promptly sunk back to the $6.15 range where I picked up the second half.

A big problem in this space is losing sales to online only competitors. Reitmans was slow embracing the internet, only making a token effort to get online prior to 2013. Last year the company started taking it seriously, rolling out totally revamped websites for each of its brands. The company’s new inventory system (implemented in 2012) now links inventory for each of its stores and the website, allowing merchandise to be taken from stores and shipped to online customers. This should hopefully cut down on discounting, a problem that’s plagued the company during its recent sales slump.

The balance sheet is practically arousing. Although I wish it had a nice real estate portfolio like a Sears Canada, Reitmans still has an asset rich balance sheet. Book value is $6.56 per share, about 7% higher than current levels. The company slashed its dividend back in December, cutting it from 80 cents per year to 20. Still, it represents a 3.2% yield, and is easily covered by cash flow. Oh, and Reitmans is sitting on almost $2 per share in cash, and has just spent a bunch of money improving stores.

Management has been at the company for a long time. CEO Jeremy Reitman has been in charge since 1974. His brother, and COO, Steven, has been around since 1976. Insiders own a whack of the stock, 57% of the voting shares and 7% of the non-voting shares. Noted value investor Prem Watsa bought 13% of the class A non-voting shares in December. I like when management has skin in the game, and I seem to follow Watsa from investment to investment these days.

Reitmans is the perfect contrarian stock. It has a rock solid balance sheet, pays you to wait, and has fixable problems. I’ve set a target price of $15.75. Let’s see if it makes it there.


Apr 132014

Probably about the time you’ll read this, I’ll be on my annual vacation to Las Vegas. This is either my fourth or fifth visit to Sin City, because if I lack anything, it’s imagination. I’ve already looked at the forecast, and it’s going to be above 30 degrees every day I’m going to be there. That’s the main reason why I’m going to be there.

There are people who get a little excited about vacationing, talking about how visiting Europe or Central America or whatever changed their lives, who are more obsessed with checking off some new destination off their list. We all know I think that kind of stuff is really overrated, that those people are more concerned with being able to brag that they’ve been to exotic destination ‘x’ than they are about anything else. Among a certain crowd, the places you’ve been have replaced the big house or nice car as the luxury item worth bragging about.

So where’s the line? How can you tell whether a vacation is because someone wants to go somewhere, or because it’s an actual legitimate desire? Damned if I know. It’s a tough call.

You know when people say “I want to see ALL the places?” I’d be willing to bet those people are just looking to one up all their traveling friends. There’s no desire to go to certain places and see certain things, there’s just a desire to escape and have stories to tell people once they get back home.

I’m no expert on psychology. I don’t know the answers to stuff like that. All I know is it’s obvious to me this exists, and it’s no better than any alternate form of materialism. Avoiding stuff like this is key to becoming rich.

Song I Like And Therefore You Should Too

I was all set to give you guys Romeo and Juliet by Dire Straits, and then I realized I featured that song like three weeks ago.

So instead, let’s CRAZY THIS CRAP UP, YO. It’s Rammstein, German heavy metal. This song is about fire. Because it’s heavy metal, and of course it is. Just once, I’d like to hear these guys singing about cute kittens.

Simpsons Quote

Lisa: It’s awful being a kid. No one listens to you.

Abe: It’s rotten being old. No one listens to you.

Homer: I’m a white male, age 18 to 49. Everyone listens to me – no matter how dumb my suggestions are.

Thing You Should Watch

Have I mentioned how much good stuff is on Youtube? It’s amazing. There’s a ton of full documentaries on there now. Interesting stuff too, not just something some guy with an iPhone ripped off his TV. Plus, you can listen to entire audio books. I continue to be flabbergasted at the free content that’s available online.

Anyhoo, here’s a full documentary about the business of marine amusement parts. It’s interesting if you’re invested in Sea World.

Note: if you watch this, you probably won’t want to go back to any sort of marine amusement park. Not that you’d want to anyway on account of you’re an adult, but still.

A Post You Might Have Missed

I went and saw the Moneyball movie. And because it’s what us bloggers do, I got all motivated and wrote a blog post about how baseball analytics is like value investing. Hey, don’t judge me. I was inspired. Yes, it’s possible to be inspired without a vision board on Pinterest.

Nelson’s So Funny

That joke was terrible. I regret nothing.

Dirty Word In Words With Friends

Let’s go with ‘swabber’ which isn’t a word according to my web browser. YOU CHEATING WORDS WITH FRIENDS BASTARDS I’M ONTO YOU.

My user is ‘nelsmi’ and your user is probably ‘nelsonisntcool’. It seems like destiny that we’d play.

Babe Loosely Related To Finance

Oh hey, I should probably reveal the winner of the hottest woman on business TV bracket. Voting for the final was as close as I predicted, with the winner pulling out the victory by a mere three votes. Without further adieu, she is…

Catherine Murray

I know of at least one person who is glad this contest is over once and for all. Oh hell, it’s all of you.

Time For Links

Let’s start things off with Robb from Boomer and Echo’s new blog, because apparently the dude doesn’t have enough going on. The new offering is called Earn. Save. Grow., and it’s all about increasing your income and investment returns. He makes fun of Derek Foster and Robert Kiyosaki, which is always fun. God, Kiyosaki is such a scumbag.

Garth Turner has a nice tribute to recently departed former Finance Minister, Jim Flaherty. I liked Flaherty, but I have to admit being surprised on how sad everyone was about this. I guess it was just because of the crappy timing of the whole thing. Imagine kicking it less than a month after you retire? Damn.

Also, I dare you to read his very last tweet and not feel genuine human emotion.

Charles from Getting A Rich Life thinks travel hacking is a “game changer.” While I think the idea is pretty cool (and much more feasible for readers south of the border), I’d just like to point out the easiest way to save money on travel is to, you know, not travel. Still, good post. Interesting stuff.

I was in the Carnival of Wealth last week over at Control Your Cash. It’s worth your time, even with the professional wrestling references.

An important lesson over at Save. Spend. Splurge., reminding everyone how important negotiating a competitive salary really is. Look for more on this later on in the week, but I really think this phenomenon has more to do with the gender wage gap than the ladies would care to admit.

That’s about it. Have a good week everyone.

Apr 122014

Oh hey, it’s the weekend, and you’re probably looking to go sip some sort of alcoholic beverage, with your feet up, sans pants. Good for you, slugger. You slacked off on the internet worked hard to push some widgets this week, and you deserve this weekend. But is this what you do with your spare time? The Masters is on. Fred Couples might win. Probably not, but he might.

Let’s get this finished and get you back watching sports, what God intended. Unless you’re reading this on Monday, in which case this guide will come in handy.

OMG! Did you see name of golfer on Sunday. How bananas was that thing name of golfer did? I laughed/was so mad/cried when name of golfer finally got to wear the green jacket.

Feel free to use that around the water cooler, non-sports minded people.

Time For Links

As you all know by now, I do some writing for The Motley Fool Canada, focusing on Canadian stocks. Every week I link to the best few, but feel free to spend some time on the site. It’s mostly pretty good stuff.

Big U.S. hedge funds are starting to talk about shorting Canada again. They’re concerned about our overvalued housing market, record consumer debt levels, and dependance on exports to a weakening China. I took a closer look at the trade and whether it’s smart.

Looking for a place to hide when the market goes through a correction? I’ve got you covered with some boring stocks.

Natural gas has some serious potential. Coal power plants are dirtier than my browser history, nuclear has the risk of going Chernobyl, and wind/solar power isn’t competitive without massive government subsidies. Oh, and it’s poised to be in a lot of trucks in the future. Go read some more words I wrote about it.

I wrote about two stock picks from my favorite market call guest, Benj Gallander, the Contra The Heard guy. Have I ever mentioned I’m a fan of his philosophy? Because I could take it or leave it.


I found some stocks with succulent 7% dividends. I also think they’ve got some capital gain potential. Usually people like those two things. Perhaps you might too.

And finally, I debunk the myth of the death of the mutual fund. Yeah, ETFs are making inroads, but there are still a lot of investors buying mutual funds. There’s a way I think works to sell them, and there are a couple Canadian companies that’ll continue to do a decent business selling that.

That’s it. See you kids tomorrow for the dump.

Apr 112014

There are at least a billion (not even close, but let’s go with it) old posts in my archives, and nobody ever bothers to read them. They get lonely all tucked away down there. So every Friday afternoon, you’re all going to be treated to a blast from the past. Take it away, guy who used to be me.

First off, a disclaimer before we start. Well, sort of.

I really don’t care for finance blog posts that get political. There’s a couple of reasons for this. First off, I’m pretty apolitical. My beliefs don’t really resonate with any of Canada’s political parties, so I usually don’t bother to care about politics. Besides, it doesn’t really matter what I think, if many other people aren’t on the same page as I am. And secondly, I don’t want the comment section to turn into a right wing vs. left wing debate. Other blogs can have that, I’ll pass. So, hopefully this post doesn’t get too politically charged. I’ll try to stick with just numbers.

With that out of the way, join me on a little thought exercise.

The fine folks from Control Your Cash hail from Las Vegas, Nevada. That’s right kids, Sin City. You know, that place you go where you drink too much, gamble too much, and pay a stripper too much to grind against your junk. Because of your overindulgence, all citizens of that fine state pay no income taxes. They do have a sales tax, and they do have to (obviously) pay their federal taxes. In short, it’s an attractive place to live, at least from a taxation perspective.

Compare that to Nova Scotia, the most heavily taxed province in Canada. Over 30% of the GDP of the province gets paid back to various levels of government. They have a 10% provincial sales tax (since rolled into the national sales tax to form the Harmonized Sales Tax- of 15%). They also have one of the highest provincial tax rates in Canada.

What’s the point of this? There are people investing and creating wealth in both Nevada and Nova Scotia. These people do it because they want to get ahead. They want to get to the point where they can not have to worry about work anymore, because financial independence is probably better than a threesome with a couple of those hot blogger chicks I write about. (Ed. note: IT WORKED. I GOT ONE.) I hope it’s the reason why you keep coming back multiple times a day, since the jokes are clearly lame.

Every single jurisdiction in North America has slightly different tax burdens on their citizens. Some, because of rich natural resource deposits, can make revenue charging companies for the stuff they take out of the ground. Others don’t have this advantage, so they have to get the revenue from somewhere else, which could include the earnings of the people who live there.

And yet, everywhere in North America, we have people who are working to get ahead, taxes be dammed.

There are actually Americans who don’t want to make over $200,000 per year, because they don’t want to pay 35% tax on that money, instead of the 33% they pay on earnings above $150,000(ish). I cannot believe that there are people who make $200k per year that are this shortsighted. For every dollar you make, you keep 65 cents compared to 67. Sure, it’s kind of a bummer, BUT YOU STILL KEEP 65 CENTS. Just take the 65 cents and accept the fact that you had to pay taxes, which are simply a cost of creating wealth. You’ve heard of the expression “spending money to make money,” right?

Let’s face it. In the United States (and Canada) higher taxes are all but a certainty in the future. We have all sorts of entitlement programs that aren’t going away anytime soon with a shaky economy and an aging population. Sure, governments can reduce revenue, but raising taxes will also have to be part of the equation. No aspiring capitalist likes that. So what’s the smarter thing to do? Create wealth anyway, and give a bigger piece of it to the government? Or pout and not create any at all?

I’m not sure what you and I can do about taxation policy. Sure, we can bitch and moan, and even join organizations that push for lower taxes. And hell, this might even work to lower our taxes slightly. But who cares! Instead of wasting your time debating someone on some online forum about the difference between a 33% and 35% top marginal tax rate, why not spend your time making enough money to ACTUALLY PAY THAT TAX RATE.

Even with a shaky economy, opportunities are plentiful to create wealth. Can you believe I’m actually making a halfway decent sideline income weakly connecting penis jokes to personal finance? I focus on making extra money, both actively and passively. The only time I even think about taxes is when I put interest bearing investments inside my RRSP, and dividend/capital gains plays in taxable accounts. Taxes don’t even enter my mind a full 99.9% of the time. You know why? Because I’m too busy making money.

Whining about taxes is the worst reason why you shouldn’t try to get ahead. I’d rather you just admit you’re too lazy to bother. You can debate tax policy all day long. The people who create wealth are too busy to care.

Apr 112014

I have a theory that a full 95% of people who live in large cities don’t bother to take advantage of the amenities that city has to offer. Take, for example, the handsome devil writing this post. HEY THAT’S ME! (fist pumps)

I enjoy having access to all the stores I could ever want and a whole bunch of different food choices, even if those choices will eventually cripple me and I just go to the same pizza place I went to last week.

They have breadsticks.

It’s Little Caesars.

I regret nothing.

But really, I don’t take advantage of all that Calgary has to offer. I’ve watched a bunch of sports, went to the zoo, and pretty much just hung out. In about six months. My life is a failure. I would be just as content in a smaller city. I wanted to experience life in the big city, and now that I have, I’m pretty meh about the experience. It’s pretty much like my old life, just surrounded by new things and different people.

I think it was important for me to experience life outside of my comfort zone for a little while, but I fail to see the excitement in living in a place like Calgary. The city doesn’t really have a personalty. There are opportunities, yes, but the city is very much divided among two groups – those with high paying jobs and those with nothing. For every oil company middle manager, there’s some struggling girl working at a store who has to live with a friend or else they’ll both starve.

I was talking to a co-worker about this a few weeks back, and I explained it like this. I understand staying in Calgary if you have a job that is so specialized that it only exists in the largest centers. But if you’re making the exact same amount you would living in a smaller city with 25 or 33% less expensive house prices or rents, you’re nuts to pay that much for the “privilege” of living in Calgary. Go to a smaller city and live a better life at a lesser cost.

I once wrote about a girl who spent an hour and a half each way commuting, which I think we can all agree is insane. She was the very epitome of this problem, choosing to drive from the city to a small town every day just so she could go hang out at some generic pub on 17th Ave and get drunk next to pencil pushers working at Suncor’s head office on the weekends. This phenomenon continues to amaze me.

Here’s what $325,000 gets you in Calgary:

  • An okay neighborhood
  • 890 square foot house
  • 3 bedrooms/2 baths
  • No garage
  • Built in 1978
  • 33 ft. x 100 ft. lot
  • Judging from the pictures, a house in acceptable shape

Here’s the link if you want to go check it out for yourself. Although the way Calgary’s real estate market looks, it might not be there for long. It’s actually one of the few ones in the country that isn’t seeing a huge spike in listings going into spring.

Let’s compare that to what $325,000 gets you in Medicine Hat, a city of 70,000 about three hours away

  • Good neighborhood (although, to be fair, there aren’t usually bad neighborhoods in cities with 70,000 people)
  • A 1225 square foot house
  • 4 bedrooms/3 baths
  • Built in 2008
  • Single car garage
  • Many extras, like central air, fireplace, covered patio, etc.
  • The pictures make it look pretty spiffy

You are literally getting 50% more house for your money. Oh, and the Medicine Hat house has been listed since the summer, if the pictures are any indication.

I don’t get why, if the job in both cities would be comparable, anyone would live in the more expensive city. I understand moving for a job. I understand moving for climate, because Canada’s winters are terrible. Hell, I even understand moving to a big city to experience life in a big city. What I don’t understand is people moving from one generic big city to the next. It’s nobody’s “dream” to live in a generic Canadian city. It’s all just lies to get you to pay more for the same standard of living.

Once you realize this and stop it, your net worth can’t help but to go up. You’ll save money on housing, sure, but you’ll also save money not trying to impress the ladies by being the 13,930th guy with a button down shirt and dark jeans. Again, and I can’t stress this enough, you’ll never get ahead if you view the world the same way as everyone else. Ditch the expected life, and go do something different.

Apr 102014

Excuse me for a minute, I’m just going to rip off a lot of this post from the Globe and Mail, the fine place of journalistic integrity that managed to convince me to pay for unlimited access like some sort of chump and/or chumpette. It’s about value investing, because everything around here is about value investing. And boobs.

(You might not be able to access that without a membership to that particular website. Sucka.)

Don’t worry, I’ll quote enough of it to you to get the gist. Study after study has shown value investing works. I pointed it out on this very blog, all you need to do is consistently buy stocks trading at low P/E ratios or P/B multiples. If you buy them all, you’ll beat the market despite yourself.

I do things a little differently, focusing on out of favor stocks and sectors, and erring towards companies with little to no debt. I’m trying to take away the possibility of one of the stocks blowing up, plain and simple. A company with no debt on the balance sheet isn’t about to go to zero.

But getting back to the main issue, if value investing works, why don’t more people do it? The author has a few ideas.

A big reason is that what value investors do is not well known or understood because universities accept the notion that markets are efficient and, as a result, they focus on teaching and applying modern portfolio theory, which cannot be more different from value investing.

I cannot fathom how people think the market is efficient. There will always be opportunities for sharp investors. Stocks will always sell off more than what they should based on short term events. The market generally looks at the short term while discounting the long term. Astute investors can profit from this.

Value investors also take big, concentrated positions, which flies in the face of modern portfolio theory.

The researchers studied about 1,700 actively managed U.S. funds from 1984 to 1999 and 1993-2002, respectively. They found that the more concentrated and less diversified a fund was, the better it did. The outperformance resulted from selecting the right sectors or stocks, not from market timing. They also found that the lower the reliance on public information and the greater the reliance on a portfolio manager’s own skill, the greater the outperformance.

Value investing is about 80% science and 20% art. You’ve got to figure out that an investment is undervalued, but you’ve also got to figure out when things are most pessimistic, and when that pessimism will push the stock to the lowest point. That’s the tough part. I’m constantly early on stocks I like. I’ve learned not to sweat it, since my target prices are often 2-3 times higher than the current price.

Value investing is all about concentrating a portfolio on a few, selected, truly undervalued stocks. Diversification does not matter much; the margin of safety, which helps identify a stock as truly undervalued, protects the downside and controls for risk.

I’m sitting on about 15 stocks right now. I have big positions in all of them. People who own thousands of different companies via ETFs think I’m nuts. But the evidence remains – value investors who have concentrated portfolios continue to outperform.

This brings us back to the original question: If the evidence in favour of value investing is so overwhelming, why isn’t everyone a value investor? Why does a value premium (showing that value, on average, beats growth investing) still exist? This is because the driving forces behind the value premium are human psychology and institutional biases – forces, again, that fly in the face of market efficiency.

I know of very few true value investors. I know a bunch of dividend growth investors who think buying Coke at 18 times earnings is a value investment. But I know very few that would entertain an unloved small cap like Automodular that we all know is disbanding. Because it’s hard to buy Automodular. There are 100 investors who would buy Coke compared to Automodular, mostly because investors are biased toward companies they know.

Like most things in life, value investing rewards hard work and thinking outside of the box. Humans in general don’t do either of those things very well. That’s why we’ll have 14000 Tesla articles for every Automodular story.

Apr 102014

Like a lot of you, I’m a fan of CBC’s hit show Dragon’s Den. I’m such a fan that I once snuck in and watched them filming an episode. Spoiler alert: it was hi-larious. Everyone was walking around in their underpants. Water guns were being squirted. People’s faces were meeting pies. It was exactly what you’d expect from a Three Stooges episode.

No, it wasn’t. I largely made up that last paragraph for your comedic amusement. I know. You are SHOCKED.

As the show has evolved, various wealthy people have joined and left the Dragon’s Den. Calgary based oil business guy Brett Wilson joined the show for the 3rd season, replacing Laurence Lewin after he kicked it. Robert Herjavec left after season 6, probably because he got lost in his gigantic house. And now, as we come to the cusp of season 9, we’re told that Bruce Croxon and Kevin O’Leary are leaving the fold. O’Leary and Jim Treliving were the only two original Dragons left from that crappy first season.

Like a lot of you reading this post, I first heard the news a couple weeks ago, shrugged that Croxon was leaving – since the guy really didn’t do or say much – and OPENLY WEPT THAT O’LEARY WAS ABANDONING US.

Frankly, Kevin O’Leary is a relentless shill. He shills his wealth management business (which is terrible, by the way, and I should really do a post on how bad it is), he shills his new mortgage business, and then he gets on camera and does his best impression of Scrooge McDuck. He has a persona on air, and he doesn’t deviate from it. It’s maddening if you disagree with his extreme views, but it’s also hilarious.

O’Leary played that character for his eight seasons on Dragon’s Den, bluntly telling pitchers what he thought of their terrible products. He reduced more than one female pitcher to tears. He offered to physically help pitchers kill their bad business ideas, especially board games, which were pretty clearly the idea he despised most.

And it was all entertaining as hell.

The contrast between O’Leary’s blunt honesty and Arlene Dickenson’s nice guy (gal?) persona made for terrific TV. She would nicely tell the pitcher that she didn’t like the idea, and then O’Leary would insult the guest and offer to kill their invention with a hammer. The fact that O’Leary was so ridiculous was one of the main reasons why people watched the show.

And now he’s gone, right in time for the season to end and for CBC to start showing its true cash cow, the NHL playoffs. These two seemingly unrelated topics have more in common than you’d think.

CBC is hurting. Canada’s national broadcaster is set to announce cuts of $130-$140 million, thanks to declines in advertising and projected pain from losing the NHL to Rogers next year. Job cuts on the English side of the broadcaster are projected to be more than 300, and programming is going to be cut significantly, starting with the sports nobody watches anyway. Oh, you watched Saturday afternoon slalom skiing live from Lake Louise? LIAR.

Approximately 70% of CBC’s funding comes from the feds, and it doesn’t even get close to making enough to pay the feds back. Most CBC programs aren’t very good, and they largely draw pretty poor ratings. Except for one major exception, and that’s Dragon’s Den.

Can we reason that O’Leary and Croxon asked for raises after last season and didn’t get them? Absolutely. Hell, maybe CBC brass figured that all the Dragons were rich enough for pay cuts. It’s certainly a possibility. Based on O’Leary’s television persona, I’d say it’s a very legitimate possibility.

Of course, a little extra money wouldn’t be a huge motivator to someone who already has a bunch of it. Nobody would argue that the Dragons do the show for the money CBC pays them. They do it because of the opportunities to invest in a few fantastic ideas a season, and because the concept is really freakin’ cool. But while money wouldn’t be a motivating factor, it still has to be a factor. I’d be pissed if I was one of the stars of the network’s shining jewel and wasn’t offered a raise.

I don’t know if money was the reason, but I probably won’t get too excited about watching next year. You guys know I heart me some David Chilton, but even he can’t replace O’Leary.


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