Ooh, look at you. Such restraint in the title. Would you like the Nobel Peace Prize?
Why yes, I would, Italics Man. I think I deserve it after putting up with you.
Let’s talk a little about Nelson’s sexy new job. It must have been a great opportunity, since I quit writing about stocks to do it.
That new job is…
Just building up anticipation here, don’t mind me…
(whispers) I work in a grocery store.
(ducks as tomatoes come flying from the crowd)
Why in the actual hell would you go work at a grocery store?
First off, remember that I’ve spent much of my adult life in the retail industry. My first real job was working in a grocery store (the same one as today, actually). I stayed for almost six years. After becoming a terrible real estate agent, I went back into the industry for three more years as a potato chip salesman. It’s nice to start a new job and not have a crazy learning curve.
As I’ve mentioned before, retail is clamoring for brains. Most chains have their share of long-term employees, but most of these workers have zero hope of ever advancing past entry level. They just don’t have the intelligence or work ethic needed to excel. They’re decent at being told what to do, but never level up past that stage. Grocery is competitive as all hell; it needs people who can truly drive sales.
And apparently, one of those people is me. At least, according to my new bosses. I’ve been tapped to move up the ladder. Management has put me into a sort of half-assed advanced training program and has me in charge of certain parts of the grocery department to try and prepare me for the next step.
Grocery management is a decent living. Department managers regularly earn more than $50-60k per year, with store managers pushing six figures. Hell, even as a guy who just works in a store, I feel I’m more than adequately compensated. Certain chains invest in their staff. Others don’t. One of the reasons why I work where I do is this company is squarely in the former category. And it shows; they have some damn fine grocers.
Despite the opportunity staring me in the face, I’m not entirely certain I’m going to go for it. And it’s all because of damned financial independence.
How FI is BS
Thanks to years of aggressive saving and some savvy investments, I’m fortunate enough to be in a position at 34 years old to not have to work. I continue to drag my ass in every day because I know time off only means something if you have something to measure it against. When every day is a treat, it’s no longer a novelty. Suddenly, taking every day off is like having a job.
But while I’m a big advocate of doing work, I find myself with less motivation now that I know each paychque just goes to further increase the big pile of money at my disposal. I should be working my ass off towards getting promoted. I should be telling management to send me to a new store the minute a department manager opportunity opens up.
But I’m not. Instead, much to their chagrin, I’m hemming and hawing and coming up with reasons why it’s not a good idea to accept a promotion. I don’t want to move. I’m not sure I’m ready. I want to make sure the manager is someone I can work with.
It’s all nonsense. The reason why I’m dragging my feet is because money doesn’t motivate me any longer. Sure, there are plenty of other reasons to take a promotion, but y’all gotta admit the cash is a huge motivating factor. And if the money doesn’t motivate me, then it’s all about the challenge of a new position. But why bother taking on huge potential frustrations when I don’t need the money?
This is what financial independence has done to me. Suddenly, I understand these early retirement bloggers who threw up their hands and decided work was stupid. It’s really hard to get motivated under such circumstances. Why work so hard when you don’t need to? Why not just have fun instead?
There’s a lot of good that comes with financial independence. We all know about that. But nobody ever talks about the bad. Sapping motivation is not a good thing. Early retirees are, generally, smart as hell and great with money. They’re probably people who should stay in the work force long-term. Unfortunately, there just isn’t much sense trying to talk these people out of it. As I’m finding out, the default response to “fuck you” money is “fuck it,” no matter how much I want it not to be.
Hey, it’s been almost two months now. I bet you kids are just JONESING FOR MORE NELSON.
(Crickets chirp and a tumbleweed slowly goes by)
The interwebs is very much a place where you can just quietly go way and nobody gives a crap. I retired from Motley Fool about a month ago and two people cared enough to mention it. Two! I’ve never felt more disposable.
I have a real job now, and it’s great. Co-workers are fun when you’ve gone without for a few years. I like working with people towards the same goal. I really missed that.
But enough about my personal life. It’s time for a bunch of thoughts on some different subjects. ARM THE RANDOMNESS CANNON.
New portfolio position
I think Alberta is a great place to search for undervalued stocks today. The economy will eventually recover, bringing up earnings of Alberta-centric companies up with it.
Gamehost Inc. (TSX:GH) is one such company. It owns and operates three different casinos in the province, with locations in Grande Prairie, Fort McMurray, and Calgary. Earnings peaked in 2014 at $0.95 per share, falling to $0.66 per share in 2016. Keep in mind 2016’s results were temporarily low because of the Fort McMurray fire.
I paid just over $9 per share for my position, meaning I got in for less than 10x peak earnings. I believe the company grows earnings in 2017, since they’ve already come out and said both Grande Prairie and Fort McMurray are looking strong. Calgary is the weak market today, but the city will eventually recover. Oil always swings back. It’s just a matter of time.
And while I wait, the company pays a generous 7.6% yield.
Gamehost has other things going for it value investors typically like. Insiders own approximately 40% of shares outstanding. It has a solid balance sheet. Management did cut the dividend, but that was to free up capital to put to work buying back shares. And since Alberta’s economy is in the shitter, there’s little chance of any new casinos opening anytime soon.
I bought a bunch of Aimia (TSX:AIM) shares in 2016, enticed by the company’s strong free cash flow and what I thought was a no-brainer choice for Air Canada to renew the contract.
I guessed wrong, and I’m now down a cool 75% on Aimia. Yeah, that stings.
I’m not entirely convinced Aimia will end up insolvent, although I do admit that’s a very real possibility. I like the company’s other assets, including the 50% stake it has in AeroMexico’s loyalty program. I suspect that will get sold and the proceeds applied to debt.
There’s also the possibility of another company buying Aimia, whether it’s the parent company of Air Miles (Alliance Data) or one of its bank partners. There’s zero possibility of Air Canada buying the company back, at least in my opinion.
The Aimia debacle pretty much erases my big win with Canam a couple of months ago. Oh, investing. You have a special way to keep a guy humble.
Home Capital and Buffett
Anything that fucks over Marc Cododes, the short-seller who declared Home Capital was a gigantic fraud at every possible opportunity, is fine by me. Short all you want, but don’t be an asshole about it.
I don’t see what attracted Buffett to Home Cap, but the reaction on Financial Twitter (or FinTwit) was delightful. I’m 80% certain Warren did the deal just to lurk and LOL at everyone’s reaction.
You still can’t convince me to touch Home Capital, however. I’m staying far away from that turd. Genworth MI Canada (TSX:MIC) looks a little more interesting, but it’s too expensive today. I might sniff when it falls back to $30ish. Or I might nope out of anything related to Canadian housing. That seems like the safer bet.
Other interesting stocks
I like Inter Pipeline (TSX:IPL) at anywhere under $25 and Altagas (TSX:ALA) under $30. I think both are solid businesses that will succeed over the long-term. Neither are particularly cheap, but they’re the kinds of companies that never get truly inexpensive.
I once bought Inter Pipeline under $10 a share and then sold at $20 per share, collecting a sweet dividend along the way. The company has increased both cash flow and the dividend since, a trend I think continues over time.
I’m down a bit on recent portfolio additions High Liner Foods (TSX:HLF) and Information Services Corp (TSX:ISV). I think both are solid businesses you want to own over the next decade or so, and would buy more once I add a little more capital to my portfolio.
Fairfax Financial (TSX:FFH) is also looking pretty interesting at right around book value. Not having to pay a premium to have Prem Watsa in your corner is nice.
And finally, if you’re into energy stocks, I think both Cenovus (TSX:CVE) and Baytex (TSX:BTE) look interesting here. I’d be much more inclined to buy the former, but the latter comes with more upside potential.
That’s about it, kids
See y’all in a couple of months. Or sooner. Probably sooner.
Those of you who show up here on a regular basis know that your boy Nelly here isn’t very generous with the guest post spots. In fact, I tell most of these people to kiss the hairiest part of my ass.
But today, you kids are in for a real treat. Paul from Asset-Based Life is one of the finest finance bloggers out there. Handsomest too, or at least I’m assuming. He consistently posts some of the most entertaining and thought-provoking stuff out there, and he’s not a douche despite having a blog name with a hyphen in it. It’s criminal he doesn’t have more readers.
Paul and I decided to do a “dueling banjos” type of post, whatever the hell that means. He’s going to take one part of an interesting personal finance argument while I take the other. The winner will feast on the warm brain goo of the loser. We do not mess around.
The topic? It’s about going to college. To put a further twist on the topic, I’m going to argue the pro-college side of the argument despite consistently saying college is hella overrated, while Paul, who’s presumably more edumacated than a penguin dressed up with a bowtie, will take the anti-college side of the argument. Make sure you go check out Asset-Based Life for my side of the argument.
Without further aideu, here’s Paul. Make him feel welcome by tossing some rotten tomatoes his way.
There was something truly decadent about going to college. My parents were quite frugal and passed it down to me, but somehow financial discipline was thrown out the window when it came to college. I was told over and over, “We’ll pay for wherever you get in.” I managed to get in a very good and very expensive school. So much for the ol’ ROI.
College opened up many career paths. I learned a lot and had some fun. But as a cold, pragmatic investment decision, college was highly suspect when I went. It’s even more so today.
College Costs Too Much
A degree from my alma mater, if you started today, would set you back a cool US$280,000 (if you grew my actual cost back from dinosaur times by 7% p.a., it’d be about $360,000).
That is a lot of money.
If you consider your career a quest to build a big pile of financial assets (not a bad way to view it), college can start you off with a huge crater to fill.
There is certainly a premium in going to college, and a further premium to a great university. I just feel that the premium is rarely worth the cost.
Even if you’re able to go to college on the cheap, or even free, there’s still a big opportunity cost to the time you spend there. Which brings us to our second charge against college.
College Takes Too Long
You can accomplish a lot in four years. You can earn a full four years of wages (trust me – I went to college). You can learn and master a trade. You can start a business and see it thrive.
There’s a long-running quip that a bricklayer who stays busy can outearn (net of school cost) a doctor. Add in a high saving rate, compound interest, and perhaps a little entrepreneurship, and their tortoise v. hare race isn’t even close.
If I had simply learned a trade out of high school and started working and investing, there’s a great chance I’d be ahead of where I am today.
But What About the Learning!
I learned some really interesting things in my college coursework.
I had an Anthropology 101 class that was fascinating. But you know what was far more fascinating? Just about any Jared Diamond book I’ve ever read.
I had a great Philosophy course where we proved we do exist. That was definitely worth a semester of my time, and I feel sorry for you non-college grads who are still struggling with that question.
Almost everything I learned in class could have been picked up from a book (and funny fact, we actually used those “books” in our classes). Today it’d be even easier with all of the cheap or free online teaching resources.
As a business major with post-college jobs in finance, I was rather shocked how little of my coursework I used. In those rare cases I did, I always needed a refresher to remind me what I (sorta) learned.
Notwithstanding that, I did need a college degree for my first job in financial consulting, and that brings me to…
College Is An Incredibly Inefficient Filter
It’s hard – sometimes very hard – to get into college. That can make college a useful filter for employers. Since the schools have gone to all of that trouble to identify top test takers, high achievers, and whatnot, lazy companies can use that as their own screen for hires.
The only problem with this Rube Goldberg machine is that it requires students to then sit through four years of classes, many (most) of which they’ll never actually use. Plus there is the real risk of finding after four years that you should have gone a non-college path. Sorry about that.
Can’t we design a near-instant filter similar to college admission? Is it really that hard? I know of some companies who rely heavily on IQ, behavioral, and knowledge tests and don’t really care about your pedigree. I think that trend is just starting.
If college was and would always remain a ironclad filter for great jobs, I’d probably favor it more. But we’re shifting to a more meritocratic world where your college degree union card isn’t as important. The role of college as a filter may be nearing its end.
The Move to Meritocracy
Nelson (feeling charitable) and I (ambitious!) have both decided to write these guest posts today. Somehow we both felt it was a good use of our time.
Are you going to measure the quality of our posts based on how much we spent on college (fingers crossed)? Or are you going to judge them based on the quality of the writing (boo)?
There are many fields where college just isn’t relevant anymore, and there are many a millionaire and billionaire with no degree. If an orangutan was a world-class programmer, he’d have a job at Google tomorrow.
There are professions where college is still a required credential, and if you really want one of them, then have at it. Just know we’re shifting more to a world of merit. If you just want a big pile, college may not be the best route. I’ll tell you what is.
The most lucrative career paths have always involved entrepreneurship. If you want a shot at being truly rich, start your own business.
It’s a scary path with uncertain prospects, but one thing is certain: You do not need a college degree to become an entrepreneur.
On the contrary, I think a college degree can inhibit entrepreneurship. College debt, a comfortable salary, and a personal brand of “college grad” can lower your risk tolerance and turn up your nose to many simple but great business ideas.
As an entrepreneur, if you ever need skills that might come from college, you can simply hire those folks. When they sniff that you don’t even have a degree, you can tell them to go make you some more money.
I’ve always wanted to be an entrepreneur. While my current effort (strategy consultant) levers my college and MBA degrees, I have no doubt I could have found one that didn’t need a degree at all.
Wait! College Is So Much More than Career Prep
I had a wonderful university experience. The social aspect was really fun. I made great friends and had many a good time. I even spent a semester in London, which was culturally amazing for a simple Texan lad.
But here’s a sneaky little secret. Did you know that people who don’t go to college are also allowed to have fun? You may not get do it in a Hogwarts-like setting, but you can have many of the same incredible experiences. You can even visit foreign countries and cultures – they let in non-students too. And you can do it much, much cheaper.
Can your genius reach its full potential without being tested in the crucible of college? I’m gonna go with yep. Many brilliant minds are forged outside of college. Colleges mass-produce pseudo-intellectuals, but I don’t know that they craft real genius.
College Isn’t Completely Worthless
College is a safe and well-trodden path from high school. You don’t need to pick a career; you just need to make it to your 9am class. Your professors will help you learn, the administration will help you pick courses and majors, and recruiters will come right to you on campus.
All of this outsourcing doesn’t come cheap, though.
I didn’t even think about careers in high school. With my parents’ full support, I just moseyed to college ‘cause that’s what one does. Had I sat down and grasped I was at the start of a great adventure, with college as one of many options, I might have gone a totally different and more lucrative route (esp. if my parents gave me my tuition as seed capital!).
College is clearly worth something. It’s just often not worth the cost in money and time. It’s an incredibly expensive luxury. In a word, it’s overrated.
As I outlined in the post RIPPING business owners who think you should shop local TO SHREDS, I’m convinced a full 90% of small business owners are disgruntled ex-employees who decided that they were going to be the boss, dargbloomit.
Because these folks aren’t entering the venture with the proper mindset, they make a lot of mistakes. Ultimately, they boil down to the same handful of things over and over (and over) again.
Here are 5 of the most common mistakes business owners make.
A local photography shop personifies this common business mistake.
They’ve got a nice studio and are only one of three locations in town that can take passport pictures. They do a reasonable passport business and a few family portraits, too.
Desperate to increase their business, the photography place decided to expand into retail. Soon the front of the studio was filled with used DVDs and other such nonsense. It’s not even photography related!
Why this place wanted to expand into retail is beyond me. Then, friends of mine went to ask the photographer for engagement/wedding photos. They had a budget of $500 for engagement shots and $2,500 for the wedding.
The response? “I’m not interested in dealing with Bridezillas.”
So to review, instead of expanding into the wedding picture business with 10 times the margin of passport photos, this photography studio decided to sell junk. Why expand into something you’re not good at when there’s a big opportunity in your core business staring you in the face?
This brings me to point two…
There’s a really easy way for the average small business to put themselves head and shoulders above the competition.
Be good at what you do.
An example? Don’t mind if I do. Most of the time, interactions with small business owners go something like this.
“Hey, I’d like (item). Can you get it in for me?”
“I don’t know. Can you give me a little time to check and I’ll call you?”
(two weeks later)
“Hey, did you look into that item for me?
“I’M WORKING ON IT. GOD. STOP HASSLING ME.”
If you’re providing a service, the way you present yourself is equally as important as actually doing the damn job. In Alberta, right now there are thousands of former oilfield employees who have decided to become handymen. Most of them struggle because they aren’t professional. They do things like providing verbal instead of written quotes and don’t show up when they’re supposed to.
There are a million ways to differentiate a business from its competitors. You can be cheaper than the rest. You can do a better job. You can offer a unique spin on a product or service. And so on. But — and this is crucially important — you can’t do all those things. Pick one and become incredibly good at it. Expansion should only be considered once you’ve mastered the original business.
A word of caution before committing to be the lowest priced operator. This is much tougher than you’d ever imagine. There’s a reason why your competitors charge what they do.
Easy payment solutions
I can’t believe how many businesses don’t make it easy for customers to pay them.
Getting back to the contractor example above, an incredibly straightforward way for a handyman or plumber to differentiate themselves would be to accept credit card payments. A good way to accept payments is with Paysafe, as they have everything you need to accept and process payments globally. Technology makes doing this incredibly easy. All you need is a smartphone reader and a 20-minute lesson on how to use the software.
It’s not just about credit cards, either. If none of your competitors offer payment by cheque, do that. Ideally, the more options you can offer, the better.
Don’t make it difficult for customers to pay you. It’s that simple.
Skipping on marketing
This was one of my big problems as the World’s Worst Mortgage Broker(TM). I assumed people would just find me because I was the only broker in town.
This was not a smart way to do business.
Here’s the math I didn’t get back then. Say the average mortgage paid me $1,500. If I spent $300 per mortgage transaction on marketing, I’d still make a net profit of $1,200 for approximately 5 hours of work.
Instead I dabbled in free stuff. I built a Twitter and Facebook page before abandoning both after a month. I started a mortgage blog that lasted about six posts (and wasn’t read by anyone except me, either).
Spend a minimum of 20% of revenue on marketing. Don’t have 20% to spare? Then you need to get into a better business.
Follow a simple rule when it comes to spending your precious capital. Track the return of every dollar meticulously.
Say it cost you $20,000 to open your own hair studio, cash that was borrowed at a 10% interest rate. Anxious to pay off the debt, you throw every extra nickel towards the $20,000. In a year, that bad boy is paid off.
But at what cost? Say that $20,000 could have been invested in fancy machines that do perms (Do ladies still get perms? Serious question). Those machines generate an additional $10,000 in annual profit.
Paying off the debt immediately saves our hero $2,000 in annual interest. But it comes at the cost of $10,000 in missed profits. As long as subsequent investments generate more than $2,000 each year in profits, the debt should remain as long as possible. Even at 10%.
Unless you have the kind of generous parents who can afford to drop tens of thousands of dollars on your education, it looks like you’re going to be stuck paying for your own education. Don’t sweat it. Having to pay for things yourself builds character.
Most people pay for their post-secondary using a combination of factors. Many will work during the summer months. Some will be able to hit up scholarships. And others will have a sugar daddy, willing to give them cash in exchange for, uh, companionship.
That last method isn’t recommended, especially if you’re a dude.
The process is mostly the same in the United States, but slightly different enough to warrant a blog post. Here are four significant differences with student loans between the two nations.
Related: the case against going to college
College is crazy expensive in the United States versus Canada. Especially when you compare elite schools down south to equivalent institutions up here.
Take McGill, one of Canada’s top schools. A student from Quebec will only pay $2,328 per year in tuition. Someone from one of Canada’s other provinces will pay $7,227 annually, while international students will pay between $15,000 and $40,000. Each will also have to pay an additional $1,000 for books.
Compare that to Brown, which is one of America’s top schools. Tuition for the 2017-18 school year is $52,231. How anyone affords that is beyond me.
What ends up happening is U.S. students end up much deeper in debt than their Canadian peers. The average Canadian ends up with approximately $25,000 in student debt after their university degree is completed. The average American student will owe more than $37,000.
Both Canadian and American student loans are administered by their respective governments. But Canadian borrowers will likely deal with their provincial government rather than the feds.
Here’s how the Canadian system works. The federal government comes up with a certain number of guidelines. Each individual province decides whether they’ll follow these rules or tweak them to their own liking. Quebec, naturally, has its own set of rules. So does Ontario and Alberta.
In the United States, loans are handled exclusively by the federal government through the Federal Student Aid program.
Working with banks
In the United States, many student loans are issued by the federal government itself. These loans are called Stafford and Perkins loans, and are directly subsidized by the U.S. government. These loans are capped at approximately $10,000 per year for each student.
This isn’t enough for the average borrower, so many turn to private student loans. The largest player in this part of the market is Sallie Mae, which specializes in student debt. Sallie Mae has approximately $150 billion in student loans outstanding. In addition, many banks offer private student loans.
In Canada, most student loans are done directly with the government. Students can borrow up to the cost of their tuition each year from the feds, plus a top-up for books and other incidentals. If a borrower needs more, they can then hit up a private bank for more cash. Banks tend to market their loans to people who need more than the average loan – like doctors.
For the most part, whether you live in Canada or the United States, you have to pay back your student loans. Bankruptcy won’t get rid of them, either.
There are loan forgiveness programs in both Canada and the United States. In the U.S., you must first get a job with the government or an approved not-for-profit organization. Then, after you’ve already made 120 qualifying monthly payments, you can apply to have your remaining student loan balance forgiven.
It’s a little different in Canada. Doctors and nurses who work in remote communities can apply to have their student loans forgiven. There are also several provincial programs that will forgive a portion of someone’s student loans (via tax credits) if they live and work in a province for a certain amount of time.
The bottom line
Essentially, both Canada and the United States have very similar systems designed to encourage as many people to attend school as possible. There are only small differences between the two. For more information about Canadian student loans, consult a student loan expert.