I think it’s fair to say I’m a little obsessed with Warren Buffett. Just like damn near every other investor.
To be honest, I’m looking forward a little bit to when Buffett dies. Now don’t get me wrong, I’m not saying I want the guy to kick it. I’ll be as sad as the rest of y’all when he does finally pass. I’m just a little sick of the cult worship. Not saying Buffett doesn’t deserve the attention, because he does. I just wish guys like Walter Schloss got their due, too.
Never heard of Walter Schloss? I’ll do a blog post on him sometime. He’s a pretty neat guy.
I’m just as guilty of the Buffett worship as anyone. I’ve wrote about the guy about once a month for the last two years. Last week I pointed out the real secret to his investing success. I also asked if Buffett would end up a billionaire if he started out today, and I busted a few Buffett myths back in the day. I even interviewed the guy, which went about as badly as expected. It turns out Warren is no fan of my crap.
Despite having a little Buffett fatigue, I was still excited when I heard HBO was producing Becoming Warren Buffett, a biographical film that promised to be jam-packed with interviews, behind-the-scenes footage, and old family pictures. It promised to be a good time if you’re a Buffett lover.
I watched the movie so you don’t have to. Here’s my Becoming Warren Buffett review.
Like the time I reviewed Early Retirement Extreme, I’ll divide my review into stuff I liked and stuff I didn’t like.
Becoming Warren Buffett starts out with our hero driving to work, explaining the ins and outs of his breakfast routine. Each day he drives to a McDonald’s drive-thru near his house and gets two sausage patties (cost: $2.61), a sausage, egg, and cheese biscuit (cost: $2.95) or a bacon, egg, and cheese biscuit (cost: $3.17). The market is down that morning, so he goes with the sausage, egg, and cheese biscuit.
Once he gets to the office Buffett pours himself a Coke to go with his meal — from Berkshire’s very own fountain soda machine — and gets to work. I would like my own Coke machine. What a perk.
That’s followed up with Buffett talking extensively about his investing career, and many shots of the Berkshire Hathaway offices. Among the dozens of different framed pictures there was a newspaper front page of the 1929 stock market crash, a Creature from the Black Lagoon poster with Buffett’s face photoshopped in, and, of course, the portrait of his father.
Buffett is shown reading newspapers at his office, including picking up and using an iPad for about two seconds, which brought me untold amounts of pleasure.
If you’re looking for a documentary on how to invest, you won’t get it from Becoming Warren Buffett. The movie spends a lot of time focusing on Buffett’s relationship with his wife and kids, with the latter getting plenty of screen time. The only exception is his current wife, Astrid. She barely gets mentioned. This is all very familiar if you’ve read The Snowball, but I still enjoyed it. It’s obvious Buffett is especially close to Susie, his daughter.
There’s a scene near the end where Buffett goes to Dairy Queen with Susie and his grandkids. You can tell he’s trying hard to make up for time he didn’t spend with his kids when they were younger.
There really isn’t a whole lot I didn’t like about Becoming Warren Buffett.
I think there was a bit too much focus on Buffett’s family. I understand he wanted the movie to really focus on his family, so I guess that’s understandable. More about Warren Buffett and less about Susan Buffett would have been better, even if the latter is pretty interesting.
I also wanted views from inside Buffett’s house, dammit. I bet there’s all sorts of cool memorabilia inside his house. Astrid was probably the one who kiboshed that.
Don’t watch this if you want to learn how to be a great investor. It does go into Buffett’s investing criteria, but only barely. I think the movie could have spent a little more time on Buffett the investor rather than Buffett the half-assed family man.
That was really about it. Overall it was a pretty good flick.
Watch Becoming Warren Buffett
Don’t have HBO? No problem. A few nice folks have put the entire movie on Youtube. Watch it before John Oliver gets it yanked. Somehow.
Have you watched Becoming Warren Buffett? Leave your opinions in the comments.
I first learned about Lending Loop about a year ago. Because I am lazier than a trust fund baby, it took me several months to actually check out the service and give them some money.
Lending Loop works something like this. Businesses need money, but banks are notoriously stingy when lending to small business. They want things like personal guarantees and collateral and whatnot. You can’t blame them. Why lend to small business when there are large businesses and potential homeowners who want the cash instead?
It’s tough for small businesses to get funding. They’re often forced to do creative things like hitting up their local private mortgage lender. I’ve done quite a few deals over the years where someone will borrow against their house and put the money into the business.
Lending Loop saw this problem and created a solution. It’s Canada’s first true peer-to-peer lender, connecting small businesses with investors who are looking for yield. Loans yielded anywhere from 8% all the way to over 20%, with most businesses (at least so far, it’s still pretty new) paying back their loans without a hitch.
But then, a problem. The company voluntarily stopped accepting new loans while it worked out its status with each individual provincial securities regulator. That took a few months, but everything ended up fine. It got back into business with the blessing of regulators.
I put some cash into Lending Loop when it opened back up. Here’s my review of the service.
The first step is signing up for an account. It wasn’t a cumbersome experience. It took maybe five minutes of my time, although I just skimmed some of the small print. GASP DON’T TELL THE CHILDREN.
You also have to fill out an investor profile. My risk tolerance is VERY AGGRESSIVE because I’m a badass who lit four buildings on fire before breakfast. THE RUSH, BABY.
The next step is funding your account. All you need to do is give it your account info (found on any cheque), and you’re in business.
I first deposited money back in February, about a week before Lending Loop decided to stop doing new loans. My timing is impeccable. It was an easy process, although it did take a few days for the money to get from my account to Lending Loop’s. I took the money out right afterwards, and it was an easy process.
When the company started doing loans again back in October, I put money back in. It spent nearly a week in transit, but I’m going to chalk that up to the increased demand.
I wanted to post screenshots of loans I’ve funded so far, but when I contacted Lending Loop they told me that wasn’t allowed. They’d like the business info to remain private.
Instead, I’ll be talking about the deals I’ve done in more general terms.
The first one I did was for a construction company in Alberta, who was looking for cash to purchase some equipment that would let it get different jobs.
The company reported good profits over the last three years, and its balance sheet was solid as well. It owed some money already, but it was a reasonable amount. The large amount of current assets concerned me, however. Since it’s a construction company, most of the current assets would likely be in accounts receivable or inventory. They’re clearly not cash, or else the company wouldn’t be borrowing anything.
I wanted to know more details about the accounts receivable, so I asked a question in the Q&A section of the marketplace. I’m still waiting for it to be answered. But the loan did offer interest of 20%+, so that made it easy to overlook any issues. Greed has a way of doing that.
The second loan I did was a restaurant that’s looking to change up their branding. It’s losing money on an income basis, but has plenty of cash flow once we add back in depreciation and amortization. It looked a little riskier than the construction loan, but it offered a slightly lower interest rate of 16%, for some reason. I guess I’m not a great credit analyst.
I threw a little bit of money at it, too. Hey, why not? YOLO kids.
Lending Loop does take some fees, but they’re not excessive. They take 3.5% off the value of the loan as their fee. So if a borrower is looking for $50,000, they’re getting $48,250. They also take 1.5% of each payment as a fee for processing. So my two loans that average 18% will only pay me 16.5%. I’m okay with that.
Should you invest with Lending Loop?
There’s a reason why these loans are paying 15% while sticking your money in a GIC pays 2%. They’re risky, and there’s a very real chance these businesses might stop paying.
There are other issues, too. They’re posting one new loan a week on the marketplace, which isn’t nearly enough. Borrowers are more popular than the only girl at a Star Trek convention, and they treat lenders as so, as my experience with the construction company showed. They didn’t respond to any questions, yet raised all the capital they wanted in just a couple of days.
To their credit, Lending Loop acknowledges this, and would love to see more borrowers.
Overall, the issues I’ve had with Lending Loop are only minor problems. It will get more borrowers. Business funding is a big problem, and it’s a clever solution. When it does, I’ll be there with more money.
Let’s talk a little about mortgages. Specifically, the Scotiabank STEP mortgage.
This bad boy is a little different than a normal mortgage. Regular mortgages are for a fixed amount for a certain period of time, usually at a fixed interest rate. It’s very possible to get a variable rate, but that rate is locked to prime. It only goes up when prime goes up, and down when prime falls. It’s the mortgage equivalent of that friend who won’t leave you the hell alone.
The STEP mortgage combines a line of credit and a regular mortgage. Let’s take ourselves a closer boo, shall we?
The Scotiabank STEP mortgage is for anyone who has at least 20% down on their house. Ideally, you’d want a little more.
Here’s what happens. Every time cash goes into the account, the value of the mortgage goes down that amount. When you spend money, the mortgage balance continues to creep up until you put more money back in the account.
As you pay down the mortgage, the borrowing limit stays the same. So if you need to borrow against the house, you can do so, without approval.
The mortgage is split into two parts. There’s the mortgage part and the line of credit part. You can then choose how your payments are structured, but you’ll have to pay at least the interest on both.
It really makes sense for a certain kind of borrower. Say you have 50% down on a house because you’re a personal finance STUD AND/OR STUDETTE. But that’s all the money you have. Common wisdom would say borrow more and leave some money aside for an emergency fund. But with the STEP mortgage, you wouldn’t have to. You’d automatically be approved to borrow up to 65% of the value of the house through the line of credit portion of the mortgage.
Be prepared to pay a little more for the privilege of having access to your equity, however. A closed three-year term currently costs 3%. A closed five-year term costs 2.9%, while an open five-year term costs 3.5%. These are all variable rates for the mortgage part of the loan. You’ll pay normal HELOC rates on the line of credit part.
Fixed-rate STEP mortgages are subject to Scotia’s normal fixed rates. A five-year fixed mortgage costs 4.49%, although I’d suspect that’s quite negotiable if you have good credit. You’ll also have to pay an appraisal fee, which is $300. And again, the line of credit part of the loan will be a floating rate, probably prime + 1%.
A good ol’ STEP mortgage isn’t all lollipops and blowjobs though. There are a few negatives you need to know about.
There are additional fees if you were to transfer out of the STEP mortgage and into something with a different lender. It’s a collateral charge mortgage, which gives the lender the ability to easily add more money to it. The negative part of a collateral charge mortgage is it’s more complicated to assign it to another lender. If you transfer it to another lender, be prepared to pay an additional fee of between $300 to $500, maybe even more.
Although most of the time the receiving lender will cover that fee. Finally, somebody pays you for something. TAKE THAT, DAD. I TOLD YOU I’D AMOUNT TO SOMETHING.
You’ve also got to transfer all your banking to Scotiabank, and although I can’t find any evidence saying you’ll have to take out an expensive month-to-month banking package, that’s usually a requirement for such a thing. At least it is for the comparative Manulife product.
It’s also more expensive to borrow using lines of credit. One-year fixed mortgages can be had for under 2% for a well-qualified borrower. HELOC rates are much higher.
Should you do it?
This mortgage is a decent deal for people who are looking for a very specific kind of loan and for those of us who would like a little greater flexibility. It also makes sense for people who want the flexibility to borrow at any time, no matter what.
But it comes with a few limitations. It’ll cost you a higher interest rate than comparable products, and most mortgages offer the ability to pay down 20% of the original principal each year, which should be enough for most people.
Ultimately, I think it’s a little too complex for most people, as well as being too expensive. You’ll probably do better taking short-term fixed mortgages or just a standard variable one with decent prepayment privileges. There’s no reason to make life needlessly complicated. You’ve got your screwy relationships for that.
If you kids are anything like me, you’re pretty much unappealing in every way.
You’re also complete cheap asses. It’s okay to admit it. When it comes to things I don’t care about, I will always choose the cheapest option. I carry around my laptop in a free backpack with Lays emblazoned on it because it was a free gift when I worked for that particular chip company. That backpack has been places, man. It has stories that would make the hair on the back of your neck stand STRAIGHT UP.
I can think of a million other examples. I buy dollar store Kleenex, because my nose can’t tell the difference. I haven’t bought a pen in years; I’m still using ones stolen from a nameless hotel three years ago. The scrap paper on my desk is the backside of documents I discarded months ago. Hell, even my post-its were free, a gift from the Egg Farmers of Alberta. Thanks, chicken lovers.
My cell phone is the same. As long as the thing rings when somebody calls me and connects when I want to EVISCERATE y’all on the Twitter, I’m good. Whatever cell phone plan lets me do that in the cheapest way is a-okay with me.
Previous cell phone plan
Right around a year ago I made the switch from iPhone to Android after I noticed my old iPhone 4s would need a little boost in the middle of the day to ensure it wouldn’t run out of juice.
It’s not like I was constantly on it, cruising Facebook or Instagram or whatever it is you kids do. I’d mostly just put it on my desk and work, periodically responding to stuff. It was just old and bloated with crapware over the years. I’m also 100% convinced Apple designs the software updates so old phones run slower than Don Cherry doing trigonometry.
So I got a new phone and a new plan with it. For $50 a month I got unlimited minutes, unlimited texts, and one GB of data, a promo deal from Koodo.
There were a couple of issues with the transaction, however. The first was buying the phone outright, which confused the hell out of the guy at the kiosk in the Wal-Mart electronics department. It turns out nobody buys their phone outright anymore. He eventually figured it out and I got a $100 Wal-Mart gift card just for buying my phone there and going on a month-to-month contract.
A couple of weeks after I bought the phone, it messed up and I had to return it to said kiosk. They replaced it for me, and I’ve been using this new phone since without incident.
Enter Public Mobile
The whole reason why I bought my phone outright is because I wanted the freedom to jump to another carrier if they were offering a better deal. That finally happened last week.
I discovered Public Mobile is offering a terrific new plan to new users. For $120 every three months, I could get unlimited in province calling (receive calls from anywhere, dial out to anyone in the same province), unlimited global texting (DONG PICS FOR EVERYONE, EVERYWHERE), and 12GB of data. Twelve. I’ll finally be able to live my dream of watching the Blue Jays lose where ever I am.
Like any good millennial, I try to avoid talking to people on the phone. What an inefficient way to communicate. So the somewhat limited minutes weren’t a big concern. Every plan these days offers unlimited texts, so that wasn’t very exciting either. But the 12GB of data over three months sounded pretty fantastic.
In short, I was getting more than what I had, and for $10 per month cheaper. Not bad.
It gets better. Public Mobile is big on getting people to sign up for pre-authorized billing. So they offer a $2 per month discount if you give them your credit card information.
This decreased my monthly cost to $38 per month, a full 24% lower than I was paying before. THAT’S WHAT I’M TALKING ABOUT, BITCHES.
(Promptly goes out and buys $12 worth of temporary tattoos) SHUT UP THESE ARE BASICALLY FREE.
Limited time only
Public Mobile is a little different from the average cell phone provider. You do most everything yourself.
The first step is you gotta order your own SIM card. When I did this months ago, it was free. It’s now $5.00. Don’t sweat it, you’ll quickly save much more money than that.
The next step is you gotta unlock your phone. This is easily done. Just Google “unlock (model)” and you’ll have a million guys selling you unlock codes for the price of a decent burger. Don’t pay your current carrier $35 to do it.
Once the sim card shows up, punch out the size you need and then head on over to the website to register it.
Next, you’ll have to pick your plan. The best deals are only available if you sign up for 90-day plans, rather than the 30-day plans which are the norm. And everything from Public Mobile is pre-paid, so you’ll have to shell out the cost of your plan up front. Still, it’s worth every penny.
There are a few steps after that, but they’re not hard. If you’ve every bought anything online, you can navigate the process. It was easy.
Remember, this deal is only good until November 20th. So don’t slack, slacker.
How does it work?
It’s been a couple of days since I made the switch, and I haven’t noticed any difference at all. Public Mobile and Telus use the same network because Telus bought it out back in 2014. Telus also owns Koodo. So there was no change in my performance.
One downfall is there’s no contracts with Public Mobile. You’ll have to buy a phone before you can do anything.
I’d sure recommend y’all buy your phones outright. Sure, it costs more day one, but you’ve got the ability to hop from one carrier to the other, whoring yourself out to the lowest rate.
The other big downfall is you have to do everything yourself, from unlocking the phone in the first place to ordering the sim card. You can’t just go to some mall kiosk and get this stuff done. It’s a total DYI solution. That’s probably okay for most of you–like I mentioned, it isn’t hard to do the process, even if you’re porting from Koodo, like I did, which makes things a little more tricky–but it’s still something to keep in mind.
Special Koodo note
If you’re coming over from Koodo (or Telus), don’t pay to get your phone unlocked. It’s the same network, so there’s no need. All you need to do is sign up for a new (temporary) phone number, and then fill out the form on the Public Mobile website requesting to port your number to the new carrier.
It literally takes two minutes if you give them your Koodo/Telus account number. It was super easy.
Okay kids, here’s the deal. I can get up to $5 per month off my cell phone bill if I recommend five of you. I’m not about to give out my phone number to the masses, but if you found this valuable and are switching, I’d appreciate it if you’d email me (financialuproar [at] gmail [dot] com and I can save a few bucks.
Because hey, even though GICs yields approximately 0.0009%, maybe some of you want to buy them.
Remember back in the day when you used to be able to get upwards of 4% (GASP!) on GICs? Pepperidge Farms does. And so does your boy Nelly. But that ain’t going to help you today.
If you’re like 85% of the country and have an account with an EVIL big five bank, you’re looking at some pretty craptastic GIC rates. On a five year GIC, which have the best rates, CIBC offers 1.25%, Bank of Nova Scotia, TD Bank and Bank of Montreal offer 1.5%, and Royal Bank leads with a 1.6% rate. SUCH GENEROSITY.
Fortunately, it isn’t very hard to do a lot better than that. Getting in excess of 2% isn’t hard, and it’s even possible to find five year GICs that pay more than 2.5% annually. Now we’re talking.
You might scoff at the difference between 1.5% and 2.5%, but it actually matters. The difference per $10,000 invested is $100 per year. That doesn’t seem like much, but that’s because you’re looking at it all wrong. $250 per year is 66.6% more than $150 per year.
This is an important lesson to learn about finance. Banks know most people don’t care about halves of percents. But they can really make a difference, especially in a low interest rate world.
Oaken Financial, meanwhile, doesn’t screw around with stuff like that. It has carved out a niche in the market by giving the highest GIC rates out there, including a whopping 2.75% on a five year GIC. Let’s take a closer look and see whether this is a good spot for your fixed income cash.
How do they do it?
Like many of the other companies offering high-yield GICs, Oaken Financial doesn’t have much for physical locations. So it keeps its costs down that way.
Oaken is a subsidiary of Home Trust, which is then a subsidiary of Home Capital Group, Canada’s largest alternative (read: crappy credit) mortgage lender. It’s a big company with some $25 billion in assets, most of which is lent out against houses in the Toronto area.
When a bank lends to people with crummy credit, they can charge more. That’s why my latest car loan was 700% a week. When borrowers are charged more, a lender can afford to pay more for capital and still be okay.
This works until it doesn’t. If something happens to bring down the whole housing market (especially in Toronto), Home Capital is in trouble. I’ve previously mentioned how I think Home Capital is screwed if the bubble pops.
EQ Bank–which has a high-interest savings account that keeps paying less interest–works in much the same way.
As a GIC holder, the riskiness of the underlying loans should be of little concern to you. Oaken is CDIC insured, which means the federal government guarantees all deposits up to $100,000. I wouldn’t be too worried with anything above that either, since it would be very unpopular politically if the government let deposit holders get hurt if the bank went down.
And most people can easily increase the CDIC amount to $200,000 by having one GIC themselves and putting another in their spouse’s name.
Sorry, single people.
There are several ways you can get an Oaken Financial GIC.
The easiest would be to go to one of their locations in Calgary, Vancouver, Toronto, or Halifax. These are all located right downtown near public transport, so there’s really no excuse for not going to visit. Tell them Nelson sent you just to see the confused look upon their faces.
You can also phone or email them to walk you through the process.
You can deal with an Oaken-approved mortgage broker. They’ll have you complete a simple form, make out a cheque to Oaken, and send off the package for you. They get a small commission for doing so.
The easiest way to do it is online on the company’s website. I filled out the form in less than five minutes. It was quick and painless. Note the only way to send your money to them is via cheque, but they can direct deposit after that.
Other things to know
The most important thing to know about Oaken Financial’s GICs is the difficulty of getting out. You have to show the company proof of financial hardship (or, I kid you not, death) to get out of a GIC early, rather than just paying a penalty like with a normal bank. Cashable GICs exist, but they max out at a rate of 1.85%.
From the company’s referral website for mortgage brokers:
And if you’re going to do that, maybe the better option would be to just stick the cash in the Oaken Financial high-yield savings account which yields 1.75%.
You can choose to get paid interest annually, semi-annually, or monthly. Note that you’ll forfeit a little interest if you choose a semi-annual or monthly payment option (2.75% to 2.7% to 2.65%).
I’ve also heard reports of things taking a little while when Oaken does get an application. Each one is delivered to the Toronto office where it’s overlooked by employees, so it’s nothing to be alarmed about. Just remember if you do use them it takes a little bit of time.
Should you do it?
There’s really only one disadvantage to using Oaken Financial, and that’s the lack of redemption privileges. There are ways around that, like signing up for a one year, 18 month, or two year term, but those have lower rates of 2.05%, 2.25%, and 2.40%, respectively. So you’ll give up a little bit for increased flexibility.
Overall I’d say its products are pretty comparable to its peers’. As long as you’re cool with committing to the whole term of your GIC, I say you might as well use Oaken.