Financial Jungle

By and large, dual-class shares are unloved by investors and PF bloggers because the structure creates a double standard that gives one class of investors unfair voting power over another. ThickenMyWallet recently wrote a post on dual-class shares titled “You’re a fool if you buy…“:

The primary disadvantage of a company with a dual-class share structure is there are no effective checks and balances to management excesses such as excessive executive compensation… The larger issue is that companies with dual-class structures tend to be poorer performing stocks than their single-class structure counterparts (ask someone who invested in shares of Ford).

Yesterday, The Dividend Guy followed up with “Dual-class shares suck“:

From a statistical perspective, it would be better to hold the single-class stock in the industry you are looking at, compared to the dual-class company.

Both bloggers singled out controlling shareholder, Conrad Black, whose extravagant lifestyle single-handedly brought Hollinger International down to its knees. While both bloggers put forth rationales with strong merits, ThickenMyWallet did offer a glimpse of hope suggesting good stocks do exist in the dual-class structure.

Admittedly, I haven’t paid much attention to dual-class structure although I may have to adjust my stock selection process. So far in my endeavor, I’ve found no reasons to shy away from *all* dual-class stocks even though the door is open for management to act in their personal interests. My view is that result should speak louder than share structure, so I tend to stick with management with a strong track record of delivering excellence.

There are many profitable dual-class Canadian stocks with smoking-hot cashflow, and management teams aren’t afraid to share the wealth with generous dividend policies. Reitmans, for example, is a debt-free high quality retailer with a long history of dividend increases. Another one is Teck Cominco which hiked their dividend 10-fold since 2004. AGF Financial also recently boosted their payout by 25%. All three stocks have so much money, at least 3 years worth of dividend is parked in cash or cash equivalents.

Perhaps dual-class structures do raise some eyebrows, but a meticulous screening process should weed out the looters.

So you think you’re a hotshot daytrader? Let’s see if you can walk the talk.

My colleague recently forwarded me a link to this cool website called Inspectd, where you can trade real stocks with fake money. While the Internet is already littered with hundreds websites that offer similar features, Inspectd is unique in that you can “fast forward” your time-horizon to ascertain your daytrading skills in a matter of seconds rather than waiting for weeks or months. From the website:

Inspectd.com allows you to test your stock market skills against over 20 million actual historical charts. We’ll show you a random stock from a random date in the past, and you try to guess whether it rose or dropped. We’ll even give you $100,000 in play money to test your skill. But beware: it’s addictive!

My little test drive was a wild one indeed. The monopoly money zigzagged from $100k, to $50k, to $130k, to $65k, to $171k, to $40k, to $100k and finished shamefully at $35k. My biggest let down was SAM. It lured me into a deceiving uptrend just prior to slipping precipitously by 36%. Maybe you have better luck than I, but I’m going back to my day job tomorrow. Let me know how you did.

Just because the financial sector is ruing Bear Sterns’s stunning collapse doesn’t mean all dividend investors are in dire straits. Smart investors who are surviving this bear market are diversifying into sectors that don’t correlate with the financial sector. Something like the largest pipeline operator in the country, TransCanada (TRP), should fit the bill, because it’s partially immune to both subprime and recession.

TransCanada is a huge conglomerate, but its 2 family jewels are pipelines and energy. Its “network of more than 59,000 kilometres (36,500 miles) of pipeline taps into virtually all major gas supply basins in North America.” The company is also one of North America’s largest providers of gas storage, and a key power plant operator with interests in approximately 7,700 megawatts of power generation.

The pipeline stocks tend to pour in vast amounts of positive cash, but they’re not traditionally known for their growth. However, things are about to change with a glut of crude and natural gas coming on steam in and around Alberta over the next 6 or 7 years. The problem is that the real demand for energy isn’t in Alberta; it’s in Southen U.S. And if crude gets clogged up in Alberta, all producers suffer a phenomenon known as apportionment, where a shortage of pipelines is preventing cruel oil from being shipped to places where it can command top dollars. With producers and refineries crying at both ends of the pipe, companies like TransCanada and Enbridge can come in to relieve the congestion. And to profit handsomely, of course.

Pipelines, are what some people call, a business with strong economic moats. Building a pipeline is tough work. It’s notoriously expensive, complex, and you must wait maybe 2 or 3 years to reap the rewards. On top of that, management must jump through many regulatory hoops, and duke it out with relentless oppositions such as First Nations, farmers, environmentalists and workers unions. The bright side is that all these Mount Everest tall hurdles tend to chase away rookie entrants wishing to duplicate the service. That’s great for long-term shareholders looking to protect their dividend streams.

Here is a map from TransCanada’s annual report showing off their pipelines which span from Canada down to Mexico. Over at the lower right (1) is the recently acquired $3.4 billion 17,000km long ANR gas pipeline system. Next is a 50% ownership in the $5.2 billion Keystone Pipeline (2), which is TransCanada’s venture into the oil pipeline business. This 3,500 km pipeline is currently under construction, and is expected to deliver 590,000 barrels of crude per day. Operation will begin in late 2009. North Central Corridor (3) is a $983 million expansion to the existing Alberta System gas pipeline. The two dotted lines (4) are the proposed Northern Pipelines: the Mackenzie Gas Pipeline and the Alaska Pipeline.

We always think of pipeline stocks as slow moving mammoths, but the company is firing on all cylinders with its numerous growth initiatives, such as the Keystone projects, northern pipelines and expansion to their Alberta system. TransCanada, along with arch-rival EnBridge, are in the most prosperous economical environment possible despite US slipping into a recession. Back-of-the-envelope math suggests that TransCanada is investing at least $11 billion in key pipeline and power projects between 2007 and 2010. (I know I’m underestimating this.) That’s a staggering figure relative to TRP’s $20 billion market cap. In 2008 alone, management forecasts overall capital spending to be $2.9 billion.

Here’s an image of their power plants and gas storages. The key excitement in this area is the refurbishment of Bruce A Units 1 and 2 (9) which is expected to add another 19% of additional megawatt of output in 2010. A couple of other initiatives include the Portlands Energy Centre (11) and Halton Hills Generating Station (10) generating 550MW and 683 MV respectively when they’re complete.

Valuation

At 16 PE, TransCanada isn’t exactly a bargain when compared to the 13.9 historical average. (Financials are still the cheapest.) But the business is investing heavily these days to accelerate revenue, cash flow and earning growths. Given their improved growth profile, I believe buying at historical average PE is a reasonably attractive entry price, or ~$33 with 4.3+% dividend yield. TransCanada closed higher on Thursday at $38.06. I’m keeping an eye on this one.

Disclosure: I have positions in TransCanada, EnBridge and Inter Pipeline Fund.

Dividends4Life recently tagged me to write a post on My Top 3 Investing Mistakes. This series, originally launched by The Dividend Guy, is blasting through the blogosphere.

As the saying goes, “when you lose, don’t lose the lesson.”

1. Over Trading - After graduating from university in 1998, I found myself in a position to day trade $5,000 in a Royal Bank Action Direct account. I split my money 5 ways to buy high-tech stocks, and paid $29 per transaction; that’s $58 squandered away to buy and sell a stock. So, it didn’t take me long to realize that gluing my nose to the screen all day long was a high stress, zero-sum and money-losing game after fees. Which is why I’ve adopted dividend-investing as my preferred approach. It’s not intense. It’s positive-sum. It’s cheap since you buy and hold.
2. Allowing Emotions To Cripple My Judgment - One of my friends accused me of being too logical, and I agreed with him. But, I was kind of proud of it at the same time. I figured I was pretty good with numbers, and my pointy Vulcan ears would always keep my mind cool during financial upheavals. Of course, all bets were off when I started losing thousands in my trading portfolio. The story isn’t unique. I know this teenager from an investment forum who claimed to have been investing in stocks since 9 year-old — using fantasy money. Little did he know, the little pinch in losing monopoly money pales in comparison to losing real money that he may have saved for months or years. Obviously, I don’t have a heart of steel, but at least now, I understand what investment strategy works best for my psychology. At the end of the day, it doesn’t matter if you a dividend-investor, an ETF investor, a mutual fund investor, a real estate investor or a combination everything; the way to prosper in the market is to stay in the market in good and bad times.
3. Not Thinking Independently - I used to think scouring investment magazines, forums, blogs, and newsletters looking for top stock picks was considered doing my due diligence. But time and time again, I found myself drowning in a myriad of contradicting and unfounded investment advice. Many investment articles are written with inherit conflicts of interests. For example, hooking investors into buying stock-picking subscriptions, or favouring certain stocks in order to attract investment banking businesses. Even well intentioned wisdom by revered investors like Warren Buffett can be dangerous if not interpreted in the right contexts. But that’s another story. Ultimately, nothing beats absorbing investment literatures with a pair of unbiased eyes. Echoing sentiments of others is a recipe for long-term disasters.

One of the greatest investing dilemmas I reckon with is ethical investing. Loading up on sin stocks doesn’t exactly align with my moral conscious. After all, most people like me have issues buying controversial companies like Lockheed Martin that thrive in times of war. But giving up these little devils doesn’t bode well with generally accepted investment principles such as diversification and return. Pull up a chart of S&P 500 and Lockheed Martin, and you’ll be surprised at Lockheed Martin’s low correction with the index, as well as its marvelous long-term out performance.

In his My Stocks Must Pass The Goodnight Test article, John Heinzl “vowed never to invest in such a vile product again.” The offending product he’s hissing at was tobacco. He recounted an accident where a driver was pronounced dead from a heart-attack that was possibly induced by cigarette consumption. A few weeks after the incident, John sold all his shares of Altria, the largest tobacco company in the United States, with approximately half of the U.S. cigarette market.

I personally don’t own any cigarette stocks, but I must confess; it’d be very tempting to wake up tomorrow and find all cigarette stocks on a fire sale. Not to mention, cigarette stocks have historically been most generous at puffing dividends at shareholders.

How do we measure the sin scale of a stock? Where do we draw the line to discern evil stocks from the ethical ones?

It’s interesting to note that prior to John Heinzl’s horrific car crash experience, he was content to hold Altria for their lucrative dividends. Tom Connolly of the Connolly Report also refuses to buy tobacco stocks because his sister died of lung cancer. That begs the question what if you own a stock that’s hurting everyone else except the people you know. Does that justify investing in a tobacco stock? Should it take a dramatic life experience before we evaluate the morality of a stock?

I also ponder how much of our perceptions are influenced by the media. We often don’t hear enough of the other evils that don’t illuminate as brightly on the radar screen. If you think tobacco stinks, how about oil? Last I heard, our energy consumption is punching holes in our ozone layer leaving irreversible damages to our precious environment. While the Earth is being worn down, the real causalities are the wildlife habitats and our future generations. Too bad for them, their mourning doesn’t garner nearly the same attention as tobacco. If we can somehow systematically measure sins in concrete and quantifiable units, I’m sure you’ll agree that cigarette, booze and gaming stocks are like little baby angels when standing next to these oil devils.

As Canadians, our love affair with energy stocks is best exemplified by the whopping 29.1% sector weighing on the TSX, beating financials to the top spot. Chances are, if you’re an equity investor, you’re probably heavily vested in energy stocks. To make matters worse, even if you’re not investors, the unconscionable is foisted upon you. An interesting fact is that in 2005, the Federal and Provincial governments collectively inhaled $7 billion in tobacco taxes. So much for trying to remain pure in our virtues. See the pavement you drive your car on? It’s built with cigarette money.

Although it’s virtually impossible to construct a completely ethical portfolio, looking at my core holdings, I’m relieved to say that my portfolio is relatively light on the sin scale.

In his new book, Retire Rich From Real Estate, Dr. Marc Andersen doesn’t teach you how to flip your way to overnight sensational success. Get-rich-schemes only enrich those authors, who otherwise, couldn’t score big in the tortuous world of real estate investing. Marc is none of that. Rather, he advocates the safe and steady approach to real estate riches by using tips and tricks stemming from 2 decades worth of investing experience.

In his introduction, Marc highlights a dire U.S. Census finding where just 4 out of 10 private landlords were profitable in the year surveyed. In another study, 1 in 3 owners would not buy the same property again if given the chance, and less than half reported a profit on their investments. “The average investor in real estate is not successful and continues to make the wrong investment decisions,” Marc warns, because unrealistic assumptions are dumping investors to the poor house. However, don’t let this dampen your spirit.

To help place yourself in the top tier of all property owners, Marc outlines a series of practical guidelines in his book, which is filled with lesser known techniques (at least to me) on how to identify bargains, deal with realtors, calculate cashflow, finance the investment, screen tenants, manage properties, and much much more.

Probably the most important subject is on cash flow. The primary culprit that sinks property owners into financial hardships is the optimistic assumptions used when estimating cash flows. Is the 5% projected vacancy conservative? Will your renovation remain within budget? Is the existing landlord artificially inflating rent revenues by accepting risky tenants? Is the landlord artifically lowering expenses by neglecting maintenance? Marc recommends artificially fellow landlords in the neighborhood to ascertain the neighbourhood’s market rent. Good point. Some sellers will attempt to dress up their financial statements just prior to a sale. Always “verify, verify, verify,” and never accept financial figures from seller’s agent at face value.

The topic on valuing properties based on CAP rate is also neat. Investing based on CAP rate is akin to investing in dividend-paying stocks based on yield. Generally speaking, the lowest CAP rate has the best growth potential. Meanwhile, the highest CAP rate has little or no growth prospect. A happy medium is 1-2% above the prevailing mortgage rate so you get a balance of both good cash flow and reasonable growth. For example, ING Direct is offering 6.25% on 10-year fixed, so investors should strive for a 7.25% to 8.25% CAP rate. (I’m not sure if ING Direct charges a premium rate on rental properties.)

Sample lessons

• “For Rent” sign on the lawn is a cheap and effective way to find tenants.
• Think like a landlord, not a homeowner. Buy on highly visible areas rather than the one that’s tucked deep in the neighborhood.
• Landlording is the most unpredictable business because it deals with people. Always enforce lease agreements with descriptions of the lease, deadlines, and consequences.
• Flat paint types are easier to touch up without repainting the whole wall.
• Offer fast closing and hassle-free “as is” purchase as incentives to lower prices.

What I want to see in future editions

• Sample letters to tenants on evictions, warnings, new rules, late rents, and rent increases.
• Sample dialogs on negotiating for lower/higher sales prices, lower mortgage rates, and higher rents.

All in all, I think for anyone serious about becoming a property owner, Retire Rich From Real Estate is an essential book that is furnished with real-life solutions to circumvent real estate investing hazards.

Also check out reviews from Thicken My Wallet and Million Dollar Journey.

The landscape of tax-sheltered investing will forever be changed as the 2008 Canada Federal Budget unleashed the new Tax Free Saving Account (TFSA). When my co-worker, Tony, first mentioned the name “Tax Free Saving Account”, my first guess was a high interest saving account that grows tax-free. To my pleasant surprise, you can pretty much throw any instrument at it. My understanding is that anything that’s eligible for RRSP is also eligible for TFSA. This includes GIC, bonds, stocks and income trusts.

In a nutshell, here’s how TFSA works:

• Starting in 2009, Canadians aged 18 and older can save up to $5,000 every year in a TFSA.
• Contributions to a TFSA will not be deductible for income tax purposes but investment income, including capital gains, earned in a TFSA will not be taxed, even when withdrawn.
• Unused TFSA contribution room can be carried forward to future years.
• You can withdraw funds from the TFSA at any time for any purpose.
• The amount withdrawn can be put back in the TFSA at a later date without reducing your contribution room.
• Neither income earned in a TFSA nor withdrawals will affect your eligibility for federal income-tested benefits and credits.
• Contributions to a spouse’s TFSA will be allowed and TFSA assets can be transferred to a spouse upon death.

I have attached a few TFSA references below, so I won’t regurgitate too much. What I pray is that the 15% US dividend withholding tax won’t be applied to TFSA. Since my RRSP is already congested with US dividend payers and Canadian income trusts, I can use a little breathing room with TFSA.

Secondly, I hope they’ll modify the rules such that people over 18 can reclaim their contribution room retroactively. Someone turning 18 this year will stand to benefit the most, but what about me? I’m 33 year-old. I want my contribution room from the past 15 years. (15 x $5,000 = $75,000)

Either way, I’m thrilled about TFSA.

More resources from:
Jonathan Chevreau
National Post
Canada.com
Canadian Capitalist
Michael James
Thicken My Wallet
Tax Free Saving Account calculator

This is the fifth post on the Dividend Increases series.

It has only been 3 weeks since my previous dividend increases post, but I feel compelled to hurry one in as Boralex Power Income Fund just announced a distribution cut from 90 cents to 70 cents, amidst external headwinds from weaker hydrology and the declining US dollar.

In 2007, BPT.un’s $42-million net cash flow related to operating and investing activities was $9-million short of the $53-million circulated to unit holders, but management has been proactive all along warning investors about the hurdles they’re facing.

Rather than masking the problems and jeopardizing the fund’s long-term health, the new distribution policy will see payout easing to $41-million a year. This is a conservative move considering the fund still has $10-million in the bank. (i.e. the cash could’ve prolonged the current payout by another year while waiting for a turnaround.) If it were an oil & gas trust, management would’ve dug themselves deeper into the hole by (a) issuing new shares, and/or (b) borrowing debts.

Here’s my original analysis on Boralex Power Income Fund:

So why is the trust being punished? The answer likely lies in the unfavourable hydrology in the 3rd quarter. Hydrology is fickle science. Due to unusually low water level, their hydroelectric segment generated 22.8% less than historical average, even though that’s only for one quarter. It was only a year ago when the water current was exceptionally strong, while year-to-date, the segment is down only 6%.
…
Since power trusts are generally considered stable and boring, coupled with Boralex’s conservative balance sheet and high ratings from S&P and DBRS, I feel the distribution is safe, and the higher yield offers a margin of safety in a rare event of a distribution cut.

Obviously I was wrong about the payout being safe. Despite the relaxed distribution policy, BPT.un is still yielding an attractive 11+% based on my average purchase price, and I see the distribution chugging back up as hydrology restores to their historical average. Although I don’t think we’ll see 90 cents anytime soon unless the US Dollar is making a come back.

Disclaimer: I’m not a professional investor. It’s vital that investors perform their own due diligent, and invest accordingly.

On a brighter note, here are my dividend increases over the past 3 weeks:

• Great West - 6.4% (14% from last year)
• IGM Financial - 5.9% (13.4% from last year)
• 3M - 4.2% (4.2% from last year) More analyses from Money Gardener and Middle Class Millionaire.

There are several stable stock markets in which investing through different stock brokerage is very profitable. Several forex companies are doing online trading. The home investment or home building business is on its boom nowadays in different developing countries. If you can invest some thing then investment property is the most favorable option.

This has been a hot topic among bloggers, so I’ll throw in my 2-cents.

Every asset you own can be classified into 3 broad categories: necessities, luxuries and investments.

Examples include:

• Necessities: electricity, gasoline, food, water, clothing, banking, medicine and *shelters*.
• Luxuries: Tag Heuer watches, iPods, Coach bags, Ferraris and sailboats.
• Investments: stocks, bonds and rental properties.

No. That’s not a typo. I did place “shelter” as one of the necessities, but I believe the crux of the misunderstanding centers around what exactly do we consume: is it the warmth provided by the shelter, or the ownership of the shelter itself? Let’s clarify by drawing parallels from my dividend-paying stocks.

I consume electricity, but also consider my ownership of Fortis as an investment. Similarly, I’m a part-owner of Saputo, Canadian Oil Sand, Reitmans, Royal Bank and Johnson & Johnson, which all provide essential products and services including milk, gasoline, clothing, banking and medicine. Yet, I consider these stocks as investments. Furthermore, I don’t plan on ever selling these dividend stocks because they pay for my everyday living expenses; similar to how home ownership pays for rents.

Let’s recap:
Milk = Essential, Saputo = Investment
Home = Essential, Home ownership = Investment (… added)

Yes, home ownership is inessential and I have proof — me! And along with 33% of the population like me. If you think all renters live below the poverty line, you ought to meet the Millionaire Mommy Next Door and Jack Hough, who choose to invest their money in the stock market while “renting” their ways to financial freedom.

Okay, so maybe home ownership isn’t a necessity, but how about pride of ownership? What exactly is pride of ownership anyway? Does owning a BMW give a sense of pride? What about the snazziest cellphone on the planet? Are they essential? Probably not.

If pride of home ownership is neither an essential nor an investment, then that leaves luxury as the only logical option by virtue of the process of elimination. Seriously. 1500 sf? 4 bedrooms? 3 bathrooms? Hardwood floor? Granite counter tops? Home Depot’s Behr paint? 2-car garage? Views? Balconies?

My belief is that for most people, home ownership is a bit of both investment and luxury. Where you draw the line is up to you.

• Jeffrey Strain concocts 10 reasons why we aren’t rich. In particular, I like number 7, You Rely on Others to Take Care of Your Money. Unfortunately, most people want to make money themselves, and this is their primary objective when they tell you how to invest your money. And number 8, You Invest in Things You Don’t Understand. Throwing in your money because someone else has made money without fully understanding how the investment works will keep you from being wealthy.
• Contrary to point 8 above, it may behoove you to emulate super investor, Warren Buffett. Between 1976 and 2006, Buffett’s Berkshire Hathaway eclipsed the market by a herculean 14.65% a year. Any dope who emulated Buffett’s every move one month after public disclosure would’ve surpassed the market by an equally impressive 14.26%. So much for market efficiency, eh? You can access Buffett’s holdings at this clean and easy-to-navigate website, DataRoma.
• Warren Buffett’s astute business sidekick, Charlie Munger, offers his timeless 10 investing principles checklist. Any new value investor should seriously consider this list as a starting point to draft his investment philosophies.
• According to Richard Croft’s article on longevity ultimately leads to success, an investor’s long-term success doesn’t depend on his investment style. Rather, it depends on how well the investor’s psychic agrees with the style in both good and bad times.
• Who says a dividend portfolio must overweigh financials? There are plenty of prosperous non-financial dividend-paying stocks in Canada. Aron Yeomanson is revealing his favourite five strong dividend stocks that aren’t bank stocks.
• Michael Sivy, a Money Magazine columnist, is a huge fan of dividend investing. In this article, Michael articulates the power of dividend yield and dividend growth, and why they’re superior investment vehicles over a more traditional portfolio that relies on capital gains and bond interests.
• John Heinzl explains that there’re no greater sins then dividend cuts. Despite the gloom and doom prognosis we hear in these vulnerable times, the market is still flush with dividend stocks that are still showing off their confidence in their ability to deliver by rewarding shareholders with pay raises.
• The heretic from Langley is convinced that the Vancouver real estate market is living on life support. In his article, he assembles a complete picture to formulate an informed view on the local real estate market.
• Mackenzie Investments just released results from a new test of theirs, and found a majority of Canadians under 50 are demonstrating troubling patterns of overspending. You too can take the Burn Rater Spending Test to see how your spending habits compare to the rest of Canada.

Recently, I had the pleasure to get to know one of my blog’s readers, Ryan. Like me, he is a cheapskate who likes to sniff around for dominating businesses that are selling at reasonable prices. One of the stocks on his radar screen is the US retail mammoth, Walmart. He thinks a few trends are working in Walmart’s favour:

Hello to those who are fans of Financial Jungle Blog. This will be guest post and here is my bio I am an Economic and Business student in my last year of school. My financial perspective is very debt adverse and value. My desire is to achieve a CFA and Live in Newfoundland and Labrador.

For a long time I have admired Wal-Mart’s business style and prices. What really got me interested in this stock is the beloved US consumer and their homes. The action that pushed me over the top is Wal-Mart was the first store in Canada to low prices to reflect the higher Canadian Dollars verse the US dollar. This has made me convert to shopping as much as possible at Wal-Mart. This post will discuss why you should invest in this stock and maybe take out a HELOC to do this. ( ADDED JUST FOR A JOKE )

In a nut shell here is why I think the stock will have a good 6 to 15 month run. In good times people over spend because they think that times are going to be really good. As well in bad times I think they will over correct. So I think that Wal-Mart will get a much bigger slice of the consumer’s pie even if this pie is a lot smaller. So I think this will bold really well for them.

Here are my reasons for liking the stock.

1.) Lower Housing Prices across the US is eroding home equity.

This is more evident in California and Florida that consist of 12% and 6% of the total population respectively. Might see a big jump in same store sales in these states which are hit hard with the recent housing revaluation.

2.) Without a declining or vanished housing equity the US consumer will have to deal with their credit card debt. To accomplish this why not shop for lower end products and cheaper household items? This will free up dollars that can be used to pay down debt.

3.) Unemployment up and Prices up.

This is were I think the biggest correction will take place. People do not know if their jobs will be around and this will lead to a big over correction in spending. Since a lot of spending is essential and a lot more of this spending will happen within the walls of Wal-Mart. People have to make up for increased dollars they have to spend on gas and other consumers hit by the commodity run.

4.) Effect of Baby Boomers.

This will have the biggest effect and draw to Wal-Mart for their day-to-day consumption. I say this because The US economy has been running at a great clip for basically 15 years baring the tech bubble. Usually in good times over consumption takes place and people do not save like they should.

Why do I call this the baby boomer effect you may ask? Well its because these are the ones who have used their rising housing prices to buy that nice vacation every year and the vacation home. Their financial plan probably was based on the stock market and housing going up slightly or staying flat. Lately it hasn’t been flat it has been down. What’s going to be the side effect of this phenomenon? Who knows but I think that people are going to flocking to Wal-Mart screaming “ I’m sort X years behind on my retirement and better tighten that spending belt a LOT!” This will mean big increases in store numbers for the next few years.

5.) Down stock market

Another nest age taking a downward spiral. Think I’m going to go out and buy that really expensive bottle of wine for supper along with that Gucci pruse. WRONG! These people are going to down grade their purchases because they have no clue what’s going to happen with their finances. Again flocking to Wal-Mart.

What will make the biggest impact on Wal-Mart earnings over the next year will be # 2, # 4 and # 5. Uncertain times will mean that the US consumer will be spending more of its money to reduce debts most likely credit card debt. Maybe Wal-Mart will allow a low transfer rate as long as you maintain X amount of dollars per month at their stores? Lots of options for Wal-Mart to grow in a slowing Economy espically if the housing market and stock market slide even more.

Long Term View.

I think Dell allowing Wal-Mart to sell some of its computers is a telling story of the tired US consumer because they are trying to use WMT distribution network to help its sales. If other brands that you wouldn’t expect approach WMT in droves to team up you no this is a bad sign for the economy. The consumer is readjusting their basket of goods to lower cost merchandise. If this happens I think at this stock will have a good run for 3 to 5 years.

Disclaimer: Whatever expressed in this post is only an opinion. Please do not interpret this as a recommendation to buy.

Disclosure: I have an indirect Walmart holding through one of my Vanguard ETFs.

1. 80% of our net worth is our ability to earn income - Our investment portfolios extend well beyond just the securities in our brokerage accounts; our greatest asset is the ability to learn new skills and to become productive citizens of the sociaty. In my opinion, the ability to earn salaries is simply bonds on steriod. I guess you can say my name is Bond. Since 80% of our net worth has bond-like characteristics, we don’t intend to overweight bonds. Instead, we let the remaining 20% ride a diversified basket of dividend-paying stocks. Critics will point out that we could lose our current jobs tomorrow, but then we simply go find another one. Jobs are plentiful as long as we’re not choosy. The only caveat is the transition. The best way to protect against short-term job interruptions is to reserve 6 months worth of emergency cash. For long-term protection, buy disability insurance.
2. Bonds are extremely tax-inefficient - The government taxes our bond income ruthlessly at our marginal-tax-rates. We can circumvent that by hiding our bonds inside RRSP, however our RRSP accounts are too precious! We rather decorate our RRSP with high-quality income trusts (e.g. Canadian Oil Sand) and US dividend-paying stocks than squandering a penny on low-yielding bonds.
3. Bonds have miniscule real growth - The current 10-year government bond offers 3.8% yield. Subtract about 2.2% in inflation and 1.2% in income tax, we’re left with 0.4% real return. That’s a steep price to pay just to tame volatility…
4. Bonds don’t make our portfolio safer - According David Dreman, author of Contrarian Investment Strategies, “The major risk is not the short-term stock price volatility that many thousands of academic articles have been written about. Rather it is the possibility of not reaching your long-term investment goal through the growth of your funds in real terms. To measure monthly or quarterly volatility and call it risk - for investors who have time horizons 5, 10, 15, or even 30 years away - is a completely inappropriate definition. The volatility measurements provide only an illusion of safety.”

The mortgage facilities are offered at various banks. You can choose any buy to let mortgages deals. The most used facility is the home mortgage facility. If you need more loans then there is an option of bank home loan 2nd mortgage available. The free insurance quote will provide you the required estimate. All insurance companies accept the online credit card. Many people are investing in this business due to high insurance carrier and scope.