Tuesday, December 4, 2012

O'Leary funds not beacons of investment brilliance

I've read a lot of criticism of the mutual funds carrying the Kevin O'Leary name. As I read the criticism I wonder how much of the animosity is generated by fund results and how much is the result of the brand --- the O'Leary name. Old Kevin is an abrasive fellow, and proud of it. On the surface, he seems to be more hot air than hot ideas. I did a quick check of one of his funds: O'Leary Global Equity Yield-X.

If you had invested $10,000 when the fund opened for business, you would have $9047 remaining today. A simple benchmark, see graph, delivers a gain of 10.3 percent rather than the 9.3 percent loss suffered by the fund.

The heavy bottom line is an O'Leary fund; The thin top line is a benchmark.

The above looks bad but losses are a part of investing. I can be forgiving. The O'Leary fund may recover. It's still too early for the definitive judgment. I believe what makes the O'Leary loss look so bad is the O'Leary name attached to the fund. On releasing his funds, O'Leary made a lot of what many would call promises and losses were not part of his promised game plan.

I'm retired. If I were interested at all in a mutual fund, my interest would lead me to look at the balanced yield funds. I compared the performance of the O'Leary Canadian Balanced Yield Fund Series A against my TD Monthly Income holdings. The OL fund is up only .85 percent, while my TD fund is up 3.57 percent over the same period.

We are comparing apples and oranges here, I admit. The TD fund really is a Canadian fund while the OL fund may hold up to 30 percent in foreign markets. But many investors looking for a pure Canadian play might be attracted to the OL fund seeing Canadian in its name.

I would never be attracted to the O'Leary fund. Its 2.52 percent MER sends me on my way. This MER is about a full percent higher than the TD Monthly Income fund. The high MER may be one reason the OL fund is struggling.

For some foreign equity exposure, one ETF that I own is First Trust Dow Jones Global Select Dividend Index Fund (FGD). It is 4-Star fund with a .6 percent MER. It pays a 4.82 percent dividend.
It is an American ETF and does carry some currency risk but I see that as a positive feature. And, check the graph, over the same time period it beat the O'Leary fund.




Oh well, if Kevin O'Leary is ever to become a billionaire (he's is not even close today) there must be some contributors to the cause. If you'd like to contribute to Mr. Wonderful's wealth, invest in an O'Leary fund. If you'd like to make yourself a little richer, find another place to park your money.

A link to an O'Leary fund criticism is broken, the post apparently taken down.

If this post seems a little weak on the condemnation of O'Leary funds, it's because when I followed the links to some of the attacks once posted to the Web I discovered that they had all been taken down. Why were the links found broken? I don't know. But . . .

Stay tuned. Stay patient and wait. Time will reveal the truth.

Tuesday, November 27, 2012

Love the one you're with

Stephen Stills may be an odd fellow to consult for investment advice but as I looked over my portfolio this morning an old song by Stephen Stills played in my head: "If you're down and confused . . . love the one you're with . . . "

When the market takes a drubbing, that is the time to buy. Buy low and sell high, right? But, the big question is "What to buy?"

Over the years I've noticed I grow attached to some of my investments. These are the ones that perform well year after year and attract very positive attention in the investment community as a whole.

A good example of one of these rather well admired stocks is Crescent Point Energy. When it dropped to about $19 in the middle of the stock market crash a few years back, it looked awfully good. I'd owned it for years. It had performed admirably. It was now down but everything was down. Everything was telling me that this was a time to buy, an opportunity of a lifetime, but what to buy.

Among the stocks I bought were Crescent Point (CPG), Inter Pipeline (IPL.UN) and Bank of Nova Scotia (BNS). Later, I sold some of my excess CPG and IPL.UN. Both were represented in my portfolio by an out-of-balance allocation. When IPL.UN climbed above $20, I moved on, but I still hold CPG (up 71 percent) and BNS (90 percent). I believe IPL.UN was up more than a hundred percent when I moved on.

I should note: Today both CPG and IPL.UN are included in the ScotiaMcLeod Canadian Income Plus Portfolio. IPL.UN is still on my radar and if it every gets dragged down by a market wide correction, I'll be and owner of that stock again.

Today, I have some stocks that may be working their way into my heart. Cathedral Energy (CET) immediately comes to mind. If the WisdomTree ETF AUSE ever has a solid correction, I would pick up some more units.

I am sure your portfolio is different than mine. Still, you must have some investments that you love, that you have great confidence in, confidence that comes from years of ownership and a solid understanding of the stock involved. If you wish you owned more, when the next large correction hits give some thought to adding to your position.

Addendum:

After posting this, I heard from a reader who told me they have an investment that meets the "love the one you're with" criteria: Dundee REIT.

I gave a quick check using my ScotiaBank account and read: "Maintain 2-SP rating; one-year target up modestly to $40.25 per unit. Down 8.6% from its YTD high, we believe valuation is looking more interesting at 15.1x 2013E AFFO and 6.5% implied cap. We think Dundee offers good capital upside,
along with modest distribution-per-unit growth potential."

I like that D.UN.TSX is down 8.6% from its YTD high. I agree with my reader, this one is worth watching.

I've heard from another reader. This person suggests that the U.S. ETF PEY would be a good addition to this list. (I wasn't posting a list, but I'll let that pass.)

PEY's full name is Powershares Exchange Traded Fund Trust High Yield Equite Dividend Achievers Portfolio. Wow! Quite the mouthful.

I know a little about PEY as I own a little but I haven't given this holding much attention in more than a year. (I blush.) PEY is well off its former highs - down a good 33 percent at least. That said, at its present price PEY is yielding just more than four percent. Considering its present price, it may not drop all that much more if hit by another downturn in the economy. It has had the stuffing kicked out of it. (My holdings are down about 17 percent.)

That 17 percent loss translates, for me, into a loss of about $2000. Softening the blow is the monthly dividend of about $33. The monthly yield varies a little. If the stock doesn't budge from its present position, in five years I'll have reclaimed my loss. Taking inflation into account, let's say six years to break even.

If I was younger I would not be seeing those numbers as positive. But I am retired. I need four percent from my money to live. PEY is paying four percent. I'm content, not happy, but content. But those numbers are why I didn't add PEY to my list. Now I think if PEY were to drop below my original entry point, my reader is right, it would be an investment to consider.

Saturday, November 24, 2012

LIM and other assorted investments

I'm still holding my LIM. No surprise here. The big question is: "Will iron ore prices recover in 2013?" A lot of bight folk are saying, "Yes." Still it is a crap shoot at this point.

I don't have a lot of skin in the game but enough to add a little spice to my portfolio. A "win" with LIM might not make me rich, I don't have enough stock. But a win might pay a few months of my expenses in retirement. Nice.

And a loss? It might cost me a couple of weeks of  retirement-living-expenses money. Not a big deal.

Never play, and I do mean play, with more money than you are comfortable losing.

My other bets have been doing much better than LIM.

  • CET (Cathedral Energy Services) is up marginally and I have been enjoying the good dividend while waiting for a turn-around in the oil patch. 
  • My REM (a U.S. iShares ETF) is well off its highs but it is still up from my entry point and is still delivering a fine 11.34% dividend. I have no complaints. 
  • My Sun Life Financial is up almost 30% and carries a nice 5.3% yield helping pay the bills in retirement.
  • AUSE, an ETF from WisdomTree, hasn't done much since I bought a few shares but it has been paying its way with a 4.81% yield. That's almost a full percentage point more than what I need to balance my books in retirement.
  • I keep adding to my RY (Royal Bank) holdings whenever the stock has a major dip. RY is up about 20% and paying a 4.1% dividend based on today's stock price.
  • My ZUT is up too, but it is not an ETF that I am enamoured with. I'm not all that fussy about some of the holdings. Still, it is up and paying me a dividend of about 5.2% to hold my nose. I'd like to make a bundle on a couple of my dogs, like LIM, and then I'd buy some more utilities. I could buy something like Fortis or Emera but I am leaning towards another ETF. This time I'd buy XUT. It is only yielding 4.44% today but I believe it would partner nicely with my ZUT holdings.

I have cutback my budgeted income from dividends for the coming year based on my concern about the stability of the high-yielding Penn West dividend. If the yield is cut, so be it. I am prepared. If the yield isn't cut and oil prices climb out of the present hole, I'll celebrate.

As of today, my portfolio has delivered almost 6% year to date. It was down of late but the market has been recovering over the past few days. It may still be a fine year for my investments when I close my  books on 2012 in another five weeks.

Monday, November 19, 2012

YTD_Up!


 As I wrote in my last post, don't panic. I don't know how your portfolio is doing in this wildly gyrating market but mine has bobbed to the surface. I am now $176 into the black for the year.

I was forced to remove more than thirty thousand to meet my and my wife's expenses this year. That's more than I like to remove but I'm comfortable with the such a large withdrawal now and then. Heck, if I live into my 70s the government will force me to withdraw even larger amounts. I've got to give that some thought and be prepared if I am lucky enough to face the problem.

I am not panicked by the fiscal cliff the U.S. is racing towards. My gut feeling is that it is more of a fiscal slope. I believe the slow but plodding recovery in the States will continue. Europe is going to provide a steady diet of financial shocks in the coming year but it looks as if it is weaving its way through the financial mine field. In China, the economy is slowing, but when the former pace of growth is factored in, it is easy to believe China has some wiggle room as it prepares to enter 2013.

In other words, I see my portfolio as still under attack, still gaining and then losing and then gaining again, but come January 2014 I expect to be comfortably into the black and that, in these trying times, is good enough for me.

Just "Don't panic."


Saturday, November 17, 2012

YTD_down

Yes, I took a lot of cash from my portfolio this year to live. But it still bugs me that I am down year to date. I like to end each year with my principal intact. It is only mid November, there are still about six weeks left for the market to rally. I'm hopeful.

But, this weekend my portfolio value is down almost a full percent from its January opening. The markets have not been kind to me since the American election. Is there a direct correlation between Obama's re-election and the falling market? I doubt it.

There are a lot of things going awry in the world and it may just seem like a good moment for some profit taking. I know I seriously considered going to cash a few weeks before this recent pullback. I was pushing my all time high and anytime I break that barrier I expect a pullback.

I figure the first time I unload on reaching my personal best, that will be the time the market goes on a wild bull run. I guess I'll just quietly lick my financial wounds, buy a few bargains and wait for the inevitable rebound.

My dividends are accumulating and come January or February I should be able to withdraw enough money to get me through four or five months. And at that time there will be more dividends to remove.

I have already calculated a drop in dividend income starting in 2013. For one thing, I own Penn West and I have a bad feeling about that generous payout. If it is cut, it will come as no surprise.

My portfolio may be down but my spreadsheet tells me my bills will still be paid and that all that is important is right in my financial world.

Friday, November 16, 2012

A lot of the shine has come off LIM

I just read that some stock pickers are lowering their target price on LIM. I checked  my ScotiaBank report and discovered the one year target is now $1.60. Not good. It seems odd that the stock is still rated 1-Sector Outperform. Since I bought in, the stock has dropped has lost 46.2 percent.

I've considered buying more and averaging my per share cost down to eighty some cents, but no. I'm just going to let this stock ride and see where it takes me. I can still see a profitable exit on the horizon, on the very distant horizon.

On the bright side, when I visited the TD site that I can access, there are four strong buy recommendations on LIM, two buy and six hold. The are no sell recommendations or even underperforms.

Thursday, November 15, 2012

Don't Panic

If you read my piece in The Globe and Mail, you know that one of the best bits of advice I've come across for stock market investors was on the cover of The Hitchhiker's Guide to the Galaxy: "Don't Panic."

Since the American presidential election, the Canadian market has been in a real tailspin. One more day like the last few and all my profits for the year will be wiped away.

At the close of trading today, my portfolio value was less than it was at the beginning of the year. This does not mean my investments are in the red, not if you take into account that I have removed more than $30,000 this year in order to live. Some years retirement is not as cheap as others. This year was a budget killer.

From New York Times, 9:53 p.m.
What does tomorrow hold? Hard to say, but if the markets in Asia are any indication, and sometimes they are, I may keep my head above water. I may even see my bottom line climb above my January opening value. The Nikkei is up 1.88% and the Hang Seng is up a tad, 0.18%. China is down and by almost one percent. I'll keep my fingers crossed, stay cool, and I won't panic.

By the way, my investment in Labarador Iron Mines (LIM) is testing my resolve. I noticed today it was trading around 66-cents. I don't have a lot of exposure, it is not a big deal, but still it's leaving a big, red stain on my balance sheet. Penn West (PWT) is not causing me as much grief but it is a close second. Time to let those two sink or swim on their own. I'm turning my investment interest to my more solid performers. Maybe I pick up a few shares of something good at a bargain price when this retreat ends.

I'll keep you posted.

Wednesday, November 14, 2012

I distrust my local paper for financial guidance.

The local paper claimed the senior investment advisor had a track record of dedication and excellence. He confessed to the reporter than the year had been challenging but his strategy had bucked the trend. While the TSX  was down 10.4 percent year to date, the advisor's investments were only down 1.5 percent over the same period.

We help clients get through difficult financial periods, he claimed.

He was, of course, snowing the reporter. Comparing his portfolio to the TSX is not a reasonable comparison. He needed to compare his record to a true standard, a benchmark.

The benchmark beat the advisor by 5.55%.

I'm an income oriented investor. For this reason I look for a benchmark designed to track a portfolio with an income bent. One designed for retirees like me. I discovered that over the same period a respected income benchmark was up not down. The annualized return was 4.04 percent.

I like this benchmark. I believe the Financial Post also uses it, or one similar to it, from the same source. I'm sure the senior investment advisor is familiar with this benchmark and I'm sure he makes no reference to it on purpose. His portfolio failed to perform as well as a benchmark.

I have a personal benchmark: The TD Monthly Income fund. I know, it is not a true benchmark. But, it is a balanced fund designed to provide income. It suffers trading costs and other expenses that a benchmark avoids. If I can beat TDB622, I feel like a success.

As you can see, the financial advisor interviewed by The London Free Press also failed to beat this pseudo benchmark. TDF622, unlike the advisor, was in the black.

The fund's return was 1.9% better than the advisor's.

Financial advisors are also sales people. It's too bad our reporter wasn't more than a reporter, being a stenographer doesn't count.

Addendum: I didn't give the advisor's name as this is truly a good person. They give a lot of financial support to local charities, for instance. They do a good job, an honest job and they keep their clients happy. But nothing in the article indicates that they are  much more than an expensive babysitter for your portfolio. If you don't need a financial babysitter, you probably don't need this advisor.

It's a correction for a lot of my holdings.

I define a correction as a pullback of ten percent or more. This recent downturn is turning into a correction for a lot of my holdings.

What am I doing? Uh, shrugging my shoulders. I like the stuff I own and if it drops low enough, or stays down long enough for some of my dividend income to give me adequate cash, I will buy more. I'll see what has dropped the most and seems to have the best chance of a speedy recovery.

Whatever, I'm cool. I have factored some loss of dividend income into my budget for 2013. I have hunkered down financially, and I'm ready for the storm --- or is that cliff?

Thursday, November 8, 2012

Penn West shake-up

I own Penn West (PWT). I'm not happy owning PWT and haven't been for years. PWT has a poor aura. By that I mean one reads a lot of bad mouthing of the stock and the company behind that stock. The big dividend has not been seen in a positive light by many Penn West critics. Simply put, a lot of folk have not been enamored with the Canadian oil and gas producer for years, and one big complaint has been management.

I got into PWT through the backdoor. I owned a small junior oil concern, Canetic Trust. I had split my junior oil investment funds and put a little in Crescent Point, some in Inter Pipeline, a little in Petro Canada and some in Canetic. Petro Canada was swallowed by Suncor and Canetic was folded into Penn West. I still own a few hundred shares of Crescent Point and with Inter Pipeline above $20 I sold my shares in the Canadian company and moved on.

When PWT got down to about $13, I bought more. I averaged down. Over time I got my average book price down by half. Not a good sign. It tells you how much the weakening stock has fallen.

Well, the falling knife is still falling. My losses are still climbing. There has been a big shake-up in the executive offices of Penn West and this has unsettled the market's feeling about PWT at a time when the stock market overall is unsettled.

How low can PWT go? I don't know. I wouldn't even hazard a guess. Will I buy more if it drops again? Maybe. Only time will tell.

Personally, I'm glad to see that management changes are occurring. PWT management has worried many critics for years. I'm hopeful. Maybe the company will find the brake pedal and stop the steady decline in the value of their stock.

The first thing that they need to do is cut the dividend. At least, that is my gut feeling. Let me make it clear that I have no proof this will happen but I will not be surprised if it does. And the price of the stock may well fall on such an announcement.

Still, I've got time on my side. I can wait for PWT to get its house in order or possibly to be the target in a take-over. Either way, the stock should get a pop. Will it be enough to allow me to get out with my financial skin intact? Maybe.

A few facts:

  • Penn West's last trade yesterday was at $10.65.
  • Penn West lost 54-cents or 4.83 percent yesterday.
  • The dividend yield is now north of 10 percent at 10.1 percent.

When I do a little research into what others are saying, I find that Patrick Bryden CFA (Scotia Capital Inc. - Canada) says among other things:

". . . asset spread remains impressive and latent value is deep, however market awaiting delivery. While the departure is a significant change in leadership for the company, with no announced replacements, we expect the stock to continue to be volatile. We maintain our positive view of the company's resource exposure company and also hold that execution remains paramount in converting latent potential into share price appreciation for stockholders.

We maintain our 2-SP rating and our one-year target price of $18.00.

I'm buckling my investment seat belt and preparing for a wild ride.

Monday, October 1, 2012

Good pensions for all? Is this even possible?

I had an interesting chat about pensions with a fellow who thought everyone should be assured a decent pension on retirement. Canadian civil servants have such pensions, why don't all Canadian workers?

It is an excellent question that defies an easy answer. My gut instinct tells me that if every worker in the world saved properly for retirement, all that retirement money would control every decent equity investment on the planet.

Think of the Norwegian Pension Fund, possibly the largest sovereign fund in the world. Just this one fund owns a little more than 1 percent of all global stock.

At one time most public pension systems, the Canada civil service plan among them, met pension demands out of the country's general revenues. In Canada, for those who retired prior to April 1, 2000, this may still hold true. Since that date, the Canadian federal public service pension plan (which includes military pensions) has been an independent pension fund, administered by PSP Investments. It does not pay it’s pensions from government revenues, but makes it’s money by investing in private markets, equities and real estate, just like any other pension plan. (Note: The Reserve Force didn't come under the PSP umbrella until after March 1, 2007.)

Pay-as-you-go plans, also known as unfunded plans, have lost support. Many compare such approaches to Ponzi schemes. This is not to say they are Ponzi schemes but only that they share attributes with the famous con. Both pay off early members of the scheme with money provided by late joiners.

The pay-as-you-go system is not as foolish as it seems at first. In a booming economy with a growing labour pool, an unfunded plan can deliver on its pension promises for many years. But sooner or later many argue such plans must do one or more of the following:

  • raise the contribution level (raise taxes)
  • raise the age of retirement (Think of OAS in Canada — an unfunded plan. In the future, retirement will begin at age 67.)
  • cut payments to pensioners
  • cut benefits from other programs to fund pension liabilities (Rob Peter to pay Paul.)

There is no reason to believe that pension rules cannot be changed, even for those already drawing a pension. Read the following from The New York Times:


Residents of San Diego and San Jose voted overwhelmingly to cut the pension benefits they give city workers. And they did so in a way governments traditionally avoid: moving to cut not just the benefits of future hires, but also those of current city workers, whose pensions generally have much stronger legal protections than those of private-sector workers.

Let's take a closer look at the PSP Investments board. It has $64.5 billion of assets under management as of March 31, 2012. It invests funds for the pension plans of the Public Service, the Canadian Forces, the Royal Canadian Mounted Police and the Reserve Force. A team of 400 professionals manages the diversified global portfolio of stocks, bonds and other fixed-income securities, plus investments in Private Equity, Real Estate, Infrastructure and Renewable Resources.

Investment boards are becoming the preferred approach for managing pension funds and meeting pension obligations in the future. The following are just a few of the investment boards found in Canada.


Will investment boards be able to meet tomorrow's pension demands? The short answer: Maybe. The truth is that no one knows the future. Risk is part of life and risk is inherent in any plan based on investing in the global stock markets.

Among the risks faced by these funds are:

  • market risk
  • liquidity risk
  • leverage risk
  • concentration risk
  • credit and counterparty risk
  • governance risk
  • strategic risk
  • operational risk
  • stakeholder risk
  • legal and regulatory risk
  • reputational risk

The recent returns of many funds have raised doubts. In 2009 the PSP lost almost 7 billion dollars (Cdn.). To put this in perspective, in fiscal year 2012 net investment income was more than one and a quarter billion dollars with net assets surpassing $47 billion. On the downside, the recent return for the fund was only 3 percent. This is not adequate. PSP calculates it needs a real return of at least 4.2 percent.

In recent years, I have beaten the PSP fund but I am a small investor and can move in and out of the market without causing a ripple. Still, with so much money pouring into global markets under the control of thousands of well-managed pension funds, how long until I will be unable to find suitable investments for my personal pension portfolio?

I already compete with the pension investment boards. Take the top ten PSP investments and you have ten of my personal favourites too. But investment boards have interests going much deeper than banks, Reits and resources.

Have you ever taken the 407 toll road north of Toronto and cursed its capitalist owners? Glance in the mirror. If you have a connection to CPP, you have a connection to that highway.

The CPP investment team saw the toll road as a great asset. For one thing, the owners can charge as much as they like, and there is no prospect of new competition. CPP bought 40 percent of the highway at a cost of $4 billion. It has since syndicated part of the stake, reducing its share to 29%.

Or take REITs, a favoured investment of Canadians running their own personal RSP portfolios. CPP in a joint venture with another fund bought real estate from London Life Insurance Co. The move by the CPP Investment Board signals its move to invest 5 percent of its holdings in real estate.

I have something in the order of 15 percent of my retirement funds in REITs around the world. Now I find myself competing with giant investment funds with billions of dollars in their war chests.

Which brings me to the question posed by this post:

Are there enough good investments, even if one is willing to search the whole globe, for all the world's pension funds to find good, high-yielding, homes?

Sunday, September 23, 2012

The Labrador Trough, Canada’s Iron Ore Rush

The Labrador Trough and Canada’s Iron Rush Infographic

 [ Added near the end of February 2015: I broke my rule and invested in a company referred to as "unprofitable." My investment, very small, disappeared completely. Oh well, it was more fun owning LIM than buying a lottery ticket but no more profitable.]

[Add: Feb. 19/2014. LIM may be going down for the count. Iron ore prices are down, the quality of the iron ore from LIM has not lived up to expectations and I have lost so much of my original investment that it may be too late to get out with enough money to even make the trade worth the effort. Oh well, at least my gold mining stock has performed nicely.]

 [Add: Sept. 27, 2012, I bought some LIM. But be aware, this is a dicey play. With iron ore dipping well below $100/t and LIM's break-even point estimated at US$111/t delivered to China, LIM may need an infusion of new funds. I've made my move. Now, to sit tight and wait.]

[Another add: I'm not feeling lucky. Read why: LIM.] 

The following post updated Oct. 3/2012.

I'm always looking for a new investment. My first encounter with LIM (Labrador Iron Mines) immediately peaked my interest. A Canadian company shipping very high iron content ore. Worth investigating, I thought.

Click on map to enlarge.
But, along with peaking my interest, LIM set off lots of personal investment alarms. A ScotiaBank investment report places the LIM investment risk at the "caution warranted" level.

But the promise of a nice return and maybe much more is holding my interest. LIM can be picked up for about 97-cents today. The price fell to under a buck after the October 1 announcement that underwriter Canaccord Genuity Corp. agreed to purchase 30 million common shares at a dollar a share, with an option to buy a further 4.5 million shares.

Analysts I follow are posting a target price in the $1.50 to $3.00 range. The ScotiaBank report, mentioned earlier, has lowered its target value a couple of times since I started following LIM. The ScotiaBank is now predicting $3 based partially on the recent sale of 30 million shares and the resulting share value dilution. Here is a link to a Financial Post article on the recent share sale.

The bottom has literally fallen out of the iron ore market. LIM has been forced to try and stem the financial bleeding. Quoting Mining Business Media:

Just over a week after it put a hold on $60M of capital works programs, the Canadian iron ore producer has ceased the mining of direct rail ore, which was selling at a discount, to focus exclusively on process lump and sinter ore.
 

The company has also shut down its higher cost wet processing plant in favour of the lower-cost dry processing system, which it says is suitable for the ore from the James mine.
 

In response to the market conditions and weaker spot iron ore prices, LIM has scaled back production for the remainder of the 2012 season, reducing its target to 1.7Mt.

Depending upon the forecast you believe, the iron ore market could be down on its luck for months. It may not recover until the second, or even third quarter, of 2013. A prolonged drop in iron ore prices will be hard on the junior mining companies located in the Labrador trough. These producers are at a serious disadvantage to their Australian competition who have much lower shipping costs when it comes to Asia.

With time to decide whether or not to put a little skin in the game, I began to wonder what other potential investment-grade companies are to be found in the Labrador Trough. I found a number and settled on three:

LIM: Labrador Iron Mines Holdings Ltd.
CHM: Champion Iron Mines Ltd.
ADI: Adriana Resources Inc.

Adriana Resources is an exploration-stage company. I read on their website:

"In May 2012, the Company commenced diamond drilling and to date has drilled 48 holes totaling 5,333 metres. Drilling is currently focused on definition drilling to better define the limits of the potential early stage mine pit for mine planing purposes.

"Additional drilling for hydrogeology monitoring wells and further delineation drilling to update inferred mineral resources are planed."

ADI shares closed at 55-cents Friday. The range for the year has been from a low of 49-cents to a high of  $1.38. With iron ore prices as depressed as they are at the moment, it is not surprising that ADI is sitting just above its low for the last 12 months.

Sweetening my interest in ADI was this fact: The Lac Otelnuk property controlled by ADI has the potential to be the largest operating mine in Canada exploiting one of the richest iron deposits in the world.

I also found this of interest, Adriana has secured a joint venture with WISCO (Wuhan Iron and Steel Corporation) giving the important Chinese steel giant a 60% share of the project.

Champion Iron Mines is another exploration and development company focused on developing the iron ore resources in the Labrador Trough running down the border between the provinces of Quebec and Newfoundland / Labrador.

Then there is LIM (Labrador Iron Mines). This company is shipping ore and plans expansion.

So, am I jumping in? Soon. But read what Bloomberg reported Sept. 19, 2012:

Iron ore demand slowed more than half

BHP Billiton Ltd. (BHP), the world’s biggest mining company, said the pace of iron ore demand from China, the biggest importer, has slowed by more than half.

"What we have seen in the past ten years is not only a function of massive demand coming from China but the industry not being prepared," said Alberto Calderon, the Melbourne-based company’s chief commercial officer and manager of its aluminum and nickel business. "This won’t be repeated. Margins will still be good but that scarcity pricing we won’t see again, on average.

"Demand will grow less, although still quite impressively and the producers, in general, are more prepared," said Calderon. "This doesn’t mean that the boom has ended, but it does mean to expect that prices will grow or even stay at very high levels, you would do it at your own peril."

By the middle of the decade the demand for iron ore could even contract as more and more scrap steel is recycled for use in new Chinese construction.

This investment may be a crap shoot.

Monday, September 17, 2012

A sugar high?

Fed Chairman Ben Bernanke ushered in another round of quantitative easing and the stock markets in Canada and the States made a nice jump. Still, the reasons for the announced QE are not in themselves positive economic indictors and the market may soon sour. I'm sitting tight and letting my dividends puddle.

LIM jumped but I didn't. I wish I had. I'd have taken my profits and returned to the sidelines a little richer. Today LIM gave back some of its gains. It closed today at $1.53. I have a gut feeling it could still test some new lows. I could be wrong but I'm patient. If it gets down into the $1.25 range, I will reconsider its purchase. I'd buy about 2800 shares and then sit tight. Someday, iron ore will be a darling of the resource crowd again and it would be nice to be dressed and ready to party.

CET closed today at $6.84. I'm really happy with its recent purchase. It can take a heck of a dip and not get close to the price at which I got into the game. I'm feeling fairly safe. I'm going to wait patiently for CET to get to $10. While I wait I'm going to enjoy a yield of almost six percent on my investment.

PWT also closed down a couple of cents but it is still pushing $16. I've still got some distance to travel before I get all my money back but my wife's investment in PWT is doing just fine. I advised her to buy when PWT was trading just above $13. She sold half in order to help pay for our kitchen reno. I will sell all my PWT when it gets above $19 and my wife will get rid of most of her holdings, too. Since she got into this stock at such a low point, she feels safe holding onto a small amount of this dividend cash cow.

Has REM changed it's name? I noticed an article about the "awkwardly named" ETF in the Globe and Mail and today I noticed the name is no longer awkward. It seems to be going by the moniker of "iShares Mortgage Plus E.T.F." I mentioned REM some months back and have been delighted with its performance ever since. Nice appreciation in value plus a nice double digit dividend. I got the best of both worlds. I believe the article I saw was by Rob Carrick. I wish I could say I was surprised that he took so long to discover REM, but Carrick seems pretty slow off the mark at the best of times.

Forgive me for any typos but I'm knocking this off in hurry before rushing out the door with my wife. Cheers and good investing!


Saturday, September 15, 2012

Quantitative easing

According to Reuters, "the U.S. Federal Reserve's third round of bond-buying could ultimately rival the size of its first huge quantitative easing, which was widely seen as boosting growth."

A lot of investors were betting Fed Chairman Ben Bernanke would usher in another round of QE and they were right. It delivered the much anticipated solid kick to the stock market keester most anticipated. Nice.

If you bought CET when I first starting taking about this stock, you've done well. If you waited and bought in when CET dipped below $5 you may be ready to lock in some of your profits. I bought in when I first mentioned CET and later I bought more for my TFSA. My second purchase is up almost 30 percent. My initial investment in CET is up about 16 percent. That is still a nice pop. I'm going to hold on for awhile. I like the dividend.

What about SLF? I'm up almost 18 percent. And you? In the same vein, Manulife Financial Corp. may be another smart move. The dividend squeaks by with 4.1 percent. I need 4 percent. I may buy some SLF Monday as it closed at about $12.64 Friday. I've been following MFC for awhile and if it climbs too much it will not meet my needs.

Do you recall my REM tip? Despite being an U.S. ETF, it is up 14 percent since I bought it and it still yields 10.22 percent. If your financial adviser tells you that nothing is delivering a high yield in today's market, ask about REM. (Morningstar is still claiming that REM is a low risk investment.)

Lastly, I bought a lot of PWT when it got down into the $12 and $13 range. I'm averaging down. This is not something that I do with comfort. I only buy when I think a stock should be heading up. When I average down, it means I have misread the stock and paid too much. And with PWT, let me assure you that I paid too much. Oh well, it pays a nice dividend and as the price rises the yield as a percentage based on the stock price drops. It is now down to 6.8 percent. I'm feeling there is some chance that the dividend will NOT by cut. I'm seeing PWT climbing in the coming months and at some point in the near future I hope to be out.

I'm still watching LIM. I find it interesting. If I had bought some when it was at $1.39, I'd be laughing. I didn't buy and I'm not laughing. I hope some of you picked it up and are now enjoying the pop which can be more than 17 percent for those who timed it right.

Cheers!

Thursday, September 6, 2012

Labrador Iron Mines: I'm waiting and watching.

 Added near the end of February 2015: I broke my rule and invested in a company referred to as "unprofitable." My investment, very small, disappeared completely. Oh well, it was more fun owning LIM than buying a lottery ticket but no more profitable.
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I've been following Labrador Iron Mines Holdings Ltd. (LIM-T) for the past few weeks. It is an interesting story with lots of potential. It also appeared rather risky. I'm never all that keen to invest in a company referred to as "an unprofitable company . . ."

Some believe LIM will outperform others in its sector and have placed a 12-month target price of $4.50 on the stock. But this is not a forecast without risk. In fact, ScotiaMcLeod rates the risks associated with this stock as "Caution Warranted".

Caution Warranted: Exceptionally high financial and/or operational risk, exceptionally low predictability of financial results, exceptionally high stock volatility.  For risk tolerant investors only.

Today the market is up. LIM is down. Just days ago LIM was above $2. Today LIM is bouncing around the $1.40 mark.

So, why would I buy some LIM. I like resources. I like iron ore. Sadly, it is a resource that may not come roaring back soon. The Chinese economy is slowing. Europe is in recession. The American economy is cruising just above stall speed.

I may like resources but I'm in no hurry to buy LIM. Yet, the price looks inviting. At $1.40 a share, it does not take much to buy a thousand shares and this price may well drop some more before it climbs. This is a stock that can be picked up with spare change. Even if LIM doesn't reach its target price in the coming months, it may well climb enough to deliver a nice return. And, if I must hold on to LIM for a couple of years, so be it. The return may well be worth the wait.

And if it wilts, my investment will be small and the loss will be of little consequence.

Wednesday, August 22, 2012

Staying on track

Right now a chap is being interviewed on BNN and he is saying that in his view this "train" is going to keep charging ahead, at least in the short term. But there are flags on the horizon. He is warning that investors must brace themselves for the possibility of a strong pullback in stock values.

I agree wholeheartedly. Today I checked my portfolio and it is up almost 11 percent for the year on an annualized basis. This is good --- maybe too good.

I use a spread sheet to track my investments and plan my retirement spending. Spend too much and you run out of money before your life runs out of steam. The rule quoted in much of the retirement literature is "remove no more than four percent annually from your retirement savings." It is a good rule of thumb, but only a rule of thumb.

My spread sheet has a column showing my portfolio opening value and my original goals for my portfolio's value at the end of the first year and at the end of every year thereafter through 2014. I estimated an overall annual return of seven percent with four percent to be removed annually to cover living expenses. (The seven percent figure reflects what a financial adviser at ScotiaMcLeod said he would deliver if I put my account in his care.)

In other words, retire on $400,000 and at the end of the first year you hope to have a balance of at least $412,000. ($400,000 + $28,000 [7%] - $16,000 [4%])

If the market goes through the roof, as it has since my retirement, one can spend a little more. I have. Based on my original retirement portfolio, I removed 6.1% from my plan this year. This might sound foolish but I defend this by saying I have 34 percent more in my portfolio than I had originally forecast.

Now, back to our speeding financial train. It can jump the tracks. A financial train wreck is never out of question. What would be a financial train wreck? How about a loss of 34 percent? If this should happen, I am prepared in two ways: I can cut the amount I remove from my RSP to 2.6%. That is the amount that I must remove, based on my retirement starting balance, in order to live. And mentally I have a 34 percent cushion. Until I lose 34 percent, I am still on track.

Friday, August 17, 2012

On the radar: FGD

One can't just grab a hunk of money and invest. Well, actually one can and often folks do. That said, it is not the best approach to investing.

A new ETF (new to me) has registered on my financial radar: First Trust Dow Jones Global Select Dividend Index Fund (FGD).It is at $23.45 (U.S.) today.

FGD is rated a 4 Star Fund (****) by some with above average return mated with average risk. That's is all very well but what has peaked my interest is the dividend: 5.06%. In its category FGD has been in the top percentile for the past three years.

This investment can be volatile. It's biggest three month loss was about 41% back in late 2008, bouncing back with a gain of 54% in early 2009. But it is still down from its pre 2008 crash highs. And of course, it also benefits or suffers from fluctuations in the Canada/U.S. currency exchange rate.

A quick look at its holdings shows financials claim only 13.2% of this fund. With a global fund, this is good. I still have to examine the specific investments but no big flags have appeared as of yet.

I still like Cathedral Energy

I've been following Cathedral Energy (CET) for some time. I bought some at $5.77 and a lot more around $5.12. This morning it is at $5.75 and I've already enjoyed one dividend payment. I'm happy.

The ScotiaBank report I access from my trading account has a one year target for CET of $9.75. This is a high risk investment but the analyst believes CET will outperform others in its sector. And don't forget the dividend: "a solid balance sheet, strengthens our conviction of a strong and sustainable dividend (5.2% yield)."

As a retiree, the dividend is very important. I demand to be paid while patiently waiting for the market to deliver a financial pop.

When I started buying CET ValuEngine was calling Cathedral Energy a hold. The other day it moved CET into the buy column. If it climbs into the Most Favourable buy category, I'll let you know. ValuEngine only calls for a one year target price of $6.10. Still, for me, that would be about a 6% return on top of the 5.2% yield. I can live with that.

It seems odd but based on available data as of Aug 17, 2012, ValuEngine believes CET is actually 3.51% overvalued at the moment according to its true fair value. This is the price at which the stock should be trading if the stock market were perfectly efficient and everything traded at its true worth. So ValuEngine has a target price of $6.10 but sees a fair trading value of $5.55. Like I said, odd.

Another report that is available to me is one from Research Team. RT now rates CET a buy. RT sees CET as "one of the better performers in the Oil Equipment & Services industry."

Lastly, StockReports+ rates CET "currently among an exclusive group of 71 stocks awarded our highest average score of 10."

StockReports+ has what they call their Fundamental Indicator. "This displays stocks on a scale of 1-10 with ten being awarded to the strongest stocks based on a combination of four fundamental component factors: profitability, debt, earnings quality, and dividend. Each component is equally weighted." CET rates ten.

SR+ also has a risk section to their report. CET rates nine on this scale, with ten indicating the least risk. SR+ derives the risk number "by looking at a series of long (60-month) and short (90-day) term stock performance measures including volatility (standard deviation), magnitude of returns (best and worst day and month), beta (movement versus broader market), and correlation to the relevant index."

There are other reasons that I like Cathedral Energy but the stuff I've posted today simply helps to reinforce my faith in CET. I'll hold CET for at least a year and I can see holding the stock for a number of years if all goes as envisioned.

Clearly, I am not the only one who likes Cathedral Energy.
Some readers have questioned why I want to hold a stock that does not promise a bigger bang for the buck. I like to hold lots of different stocks. I only buy the one's I have confidence in, no surprise here, and even then I sometimes lose money.

I don't want to put too much money in investment. One never knows what misfortunes can await even a fine investment. Think RIM, or Nortel, or one that I presently hold, Suncor. I find if I make a little here and little more there and get a nice pop now and then, the gains are better than the losses and my portfolio is successful.

Update:

The shares of CET I hold in my TFSA (tax free savings account) are up 26.67 percent as of market close on Sept. 5/2012. (My REM, and earlier investment) is up 13.07 percent and ZUT is up 6.95 percent. And my Sun Life Financial has climbed 7.63 percent. Note: all of these investments pay dividends that easily meet the demands of retirement.)

Tuesday, August 7, 2012

Holding pat, values climbing, ready for a retreat

I have great fears about Europe. I would not be surprised to see the Euro Zone go down the financial tubes --- at least, for a time. If Europe sinks, it will take us here in North America with it to a great extent. I'm mentally prepared for some paper pain, no, for a lot of paper pain.

But today the market is rising and all is right with the world. For me this means that when the next pullback occurs I may be holding a more valuable portfolio than I am holding today. For me a bear market kicks in at a ten percent loss and a damn bad pullback is something more than 20 percent.

I started my retirement with X in my portfolio and as long as I don't dip below X, I'm comfortable. Mentally, I would not feel that I have lost any money. Heck, I've taken out cash in the five digits range over the past three and half years in order to live. If I can claim to have my original investment intact, I'm not going to complain too loudly.

The higher the market climbs the more it can fall and not rock my comfort zone. At the moment my comfort zone won't be threatened until my losses pass the 30 percent point.

My recent purchases of Penn West (PWT) are adding to my comfort. I bought some shares of PWT in the $12 range and some more for my wife around $13.27. Today PWT is trading around $14.25. My AUSE is almost back into the black and my recent Cathedral Energy (CET) purchases are nicely back in the profit column. And my REM units just keep climbing. For the past few months REM has been in its top quartile. Nice.

Despite all the gloomy talk, hey, I visit the dark side frequently, there is still money to made in the market. (The TSX is up 180 points right now.) Make some money while you can. It is a great buffer against bad times.

Cheers!

Friday, July 27, 2012

Taking a little off the table

Penn West had a nice little bump today as it followed along in lockstep with the market. I sold enough of my wife's PWT to give us the cash to get through the year. The small profit made from holding this stock for about a week was a nice bonus.

Now to sit back and wait. If all falls apart in the financial world, my wife and I have our dividends. If markets continue to simply stumble along, my wife and I have our dividends. If markets recover a little, hey, we have some profit along with our dividends.

Nothing is certain when one is guessing the future but I feel comfortable. I say, enjoy the feeling now because who know what the financial Gods have in store for us.

Some quick notes:

Cathedral Energy (CET) has finally made a solid move to the up side. Finally!
Penn West (PWT), as mentioned, has begun to get back into more familiar territory. I have my fingers crossed.
Sun Life Financial (SLF) climbed back into the black today. I heard a fellow on BNN say that he rather liked SLF. Nice to hear. (I have a friend who refuses to touch SLF as it was the insurance company, he says, featured in a CBC news show looking into travel insurance in Canada.)
My AUSE ETF is recovering from recent lows. Good to see. This says fear levels in Southeast Asia are receding.
From what I can see, almost the entire Canadian financial sector has had a rewarding day today.

Cheers!

Wednesday, July 25, 2012

Keeping your eye on the ball

As the markets bounce along, one day up and the next day down, it is important to watch the performance of one's portfolio and not get too hung up on what the rest of the world is doing. Find comfort in the stuff you own that is resisting the downward pressures of the moment and realize that all is not as bleak as the business pages of the paper would have you believe. (If some of the stuff I read is right, the world is coming to an end and I sure can't do much about that. That is out of my hands entirely. Oddly, this is very comforting.)

My overall portfolio is down. No surprise. But my Tax Free Savings Account is up. Not a year old, my TFSA is up 11.06 percent. Comforting. I bought Royal Bank at $45.01 and Cathedral Energy Services at $15.15. All very comforting.

I have a small RSP account that I opened at TD Canada Trust when I retired in 2009. That account is up nicely from its opening balance. It has about 14 percent in cash, gotta be ready for a really rainy day, and the rest is in Cathedral Energy Services, CPD (the iShares preferred Canadian shares ETF) and lastly the CIBC Monthly Income fund (CIB512). My most recent addition, CET, is up 2.7 percent today.

Not all of my relatively recent adds are up. AUSE is down 4.33 percent, SLF is down 5.77 percent and some of my early purchased shares of CET are down. Yet my REM, a real gamble, is still up nicely today: 12.7 percent in the black. Even my Singapore ETF is still humming along with a gain of 28.6 percent since purchase.

I confess my Penn West is struggling. But, I'm still rooting for the western oil and natural gas producer.

There is still lots to take comfort in. I'm cool.

Tuesday, July 24, 2012

Penn West suffered downgrades

With the turmoil in Europe continuing to fester, stock markets around the world are suffering. This was not the moment to try some day trading. Something I usually avoid, and for good reason.

I bought some Penn West Energy (PWT) for my wife for a quick profit and instead I have made a quick loss. It is a small loss. She won't divorce me over this but she won't pat my head either. Today, while floating about the Internet, I read this in a Business Desk report from the July 18, 2012 National Post:

Penn West shares have been hit substantially harder, having faced a litany of downgrades in recent months. The stock was down more than 4% shortly after 1:15 p.m. ET on the TSX to $12.76 per share, though it has fallen 37% since the start of 2012.

Mr. Pardy was also not the only analyst to lower his expectations for Penn West on Wednesday. Barclays Capital cut its rating on the company to Underweight from Equalweight in a research note published Wednesday morning.

Macquarie Capital and TD Securities also downgraded Penn West in May and June respectively as its share price has continued to steadily decline.

The company has pledged to reduce its mounting debt load by $1-billion over the next year through asset sales. While Mr. Pardy said he believes Penn West will be able to sell some assets successfully, “we have chosen to move to the sidelines for the time being pending further clarity regarding the timing and definition of the process, including the impact on its production levels.”

I'm looking for a window to ease my wife out and maybe lighten my own load when it comes to PWT.

Not all analysts are in agreement when it comes to PWT. StockReports + is still generally positive and recently upgraded the average score it posts for PWT. It only moved up a notch but PWT did move up.

I'm keeping my fingers crossed.

Wednesday, July 18, 2012

Guessing the future

Continuing on the theme of how hard it is to estimate accurately what will happen tomorrow, let alone in a decade or two, I ran some figures through a Monte Carlo calculator. An MC calculator will give a range of possible outcomes and not just pump out one result.

When I read something to the effect that if I invest so much and get such and such a return each year for so many years I'll end up with this, I cringe. The one thing I am certain of is that my investments will never return exactly the same amount two years in a row, let alone two decades.

Simply plugging an annual percent return into a calculation tells you next to nothing.

So, I plugged some numbers into an MC calculator and here are just two of the many results.


As you can see, based on past results, the above numbers could power a lucky portfolio well into the financial stratosphere

But take the same numbers and run another monte carlo scenario and you discover that an unlucky investor can have his/her RSP portfolio completely devoured in little more than a dozen years.


So, what will happen in the future? I don't know. But, if 80 percent or more of the results from my MC calcualtions are in the black, I'm happy.

And remember, if one actually saw their money disappearing at the rate it does in my second chart, corrective measures should be taken quickly and the total collapse would most likely be prevented.

Use the Internet to research investments

No one knows the future. No one.

That said, it is clear that some folk make more informed guesses than others. When you are investing you want to be among the informed.

Being adequately informed can be difficult. There's a lot of information out there and it is often in conflict. That said, start investing early in life and as your portfolio grows so will your abilities to discern good info from noise.

If you've been following my posts over the past few days, you will know I've been buying the western Canada oil/gas producer Penn West. I've averaged down my cost to own PWT to the point that I now have an exit point that is well within the target price of almost all analysts.

Yesterday I pushed my wife into the oil space by buying her a nice chunk of Penn West. At the time, I thought PWT would gain on the day and she would make a nice bit of change by selling before market close. This didn't happen. The stock dropped and only recovered late in the day. She ended up holding PWT.

This morning I did a little more research into oil prices. This is so very easy today thanks to the Internet. I read a number of reports similar to this one published by J.P. Morgan:

Oil prices have taken a beating in the last few months as euro-zone debt problems and bearish economic data from other major economies triggered concerns that demand for oil may fall. But sentiment has improved with the latest rebound in both West Texas Intermediate and Brent crudes, suggesting the bottom has already been reached. 

Will oil prices continue to firm up? In the short term, who knows? Will oil prices go higher in the near future? I think so. And so apparently does J.P. Morgan.
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By the way, a better investment for my wife would have been ARC Resources Ltd. (ARX). This stock is part of the ScotiaMcLeod Canadian Core Portfolio. I have allowed myself to get too focused on Penn West. Getting too focused is always a danger and usually a mistake. ARX jumped 1.34 percent yesterday and it would have been a better fit in my wife's portfolio. ARX yields 5.1 percent.

When I do get an opportunity to sell my wife's PWT, I'll probably keep a very small percentage. It does offer a fine dividend. I'll take another small chunk of her money and buy some ARX if it is still selling at a discount to its target price.

And a final add: After the open today, PWT had dropped more than two percent while ARX had climbed almost a full percent. Enough said.

Tuesday, July 17, 2012

Day Trading

I keep telling myself that I'm not going to try day trading. Then I get some cash ahead and I can't resist trying to make a little quick money. I confess, I haven't got the knack.

Recently, I bought some Penn West for myself and it is up. My goal here is to hold on for a couple of years and dump it if and when it breaks the $20 barrier.

Today I bought my wife some PWT. Oil was up in pre-market trading. I thought she might make a few quick bucks. It went up at the open but it quickly lost momentum and then retreated after investors heard Ben Bernanke speak. Oops!

I'll keep my fingers crossed and maybe I'll be able to extricate myself from this position soon. If she ends up with PWT as part of her portfolio, I won't be overjoyed --- but I won't be all that upset either. I'm sure this will resolve itself in her favour in the end.

The question is: When will she see an end?

Addendum


Before heading off to bed I checked the closing figure for PWT. My wife was up a penny on her investment. Hey, that 's better than a loss.

Then I checked the price of oil in Europe. It is already July 18th in Europe. I learned:

"Oil also rose as confidence among homebuilders climbed in July to the highest level in five years and US equities advanced. Crude, which reached an intraday high of $US89.46, settled above the 50-day moving average for a second day."

I also read:

"Oil rose to a seven-week high on speculation that oil inventories fell and as a report showed US industrial production increased in June.

"Prices advanced for a fifth day as supplies probably declined 800,000 barrels last week . . . 'The economic data is pretty good and it's painting a better picture for oil demand,' said Phil Flynn, senior market analyst at the Price Futures Group in Chicago."

I failed at day trading but I may still come out of this smelling like Roses.

I figure I can comfortably keep about .5 percent of our portfolio parked in PWT. If the stock makes a nice push back to its former levels I'll sell all but an amount equal to that half a percent. I'll consider that money parked and leave it to its own devices for a few years. If it does well, nice. If something awful happens, who cares.

I'm off to bed with a smile gracing my aging face. (I'll keep you posted.)

Friday, July 13, 2012

Finding a bottom

My Cathedral Drilling (CET) hasn't done much lately but that's good. The almost daily fall has stopped. It seems to have found, as they say, a bottom. I'm hoping I can now sit back and wait.

I'm not a big believer in stuff like bottoms. Oh, they exist, no doubt. But determining when one has hit bottom is only possible well after the fact. When the bottom is clearly history, then we can declare a bottom with confidence.

Now that I am so deeply mired into Penn West, I am hoping that I can soon declare it has bottomed, turned around. I don't need much of a recovery to make all rosy. Rosy is not to be confused with red. When it comes to PWT, I have lots of red.

Would I buy more PWT? I would consider it but I might pass. If the market is that weak, there might be better places to park my RSP savings and spread the risk a little.

Oh well, the markets open in a minute or two. Let's take a look at the opening action. I have a few stocks I watch. Mostly, I'm looking for entry points. I'm well invested and can wait patiently for what I see as bargains.

PWT has opened stronger. It's up more than a percent. Nice. CET is sitting on the sidelines. Trading is often very light when it comes to CET. All I ask is that these two stop hemorrhaging money.

All the other stocks that I follow are in the green. Such stocks as: IPL.UN, TDG, EMA, BEP.UN, FTS, PD, CPG.

Oil is above $86 at the moment. Anything over $85 is good. It may be a good end to a rough week. But it is always good to remember individual days, or even weeks, are only important when viewed in context. Take the long view.


Thursday, July 12, 2012

Added some PWT. Could not resist.


Penn West Petroleum Ltd. dropped into the $12.50 range today. I said just a day or two ago that the bottom was dropping out of my PWT investment. I couldn't have been more right.

Seeing PWT at today's price was simply too tempting. I bought the better part of a thousand shares. The purchase today did a great job at averaging down my per share cost. I'm happy.

I got into PWT through the back door. I originally bought Canetic Resources Trust and then Penn West and Canetic merged under the Penn West name. I wasn't happy when the merger took place and I haven't been all that happy since. The merged company has lost a lot of value over the years and at one point I was down very big bucks.

PWT has a fairly good name. It has a good chance of recovering a lot of value in the coming years. For those who are patient, I am, it may be a very nice stock to own if your entry point is in the $12.50 range.

The dividend at the moment is 8.6 percent and that worries me. When yields climb too high, I worry the dividend may get knocked down a notch. I don't lose sleep over this as even chopped in half I can live with the dividend.

Yes, I'm happy.

Wednesday, July 11, 2012

Jumping ship


Over the past few weeks my portfolio has been losing value. It is now well into five figure losses since hitting its high for the year. This is decision time. Some jump the financial ship at times like this, while others stay put and ride out the storm.

Jump early and you do very well. My problem is that I can never discern "early." By the time I'm feeling queasy the worst is here and the turn around is imminent.

Some of my relatively recent purchases are still in the black. REM is up 11.32 percent. I wish I had bought more. SLF is up 4.01 percent and I'm wondering how long until it drops into the red. The bottom is dropping out of my PWT but then the entire oil/gas sector is collapsing at the moment. The CET that I thought was a bargain at $5.12 is now down almost two percent since my recent purchase. My ZUT has been dropping, but slowly; It is still in the black with an 8.7 percent gain. My China ETF and my Hong Kong one are both in the red but my Singapore ETF (EWS) is still up by more than 25 percent since I bought it some years ago.

It's nasty out there and shows signs of getting a lot worse. Will I sell? No, I will buy if I get a gut feeling a bounce is on the way. And then I'll sell what I bought on the bounce.

If you only buy stock you would be comfortable being stuck with, (the bounce may not come), it is not a terrible approach. But it is not the best one either. I tried this trading stuff a few years ago and made a small profit and then got stuck holding IPL.UN. It was a good stock and I was comfortable being "stuck" with it. It delivered very good dividends and recently I sold my last holdings for more the $20.

As the markets around the world drop in value, I'm looking at what I own, and what I wish I owned, and looking for the right stock and the right moment to take a stronger position. I worry we are heading into uncharted waters and I worry I should have given more thought to "jumping ship."
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I figure oil, if not natural gas, will stage a comeback within a year or two. I'm looking at oily investments that will pay me a dividend while I wait for the turnaround. I heard comments on BNN yesterday that it could be late 2013 before oil gets back into three digit territory. And one must be prepared for oil patch companies to cut dividends as oil continues to dip below $85.

If some of my non oil investments drop a lot, I will consider adding to my position. I liked them enough to buy them once, I may find I like them enough to buy them twice.

One stock I have been following is: Brookfield Renewable Energy Partners L.P. (BEP.UN-T) The Daily Edge posted today by the ScotiaBank said: "We are raising our target price by $0.50 to $32.50 per share and maintaining our 1-Sector Outperform rating." That's enough to whet my interest. That and the 4.8 percent yield.

Friday, June 29, 2012

I'm liking Gibson Energy and Trinidad Drilling

I've notice Gibson Energy Inc. (GEI) in the Canadian Income Plus Portfolio assembled and posted by ScotiaMcLeod. Today I heard a chap on BNN extolling the virtues of having a little GEI in one's portfolio. He said it was an especially good investment for the conservative investor looking for a low risk, dividend-paying spot to park money.

I did a little research. GEI looks good. It is now on my watch list. I also learned why I hadn't followed it in the past. It seems that Gibson was held privately until going public in June, 2011 with an IPO priced at $16 per share.

Gibson Energy Inc. (GEI) is at $20.51 at the moment and offers a yield of 4.9 percent.

If I notice GEI drop below $20, I'm in.

I've owned Trinidad Drilling (TDG) in the past. My entry point was just above $5. Recently I've watched the price dropping and considered jumping back in. Today I notice that TDG climbed 43-cents for an 8.19 percent gain.

I've put TDG back on my watch list and if it drops again, I may well buy a little. I like to wait until the yield is closing in on four percent. If it hits the magic four, I'm in.

I'm surprised my Cathedral Energy holdings haven't shown more life. Oh well, I'm patient and I'm getting a yield of almost six percent while I wait.

Whining won't make it better

Note date on this receipt. I was 14 when I bought this stock.

When I wrote this post, I was fuming. I had just read an editorial in The London Free Press. It was another one of those woe-is-me pieces about retirement. It is not just the Baby Boomers Who Have Pension Worries the headline told us. I sat down and penned this blog but then I sat on it. I thought I'd wait until I calmed down before posting my response. A day after posting my response I took it down for a serious rewrite. I wanted to get this right.

First: whenever I see a reference to the baby boomers, like the one in this editorial, I prepare myself for some off-the-shelf thinking. Media folk have a lot of axiomatic beliefs. The mythical baby boomer, a member of a remarkably homogeneous generation spanning almost two full decades, is one of these myths.

The people facing retirement with dread are real folk with ages spanning many generations. What they all share is that they have all, for the most part, been given a lot of bad advice on investing and on saving for retirement.

The London Free Press tells us:

"Financial planners who used to tell clients to expect yearly growth of 8% in their RRSPs without breaking a sweat have turned less optimistic, suggesting a far more conservative 5% return over the lifetime of the plan is more realistic."

O.K., let's put our thinking caps on: If financial advisers were promising 8 percent annual growth but are now only promising 5 percent, what does this tell us? It says that the financial advisers consulted by the paper are not to be trusted. These financial wizards have cut their annual growth projections by 37.5 percent. Since they were so wrong in the recent past, why is the paper so sure that they are dead on the mark today?

Let's say, just for the sake of argument that the 5 percent number is correct. Working folk give their RSP money to a financial adviser for managing. The adviser charges a fee equal from two percent to three percent of the fund's value. This leaves only 3 percent growth, possibly less. Factor in inflation and these RSPs are not growing at all.

Now, put back those thinking caps back on: What does the above tells us? Answer: At five percent annual growth, most folk saving for retirement cannot afford a financial adviser.

Once a month I try to attend the Blackburn Group retiree breakfast. There are very few baby boomers in the group. Baby boomers have just starting to hit the magic age of 65. (Heck, I am one of the first of the so-called baby boomers and I am not yet 65.)

Many retirees at the breakfasts were born before the Second World war. Many folk in this group have a good grasp of personal finance. I believe being raised by parents who experienced the Great Depression gave many of these retirees a deep respect for money and personal finance.

I don't hear these people whining about living their golden years "doing without." This group did without during their working lives. They understood the concept of living within their means.

Our editorial writer has a good job. Yet this person confesses, "We’re still borrowing more money." If the writer is talking about much more than a mortgage and a car loan, we have found one big drain on the writer's financial worth.

I had parents who struggled through the Great Depression. After my father's death, my mother took in her aging parents, both in their 80s. My mother and I loved these two dearly but make no mistake, this was a necessary arrangement for my mother. (After her parents died, my mom sold her home and moved in with my sister. She spent her last years living with me. My mother was not one those born with a silver spoon.)

I admired my grandfather and loved talking with him. He shared books, magazines and newspapers with me and later we would chat about what I had read. One paper he gave me to read was the weekly Financial Post.

Before I was even in my teens, I realized that earning money, saving a chunk of that money, paying one's bills and not running up debt were all good goals. While I was still in grade school, I had flyers printed advertising my lawn cutting service and I plastered the entire neighbourhood. I distributed about a thousand flyers. I encouraged people who were going on vacation to contact me and I'd cut their lawn while they were away. I paid for the flyers by cutting the lawn of the printing company president.

Flush with wealth for a boy of about 12 I didn't know what to do with all my cash. Letting it sit in the bank didn't seem like the answer. I knew money should be put to work. I got on my bike, a used but solid two-wheeler, and rode to the James Richardson and Sons brokerage office. I was going to buy some stock.

You need not be rich to save. Put your money into stock not pop and chips.
I think the stockbroker may have broken the law doing business with me. I don't think he should have sold me stock. I was just a child --- not even in my teens.Surely there were laws against entering into financial agreements with a child. But, he did. Every time I had enough money to buy another couple of shares, I saw my stockbroker.

I was buying Bell stock and I don't think he saw that as risky. It was the classic widows and orphans investment.

Then one day I wanted to sell all my Bell stock and buy something called Pacific Pete, I believe. It was a small, junior oil company. I was acting on a stock tip from my uncle who lived in Detroit and who played the market.

My stockbroker was noticeably uncomfortable but reluctantly sold my Bell and bought the oil stock. The small oil play took off. I sold my holdings for a tidy profit. I bought back my Bell stock and lots more. My stockbroker relaxed.

When I read all the stuff about baby boomers and their silver financial spoon, I want to scream. I was born into a family with a dad who never earned more than $5000 in any given year and a stay-at-home mom. Until my early teens, we lived in what was known as Wartime Housing, a government subsidized neighbourhood. I most certainly was not born with a silver spoon.

It is now almost 65 years since my birth. I'm retired. I still have no silver spoon. My company pension after thirty some years did not deliver even $20,000 annually. I took about a 24 percent cut in my CPP in order to start drawing early. My wife took an even bigger cut. We needed both CPP payments if we were to get by in retirement. But, we are getting by.

Our editorial writer whines that "It’s becoming clearer that only those who are prepared for the worst . . . are facing a secure old age." And continues, "That’s a small group. And the rest of us need to be included . . . "

Get out those thinking caps again. If only those prepared for the worst are secure, what does that tell you? Answer: prepare for the worst. Join the small group. And don't whine about needing "to be included." If you are not a member of this group, it is by choice.

I have been preparing for my retirement since I was in my twenties. I can assure the editorial writer that it is not possible to foresee the future. The retirement life I envisioned in the '70s is but a hollow dream today. No surprise here. Four intervening decades have a way of doing that to dreams almost every time. Prepare for the worst as life has a way of tossing curves.

I have some advice for the editorial writer: Instead of worrying about buying your dinner coming from the "cat food aisle" (another media myth --- click on link) in your senior years, stop thinking about your RRSP as an "income tax dodge" and stop relying on others to guide you into a successful retirement plan. Get yourself up to speed on investing and take charge of your financial life.

The editorial writer should take her own advice. She should become one of those preparing for the worst. It is always a good approach to take when investing.

Addendum: It is early December and I am well on my way to seeing a return of about 8.75 percent for the year, 2012. Even after taking out a little more than four percent to live, I should end the year with more money than I started. Trust me, there's no cat food on the horizon.

Thursday, June 28, 2012

Progress Energy and Risk


I've blogged about Progress Energy (PRQ) in the past. I owned the natural gas producer for years and even as the value of natural gas tanked, so to speak, I upped my holdings of this natural gas producer. A very gassy energy play, many argued PRQ was a very risky investment. They would have been right -- on paper in a general sense. But, as I pointed out in one of my earlier posts:

"I've got the money to buy some PRQ. The yield is something that I can live with, at least for awhile. The stock offers the potential of offering an exit point that recoups all my investment and then some." 

I noted in my old post that "PRQ has proven to be amazingly resistant to the downward pull of the bear." When a stock has strong legs and holds its own as its sector crashes around it, one has to think that something is adding support to this story. It was no secret that a lot of this strength was coming from a link between Petronas and the excellently run Canadian gas producer.

Today my faith was vindicated. Petronas, Malaysia’s state-owned energy company, struck a $5.5-billion takeover deal with Progress Energy Resources Corp. It was time to sell. I sold almost all my shares at $20.07 and some more at $20.06.

I was not too concerned with owning Progress Energy. I did not feel the risk was all that great. A good dividend, a solid company and a good chance of something very good happening in the near future.

I almost wish that I had held more PRQ but I didn't and that's O.K. Too much money in any one place, no matter what the place, is risky.
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One thing about blogging, you put your ideas down for all to see. Later you can go back and say, "See! I was right!" (Or, damn! Was I ever wrong.") Here is what I wrote about PRQ back in January of this year.

"PRQ (Progress Energy) - This would be a big drag on my portfolio performance if it were not for the fact that I have less than two percent of my money invested in this natural gas producer. As the prices have come down, I have averaged down, and I believe an exit point will open up near the end of this year or sometime next year. I may be down thousands but I'm not worried over the long term and it pays enough of a dividend to ease the pain while I wait. If it declines in value anymore, I may buy a few hundred more shares. Yield is 3.6%."
And yes, I did buy more.

Wednesday, June 27, 2012

The shine is off the WisdonTree DRW ETF


I dumped all of my DRW and most of my wife's. I kept 100 shares. It was more of an oversight than a plan. Yesterday I learned that the WisdomTree Global ex-U.S. Real Estate Fund had declared a dividend of .30398  (US) to be paid at the end of the month.

DRW is $25.90 at the moment. It has only paid two dividends in the past 12 months for a total dividend yield of about 61.4-cents or a percentage yield of about 2.4. Last June, DRW paid something in the order of 98-cents. Now, that is more in line with why I originally bought DRW.

If DRW recovers a little more of it value, say climbs to $30, I will probably dump the last 100 shares. I need dividend money and DRW is not delivering. I can put this money to better use.

A quick look at my recent purchases:

Cathedral Energy Services Ltd. (CET) has lost almost 14 percent since I first became interested. Ouch. When it entered personal bear market territory, I bought another block. This second investment is now down about 3 percent. If it drops another full 10 percent, I'm buying more. I've kept, as they say, some powder dry. Oh well, as the cost of a share has declined the dividend has climbed. It is now in the six percent range. I can live with that.

Sun Life Financial Inc. (SLF) is up 3.57 percent since my purchase. Nice. Not great but still nice.

The Royal Bank of Canada (RY) added to my position a few months ago at about $45 is up more than 14 percent, plus it has paid one dividend. With all the unrest in Europe, RY may yet get tangled in the turmoil, and if it does my smile may get wiped from my face.

iShares Tr FTSE NAReit Mtg Plus Capped Index (REM) was a bold move when I made it after following REM literally for years. It just looked too good to pass up. It is now up 8.67 percent plus it has been paying a fantastic dividend --- 11.32 percent. This is an example of a risky buy, I would have bought more if I'd have had more confidence. Now, it has climbed to the point that I can handle a rather large pullback without losing any sleep.

My BMO Equal Weight Utilities Index ETF (ZUT) is up 5.8 percent plus it is yielding 5.35 percent .

I am disappointed by my WisdomTree Trust Australia Dividend Fund (AUSE). It has lost 7.15 percent of it value since its purchase. Another ouch! The yield of 5.13 percent today helps to sooth the pain (this was the yield the last time I checked --- this may change if the June dividend is not as expected.)

So, what am I watching today. First, I'm watching the price of oil drop. I've heard some analysts claim that if Europe goes into a financial meltdown, oil could hit $65 a barrel. If that happens, I'd look at Crescent Point (CPG) and PennWest (PWT) and Inter Pipeline (IPL.UN). I like both CPG and IPL.UN and can see as much as 2 percent of my portfolio in each of these investments.

With PWT it is a different story. I'm averaging down my share cost. I paid too much for this stock; I'd like out; I don't want to take a big loss. I'm averaging down and enjoying the yield. Even if the dividend gets cut, I'll survive nicely. I'm not too worried. I've got a few years before I simply must dump this investment.

One other company that I am watching closely is ARC Resources Ltd. (ARX) This one made the ScotiaBanks's Canadian Core Portfolio list. It it going for about $22 today and yielding about 5.4 percent.

With the price having been under attack for months, I might buy some iShares Inc MSCI Hong Kong Index Fund (EWH) if the price drops to $15.50 or lower. This one meets my need to diversify and my need for yield. Based on the present unit price, the yield is very good. (Do your own research on this and see what you think.) I'd also research the Asian economy in total and make my decision based on what I discovered.

It's funny. My Hong Kong ETF is down about ten percent while my Singapore one is up almost 21 percent and my China ETF is in the black but barely. Oh well, the world is still in balance. In fact, it is still weighted in my favour. I'm happy.

Friday, June 15, 2012

With markets weak, strengthen the portfolio

There are questions that I must get around to answering but I'm retired. I do this mostly for friends and to force myself to address certain investment topics. With the market dropping, now is not the time to waste important moments blogging when one should be giving some thought to one's own investments. I'd like to get my income up by at least three and a half percent. With the market down, this seems a dream that is now within my grasp.
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The world financial system is still shaky. This is not a time to put all of one's money to work. Crystal balls are simply not to be trusted. That said, I like Cathedral Energy Services Ltd. (CET-T). It is a high risk investment, according to some sources, with the potential to outperform in its sector. A report from the ScotiaBank sees a possible target price of $10.50. The same report calls the dividend a "stable 5.1% yield.

A quick search of the other investment research papers available to me through my accounts a the ScotiaBank and TD, confirms that the consensus is that CET is a buy in the top quartile of stocks being scored. Examine profitability, debt, earnings quality, and dividend and you may decide CET is a buy.

I took a look at the payout ratio published by Reuters. It shows the ratio dropping over the past three years. The number for the last full year was 32.58. This explains why the ScotiaBank sees the dividend as stable.

I own some CET. I thought I bought in at a good price. Yet today it is selling at a discount of 10.46 percent to the price I paid. I'm facing a bear market drop. Anytime something I have confidence in drops by more than ten percent, I say it is time to consider buying a little more. I stress 'a little' more. I don't want to buy a lot and then learn the market evaluation was right. I don't want to be blind sided.

So, today I bought a hundred shares of CET within  my tax free savings account. My TFSA is up more than 14 percent since I opened it less than a year ago. I can afford to take on a little more risk. I paid $5.15 a share for 100 shares of CET. Within moments I had lost .39 percent.

At times like this I like to view my other recent purchases and get an overview. My AUSE is down 5.48 percent but  my ZUT is up 7.02 percent, REM is up 10.78 percent, SLF is up 4.75 percent, RY is up almost 14 percent from the $45 range that attracted my attention. Even my PWT is up 2.7 percent from where I recently added to my position. (I was prepared for PWT to drop in the short term.)

I have a good feeling about CET. I'm not going to put a lot more money into the company. But, if it should take another big drip, I'll try and learn why and if all seems good, I'll buy another one or two hundred shares.