Blessed by the Potato

There is a saying that hindsight is 20/20, but when it comes to the stock market I don’t think that’s necessarily true: even after seeing a stock’s price move, you might never square away why in your head. Plus, of course, there are so very many ways to drive yourself stark raving mad by constantly looking back at all the coulda-woulda-shoulda moments the market provides. Don’t beat yourself up about past mistakes is one of my dad’s pieces of advice, don’t worry about what happened in the past since you can’t change it, and the market will be offering up another opportunity if you look for it. There are many times when I wish I had a time machine to go back and do something differently, and I try not to dwell and obsess since it is far too easy to do both. However, I can’t help but feel that since I still have so much to learn, that it couldn’t hurt to look back and see where I went wrong. I already had one brief retrospective back in January, so let’s start by following up from there.

Then, I talked about falling knives, and boy, did the bank stocks fall in March when Bear Sterns went under. I came seriously within one mouse click of buying some TD that day, but was afraid (stupid emotions!) of repeating my knife-catching mistake, so I called my dad for some sober second thought. He said to just steer clear of the whole sector since there was so much uncertainty, and that there was no real way to know how liquid or profitable any of the banks really were in these times. Even though I thought TD was a quality bank that was being sold off due to fear, I wasn’t sure, and started to fear myself that such a big downswing must be for a reason, and that maybe somewhere out there was a group of investors who knew more than me, so I steered clear, and still haven’t bought in, as much as I’ve been kicking myself for it the last few days as the whole banking sector seems to be recovering. Taking advantage of other people’s emotional selling is supposed to be what I was all about, and I missed what might have been the biggest deal (that I was actually close to making) of my investing career. Of course, my dad was not completely wrong either: there was risk there, and if TD had come out the next day saying that it was the next Bear Sterns, I could have lost it all.

Russel Metals, the falling knife I mentioned in that previous post, has come back nicely. Quite nicely, in fact. While my timing was not great, I did buy what I considered a quality company at a value price. From the broker reports I read on it and my own crude attempt to value the company, I figured that in a year or two, it would be up to $30 — 25% gain on top of a 7% dividend in a year or two would be very decent indeed. It turned out to be much better than that, hitting $30 this week, so I decided to sell. I might be making yet another mistake in shooting the running horse, but I think, today, that I’ve gotten my full value out of RUS and it might just stagnate for the next year or two from this point (or, correct to a point where I can get back on and ride the pony again). While I could have made almost twice as much by having better timing back in January, that buy doesn’t look to be such a big mistake any more.

The big thing I wish I could go back in time to buy is oil. I’ve been talking about peak oil for years yet somehow, that never translated into thinking about actually investing in oil. Even just a few months ago when I was looking at possibly investing in Petro-Canada, I was thinking more about the looming recession in the states and a possible short-term downturn in the price of oil than the 10-year gain peak oil thinking would lead me to. Of course, now oil (and PCA) has had a huge run-up in just the last few months, and again I’m waffling about whether or not to invest in it (and, again, what form an investment in oil should take: I don’t know how to just buy a few barrels at the mercantile exchange, and am not sure if I should look at an ETF like TSE:XEG or a single company like Petro-Canada). I think there’s a good chance of a correction in the next few months, especially if Nigeria and the middle east settle down for a little bit. However, I think in the long term that’s not necessarily going to matter so much, and even buying at these record prices might be a real bargain 10 years down the road. A third option is to try to avoid the necessity of timing the market (whether I want to or not) with a lump-sum investment in one company or ETF by instead buying into the TD mutual fund for energy, which has a low minimum investment (~$100), so I can just keep buying as oil goes up or down, and don’t risk either missing what good times are left, or any bargains to come. Unfortunately, that mutual fund is not an “e-series” one, and the 2% MER is not very appealing.

In a similar vein, my dad and I were talking a few months ago about “big concept” investments for the long term. One “theme” that we both agreed would be very big in the years to come was the development of China and India. Specifically, in terms of their diets. As the people of those countries found themselves feeling wealthier, they would want to expand their diets to include more high-quality, fertilizer-intensive food, including meat. So we looked for companies to invest in that would be in a good position to make money off of the demand for fertilizers to come. The big name in the business is of course Potash Corp. of Saskatchewan, which we quickly determined was not “value priced” at $100/share and a P/E of something over 25 at the time. Instead, we looked at a smaller “potash producer” in China (but listed on the TSE) called Migao. Not 6 months later, and my dad looks like a freaking genius as potash prices hit incredible new records due to demand in China, and Potash Corp. of Saskatchewan has just about doubled in price. Of course, getting the idea, the “investment theme” right doesn’t always lead to riches as we found out: Migao is down 15% in that time, and neither of us own Potash. There were two things working against Migao, and one of them we should have forseen if we had done our due diligence properly. You see, Migao is in the fertilizer business, and it does sell potash products. However, unlike Potash Corp. of Saskatchewan, Migao doesn’t actually dig the potassium-based chemical out of the ground and sell it to put on crops. That digging it and selling it business is a sweet deal when prices rise this quickly due to demand, because the cost to dig it up is basically fixed, so the unprecedented increase is pretty much all profit. No, Migao buys potash fertilizer (from a company in Russia mostly) and chemically refines it further for specialty applications. When prices go up like this, it has the potential to hurt their bottom line. Somehow, I didn’t catch that little detail when looking at the company, which I’m sure either demonstrates a valuable lesson about how important really doing your homework in the stock market is, or about how you can never really predict how well a company can do (I think probably more the former). As it turns out, Migao has basically a fixed percentage mark-up on its potash products, so it is managing to pass along the increased cost of potash to its customers and is making more money off the potash craze (though not to the degree POT is). That still makes one wonder why the stock price is down then, when they’re making more money. I don’t have a good answer to that, though it may be due to rumours that the Chinese government may, in light of the emerging food crisis, put a cap on Migao’s profiteering. That could be worrying, but I couldn’t even find a source for those rumours. So anyway, be sure to add POT to my basket of stocks to buy with that time machine.

Priszm, which I mentioned as looking decent near $6 in February has had a bit of a roller-coaster ride. Right after that post, QSR moved up to above $7, and then slid back down to $5 where it sits now. I honestly can’t figure that one out. The company is really not doing all that great, admittedly, but it was paying out 20% at $6. That was of course due to the risk premium investors would demand since, as the company is not doing great, there is a good chance that distribution will be trimmed down. However, at $5/share the current distribution is more like 24% — even if the future payout is cut in half, that’s still a 12% return, and I think it’s more likely that the distribution will only be trimmed by about a quarter (to 18% for someone buying in at $5). As much as I have trouble understanding why it might be so low, I’m not tempted to buy any more since I already have quite a bit. I might wish I had sold at $7 (to buy back at $5) with that time machine, but I think holding it for longer has not been a terrible move… yet. I’ll be sure to revisit this one in my next time machine retrospective post in the months to come.

Finally, the index funds are doing quite well for the most part, because, well, the stock markets in Toronto and New York are recovering. At least they don’t require this much work and second-guessing!

I can’t believe the move by the TTC union last night. The matter was settled, as far as I was aware: a deal having been struck between the union and the TTC, the deal recommended by the union leadership, and the only remaining thing a vote by the union members, which after the union leadership strikes a deal is often a rubber stamp. Not this time, as the union rejected the deal and went on strike.

It’s the “went on strike” part that really burns my balls. I think the TTC borders on an “essential service” as it is, and that the union would risk losing a lot of goodwill with their original strike plan of providing notice. At least with notice, the TTC can become non-essential as people can plan to not go to work, take trips, arrange rides, reorganize their schedules, etc. This is barely made practical by the fact that the TTC contracts come up in the spring — in the middle of a “don’t go outside” heat wave/smog day in the summer or intense cold in the winter, then there would be much worse consequences to a TTC strike.

However, this wasn’t a planned strike with notice. They just walked off the job immediately after the vote, stranding thousands of people. They weren’t even stranded during the day when there might be the chance to wait out the rush for cabs in a restaurant or mall, or to walk in the warmth of the springtime sun. Instead, people were abandoned late at night, not even knowing that a strike that night was a possibility.

I watched a bit of the news as they caught people coming out of bars and clubs downtown, many of them making the responsible choice to not drink and drive and take the Better Way. Only to find, after getting there with everything hunky-dory, that suddenly the subways were closed and there were long queues for cabs… if you could even afford to take one. One guy interviewed (and I’m sure there were many more in that situation) spent all his money except the $3 he knew he’d need to get on the subway — how far would a cab take him for $3?

This also happened late enough at night that anyone who had to work on Saturday morning might not have had time to catch the news and adjust their plans. How many people will show up seriously late for work because of this insane move? A nurse called into CP24 to highlight another group of people caught off-guard by the sudden strike action: any shift-worker who had to start that night (e.g.: at midnight) found with zero notice that their route to work suddenly wasn’t there. Hospital workers were forced to work unexpected overtime as they weren’t allowed to leave until their replacement showed up.

The provincial government is going to introduce back-to-work legislation tomorrow, and even that I think is too long. They should have had that out today, but at least they’ll get together and have this fixed by monday. I’m going to write my MPP right now and encourage her to make the TTC an essential service.

This move by the union is doubly damaging because the SURPISE! factor is going to hurt the reputation of the TTC and transit as a reliable way to get around. So many people in and out of government are trying to get more and more people to give up their cars and take transit more often for congestion and environmental reasons. The price of gas skyrocking lately has really been helping with that message… and then the TTC Union goes and screws it all up by telling people who might be on the fence about giving up their cars “Hey, fuck you, we don’t care about you, and you can’t rely on us for shit.”

The stated reason for the sudden walkout was fears of violence against drivers. Hey, I’ve got news for you, when you dick around with this union strike bullshit when you’re an essential service that people need to get to work and go about their lives, they’re going to be really pissed off when you take it away from them, and there is a risk of some of the more unstable members of society getting a bit violent. It’s the risk you run as a union, and you’ve got to take steps to deal with that (have your “brothers” double up — let one guy ride shotgun unpaid until the issue blows over, get extra help from the police, etc). But when you really fuck people over by abandoning them with no notice, you are going to turn a couple of unstable and potentially violent people into all out homicidal nutbags. In fact, with next to no facilities to handle all the people stranded by the TTC last night I’m surprised there wasn’t a riot, or at least more violence as people fought for cabs. When you’re a union for something nonessential, like a car maker, or a retail chain, you can go on strike and you really only hurt the company (which may indirectly hurt yourself, the union, in the long run). It’s a bargaining tool that can be effective in some situations, without much chance of violence. However, if your strike takes away things that people really need: food, healthcare, transportation, power; then you are putting your lives into your own hands by striking. Violence is a real possibility. So what I don’t understand is why the TTC didn’t decide on some other form of job action that wouldn’t fuck quite so much with people’s lives. Anything to make their point but not cripple the city. Why not decide to stick to the “holiday” schedule until a new deal was reached? At least then people could still get around, especially those who really don’t have any other choice, but it would be slow, crowded, and inconvenient. Or stop all buses, streetcars, and subways for a minute at a time every 10 minutes? For the buses and streetcars, you’d even get to hold up motorist traffic. Or better yet, run the transit infrastructure, but don’t collect any fares. That hurts the TTC corporation/management and will actually get the public to have some goodwill for the union.

Finally, there were two very valuable reasons to have a nice window of notice for the people of Toronto prior to a strike. The first was to be nice and fair and give people a chance to cope with the strike. The second was to let the union threaten a strike and flex their union muscle to show management that they’re really serious this time without actually having to carry through with the strike. A strike is damaging for pretty much everyone involved: it’s bad for the city, and it runs the serious risk of getting bitch-slapped with back-to-work legislation for the union (which is exactly what happened) while they lose any support they might have had from loyal TTC riders. The TTC management is not totally retarded.

This will likely be a multipart post since I’m probably going to want to cover a lot of ground and dig up a lot of figures, but just don’t have time right now. For now, a quick point to make:

“Switching to ethanol [to fuel cars] was a big thing, until they realized they are starving people.”

[clarification for context mine]

This is just one representative quote (from an off-hand comment on Preet’s site) of a sentiment that I’ve been seeing a lot lately. There is some sort of food crisis happening right now, and it’s snowballing astonishingly quickly. There are food riots in poorer countries, and even in the States there are the beginnings of rationing on rice.

I’ve got my doubts about the ultimate utility of ethanol production, but I also think that it’s far too easy to blame biofuel production for the current food price spike. From what I can find, about 20% of the US corn crop went into biofuels last year, and it’s pretty much the only food crop that gets diverted to that stream. 20% of the crop looks to be within the normal range of crop yield variances, and last year was a record crop to boot. It may be a factor, but I have to say that something else is leading to food price inflation and starving the world…

It was not so very long ago that we were having a conversation with Ryan about lactose intolerance, or “lactardation”. Many people in his family are lactarded, and he was ordering essentially a cheese-covered dish of baked cheese with a coffee and cream on the side. He waxed on about how much he loved cheese, and that if he ever became lactarded like the rest of his family, to just put him out of his misery because life just wasn’t worth living without cheese. So it would be fitting that at that very meal I ordered a chocolate milkshake, and about an hour later found myself with terrible gas and cramping. The realization set in:

I was lactarded.

Oddly enough, I seem to be fine with regular milk and cheese — in fact, as a vegetarian cheese is one of my primary protein sources, and it never seems to bother me. It is somehow the combination of chocolate and ice cream that seems to set my stomach off. Not wanting to blame chocolate ice cream for anything (that stain? it’s… umm… blood), I resisted seeing the connection between my intestinal issues and ice cream consumption. After all, I couldn’t actually be lactose intolerant, because of all the other dairy I eat without a problem! Perhaps there was some other reaction with ice cream and chocolate that could explain the issue… but I couldn’t find any. Not even made-up ones on the internet.

The big test came this weekend when we went out to the marble slab and I packed one of my sister’s lactaid pills. Lactaid pill + chocolate ice cream = no tummy issues. That to me suggests some sort of lactose issue, even if I can’t explain why I’m fine with cheese. Of course, coming out fine after a single test isn’t really definitive, so I suppose that, in the name of science, I will have to go out and eat more ice cream. Just to be sure. It’s that or go to the doctor for a proper test, and between you and me, I’ll take the ice cream.

I don’t really think a completely car-free life is for me, at least not any time in the near future. Wayfare, for her part, has done a remarkable job of going through so much of her life without ever having to drive herself, thanks to public transit, cabs, and most of all, the generous offers of high-class chauffeur services from people such as her parents and myself. Of course, she’s not entirely convinced that that will continue indefinitely, so she maintains a license and insurance even though she never drives. To try to keep her in practice, I offer to take her out driving occasionally. Today, for the first time since she had to renew her license, she agreed to go on a little spin with me — and boy, was it a little spin: we covered all of 8 blocks and two parking maneuvers. However, she is scared of driving, so I would like everyone out there to offer her mad snaps for having the courage to give it a try. Especially since she faced that nightmarish spectre that every driver is afraid they might one day have to face but hope that, for the love of sphagetti, that it is not this day. Yes, right there in front of her eyes:

A puppy.

It was being walked by a group of girls on the sidewalk, but there was no telling when it might decide to run off into the road in front of her! There’s no predicting what puppies might do, they have no respect for the rules of the road, no concept of right-of-way, and worst of all they’re combustable! Well, maybe the puppies aren’t, but if they cause an accident the car is and we could all die in a fiery fiery crash!

All kidding aside, Wayfare is a bit of a nervous driver, but I’m quite proud that she’s finally managed to overcome that and get behind the wheel when she didn’t absolutely, positively have to. She is a pretty good driver, and as silly as it can sometimes be, I suppose approaching the whole experience filled with terror is possibly better than coming at it all excited that you finally get to live out your video game speed freak fantasies.

As long as I’m on the topic of driving, does anyone know where I can rent a Prius in Toronto? There are a number of places that say they have them in their fleets, but none are actually available from any of their locations. Discount and Alamo list them specifically as part of their fleet in Canada, but none of their Toronto locations seem to have them (and I think, through trial-and-error, I’ve tried them all online). Thrifty doesn’t seem to advertise having any Priuses, but a poster on the redflagdeals forums suggests that the Holiday Inn/King location has at least one available (though again, not through their website).