Blessed by the Potato

All this time with a blog, and I haven’t really touched on personal finances.

My dad’s an accountant by education, and then became a financial consultant as he got more experience in the work force (though the subtle differences between a CA and a financial consultant escape me), opening his own business and then closing said business down and “retiring” early. Now, retiring here goes in quotation marks because my dad still works at least a little bit every day of the week. His nearly full-time job now is managing his retirement savings to make sure that the returns keep coming in sufficient quantities to make ends meet without having to dip into the principal, if that can be helped.

He got my brother and I interested in investing at a very young age; he shopped around for banks that were willing to do business with kids with respect, and sell them very low-minimum GICs. We set up my first savings/chequing account when I was 10, and he explained the value of tucking the money I had saved up from my allowance and gifts into a GIC to not be touched for a whole year to get even more interest around age 13. I think I had my first set of Canada Savings Bonds at 15, and he was helping us play the market before I went to university.

Unfortunately for me, while I had the head for everything he was trying to teach us about picking stocks, I just didn’t really have the interest or more importantly, the talent for the non-tangibles. As much as my dad will scour a balance sheet for earnings, market capitalization, cash on hand, and yield, he also pays attention to the overall market and psychology of a company. Even if a company looks good on paper, if it just has a bad reputation and isn’t going anywhere with its sales, the stock isn’t going to do well in the long term. Vice-versa, even companies with a mediocre balance sheet can really turn it around if the market is going in their direction. One example is those funny sandals known as “crocs.” They’re actually made by a Canadian firm, and that company flew more-or-less under the radar for a while. My brother and my dad saw how popular these ridiculous shoes were becoming, and decided to invest a little bit, something that’s come out well for them. I couldn’t get over the fact that they were ugly and had holes in them, and thought it would never go anywhere. In case you haven’t noticed, my brother does seem to have the head for this sort of thing, and certainly the interest, so he’s now on the career path to becoming a stock broker himself.

You can’t really avoid the stock market if you want to save and invest your money. I mean, you can but then you’ll be barely beating inflation with a 4% GIC (OK, 5.5% if you run out to Canadian Tire right now). My dad has never been much of a believer in mutual funds, partly because he’s better than many fund managers at picking stocks (and even the good fund managers are sometimes hampered by the momentum of a mutual fund or other rules), and partly because many mutual funds will sap your potential returns with various fees (though investing out in the wilderness on your own also has commissions). Somehow, that dislike of mutual funds got passed on to me, and so I’ve been investing pretty much soley in individual equities either on my own or with my dad’s help.

In the last few days I’ve started to really reconsider the value of mutual funds. I’ve been largely invested into income trusts, which with the lying Conservatives have become a bit of a minefield. So I’ve been trying to do this “diversification” thing. And it’s really, really hard to spread your investment around when you don’t have a lot to invest. Not being diversified has hurt a bit. There are the nice winners, such as Q9 Networks, which has grown by over 50% in about two years for me. But there are also real dogs, such as Surebeam, which looked promising at first, and then tanked all the way to nothing once it was revealed that the people managing the company lied and they didn’t have the lucrative contracts they said they did.

Another advantage of mutual funds is that you don’t have to keep a constant eye on the market, which is something that my dad does but I, until very recently, haven’t. For one thing, it was always a bit of a pain to try to keep track of things, and while looking up stock prices is pretty easy to do each night, I always had trouble remembering where I bought, so it was hard to keep things in perspective. Plus, it was stressful. It’s much easier to be a buy & hold investor when you’re not worrying your portfolio daily. The use of easy tools has helped me with that recently, things such as Google Finance. To also keep on top of things I’ve started reading various analysts, bloggers, and writers in the business section of the paper and online. One, themoneygardener, is linked over on the right.

I’ve also become more interested in my “investment portfolio” lately as buying a house and a car have become nearer and nearer goals. Lots of friends have been getting all grown up, with houses, jobs, and kids. I am, of course, still in grad school, but that doesn’t mean that Wayfare wants to wait another decade for that sort of thing, so we’ve got to be planning and saving now, and keeping one eye on the real estate market.

To put it briefly, the housing market is scary.

If I thought diversification was a problem with a stock portfolio, buying a house blows that completely out of the water. For many people, once you get a house, that’s pretty much your only investment for at least a few years. Of course, at the same time you don’t worry as much about a market downturn because real estate is pretty stable in the first place, and even if there was a housing crash, well, you still have a place to live which was the main point (unless you’re flipping houses, which no one I know is), and as long as you don’t have to move, you can usually ride it out. Sure, we “lose” money by paying “rent” instead of “building equity”, but it’s a lot less risky that way, and there are lots of good articles that point out that if you can live frugally and save the difference between what rent is and what a mortgage would cost, that you can come out ahead of the game. Especially if it means you then save enough to put a decent down payment on a house…

But the thing that’s really scary is how fast the housing prices are shooting up. Wayfare tells me it’s 9% a year in London, and it looks to be about the same around Toronto (of course, a house in London costs about 50-75% of what an equivalent one in Toronto would). A friend just recently bought a house after saving and saving and saving for years to try to get a respectable 20% down payment. He tells me though that he couldn’t do it, and had to buy because he couldn’t even keep pace with his savings, let alone build on them, and had to get one of those 5 or 10% down insured mortgages. The housing market was simply growing faster than any other investment he could make. That renting and “saving the difference” argument really only applies to a relatively stable market, not one that’s shooting off like crazy like this.

For a long time now, I’ve looked at the real estate boom and consoled myself that it’s really a much better decision to stay out of it: I simply don’t have enough certainty about what I’ll do after I graduate to be buying real estate anywhere, and surely that kind of growth can’t be sustainable. I looked at the US, and read the market analysts, many of whom have long been predicting the “subprime meltdown” we’re seeing now. I looked at the demographics, and saw a lot of baby boomers coming up on retirement: to me, that looked like a lot of excellent family homes that might soon come up for sale as they decide to winterize their cottages and retire outside the city. From all of that I concluded that housing prices must stabilize soon, and maybe even correct downwards a bit.

It’s been over 2 years of saying that to myself now, and won’t we be damned, but the subprime crisis is hitting the States, but the Canadian market seems completely immune to it (well, except for our banks), much as it may bedevil me. My own parents (baby boomers), despite spending upwards of 50% of their time at the cottage have no intentions of selling their Toronto home, even with one son gone, the second on the way out, and the final kid applying to university next year, with out-of-town schools ranking high in her preferences. So much for my theory about a flood of baby-boomer homes coming up for sale.

I’ve had some rough luck in the market in recent years, and the markets in general aren’t doing too well lately, either. There have been some nasty capital losses for me, but thanks to the high payout of some of my income trusts my average return is still around 6%. While that is better than sitting on a savings account, that’s not a lot of return for the risk I’m exposed to. It also seems to be a low rate of return. I don’t really have any mutual fund literature that says they can do better or anything like that, but I have read a lot of investing articles that say things like “compounded at 8% over…” which seem to imply getting an 8% return is common and easy (in fact, I think that’s closer to what my dad averages). Heck, my landlord has to pay me 6% on my last month’s rent down payment. Of course, once you compare my 6% figure to the 9% the housing market has gone up, and I start thinking bad things about my ability to ever buy a house in the future.

But hey, the slight downturn the stock market is facing now may present some “buying opportunities” so that I can at least aim to be a rich renter (as much as it may irk Wayfare to “waste” money that way).

Almost every year I’ve watched the Toronto Santa Claus Parade on TV, and gone down in person a few times (twice as a kid, and at least once as an adult with my parade-loving other half). It’s always a top-notch affair, and I think it’s inspired a lot of other cities and towns to do the same (or maybe it has something to do with Christmas). Anyhow, this is the first year that we’ve bothered to go downtown to watch the London Santa Claus Parade in person. It was a pretty good show, with some high-quality well-integrated floats (notably the entry by Kellogg’s), as well as a number of sadder-looking “let’s throw a tree and some lights on a trailer” floats. I’m not trying to disparage the London parade for that: the Toronto one has a lot more advertising and money, etc., that goes into it, and the London one was still a good show even if it was more low-key. Of course, the Toronto one also gets entrants from all over the place, to get the best marching bands and the best float entries, etc. In London, it’s all local.

Which made some of the sights pretty surprising. For instance, London has all kinds of weirdo dance and band groups, a unicycle club, and more shriners than you can shake a stick at! (I think there were 3 separate groups of shriners that went through, and each group was pretty substantial!) Some things really weren’t very wintery or Christmasy, such as the group of Jedi and stormtroopers that walked by. Wayfare mentioned before they got to us how cool it would have been to be in the marching band — she briefly considered joining the Western one when she was in grad school. I sort of shrugged my shoulders, not thinking that would be all that cool, but then the Jedi came by and I was all like “wow, how cool would it be to be a Jedi in the parade?!” “That would be pretty cool, of course, when I was thinking of joining the marching band, I didn’t realize that was an option. I still don’t quite get how it relates to Santa…”

The parade didn’t quite go off without a hitch: the route was different this year because of the giant sinkhole, so apparently it’s more picturesque as it rolls by decorated shop fronts, rather than the more barren facade of Queens. Beyond that, it was quite a bit later rolling by than we expected, and there were two or three very large gaps where there was nobody coming for almost as far as we could see (at least 5 or 6 blocks) and we started to wonder if the parade had ended without Santa (we knew from the paper that there was some minor controversy with Santa). London, unlike many other cities’ Santa Claus Parades, holds its at night. That makes the lights (and lightsabers!) all the more impressive as they go by, but it also makes it colder, so those big waiting periods weren’t really appreciated.

This is just about the time of the year when my family puts up the tree (sometimes we might even wait until December), but Wayfare’s traditionally does theirs while the Santa Claus Parade is on TV. A nice little tradition, so we’re going to watch our tape of it tomorrow and put the tree up then…

I have to wonder just how dumb thieves really are. I mean, in my own life we have lots of evidence of mean, spiteful, stupid thieves: the ones who did over a thousand dollars of damage to my car just to take it out for a joy ride (or commit another crime), who had the car for a week and couldn’t get the radio out (though obviously not for lack of trying), and the ones who broke into my house and left behind the American money. Now in the news we have several reports of thieves stealing copper for the scrap metal. From the London Free Press a report about thieves risking their lives to get the copper from live wires. Wow, copper must be worth a fortune for someone to risk their own life, the life of the power worker who will have to come by to fix the damage, and to be spiteful enough to plunge a whole neighbourhood into darkness for hours (not to mention stealing from a public utility)! And the going rate, according to the LFP?

Scrap dealers are offering about $2.80 a pound for copper.

The price is down from the high of $4 last year but still worth a thief’s effort.

“Don’t forget, their profit is 100 per cent,” Kummer said.

$2.80 a pound! Geez, even if you haul a hundred pounds of wire out of a substation (which is about as much as I could see a thief taking out on foot), and assume it’s pure copper and not wasted weight on insulation, you’re looking at $280, and that’s probably a pretty generous estimate. Possibly worth the time since it is, as the person quoted says, all profit, but there is a lot of risk associated with that, and the dickheadery that goes along with stealing from a utility, and putting others into a blackout and at risk. Nearly everyone has a price at which they’d sell their own mother, but I can’t believe these guys place such a low price on their respect for other human beings. And hey, here’s another similar story from the CBC.

“What they do is they take this and they wrap it around a trailer hitch of a four-by-four and drive away. And they take probably 1,200 feet, ripping that up.”

Wow, 1200 feet. Since I’m a science geek, let’s figure out just how much copper that is. Of course, we’ll need to know how thick the wire was, which wasn’t reported in the story, but let’s assume it’s pretty hefty wire with a diameter of 1 cm [r=0.5cm] (not quite as thick as the wire carrying bulk power in your neighbourhood, but a fair bit thicker than even an outdoor extension cord). 1200 feet ~ 400 meters. Density of copper = 8.9 g/cm^3. Volume = pi*(0.5 cm)^2 * 40000 cm = 31400 cm^3. Mass = 279 kg, or 615 pounds. Hey, not too shabby, but that’s assuming something that’s more of a copper rod than a wire. If it was 8-gauge wire (still pretty hefty), we’d have a cross-sectional area of 0.08 cm^2, for a mass of 89 kg, or 197 lbs. Hey, still nearly double my earlier estimate, but hardly mess-with-the-power grid money.

Speaking of putting people at risk for selfish bone-headed copper thieving, how about this story from the CBC in Nova Scotia?

A thief stripping propane tanks of copper lines is putting people at risk, Halifax police warn.

Someone stole the copper lines from two propane tanks outside residences in central Halifax on Monday. In both cases, the highly combustible fuel leaked.

“The person is literally playing with fire,” said Const. Jeff Carr, spokesman for Halifax Regional Police.

It was only a few weeks ago when police reported that someone had cut copper from several oil tanks in north-end Dartmouth, resulting in oil spills and expensive cleanups.

All of this of course doesn’t mention the disparity between the cost to the victim and the gain to the thief. Ignoring the issue of the insane risks the thieves are taking and forcing upon others, the people who have to replace their propane lines or power connections don’t pay the scrap price for their copper. Their lines cost much more than that. Similarly, people who get a laptop, iPod, car stereo or catalytic converter stolen usually have to pay much more to replace it than the thief will ever get for it, and that’s not counting any repairs from a break-in that might be necessary, or intangibles lost (such as data on a laptop). Whatever happened to the days of holding up a bank, or swiping the cash out of a till, or pickpocketing a person? In other words, the days of stealing money? It still sucked to be a victim, but at least the thief would get as much utility out of the money as the victim lost, rather than this stupid, spiteful gap.

Well, like every year since I started working at the hospital, I got my flu shot as soon as it was available. And like every year, I got some kind of mild flu/bad cold right at the beginning of flu season (one year, I got the flu before they started offering shots). After being sick for 4 days, I think I’m finally on the upswing.

It’s been fun though, Wayfare came back home on Sunday and won’t let me go near her. I know she has a craptacular immune system, but sometimes she acts repulsed in such a way as to suggest she thinks I’m sick on purpose, and cruelly trying to make her sick. She’s running around opening doors with her shirt, and steadfastly refusing to touch the orange juice container I was using. She put a kleenex around the TV remote so she wouldn’t have to touch the buttons. She gives me a dirty look any time I touch something…

I’m a pariah in my own home!

Tracking my gas mileage, there’s a noticeable drop in efficiency when winter comes around. There are a number of things that cause this, and I can’t really do much about a lot of them. Winter gas blends, snow, and decreased temperatures all take their toll. As does my change in habits as the weather cools down: no longer up for long walks down Richmond when I want to eat out, and with the start of curling season, I start taking the car more often for short trips within the city, and short trips can have quite a dismal effect on fuel economy. Winter can make that even worse with more idling required to get the car warmed up and clear…

1. Idling: this is a good way to waste fuel, burning it up by not moving. Generally, I try to avoid idling when I can, by doing things like buckling my seatbelt before I start the engine so I can just put the car in gear and drive off, and by shutting the car off when trains are going by and I know I’m not going to be moving. In the winter however, that changes for me as I need to have the car idle for a bit at startup if there’s any fog on the windows. A lot of places say the best way to warm up the car is by driving it, and for what it’s worth, that’s true… but for me, it’s not about the car being warm, it’s about being able to safely see. I won’t be the person recklessly driving around leaned over the wheel squinting through the sliver of clear window at the bottom, so I wait until it clears up, even if it costs me some more in gas/efficiency. Unfortunately, this is one compromise I have to make for winter driving without much recourse. Someone did suggest trying an anti-fog glass cleaner to reduce condensation in the first place, and I’ll have to give that a go.
2. Radiator block: similar to the theme of idling, in the winter the car’s engine can often run more than it needs to in order to get up and stay at operating temperature. A block heater can help a bit with this, but isn’t quite so useful for my situation because I don’t really have a set schedule (whereas a daily commuter might be able to better predict their car use and make use of an outdoor timer to run the heater), and because I park in a parking lot out behind the house (and… er… my car doesn’t have a block heater installed). Coincidentally, a block heater can also help ease the starting process. However, another component of winter engine operating temperature is staying at operating temperature. In that case, the openings at the front of the car to let air flow over the radiator are actually too large; the radiator has to have the cooling capacity to keep the engine cool when running full out in the summer heat. So too much cooling takes place in the winter, and some people recommend blocking the radiator openings in the winter, often with pipe insulation. Now, common sense would dictate that one should tie the pipe insulation down in some way, but I figured I’d give it a whirl and see how it worked without that, and lost one segment that was just compression-fit on my first highway drive, so I’m going to have to figure out how to secure it now.
3. Tires: One way to improve mileage and extend tire life is to inflate your tires beyond the door jamb value (but still staying safely under the tire’s sidewall pressure). However, while I know that modern tires don’t really lose much traction under higher pressures, I’m hesitant to run too high in the winter. In the summer, I’ve been running 3 PSI over the door jamb (up to 35 PSI in my case) and have been experimenting with 40 PSI (which is the compromise value of my door jamb and maximum sidewall pressures). Of course, under-inflated tires are a safety and efficiency issue as well. Since air contracts at colder temperatures, I’m starting out this year at 37 PSI, and expecting that it will drop to the door jamb value of 32 PSI by the time it gets really cold out. As always, regular monitoring is important! Tire selection can also impact fuel economy, but a set of winter tires (or a good set of all-seasons and a careful driver) is critical in winter, so this is another area where we just have to sort of suck it up and accept that there’s going to be a mileage hit in winter.
4. Snow: I get much tireder walking through deep or shifting snow than I do when walking along a cleared road, and I’m pretty sure the same thing happens for a car that has to force its way through the snow (on top of the fact that if the roads are crappy, you’ve got to drive slower to stay safe). Since I have a more flexible schedule in terms of my car use, I can avoid the worst of the road conditions: call up the ‘rents or my friends and say I’m not driving to Toronto in that, give a night of curling a pass (which happens fairly often when there’s late afternoon snow, as London seems to like to wait until the next morning to plow it if it starts after 4 pm or so). As a grad student, I even have the freedom a lot of the time to stay an extra night in Toronto if I get stuck there when the white stuff comes and just work later when I do get back. While avoiding the nasty times can help improve fuel economy, the reason I do it is for safety, and I recommend anyone who has to drive in the winter sort of step back and ask yourself if you really need to be out driving when it’s nasty out.
5. Short trips: Short trips are bad for mileage at any time, but especially in the winter when each trip requires the car warm itself up and defog the windows, etc. So one killer for me is of course the bizarre seasonal predisposition towards short trips to the curling club, shopping mall, etc. Really the only way to avoid some of this is to try to combine trips as much as possible. Unfortunately, I didn’t have much success with that last year: trying to go X-mas shopping before curling put too much pressure on an already stressful time, because I had to be out of there at a very specific time, and of course nearly everything is closed afterwards. Going grocery shopping works a fair bit better right after curling, but that was about the only trip combination I was able to work out. Hopefully this will be a more helpful tip for my constant readers.
6. Slowing the hell down: a good year-round tip, slowing the hell down is doubly effective in the winter because it’s also the basic premise of safer winter driving.