And then there was one...

Markets just closed for this, the penultimate trading day of 2010. After reaching a new twenty-eight month high yesterday the TSX sagged a tad today. No surprise given that both gold and oil fell away from their recent highs. All-in-all, not to worry about a tenth of a percent drop.

South of the border things are about the same and the second the markets closed, the US futures came to life and immediately pointed to a lower opening for tomorrow. Looks like we're going to close an excellent year with a bit of a downer.

Me, I'm going to close the books for the year and count the money. After all, this is the year TPCI made it all back. Barring a market meltdown tomorrow...I'll be smiling.

Dead Money Comes To Life

Back in May of last year, I wrote about Orphan Fund(s).  These are the the small investments in our RSPs that don't seem to belong.  On occasion, hopefully not often, our trading accounts hold an orphan stock or two which we tend to ignore as they're dead in the water.  I held such a stock until December 3.

Four years ago this month I heard of a small company that was destined for great things. National Challenge Systems has operations in Ontario and BC. The principle business is collection and disposal of restaurant grease and other organic wastes.  Had I done my usual research I would have passed. Firstly, it was a penny stock which I avoid. Secondly, nobody had anything good to say about the company. Posters on Stockhouse.ca expressed great disappointment with senior management of the company. Be that as it may, I had some money in my trading account and proceeded to buy thousands of shares at an average price of .095. Yup, nine and a half cents.

Over time a few things happened. The share price gradually fell off to the .05 - .075 range. The shares were delisted from the TSX and listed on the Venture Exchange. The company did a one for twenty reverse split turning my thousands of shares to hundreds of shares. Investopedia.com has this to say about reverse splits; "firms do it to make their stock look more valuable when, in fact, nothing has changed. A company may also do a reverse split to avoid being delisted."  Based on the share consolidation my acquisition cost was now $1.95 per share.  The day of the consolidation they traded at $1.30.  Not good!

Somewhere along the way, the company changed its name to Organic Resource Management. Changes were implemented, which on the surface at least, appeared positive.  The range this year has been from a low of .95 to a high of $1.80.  Any time it traded for $1.80 a couple of hundred shares would change hands and then it would drop back with the next trade.  The volume was always low and many days there were no trades at all.  Dead money.

Holding Organic Resource (ORI) wasn't fun.  So, how does one resurrect dead money?  Me, I calculated that I needed $2.04 to get all my money back including all fees.  Each week I placed a sell order, good through the following Friday, at $2.04.  Each week it expired without being filled.  As I don't sell at a loss, it appeared that I was destined to hold ORI shares for the foreseeable future.

On December 3, after selling the coal miners I placed a buy order for more BMO and RBC shares.  I refreshed my 'Order Status' page every few minutes to see if either of my buy orders had been executed.  The bank shares were recovering from earlier lows so I wasn't hopeful.

Suddenly with just a few minutes left in the trading day my sell order for ORI was filled at $2.04, a new all time high!  My guess is that someone placed a buy order at 'market price' assuming the order would be filled at around $1.75, which was the last quoted price and the only shares available on the sell side were mine at $2.04.  Bang!  I had my money back.  Goes to show, you can't ignore things in your account no matter how stagnant they appear.

Not a bad day...

Actually, a heck of a lot better than expected given the Chinese interest rate hike over the weekend.  Bearing in in mind that a slow down in China means a global slow down, I expected the US market would tank today.  The DOW dropped a tick, while the S&P 500 and the NASDAQ both ticked up.  All-in-all, not bad.

My newly acquired Cisco Systems (CSCO) shares finally moved up, 2.39%, after been flat to down since I bought them a few weeks ago.  With the TSX closed I checked out some of my Canadian stuff on the NYSE.  RBC was down while both BMO and TD were up after starting the day on the downside. Not bad given the Chinese thing.

If our financials gain some strength and oil holds at it present level of $91.00, we may have a nice pop to close out the year.

'Twas the week before Christmas

Caught me by surprise...and no, not because I forgot to do my shopping, which was made easy this year.  Most of the adults in our life agreed to make donations to charity rather than exchange gift cards which seems to have become the norm over the past few years.  No, what surprised me this week was the TSX's huge spike up on Tuesday.  I was surprised again on Wednesday when it didn't sell off, which often happens after a decent gain.  Even today's tiny downward tick of 9.5 points was surprising given that tomorrow is the last day for year tax loss selling.  That being the case, I'd normally expect tomorrow to be flat or down...but, with oil over $91 I'm not so sure.  This week may have one more surprise in store for us.

At any rate, after tomorrow the TSX is closed until next Wednesday.  If oil holds at or near the present level for the next six days we may very well close out the year with an upward move.

For my part I'm standing pat.  I like most of my stuff.  I doubt that I've got any short term rockets but I think I'm well positioned for gains in the 10-15 % range for 2011.  With a bit of selective trading I hope to get this to the 15-20% range.

Merry Christmas and best wishes for a safe, healthy and prosperous New Year!

What a difference a day makes...

Early this morning I was going to write about the way BMO was being punished for Friday's announcement of their acquisition of Marshall & Ilsley for $4.1 Billion.  BMO shares were $62.05 on Thursday and $56.60 on Monday...a drop of 8.8%.  Apply that to the BMO market cap and do the math.  It's a really big number.

I held off writing about BMO because TD Bank, not to be outdone, announced that they were buying the old Chrysler Credit, now known as Chrysler Financial for $6.3 Billion.  I figured I'd wait and put it all in one long, sad story as I prefer not to rehash bad news.  My guess was that the market would similarly dislike the TD deal.

Not so fast!  Apparently TD walks on water and the markets responded by bidding TD up $2.64 to $73.16 in one day.  If that wasn't enough the market spread the love to the all the big banks.  My BMO shares jumped $1.18 and even my long suffering shares of RBC came up $1.04.  All-in-all, I made some real money on my bank shares on Tuesday, December 21.

The TSX reached a new twenty-eight month high of 13,365.  US, Europe and Asia were all up and my stuff reached a level I haven't seen since the summer of '07.

Yes, what a difference a day makes!

Stuff I'm Reading This Morning

TSX may open higher on rising commodities Reuters.  Will we have one more Happy Monday?

BMO may have last laugh (after getting beaten up on Friday) Globe Investor.

Twenty minutes into the new trading week.  TSX and US markets all up...for the moment at least.

Happy Monday and have a great week!

Will Santa Sizzle or Fizzle?

At the beginning of December it looked like the TSX was going to add a fourth month to the year end rally.  Now we've had three days of slippage and dropped 114 points from Monday's high of 13,295.  We're still up for the month but both gold and oil have backed off their earlier highs so it's not looking great for today.

On a positive note, RIM blew the doors off with their Q2 earnings report after the market closed yesterday.  Other news, just out this morning, is BMO's acquisition of Marshall & Ilsley, a US regional bank, for $4.1 Billion.  

I started this half an hour ago but decided to hold off posting to watch the opening.  TSX has been both up and down a tick.  RIM up 4.24%, BMO down 6.48%.  Guess the market doesn't like BMO's all stock purchase which will water down the shares although, this may change as the day goes on and the numbers are further digested.  Happy Friday!

Research

A reader, Chad, posted a comment to Monday's post and asked a number of questions. Welcome Chad.

Regular readers of TPCI will be aware that my investing style is anything but well organized or scientific.  I expect that most finance guys would scoff at my asset mix and methodology.  In my defense I point out that I have recovered from the abyss of 2008 after watching the value of my life savings fall off the cliff while invested in finance guy's picks.

In my May 5 post, Who Should(n't) Be In Funds? I mentioned that I've only read one book on investing.  The overall message of The Wealthy Barber by Michale Chilton is covered in the May post, including, most importantly, the answer to the question asked by the post's title.

I've mentioned that I use both Globe Investor and Morningstar for fund research.  Recently, my preference leans toward Morningstar as Globe Investor made changes to their site and blew away my saved portfolios.  Prior to the change I had a pretend portfolio on Globe Investor wherein I was tracking all of the seg funds, about sixty, offered by one of those goofy guaranteed income plus programs.  The process of adding numerous funds to a portfolio, so they can be quickly compared, is fairly painful so I was disappointed with the change.

In my post of June 1, 2009, My Home Run! (Part 2 of 2), I told of my early success with ETFs. ETFs are all about a sector so you have to listen and learn as much about the sector of interest to understand where the sector is at any given time, and maybe, just maybe be able to predict which direction it may head.  My investments in the energy ETF (XEG) and gold ETF (XGD) involved fairly basic research as these ETFs track pretty closely to the commodities.  Still, at the end of the day it's about gut instinct.  With oil presently near $90 and gold near $1,400 would I be a buyer or seller?

Individual stocks are another kettle of fish.  It begins with a name.  The name of a stock that is.  Sometimes a friend or family member comes up with an idea.  Other times a story in a newspaper or blog creates interest in a certain company.  Except for my HudBay Minerals story, I've done fairly well with top picks of BNN guest analysts.  No matter how you come up with the name you've got to do your research before placing that buy order.

I know I've mentioned using Stock Chase and Stock House as research tools. Stock Chase summarizes all the comments about each company made by BNN guest analysts.  Additionally, the date and price of the stock on that date are recorded.  This can sure reduce the endless hours watching the tube.  The Bullboards on Stock House are always an interesting read as these are the views of other retail investors.  For historical charting I love the interactive charts of Yahoo! Finance.  You can add Technical Indicators such as moving averages and see the dates of events such as stock splits and dividend payments.

For a nice easy, entertaining read, I enjoy Josh Brown's The Reformed Broker.  Josh's blog roll includes links to a multitude of other financial blogs.  

To be fair, I should add that we can always discuss fund choices with finance guy.  After all, he's the one who receives commission when we buy a fund.  Those dealing with full service brokers also have access to their research and recommendations for stock research.  Online discount brokers don't provide these services.

At the end of the day, there are thousands of investment opportunities out there.  The first thing to decide is your tolerance for risk.  In my opinion, exposure to risk should decrease with age.  A market meltdown late on the game could have you looking for work in an unfamiliar environment.  Case in point....me.

Mondays Are Happy Days!

This December at least.  Last Monday the TSX reached a new high for the year...in fact, it was a new high for well over two years.  Until December 6, we hadn't seen the TSX over 13,200 since September 2, 2008.

Well, here we are.  Another Monday rolls around and another record close for the TSX.  Today's close, 13,295.

BNN analysts and various bloggers are now talking Santa Claus rally.  If the optimists are correct, it looks like we may enjoy this run up 'til year end.

Defying Gravity

I'm happy to say that I've got enough going on in my life that I don't watch BNN 24/7. Yesterday I came in on the right side of a curling match and  was away from the house and BNN so I don't know exactly what happened.  I was surprised to see that the TSX gained ground throughout the day while the big Canadian commodities, gold and oil, were losing ground.  Usually the TSX tracks pretty close to these two.  At the end of the day the TSX carved out a 72 point gain and my stuff advanced for the ninth consecutive day.

Right now I'm holding eight stocks and watching twenty-two others.  Yesterday only two of the thirty went down.

I took a small plunge into US waters this week and made my first purchase on the Nasdaq Exchange.  Bought Cisco Systems as the outlook for them is very good for the coming year.  An anticipated explosion in the smart phone and tablet market will flow through to Cisco as the massive amounts of data which these items utilize is processed by Cisco equipment.

IMPORTANT REMINDER:
Nothing on this site should ever be considered to be advice, research or a suggestion or invitation to buy or sell any securities. Every investor should do their own research and consult their own finance guy. See full DISCLAIMER.

It's beginning to look a lot like Christmas...

Here in the 'Peg at least.  The late November snow is piled up everywhere and we're looking at a deep freeze this weekend with January type lows in the -20 range.

The markets have been flat but still slowly trending upward.  The TSX hit a new high for the year on Monday.  Despite a couple of downward ticks in the TSX, down 25 points on Tuesday and another 98 on Wednesday, my stuff has gone up every trading day this month.  That's pretty surprising given that my portfolio is almost all Canadian.  So far at least, it looks like the rally which started at the beginning of September continues.  Maybe there really is a Santa.

With a couple of hours to North America market opening, it's anybody's guess today.  No real definitive overnight news, but US futures are up a tick.

Happy Friday and good luck to all!

Sometimes things just work out

I've been honest about fessing up when I make mistakes.

In my March post Canadian Banks - Buy 'em and Hold 'em I told about leaving a sell order on the table and leaving town for the day.  The result was that I was taken out of RBC (RY) on the way up at the very beginning of a rally for RBC shares.  Had I been paying attention I would have seen the share price approaching my sell order and either increased my ask or pulled the order allowing me to reassess the situation.  A month later, not having learned my lesson, I admitted that I'm not the sharpest knife in the drawer... with my story about a sell order for Cenovus Energy (CVE).  In this case, I failed to pay attention to the fact that Cenovus shares bounced one day and oil spiked overnight.  I left a sell order in place and once again was taken out on the way up and missed a nice gain later that same day.

So, when I finally do something right I'm going to brag a bit.  As mentioned yesterday, I doubled my positions with both BMO and RBC on Monday.  Wham!  BMO reported real good Q4 numbers before the markets opened on Tuesday and the shares took off.  I would have been happy if BMO shares rose to my new lower average acquisition price but they hit that and kept going. In one day I went from being under water to a real nice gain.

Sometimes things just work out.

Big Beat By BMO

Happy Tuesday!

Yesterday, I put Friday's money back to work by doubling my October positions in both BMO and RBC. Ironically, I was able to buy shares for less than I had offered on Friday on yet another dip. Afterward, both went up throughout the day so it felt like a win, win. Averaged down on my October purchases and actually made money on my Monday morning buys.

BMO just out with Q4 numbers and it's a big beat of expectations. The banks, BMO for sure, should get back on track today.

Asia, Europe and US futures all up overnight. DOW futures way up! Oil over $90. TSX should keep on rockin' today.

I'm glad to see a couple of readers weighing in with comments. Welcome! Bloggers do wonder if anyone is reading.

TSX On A Roll!

Despite Friday's sell off of the banks the TSX carved out a new two year high,  The run that began on September 1 has been quite spectacular.  With gold at $1,415 and oil over $89 we may keep 'er going today.

One last chance to put some legs under the banks with BMO closing out the reporting period tomorrow.

Markets just opened.  First tick for TSX to the upside.

BNN live from new studio in Toronto.  Freshened up their look.  Lookin' a lot like CNBC.  Too bad they told Michael Kane where to find the new digs.

Coal Miners, Love 'em and Leave 'em

Usually when I sell something it's because the markets are strong and the stock I want to sell is along for the ride.  Today is different.  It's been a flat day but Western Coal (WTN) has been up all day.  Not to the level that I suggested earlier today.  Rather, the market still wants to stay within the range of the cash offer which is $11.50.  After watching it all morning I finally placed a sell order and let them go at $11.48.  A nice 42.6% gain since my purchase on November 9 at $8.05.

My other coal miner, Grande Cache (GCE), also purchased on November 9 got caught in the updraft and it too was on a roll today.  Figuring I might cash in on this I placed a sell order at $10.15 when is was trading around $10.00.  It took about an hour but the buy orders finally reached up to my price and took out my shares at $10.15, a 20.8% gain over my $8.40 purchase price.

When I bought the coal miners last month I was thinking about a twelve to eighteen month hold.  Little did I know that a takeover offer would fire up the whole sector in a few days. Sometimes things just work out.

Now here's what is so different today.  Since RBC's big earnings miss, reported before the markets opened this morning, the banks have tanked.  As a holder of bank shares, BMO, Royal and TD, I'm disappointed.  On the other hand, I see this as a buying opportunity.  I've taken my new found wealth, from today's selling activity and placed buy orders for additional shares of both RBC and BMO figuring it's a chance to average down on my October purchase prices. I'm well under the market on both offers so I may or may not get them but it's worth a try.

Have a great weekend, and as always, Happy Investing!

Good News - Bad News

GOOD NEWS

• Great Canadian employment numbers.  Unemployment rate down to 7.6%
• Oil over was over $88, now dipping on the bad news
• Gold over $1,390, now rising on the bad news
• Walter Energy (WLT) finalizes deal for all the shares of Western Coal (WTN)

BAD NEWS

• Huge disappointment in US employment numbers just out seconds ago.  Unemployment rate up to 9.8%
• Big earnings miss by RBC.  Estimate was 1.00 per share, actual .86

Of the above, the market mover will be the US employment figures.  Europe which had been in positive territory tuned down instantly on the news.

Me, I'm real happy with the Walter/Western Coal Deal.  It's been finalized at the previously reported $11.50 per share cash.  The new news is that the alternative to cash is .114 of a Walter share for each Western share.  Walter shares closed in New York yesterday at $105.60. This values the Western Coal shares at $12.03US. 

Is it too soon to say Merry Christmas?

Christmas isn't for a while but it already feels like we got a present.  After coming off the best three months in recent memory the markets continued to climb yesterday.  The TSX began the new month with a  pop of 1.5%.  The DOW jumped 2.2%.  What surprises me the most is that Asia, Europe and US futures are all up overnight.  It actually looks like the rally will continue today.  It's too soon to talk Santa Claus Rally but who knows?

Mixed results from our banks this morning.  CIBC (CM) beats while TD (TD) misses estimates...but still turned in a "weaker" profit of  $994 Million for the quarter.  Not too shabby.  RBC (RY) results tomorrow.

My new coal miner, Western Coal (WTN) rose 6% yesterday but at $10.60, it's still trading below the offered takeover price of $11.50.  It seems the market doesn't believe the deal with Walter Energy (WLT) will close.  Me, I'm on the fence but trying to cover my butt with sell order at $11.05.  I paid $8.05 on November 9.  I'd be happy to take the three bucks and move on rather than wait for takeover thing to play out over the next several months.  I place this order each morning only after checking to see where WTN opens.  I don't want to leave a multi-day order sitting there only to be taken out first thing in the morning on the day when it pops.

Chrysler Bragging?

Saw the prez of Chrysler Canada on BNN this morning.  He was bragging that November sales were up 34% over last year.  Let's see now...34% of nothing is...hmmmm?

Fact is, it looks like the whole auto industry is rocking once again.  Maybe this recovery is for real.

Best Three Months Since???

But for a major downward dip in in November it's been a nice steady climb.  The first peak was on November 8 which was the same date the TSX reached a twenty-six month high.  I reached a new high on the 22nd even though the TSX sagged a bit that day.

I'm up 11.7% YTD.  Of this, 10.1% came in the last three months.  Doing a smig better than the TSX on both counts.

And Now For December...
Out of the blocks like a sprinter this morning.  The TSX is up to new two year high...up 137 to 13,090 forty-five minutes into the trading day.  The DOW is up 194.  WOW!

1035 Days Ago

January 18, 2008.  Three things happened that day;

1. I broke my long standing rule to never sell anything at a loss and bailed on HudBay (HBM) as documented in my post HudBay Minerals - My BIG Mistake.  
2. I promised myself that I'd learn as much as possible about the markets and get the loss back...and not just get it back but get it back into my trading account which is a small portion of my overall portfolio.
3. I made up my mind to never again recommend a stock to family or friends as I had with HudBay.  Fortunately none of them followed up on my recommendation, because, as a group, they are very passive investors who don't have trading accounts.

I bought HudBay on July 11, 2007 at $27.35 and sold on January 18, 2008 at $15.69.  A huge loss at the time.  Not chicken feed today.  Since then, HudBay has been down as low as $2.90. Had I held, this would have wiped out my trading account.

Fast forward to yesterday, 1035 days later.  It's all back!  Yup, as of yesterday's close, my entire HudBay loss has been recovered.

So, how did it happen?  Since selling HudBay I've bought and sold 43 times in my trading account.  Not all different stocks as I've been in and out of a few more than once.  For example, I bought and sold the Gold ETF (XGD) and the Energy ETF (XED) several times. Buying on dips and selling on gains of the underlying commodities.

I got real lucky a couple of times with takeovers.  I bought Fording Coal Trust (FDG.UN) just days before a hostile takeover offer from Teck Cominco (TCK-A).  Same thing with Canadian Hydro Developers (KHD).  Bought them a week or so before the TransAlta (TA) offer. In both cases I sold as the stock ran up rather than wait for the final takeover in order to take the profit and move on.

Very recently I lucked out again with Western Coal (WTN). Bought it on November 9 at $8.05 and along came Walter Energy (WLT:NY) with an offer of $11.50. Not too shabby for nine days.

Of course, my biggest single gain was my recent double with Scorpio Mining (SPM) as reported in my post Thank You Mr. Brieger!!!

All-in-all, I've beat the TSX by a wide margin over the past 34 months and most of my picks began with BNN and then followed up with research which been mentioned on these pages.  It's been a ride.  Along the way I learned a lot, practiced more patience than I'm used to and had fun doing it.

Good Luck & Happy Investing!

So, you're selling, what are you buying?

That's what friends have been asking since my recent posts about selling Encana (ECA) on September 30 and Research In Motion (RIM) on October 13.

Well, the little birdies have been predicting an upturn for Canadian banks for the past couple of months.  There is a near unanimous consensus that the banks have their troubles behind them and will report strong results for the next several quarters.  Most analysts predict that the banks will begin raising dividends as early as year end.

So, decision made…going to buy the banks.  Which one(s) to buy?  That’s the question.  For the answer I turned to the Interactive Charts of Yahoo! Finance.  I had a look at one year charts for BMO, BNS, CIBC, National and RBC.  Why not TD?  Because I already hold TD and have for some time as mentioned in my post Canadian Banks - Buy 'em and Hold 'em. Why National when it’s not one of the big five? Because it’s often a top pick by BNN analysts and many expect it to outperform the others and be the first to increase dividends.

To the charts I added Technical Indicators for 50, 100 and 200 day simple moving averages. By doing this I discovered that that BMO and RBC were trading at or below their moving averages. On the other hand, BNS, CIBC and National were trading well above which possibly indicates they have already begun the assent to new levels so there may be less upside over the next few months.

Based on this simplistic research, I divided my Encana and RIM money in two and placed buy orders for both BMO and RBC.  On October 13 I bought these two banks.

This week I sold Scorpio Mining (SPM) on Monday and Lundin Mining (LUN) on Tuesday.  As mentioned, Scorpio was my first ever double and I picked up a very nice 37% gain on Lundin. Anxious to keep the money in play I quickly bought Grande Cache Coal (GCE) and Western Coal (WTN).  Why the coal miners?  Again, the little birdies are predicting that the demand for coal will outstrip supply in the next 12 to 18 months as China builds another coal fired something or other every couple of weeks.

I have great hopes for my four new stocks over the next six to twelve months.

IMPORTANT REMINDER
Nothing on this site should ever be considered to be advice, research or a suggestion or invitation to buy or sell any securities. Every investor should do their own research and consult their own finance guy. See full DISCLAIMER.

Thank You Mr. Brieger!!!

THE STORY OF MY FIRST DOUBLE
One day in August of 2009 I was watching BNN.  The analyst du jour was Peter Brieger of GlobeInvest Capital Management.  A guy called in and asked Brieger if he still liked Scorpio Mining (SPM).  It must be his brother who calls every time he's on to ask the question to give him the lead into talking about his favorite stock.

Brieger gave a number of reasons for his belief that the .55 stock would rise to $1.50 to $2.00 over the next eighteen to twenty-four months.  I'd seen Brieger a number of times and believe that he's a fairly conservative guy so it was a bit of a surprise to hear him talking up a small cap miner.  He stated that Scorpio is his largest single holding and he's still adding it to client's accounts.  I figured if it's good enough for him, it's good enough for me.  The price that day was .55.

I had some cash in my trading account having recently been taken out of Royal Bank (RY), so I put in a buy order at .50 good through the end of August and went on vacation.  A couple of weeks later, while snorkeling in Maui, my order was filled and I became the proud owner of Scorpio shares.  Within weeks the price bounced to .75.  Normally I would bail and brag about a 50% gain in less than a month, but I held off.  Brieger's forecast of a share price in the $1.50 to $2.00 range intrigued me.  I've never had a three or four bagger.  Forget three or four, I'd never had a double.

Months passed, the shares traded in a range between .55 & .70, seldom touching .75 again.  With my usual impeccable sense of timing I put in a sell order at .75 in March.  Yup, here I was, seven months later, trying to get the same .75 that I could have had months ago.  I renewed my sell order each week for a number of weeks.

On Monday, April 5 I changed the strategy and revised my ask to .90 figuring it was just plain dumb to settle now for what I could have had last September.  Brieger's predictions haunted me. I realized that I had already held for nearly half of his earliest prediction of $1.50 to $2.00 in eighteen months. The following day, the price popped to a high of .85 and closed at .83. At last, I had avoided being taken out on the way up. 

One day later, on Wednesday, greed set in.  Before the markets opened I revised my order to an ask of $1.04 for half my position, calculating that I'd get all my original investment back (including fees) and still hold half the shares for the ride to Brieger's $1.50 to $2.00.  The Wednesday high was .94 and it closed at .88.  Once again, I'd dodged the take out bullet.  Was I finally getting the hang of this?

Well, you gotta know, on Thursday it dropped to .80...but everything else dropped so I wasn't worrying.  I decided to stand fast with the $1.04 ask figuring if it hit .94 on one good day, it would get there again in the near future.  If .94 is possible how far away is $1.04?

On Monday, April 19 the share price jumped over .90.  By 11:00 AM 'Peg time the volume was twice the average daily.  The price was in the .93 to .97 range with a brief pop to .99.  I resisted the temptation to reduce my ask to 1.00 and grab the double.  I stood my ground only to watch it fall off and wander in the .60 to .75 range for the entire summer.

Things heated up in September and Scorpio's share price bounced to the .80 to .90 range. Brieger was on BNN on September 21.  As usual, the very first caller asked if he still loves Scorpio.  As usual his answer was yes.  In fact, he now has a price target of $2.50 to $3.50.  This he calculates as a simple multiple of anticipated earnings.  Once again I placed a sell order at $1.04.

In mid October I revised my sell order and offered all of my Scorpio shares.  Figuring that I'd held for fourteen months I may as well take the double and move on rather than sell half and wait it out any longer.  Last week my sell order expired on Friday and I was busy with other things and did not renew it.  I was heading out early this afternoon and thought I'd check my trading account.  Scorpio had briefly touched .99 this morning.  I placed my usual sell order at $1.04 just before leaving the house.

While I was out my Scorpio shares sold for $1.04 giving me my first ever double.  Yup, fourteen months and three weeks and I doubled my money with Scorpio Mining.  Thank you Mr. Brieger!

ROCKTOBER!

Wow!  Here we are, one month past the historic weakest month of the year, September. October isn't usually a whole lot better as it's the final month of the summer doldrums as described by the Halloween indicator, a term used by some for the theory that the markets generally do better in the months from November to April than in the May to October period. The Sell In May And Go Away crowd supports this theory.

So what happened this past summer?  At the end of April my stuff was up 5.42% for the year. By the end of August it was all gone.  My year to date gain had disappeared.  I sure was feeling like I should have joined the Sell In May And Go Away gang.  Needless to say, I wasn't looking forward to September, the weakest month of the year.

September!  The TSX gained 3.82% while in the US the DOW shot up 7.77%.  And then, along came October.  Pumpkin month saw the TSX gain another 2.49% while the DOW bounced another 3.06%.  While the markets did very well in September and October, I did better.  My stuff shot up 9.19%.  A fantastic two month gain!

On October 8, I triggered my exit strategy by unloading my long held Canadian Resource Fund. That day I simply parked the proceeds in an Interest Fund with the same fund company.  A few days later I transferred it to a Canadian Bond Fund, again, with the same company.  I don't have a crystal ball and I'm not suggesting that resources and commodities are going to fall off the cliff.  What I do know, is that if they do, my Canadian Bond Fund units will be worth the same amount, or more, the day after the meltdown.

Exit Strategy?  Who said anything about an exit strategy?  Well, I think I did...at least I've been gradually introducing  the idea throughout the year.  On May 5 I wrote Who Should(n't) Be In Funds?  This one triggered some interesting response from readers who told stories about finance guys who no longer return calls.  After hearing some of these stories I was compelled to write my July 9 post Why we fell in love with funds.  Do we still love finance guy today?  Finally, my July 16 post A Little More About The Last (Next) Ten Years revealed that in the past ten years the markets were pretty crappy and I suggested that we all need a plan.

Another September to Remember!

A year ago tomorrow when the markets defied the long term norm and bounced in September I wrote A September to Remember.  We are told September is historically the worst month of the year.  Well, it happened again.  It's looking like the norm isn't the norm any longer.

This year, the TSX began September at 11,913 and closed at 12,368 for a gain of 3.82%.  South of the border things were even better.  The DOW gained 7.77% while the broader S & P 500 shot up 8.77%.  Wow!

Unfortunately, the gains of September 2009 didn't last long.  The TSX tanked 323 points on October 1 and by month end pretty much all of the September gains had disappeared.

We're off to a much better start this month.  As I write this, the markets have been open for less than 45 minutes and the TSX is up 74.  Additionally, gold, oil and the US markets are all UP!  It's all good....for the moment at least.

As reported on these pages, I made a couple of changes in my trading account in September. On September 2 I bought Research in Motion (RIM) at $46.49.  Since then it's been a rocky road.  It's been as low as $45.40.  Right now it's at $50.90.  After some disappointment with the announcement that the new Blackberry Play Book won't be released until the new year, the investment community seems to be responding to the positive press about this new device. Yesterday I gassed my gas company, Encana (ECA). Even as we approach the heating season I couldn't see hanging onto this company.  Nat gas is just TOO cheap and there's TOO much of it.

Good Luck & Happy Investing!  

A Change In Direction

In my most recent post I briefly outlined a plan to get more aggressive with my trading account. The process begun a few weeks ago with the sale of TransCanada Corporation (TRP) at what was then the 52 week high of $38.16.  This stock had been range bound between $32. & $38. for a whole year.  I was happy to sell my shares at the top of this range.

Now for part two of the plan.  Identify an undervalued stock to add to my portfolio.  Hopefully one with real potential for an upside surge.

Let the research begin.  Not a day goes by, on BNN, without a caller asking the guest analyst for an opinion on Research In Motion (RIM).  This, I learned, is because RIM is presently trading near the bottom of it's 52 week range.  The 52 week low is $44.94 and the high is $94.00.

It seems RIM's troubles stem from the threat of the government of India and few others to shut them down unless they allow government access to their state of the art encryption so as to allow governments to 'listen in' for threats of terrorism.  The Blackberry is supposedly the communicator of choice for terrorists and other criminals.  We know politicians all use them. Coincidence?  Most analysts believe that RIM will negotiate a reasonable settlement on the encryption issue long before being shut down.  Additionally, there is a belief that the Blackberry is not as sexy as Apple's iPhone.  I then learned that this issue is a North American phenomena.  Apparently Blackberry is smart phone of choice for the 18 - 30 crowd in pretty much the rest of the world.  North Americans love all things Apple.

Next stop Stockchase.com   As I've mentioned before, this site capsulizes all the comments made on BNN by the various guest analysts.  In addition to their comments, the share price on that date is listed.

Next I turned to the interactive charts of Yahoo! Finance.  These charts allow customization by adding any number of technical indicators to the chart.  By adding moving average indicators I learned that RIM shares were trading 15% below the 50, 24% below the 100 and 29% below the 200 moving average.

Last stop, the RIM website.  A few highlights from RIM's first quarter financial report;

• Revenue grew 24% over the same quarter last year to $4.24 Billion
• Earning per share increased 41% year over year to $1.38
• Blackberry shipments grew more than 43% over the same quarter last year to 11.2 Million.
• RIM shipped its 100th million Blackberry during the quarter.
• Subscriber base grew 60% over the period year to 46 Million with 4.9 Million accounts added in the quarter.

Satisfied, I bought RIM on September 2 for $46.49.  This is a real change of direction me.  I've kept my stuff all Canadian, all the time but have stayed away from the tech sector.  Since September 2 it's been as high as $46.71 and as low as $45.40.

The short term direction for the RIM share price will be established later today with release of second quart results after the close.  Will I be listening in on the web cast?  You bet.

IMPORTANT REMINDER
Nothing on this site should ever be considered to be advice, research or a suggestion or invitation to buy or sell any securities. Every investor should do their own research and consult their own finance guy. See full DISCLAIMER.

Nat Gas. The Only Loser Today!

Europe, Asia, US Futures, oil, gold all UP! The only thing that's down this morning is that perennial loser natural gas. Methinks it's time to review the Encana (ECA) holding.

After dipping below $72 yesterday, on US weakness, oil bounced back overnight supported by positive numbers for China's manufacturing sector. I wonder when (if) weekly US oil inventory figures will stop driving the price of oil.

I Need To Make A Change!

Sometimes I wake up with an idea, go to the computer and write a complete post and publish it to TPCI.  Sometimes I begin drafting a post weeks in advance with a plan to post it at month or quarter end.  I began drafting this many weeks ago in anticipation of the end of June.  My initial opening line was "I'd like to get things going UP instead of sideways".  Doesn't that just bite.  After the bloodbath of June, sideways would have been great!

The TSX began the year at 11,746.  At the beginning of June is was 11.762.  The end of June 11,294...down 4.85% for the year. 

    

Obviously I need to change something.  I still have faith in my two main funds, the Endeavor and Resource Funds.  I'm thinking I need to change my strategy for my trading account.  The winners are still winners, the losers are still losers and the do nothings are still doing nothing.  My strategy has been to hold the winners, with the expectation of further gains, and hold the do nothings with hope that they'd turn into winners.  Because I don't sell anything at a loss, I'm still holding a couple of losers with the faint hope that eventually I'll get my money back.  Well, guess what?  It's not working!  For seven months now the winners have fluctuated between break even and plus 5 to 10%...and because we can't put two decent months together the gains of April disappeared in May...and the whole process began anew.  My do nothings have taken a similar path except that they've been fluctuating between break even and minus 5 to 10%.

What to do?  I'm thinking that I should identify a couple of undervalued stocks to add to my account with the hope of a nice short term run up.  You guessed it, I'll be watching BNN until my eyes bleed.  I think I've mentioned how painful watching BNN can be.  One rainy day when I've nothing to do I'm going to watch it for a whole day and document how many times they mention and analyze the first headline story of the day.  They really should be embarrassed.  Michael Kane leads with an overnight news item at 6:00 AM 'Peg time and after rehashing it over and over all frickin' day long it's Pamela Ritchie's lead story thirteen hours later on Market Call Tonight.  But enough about BNN.

Thankfully there are some short cuts to BNN research.  I've previously mentioned Stockchase.com.  Stockchase capsulizes all the BNN guest analysts' comments about the stocks they talk about.  They include the date of the comment and the stock price of that date.  Once I identify a few potentials, I'll be looking them up on Stockchase.  The Bullboards on Stockhouse.com are also an interesting read although you have to recognize that these comments are posted by retail investors with an agenda of their own.  Still, worth a read. 

After identifying a couple of undervalued stocks, I'll bail on a couple of my present holdings to raise the money.  This step will take a while as I'll try sell at the top of the aforementioned 5-10% curve.  The decision to sell a good stock is not easy.  On the other hand, it can get pretty boring watching as real good stock go up and down in the 5-10% range.  The fact is, the real good, real big companies  seldom spike up in value.  As someone once said, "elephants don't gallop, they just plod along".

  

I've initiated the first step by putting in a few sell orders.  I picked four good ones and put in sell orders equal to their 52 week highs.  They're all so far below that right now that I don't even have to watch.  Maybe, just maybe one or two of them will get there in the next few weeks (or months) and I'll have some cash for bottom feeding.  

Head Above Water

Buoyed by the price of oil, holding above $82.00 and gold, back to $1,200.00, yesterday's up-tick in
the TSX brought it and my stuff above water for the year. It's been awhile. Agrium (AGU) reported it's second best quarter ever. Maybe, just maybe my aggie ETF (COW) will get moving.

Asia, Europe and US futures are up. Excellent earnings reports are rolling in. Might we have three in a row?

Pension Reform

For the past while the feds have been giving a bit of lip service to the idea of pension reform. It seems they finally woke up to the fact that many boomers are either recently retired or soon to retire and failed to, or were unable to plan for their sunset years. The result is that these old buggers either stay in the work force or return to work when they wake up to the fact that the little nest egg just isn't cuttin' it. When old guys aren't falling off one end of the employment ladder there's no room for young guys to climb on to the other.  Both groups suffer.  The dream of old guys to retire to a sandy beach sinks like the sunsets they were hoping to see.  Young guys who hit the books and got an education line up for night shift jobs at Tim's and Mikey D's.  Their Grandmas have all the day shifts.

No surprise that any pension reform suggested by government will involve either, or both, increased taxes and increased plan contributions.  It's likely that any increase in CPP benefits would not affect present CPP recipients.  Rather, the increase would kick in  for future retirees.  This means that retired boomers would be subject to higher taxes without participating in increased benefits.  Thus, the group whose very dilemma triggered the need for reform would be left out in the cold.

Nobody wants higher taxes, especially retirees living on fixed incomes or under-employed young people.  The business community, according to the C of C, is totally opposed to increased contributions.  As you know, for each dollar individuals contribute to CPP, their employer is compelled to match it.  I suspect that the greatest fear among business is that the feds will change the rules and make employers contribute $1.40 for each employee $1.00 as is the case with EI premiums.  This would be a 40% increase in employers' contributions.

Now, here are my ideas;

1. Remove the $5,000.00 annual cap for deposits to Tax Free Savings Accounts for retirees.  If a larger portion of the investment income, earned on unregistered funds, were free of tax this would effectively provide additional income for this group without increasing either taxes or contributions.  I'd expect there would have to be some sort of means test for this.  Gazillionaires shouldn't be included.
2. Increase the Pension Income Tax Credit.  Again, this would reduce taxes for those who need the break without affecting others.  Once again, Richie Rich shouldn't be included in this program. 
3. Tax-Free Muni Bonds.  South of the border, interest paid on Municipal Bonds is generally exempt from federal and state taxes.  Again, this would be great for retirees.  It would be huge for the municipalities who would have access to a whole new source of funding for infrastructure renewal and capital expenditures, without going to the feds or the provinces as is now the norm.  The resultant reduction of income tax would easily be replaced by normal taxation of the income produced by the increased economic activity.  A win, win!

If you like these ideas, send the link on to your MP.  Maybe we can start a grassroots movement.

A Little More About The Last (Next) Ten Years

Since last Friday's post I've been doing a lot of thinking about the last ten years and wondering if there's any logic which might help us look forward to the next ten years.  Most of my gang are either retired or hope to retire in the next ten years.  Timing may be a critical factor.

I can't get it out of my head that the next ten years are unlikely to be any better than the last ten.  Why would they be?  News spreads instantaneously.  No more waiting for the morning paper.  The markets react negatively to everything from earthquakes and floods to oil spills and acts of terrorism and positively to increases in commodity prices and excellent earnings reports.  At the end of the day, I have come to believe that there are more negative influences than positive ones.

The TSX was driven to an all time high of 14,984 on May 16, 2008 as it rode on the back of the price oil.  I doubt that we'll ever see $147 oil again.  It wasn't worth it then and it won't be worth it in the future.  I believe the difference now is that regulators will never allow the price to be manipulated to this level again.

Imagine where you'd be today if you had cashed in on July 8, 2007.  That five year rally compounds to 201.56%.  Yup, better than a double in five years!  Back to the beginning of the ten year period, $100.00 invested July 8, 2000 would have been $110.23 at the end of the ten years, July 8, 2010.  Yup, ten years... 10%.  Ugly!

Just over one year ago I wrote A Brief History of Volatility.  If I had to guess, I'd guess that we're in for more of the same.  I believe that those who stay in for the next ten years will have a ride like they've never imagined.  There will be periods of tremendous gains.  You know, the times when greed rules and we hang in there believing that it'll keep on rolling.  There will be huge down cycles when fear takes hold.  In these times some will cash out to stop the bleeding, some will hang in hoping upon hope for the next extended rally, which may never come.

What are your plans?  Are you intent on hanging in there and riding it out no matter what?  Do you have any reason to believe that the next ten years will look more like the eighties or nineties?  Do you have an exit strategy to move toward guarantees when (if) the markets reach a predetermined level?  Are you talking to finance guy or does he no longer return your calls?  Do you have a plan at all?

Why we fell in love with funds. Do we still love finance guy today?

Most of the investing by my gang consists of contributions to our RSPs and for a large part that began in the eighties when we finally had some money and woke up to the fact that we weren't going to be able to work forever.

In the ten years, ending July 8, 1990, the TSX rose from 2,116 to 3,596 or 69.94%. We fell in love with finance guy and his wonderful mutual fund products.

In the next ten years, ending July 8, 2000, the TSX shot to 10,380 for a ten year increase of 288.65%. We declared finance guy to be an absolute genius and bragged to each other that our guy was the best!

In the ten years ending yesterday the TSX rose to 11,433 or 10.14%. Yup, 10% for ten whole years!

A GIC invested at 5% for the same period would have returned 62.88%

What do we think of finance guy now?

Sell in May and go away...woulda, coulda, shoulda

We've all heard the old adage "Sell in May and go away".  This is based on the theory that markets generally do better from November 1 to April 30 than in the May 1 to October 31 period.  Some refer to this as the Halloween indicator.

Looking back at the past few years, stats don't prove much...until now, maybe???

I beat the TSX to the end of April with a YTD gain of 5.42%.  The first trading day of May produced a small, very small, upward tick.  That was the top and then look out!  Down she went.  By May 20 the TSX had dropped 6.59% for the month!  Yup, that nice YTD gain all went away...and then some.

So, what happened in May?  The never ending Greece story lead to the bail out by the EU countries lead to devaluation of the Euro lead to fears of further financial crisis in Europe lead to fears of slowing of the financial recovery in North America and elsewhere lead to worldwide market turmoil.

Just as the sub-prime crisis was caused by unscrupulous bankers and traders who first screwed each other and then the governments of the world, the Greek story began with Greece's lying their way in the EU by overstating their GDP and understating the debt and deficit.

So why does this geopolitical crappola have such a disastrous effect on our Canadian market?  Good question.  Will the TD Bank (TD) make any less in the next quarter than the last?  I don't think so!  On April 30, TD shares were $75.50...May 20 $70.32 a drop of nearly 7%

By month end both the TSX and TD had staged a modest recovery from the lows of the 20th.  The TSX closed May at 11,762.  A drop 3.66% for the month.  TD shares fared even worse as they closed at $71.75, down 4.96% for the month.  That bites!

South of the border, (Bloomberg) reports that the DOW had the worst May since 1940. 

Based on yesterday, June isn't looking any better.  Fears and doubts about economic recovery sent the markets into a tailspin.  The TSX joined the downward slide despite Monday's report that Canadian GDP increase doubled expectations.  Yup, the Canadian economy is rockin' and we're still getting caught in the downdraft.  Fact is, the TSX is unlikely to stabilize until the there's definitive evidence that the US economic recovery is for real.  So goes the world's largest economy, so goes the world....unfortunately.

Overheard in the Men's Room in the Greek Parliament

Dimitri:  How are we going to solve this crisis?
Hector:  We've got to get the people to stop demonstrating and throwing fire bombs.
Dimitri:  How?
Hector:  We'll get them working in the private sector for the first time, non-government jobs.
Dimitri:  Then what?
Hector:  Then, for the first time, we get them all to pay taxes.
Dimitri:  How?
Hector:  We hire a bunch of compliance officers and tax collectors.
Dimitri:  You mean honest people who would not accept bribes?
Hector:  You right, we're screwed.

Who Should(n't) Be In Funds?

Blogging works for me on two levels. Firstly, I enjoy writing, always have. Secondly, the brief, simple posts work well with my short attention span. I also read a lot of Blogs. Again, works on two levels. Firstly, I enjoy reading about new stuff. Secondly, the brief, simple posts work well with my short attention span. Do I hear ADD?

Because I believe that the majority of Blog readers also tend to be short in the attention department, I try to have each post fit a single screen...otherwise I suspect you lose them before they read the whole thing. Hey, I'm not trying to write the Great Canadian Novel here, but when you put it out there, you do hope somebody reads it.

Because of my ADD my investment research tends to be brief and sporadic. I've mentioned using Globe Fund & Morningstar for fund research. I read several Internet financial pages and a number of financial Blogs. As you can guess, because of numerous mentions, when I'm at home BNN is on in at least two rooms.

In all the years that I've been investing I've only read one book on the subject...and I'm guessing that many of you read the same book. The Wealthy Barber by Michael Chilton was loaned to me years ago by finance guy. I think he had a dozen copies and circulated them among his clients. This entertaining, well written book must have been commissioned by the Mutual Fund Industry. Surely it was difficult to read it and not be convinced that you just had to get into funds.

I don’t remember much about the book. I do however, remember the message about when to invest in funds and when to get out. Chilton’s strategy was simple. Get into funds when you’re young, continue adding through your working years by taking advantage of dollar cost averaging and get out when you’re old. What’s this about getting out? Again, the message was simple. Chilton’s advice was to pick a time, when the markets are up, somewhere around 5 years before your planned retirement date and get the heck out! Why? Simple. Don’t be greedy and risk the possibility of a market meltdown devastating your nest egg close to your planned retirement date.  Got it?  Young Guys In, Old Guys Out!

FOUR QUESTIONS:

1. How many of us took a huge hit in the past few years?
2. How many of us postponed retirement plans because of it?
3. How many of us came out of retirement and went back to work because of it?
4. How many of us received a call from finance guy, when the markets were at their peak, suggesting that the time had arrived to move away from funds, lock in the gains and preserve our capital?

FOUR ANSWERS:
Lots…  Lots…  Lots and NONE!

IMPORTANT REMINDER:
Nothing on this site should ever be considered to be advice, research or a suggestion or invitation to buy or sell any securities. Every investor should do their own research and consult their own finance guy. See full  DISCLAIMER.

Did Pretty Well Sittin' On My Duff...

Regular readers know that I live and die by fluctuations in the TSX because I'm pretty much all Canadian, all the time.  Other than simply trying to make money, I have a sub-goal...if there's such a thing, of matching or beating the TSX.  I'm happy to report that I beat the TSX for the quarter!

As of March 31 the TSX was up 2.48% for the year.  My portfolio value was up 3.34%.  What I like is that I did nothing.  Well almost nothing.  The only change I made in the quarter was to re-balance the one mutual fund account 50/50 between the Resource and Endeavour Funds in early January.  This worked out well as the change involved transferring to the Endeavour Fund which out performed the Resource Fund for the quarter.  Isn't is great when a plan comes together?  With a whole lot of eggs in two baskets, I would like to diversify this account by adding one more fund but I just can't seem to find a fund that has been performing like these two since the market bottomed in March of last year.

I have great hopes for the Resource Fund for April.  With the recent spike in oil price and gold holding well over $1,100.00, this fund should do well.  It's up 2.88% after three trading days, handily beating the  Endeavour Fund.

April started off very well.  Three trading days...new highs for the year for the past two days...my portfolio that is, despite a downward tick for the TSX yesterday. 

My April Fool's Day Cenovus (CVE) trade still bites.  The best I can say about that is the money I got for the shares hasn't gone down...in fact, I guess I could say that it's gone up as the Loonie touched par with the Greenback yesterday before dropping a tick.  Now, there's a spin.

Happy Investing! 

I'm not the sharpest knife in the drawer...

and here's more proof.  Yet another item for the Note To Self file.

I didn't buy Cenovus Energy (CVE) shares, but I didn't get them free either.

One day I had Encana (ECA) shares valued at $57.63.  The next day I an equal number of Cenovus shares which traded at $26.30 that first day.  Needless to say, the Encana shares dropped by more than $26.30 to $30.13.  Such is life when a public company divides itself into two entities.  In this case, Encana the giant became Encana the gas company and Cenovus the oil company.

Initially the talking heads suggested keeping Encana and blowing off Cenovus.  Since then, sentiment has turned and there's a fairly even split between:  A) Keep both  B) Dump Encana  C) Dump Cenovus and D) Dump them both.  As usual, every analyst that BNN drags out of the woodwork has their own, and very different opinion. Not surprising retail investors get confused.  Who are you supposed to believe?

I've been holding Encana since last July and Cenovus since the split on December 1.  I've been getting pretty bored with both.  Cenovus has been as high as $27.84 so when I put in a sell order at $27.00 on March 22 when when it was trading at $25.24 it was a bit of a flier.  I figured, what the heck, if it happens to drift up there in the next while I'd be happy to unload them.

I reviewed the sell order last Monday.  Cenovus closed at $25.11 on Friday the 26th. As it had been trading in a tight range between $24.50 and $26.00 for some weeks, $27.00 seemed a long way off.  I renewed my sell order through April 2. 

I was in a bit of a fog when I staggered to my computer at 4:30 AM on April Fools Day.  Don't ask.  I noticed that Cenovus has spiked to $26.53 the day before.  I should have gone to (Bloomberg Commodities) to check the overnight price of oil.  I should have noted that the whole energy sector had gone up on Wednesday.  Gosh knows, I hold four major energy players and am monitoring ten others right on my Yahoo! Home Page.  Instead, I checked email, read a few blogs, stood on the scale and declared to my wife, for the tenth time since Christmas, that I am starting that diet right after the long weekend.  No way I starting before I get those chocolate bunnies!

You gotta know, I got taken out at $27.00 on the way up to $28.12.  That's the disadvantage of being a part-time trader.  Any self respecting day trader would have been all over the winds of change and canceled the $27.00 sell order before the markets opened, watched for a while and made an extra buck a share...or held if he could see some more upside.

On a positive note, I now have some liquidity in my trading account.  Just have to source out the next home run!

I should rename this bog, The Lazy Canadian Investor!

One, two, three months and counting...

Canadian investors seem to embrace each new month with renewed enthusiasm and optimism.  Evidence the run up in the TSX during the first week of January.  After 6 trading days my portfolio value was up 3.1%.  Nice start to the new year.  Regrettably, by month end it was all gone and I was down 3% for the year.

Again, February began on a positive note.  Up 2.6% after just 2 days!  Day 3 was a slight tick down and things fell off the cliff on day 4.  By month end, things recovered to the point where my portfolio was up a fraction of a point for the year.

Here we go again.  Except for a tiny downward tick on Thursday, last week was fantastic!  The TSX closed at 11,975, a new high for the year...up 2.9% for the week.  With an increase of 2.5% I didn't fair quite as well partially because my little grease collector stock, Organic Resource Management (ORI.V), dropped on Friday.  Organic Resource reported second quarter results Monday morning and the stock jumped to a new 52 week high, albeit on very low volume.

As is so often the case, after a great week, the TSX gave up 11 points on Monday and another 45 yesterday.  Yesterday's great results from Scotia Bank (BNS) failed to keep the TSX in the black.  I believe that this was partially because the analysts spent the whole predicting a build in US oil inventories.  Of course, an inventory build has a negative effect on the price.  Inventory up - price down.

US oil inventory figures come out every Wednesday at 9:30 AM 'Peg time.  Why the heck the analysts have to make their crazy guesses and predictions the day before (each and every week) makes me wonder who they're trying to trick.  Remember, these are guys that have never owned a barrel or oil or even pumped their own gas.  I guess it's just too much to ask them to just SHUT UP on Tuesday and let the truth on Wednesday set the direction. 

They good news is that they were wrong...again.  The inventory build was much smaller than they predicted and gasoline inventories are down.  The price of oil is up over a buck!  Accordingly, the TSX is up 60+ points!  Will we have our first 12,000 plus close today?  Here's hoping.

Canadian Banks - Buy 'em and Hold 'em

This is going into the Note To Self file.

I bought RBC (RY), at at a bit of high point, at $50.25 in February, 2008.  For the next few months the share price wandered in the $45.00 - $50.00 range, seldom reaching my purchase price.  After late October, 2008 RBC shares joined everything else on the slippery slope, all the way to $27.07 on February 17, 2009.

Again, like everything else, they clawed their way back after the February/March lows.  By July they were back in the $50.00 range.  I'd been holding for nearly a year and and half and was becoming bored. I placed a sell order the last week of July believing that I could pick something better if I could free up the RBC funds.  The price finally caught up to my sell order and I was taken out on the way up at $50.49.  RBC closed that day at $51.00.  That was my first clue.  Within hours I'd missed a further 1% upside.

After selling my RBC shares the price rose steadily, all the way to $56.00 by the end of August.  Yup, because of my boredom and impatience, I'd missed a full 10% gain in four weeks!

While holding RBC shares I did do a bit better than my purchase and sell prices would indicate because of very nice quarterly dividends which steadily flowed into my account.

RBC closed yesterday at $58.24...up nearly $1.00 ahead of today's earnings release.  The numbers are out this morning.  Missed estimates by a penny a share but did turn a profit of 1.5 Billion for the quarter...a 35% increase!  Not too shabby for 90 days.

Thankfully, I held TD (TD) shares throughout the same time line...mainly because TD never got back up there as quickly as RBC.  TD earnings out tomorrow.  Should be interesting.

Yup, my new rule for Canadian bank shares is buy 'em and hold 'em!

The January Effect...NOT!

In a recent post I mentioned the Santa Claus Rally. I naturally assumed it was a good thing as mention of the word rally is a positive thing. Toward year end, the talking heads on BNN confirmed that we were enjoying a Santa Claus Rally. To get an understanding of this I turned to (Google) for some in-depth research. What did we do before Professor Google?

A Santa Claus Rally, I learned, is a run up in the market between Christmas and year end. This occurs, from time to time for various reasons, one of which is anticipation of The January Effect.

Further arm chair research revealed that The January Effect is an extended rally resulting from, among other things, investing by happy people celebrating having made it through another year with the shirts on their backs. Surely, given the gains of 2009 and the year end rally we would be looking for a classic January Effect. Heck, we didn't just get out of 2009 the shirts on our backs, we got whole new wardrobes!

I think our December rally was even jollier than usual. I say this because the good stuff began well before Christmas and continued right through to year end. As mentioned previously, my portfolio hit a high for the year on December 30 and dropped just lightly on the 31st.

January got off to a great start! After the 7th trading day my portfolio was up 3.17% WOW! Sitting on my duff doing nothing sure was paying off!

The TSX hit an intra-day high of 12,070 on January 11 and closed that day at 11,947. We haven’t seen 12,000 since September of 2008.  After January 11 it was pretty much all downhill. So much for The January Effect. Once again, we saw that share prices, and market indexes take the stairs up and the elevators down. By January 29 the TSX hit an intra-day low of 11,084 and closed the month at 11,094. Yup, nearly a 1,000 point drop from the high on the 11th.

In the final week of January good news rolled in day after day. Corporate earnings exceeding expectations along with other evidence that the recovery is for real. Despite this and reports of much stronger than expected growth in consumer confidence on both sides of the border, the markets sold off.

If I’ve learned one thing in the past few years it is that retail investors have difficulty getting ahead of the curve. We read the Globe & Mail, and a bunch of stuff on the Internet and watch BNN until we’re sick to death of their endless repetition, but it’s all yesterday’s news.  Based on the headlines, the final week of January should have produced a five day rally. Instead, we had a five day slide. The TSX dropped each day to new lows for the year. Apparently there are factors at play which neither BNN nor we are privy to.

Other than the previously reported rebalancing of my large fund account I made no changes in January. I still like the good ones and am not prepared to sell the under-achievers at a loss.

As I write this, February has begun on a positive note. The TSX is up 193, on track for its largest one day gain since December 1. Maybe I’ll do some trading this month…maybe.

Old Guys Getting $crewed - and it's not about Viagra!

Large US banks nearly destroyed the World economy when sub-prime mortgages, asset backed commercial paper, credit default swaps and other imaginary investment vehicles proved unsustainable. Sub-prime mortgages were a bad idea in and of themselves, then the BIG guys added insult to injury by bundling them into $100 Million packages and selling them to each other and off shore banks. Have they no conscience? On a positive note, the market collapse exposed flakes like Bernie Madoff and lesser Ponzi practitioners.

The US government stepped in to bail out the banks to the tune of hundreds of billions of dollars. Then, to stimulate a struggling economy the US Central Bank reduced interest rates to very near zero. The banks took their bailout money and took advantage of low interest rates. In the process, they managed to squeeze another point or two into the deposit/lending spread, enabling a miraculous recovery.

America’s second largest bank, J P Morgan (JPM:NY), managed to repay their full $25 Billion TARP loan in June of 2009, a scant eight months after receiving the funds. Heck, at that rate it was more like a revolving line. $25 Billion here, $25 Billion there, who cares? For the quarter ended September 30, 2009 J P Morgan reported profits of $3.59 Billion. Quite a turnaround in one year!

Naturally, the Canadian economy suffered along with the US. The overall slowdown along with the near collapse of the automotive sector forced the Canadian government to step in with stimulus money. The Bank of Canada went along for the ride and reduced interest rates to near zero.

Like the US banks, Canadian banks did very well during the recovery period. Similarly, Canadian companies benefited from historical low interest rates and continued to turn in decent numbers throughout the downturn. Young Canadians snapped up real estate and no longer asked, "how much house can I afford?"   Rather, the new question is "how much mortgage can I afford?"   At these rates, they can afford BIG mortgages. This undoubtedly contributed to the escalation of real estate values...during a so-called recession!

Good for the banks, good for business, good for young people buying homes. So who’s getting shafted by near zero interest rates? The Boomers! (that’s me) and elderly Canadians (that’s not me…yet).  Canadians who worked hard and saved all their lives are now offered  .5% in a Bonus Savings Account or 3% for a 5 year GIC.

The Bank of Canada provided the ultimate insult with the annual issue of Canada Savings Bonds. Remember the ads? The falling leaves…the flying geese. Yup, The Bank of Canada spent mucho dinero advertising CSBs, and they were paying…are you ready for it? .40%! Yup, four tenths of one percent for our hard earned money. I’m all over that. NOT!

My own retirement a number of years ago was based on deposit rates in the 8-10% range.

Hi Ho, Hi Ho, it’s off to work I go!

Plans For 2010

My last post was prepared in a bit of a fog on the Monday morning following the festive season. Since then, I've looked into things more closely and discovered some interesting numbers.

My portfolio has three main components. The largest is an account with a fund company which includes just two funds, both of which I've previously mentioned, the Canadian Resource and Endeavour Funds. The next account is a basket of five seg funds with a life company. It's one of those guaranteed income accounts...if I live long enough. Finally there's my trading account which a self directed RSP with a discount broker. As mentioned before, this is my smallest account and I have the most fun with it.

The value of my trading account increased by 56% in 2009! Whoopee! I started the year with six stocks in this account...four of which were still there at year end along with five new ones. Additionally, there were a couple that I bought and sold during the year. I completed eighteen trades in 2009. Not nearly enough to qualify for discounted active trader fees but at least I feel that I'm moving away from that passive mode. Taking charge...sort of.

One of the stocks I bought and sold within the year was Canadian Hydro Developers (KHD) which was taken over by Transalta (TA). I wanted to buy it when Transalta made the initial offer but had no cash in my account. Their offer was 4.55 but the shares quickly went higher as the market anticipated an increased offer to come. By the time I sold something the Canadian Hydro shares had risen to 5.00 which I paid. I was rewarded a couple of weeks later when Transalta revised their offer to 5.25. I was pleased with a 5% gain in a very short time. Had I been in a position to buy sooner I could have done much better. The lesson...keep some liquidity in the trading account for great opportunities when they arise.

My large fund account was up 34% thanks to rising commodity prices and strong performances by Canadian large cap companies. This account makes up more than 50% of my portfolio and the Resource Fund was a full 75% of this. I was in love with this fund when oil reached $147.00 per barrel. Not so much when oil fell to $33.00. Now that oil has recovered to the $80.00 range and the unit price has responded accordingly I felt it was time to make an adjustment. I rebalanced this account to divide the holdings 50/50 between the Resource and Endeavour Funds. My next step will be to source out a third fund for this account. I’ve done well with all the eggs in two baskets but wonder if a little diversification is in order.

My seg fund account increased by 18% in 2009…but not before going down 40% in the final six months of 2008. We’ve got a long way to go baby! Canada’s two largest players in the seg fund business suffered in 2009 as their balance sheets went out of whack because of the difference between the seg fund guarantees and the actual value of the funds. Not my problem, they’re the ones who provided the guarantees. My plan for this account id to get out of it sometime in the future when the Deferred Sales Charges are fully paid and value of the holdings equals or exceeds the guaranteed value. Guarantees are nice but 5% annual is pretty easy to beat in a normal market…and we all hope for a return to a normal market….right?

Looking Back At 2009

My portfolio is still under water from the beginning of 2007.  Three full years and it's not back yet!  Close, but still down 8%.

On a positive note, my portfolio value clawed it's way back a full 49% from the low point of last March.  I am thankful that I did not succumb to the urge to bail.  It did cross my mind.

We ended the year on a high note.  The TSX reached a new high for the year, 11,779, on December 2.  My portfolio reached a new high on December 30.  It didn't hold for year end on the 31st but very close.

The TSX began the year at 8,987 and ended at 11,746 for a gain of 31%.  The market went up on 146 days and down on 105 days.  The value of my portfolio rose by 33%.  AT LAST!  I beat the TSX!

South of the border, the DOW began 2009 at 8,776 and finished at 10,428 for a gain of 19%.  Once again, I'm happy with my decision of a couple of years ago to stay with Canadian investments.

All-in-all, I think most of us who held on are pleased with the past year.  Others, who took money off the table a year or so ago missed a nice upside but likely slept a whole lot better.  You've gotta do what you've gotta do.  What works for one doesn't work for all.

Here we are at the beginning of a New Year.  Oil, Gold, the Canadian Dollar and the TSX are all going up on this, the first trading day.  Let's keep our fingers crossed.