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.

Decoding Mutual Fund Brochures

I spotted this a week or so ago in the Globe & Mail. I thought of ripping it off and posting it here but wondered about the consequences of ripping off the mighty newspaper. Fortunately, the Globe & Mail had given the appropriate credit to the author, Joshua Brown of The Reformed Broker.  I went to the site, followed the Contact link and requested permission to add this post to The Passive Canadian Investor. Joshua came back immediately with his permission and best wishes. Thanks Josh!

Visit Josh at (The Reformed Broker).  His light hearted, entertaining, insightful comments are worth the read. I suggest subscribing to the RSS feed to add a link to your homepage.

October, a pretty boring month

Not much happened in October. The Dow was flatter than the proverbial pancake. It ended the month at 9,712.73 compared to 9,712.28 at the end of September. On the down side, the TSX had its first down month since the small drop in June. This time it was significant, from 11,394 to 10,910. A full 4%.

When I last posted on October 2, we had had a down day on the 1st and the 2nd wasn’t looking any better. By market close on the 2nd, indeed we were seeing a very poor start for the month. As the month progressed, we enjoyed a bit of a rally. My portfolio value reached a new high for year on October 20. Wow! Alas, the gains were totally erased by month end as six of the remaining eight trading days were downers…and big downers at that!

With a month like this I tend to sit tight. In fact, the only change in my portfolio was the transfer of a small position in a Canadian Equity Fund to the Canadian Endeavor Fund which I mentioned in my last post. This change was actually requested in September but wasn’t finalized until October 23. Fund companies don’t make things easy. A transfer from one fund to another within the same company can take place the day you request it, but to actually change from one company to another is something else.

I made no changes in my trading account in October. I still like all the good ones, six out of nine, and I’m so far under water with the losers, two out of nine, that there is no point is selling. The final stock is down a bit but I wouldn’t call it a loser. It’s just not performing right now. It’s the (Claymore) Canadian Agricultural ETF, that I’ve mentioned before. I still have hopes for (COW).

As of today, we are nearing the end of US earning’s season and getting into the thick of the Canadian earning’s season. US companies did very well with some 80% turning in better than expected numbers. Things aren’t quite as rosy North of the 49th, but still, better than half of the early numbers are matching or exceeding expectations. Our best hope for a nice bounce this month rests with our big banks which will begin reporting in the next couple of weeks. Of course, as always, we need the price of oil and gold to hold as well.

They, whoever they are, say that November and December are historically the best months of the year. We’ve all heard of the Santa Claus rally, right? Let’s hope they’re right and we end the year with a nice bounce. Maybe, just maybe we’ll get back to where we were on January 1, 2007 by year end. On one hand, it’s pretty sad when you think about it. Our most optimistic wish is to get back to where we were a FULL THREE FULL YEARS AGO. On the other hand, if we make it back, it’ll have been an amazing recovery, after what we’ve been through.

A September to Remember

At the beginning of the month, the talking heads continually warned that September is historically one of the worst months of the year for the markets. My own research indicates that the TSX dropped, in September, 6 times out of 10 since 2000. 60/40, not really definitive. They’re obviously talking about longer term trends.

As mentioned in my post, A Brief History of Volatility, the low point in both 2007 and 2008 occurred in November which is diametrically opposed to the old adage Sell in May and Go Away (come back in the fall). The point is, long term trends and averages are just that. They consist of highs, lows and everything in between. In order to invest, you must do your own research and pay attention to what’s going on, both here at home and around the world.

I tend to pay less attention to global goings on, because, as previously mentioned, my portfolio is all Canadian all the time. Not to say I completely ignore global factors. One can’t invest in the TSX without paying attention to global commodity prices. As goes the price of oil, so goes the TSX which is heavily weighted with Canadian energy companies.

Now, back to September, 2009. On September 22 the TSX hit a new high for the year, 11,585. Yippee! No surprise that my portfolio value reached a new high for 2009 on this same day.

I’m often guilty of spending too much time with my trading account and being far too passive with my mutual funds. I took the time for a brief review of my funds last month and discovered that I should have been paying more attention.

To the end of August, a Canadian Premier Fund that I’ve been holding for a couple of years was up 11.5% for the year, well behind the TSX, while the Canadian Endeavor Fund, offered by the same fund company, was up 41.5%, beating the TSX by a bunch. The (Globefund) 5 Star rating for the Premier Fund was 2, for the Endeavor Fund 5. Needless to say, I made a change. On the surface, the two funds appear very similar, just one of those things I guess.

(Globefund) and (Morningstar) are wonderful resources for mutual fund research…and they’re both free! See links to both in LINKS OF INTEREST down the right hand column

So, after a September to Remember, we’re into a rough start for October. The TSX tanked by 323 points yesterday and it’s not looking great for today…but it’s still early. We’ll soon be into earnings season. Let’s hope that our Canadian companies report some decent numbers.