Bond, James Bond

The title should be Bond To Bond but I thought the 007 reference was kind of catchy.  My exit strategy began last fall when I transferred out of the Canadian Resource Fund to a Canadian Bond Fund.  I took the next step in May when I switched out of the Canadian Endeavour Fund to the same bond fund.

As of May 4 the largest chuck of my stuff was sitting on the sidelines in the bond fund with a finance guy who I feel rather ambivalent about.  It's not that I dislike finance guy, it's just that I don't really know him as he inherited my account when my previous finance guy, a close personal friend, passed away very suddenly a couple of years ago.

We figured we'd like to have a local finance guy here in Carman.  Hey, if you live in small town Manitoba you should make an effort to deal locally.  That's what keeps small prairie towns alive and we sure want Carman to remain healthy given our investment in the bungalow by The Boyne.  It just happens that one of our close friends at the lake is an account manager with the local branch of one of the big five.  We asked, and she introduced us to the branch finance guy.  So, after many, many years with our previous fund company we switched to the bank and parked it all in their bond fund.

Given that the TSX is off nearly 9% from the high of April 5 I've been sleeping really, really well and enjoying clipping the coupons!  I expect to jump back in sometime this fall but not until I see some stability in the markets.

The Boomerang Effect. It Ain't Over 'Til It's Over!

If a blogger looks back into the history of his own blog, digs up something he likes and uses it again, is it plagiarism or is he simply repeating himself?  I'll go along with the latter as that's what I'm about to do. I reached back to my post of January 25, 2010 for the following paragraph. The title of the post was Old Guys Getting $cewed - and it's not about Viagra! If you're new to TPCI you should have a look at that one as it's likely better than what I'm about to write. It must have been good as Feed Burner stats tell me that it's the most popular post ever to TPCI. Seems all you have to do is mention Viagra and the Google freaks hunt you down. Here goes...

"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?"

So, why am I bringing this up again? Well, it seems to be taking forever but we're slowly digging out
of the mess, or at least some think we are. There is a fairly large contingent, me included, who believe that the US is in for a double dip recession within the next year or so. Heck, I heard a guy on CNBC yesterday saying that there's a 99% chance of this. Short of starting WW III to juice up their manufacturing sector the deficit and debt levels are unsustainable. As I arrived well after the end of WW II I don't remember Rosie the Riveter but as a history buff I've heard the song and seen the "We Can Do It!" posters.

"All the day long, whether rain or shine she’s part of the assembly line.
She’s making history, working for victory, Rosie the Riveter"

So, what's my point. Well, I don't believe the US will start WW III to bail out their economy. Some of them are crazy but hopefully they'll keep her out of office.  "I can see Russia from my front door". Jeez, give me a break!

You can't turn on the news these days without hearing about and seeing video of the riots in Greece. The Greeks don't get it. They're screwed! Think about it, as most of the world clawed it's way out the recession it stands to reason that the weakest links simply won't recover. Regrettably Greece is destined to return to the Third World and once again become a nation of sheep herders and olive farmers. As Greece goes down, others will follow. Other countries... maybe. European banks...maybe. US banks with huge positions in European countries and banks. Yikes! The Boomerang Effect! All these months later and it will potentially go full circle and bite the large US banks in the butt. It ain't over 'til it's over!

Strategy, Gut Instinct...Whatever

Back on May 2 the total value of my stuff hit a new all time high. Yup, after recovering from the market meltdowns of 2008 and 2009 I had it all back and then some. What a ride!

In the past, at times like this, I've been sucked in to believing that we're on a roll and there's nowhere to go but up. I did things like cash out GICs to get more money into the market. That's called GREED! On May 2 I made the decision to take money out of the market and watch from the sidelines.  That's called FEAR!

As documented in earlier posts, my switch out didn't actually happen for two more days but switch out I did. On May 4 my Endeavour Fund units sold for $11.012...yesterday $10.22. That same day I bought Bond Fund units for $6.102...yesterday $6.139. I avoided a substantial downside on the Endeavour Fund and enjoyed a small uptick with the Bond Fund. Additionally, the Bond Fund has paid two nice monthly distributions since my May 4 transaction. I just did the math. The Bond Fund units are worth 8.822% more as of yesterday than the Endeavour Fund would be worth if I'd held them. Yup, 8.822% to the upside in what? 41 days! I'll take it every time!

Stuff I'm Readin' This Morning

Dollarama Beats Again... This was the 2009 IPO that I didn't like.  IPO at $17.50 in October, 2009...Yesterday $31.00!  Today ???

Greece At The Brink and then, just to show that the Greeks still don't get it Greek Workers Strike.

The Economy Is Worse Than You Think  Not much good news today.  With the TSX off over 1,000 points from the April 5 high it's lookin' like a good summer to stay away from the markets.

A View From The Sideline

So here we are, a year and a half into the second decade of the new millennium. So far it's looking a lot like the first. The TSX is up 13.39% since January 1, 2010...that all happened last year as it's actually down .93% this year-to-date. If you're a die hard and plan to hang in no matter what I suggest you read TPCI post of July 16, 2010; A Little More About The Last (Next) Ten Years.  Sorry, I simply don't see any reason for this decade to be any better than the last. The world changed somewhere around September 11, 2001 and I don't see it changing back. The eighties and nineties were good to us boomers. We paid off the damn mortgage, the kids moved out and we finally managed to put a bit away for our anticipated golden years.  Not exactly freedom fifty-five but at least we saved something.

Then came the new millennium... 911.  Huge volatility for commodities and stocks. A couple of market meltdowns. The worldwide banking crisis. Bankrupt automakers. Whole countries teetering on verge of bankruptcy. The boomerang kids came back as they struggled to sort things out in the strange new world. Our aging parents moved on to assisted living or nursing homes where they spend their days complaining about the food. We postponed planned retirements and many of us who had retired went back to work.

I don't think we've seen it all yet. Watch for the US to default within the next few years.  In the end, it'll be okay because China will come along and bail them out. Yikes! In response, US schools will add Mandarin to the curriculum. What tail's gonna be waggin' what dog then?

For my part, I triggered my exit strategy last fall when I switched out of the Canadian Resource Fund. With the recent transfer of my largest holding to the Canadian Bond Fund I'm pretty much just a spectator now. Oh, I still have my trading account to play with, although that hasn't been a whole lot of fun recently.  Oh ya, I still have that crazy basket of seg funds but by-and-large I'm out of the market.  Speaking of which, that 5% guarantee on the seg funds is looking better and better.  On the trading account side, the things I like; BMO, RBC, TD and Suncor are still doing okay albeit they've dropped off substantially in the past while. The others...I don't want to talk about.

So, what's your plan? Did you bail during one of the meltdowns? Are you hanging in for the time being? Are you hanging in no matter what because finance guy keeps reminding you about the long term returns of the market?  A little reminder may be in order; Who Should(n't) Be In Funds?  Most importantly, do you have a plan at all?

So, I Sold In May and Went Away...and how did that turn out?

Last month I documented switching out of my largest single holding, the Canadian Endeavour Fund, to the Canadian Bond Fund where the plan is to park the money for a while just to see if I can avoid the downward trend of the summer months. I was PO'ed with finance guy for not completing the transaction when requested...and even more PO'ed when he put it through two days later while I was waiting for "the right time" to arrive again.

The two day delay cost me several thousand dollars as, in that two days, the Endeavour Fund units went down and the Bond Fund units went up. The question, where do I stand today? On May 2, when I requested the switch, the Endeavour Fund was at $11.194 and the Bond Fund $6.079. On May 4, when Dopey woke up and got the job done they were $11.012 and $6.102 respectively. That two days cost! On the plus side, the unit prices continued to move as expected. As of yesterday were $10.528 and $6.151.

Yup, I avoided a huge drop in the Endeavour Fund unit price with the decision to bail. Furthermore, I've gained as the Bond Fund units continued to climb and I received the May distribution on my newly acquired units. The monthly distribution for May annualized to a tick over 3% which was very nice for something that I'd held for only 11 days prior to the May 15 distribution date.

No, I don't have a crystal ball.  The decision to Sell In May was based pretty much on gut instinct and the fact that I was growing tired of  the seemingly never ending cycle of volatility. It just seemed like a good time to take a breather, go to the lake and relax without worrying about the @#$%&*! markets!

Canadian Banks - We Love 'Em and Hate 'Em...for the same reason

They make tons of cash!

As investors we love it that our banks are so profitable. Quarter after quarter they churn out mind boggling numbers. Oh sure now and then they disappoint a tad by missing expectations and we sell off the shares for a while. For the past few years they held off increasing dividends while reorganizing after the world wide banking crisis which affected them very little. With that behind us the smart money is betting that we'll see dividend increases in 2011. In fact, National Bank (NA) kicked it off with a dividend increase announced last November, the first Canadian bank to do so since 2007. RBC (RY) joined the party last week with an announcement of a 8% dividend hike.

As retail bank customers it's more of a love/hate relationship. While we appreciate the banks' for the services they provide we often get more than a bit PO'ed with their #$%*! charges. If you're like me, you've shopped around for a package with the lowest possible monthly service charges, transaction fees, ATM fees etc. I'm happy to report that I pay no service charges for my day-to-day banking services. I think they call it a "seniors' package"...don't like the term but what the heck, I'll take...whatever. For the record, I NEVER order from the seniors' menu at restaurants.

So, you ask, what's my beef with bank charges? I didn't have one until a couple of weeks ago. We took a short four night trip to Vegas in mid April. In keeping with our practice, we took cash out of our US funds account. No exchange, no problem. Right? I did have fair warning before we left that my better half intended to shop. The shopping in Vegas is just too much fun. Jimmy Choo anyone? It was no surprise that we burned through the cash and were soon into the plastic and therein lies my beef with bank charges.

For the entire period we were away the Canadian dollar was trading well above the US, in a range between 1.0225 and 1.0275 US. Guess how we made out with our credit card charges. The best we did was 1.00368 on a day when the C$ was over $1.025 US. A day or two later when the C$ dropped below $1.025 US the rate was .99558. Yup, while our Canadian dollar was worth well over the US$ we lost out on any possible savings by virtue of a 2.5% fee for all foreign currency transactions.

Yup, our banks make tons of money...trouble is, all too often these great returns are at our expense.  For my part, I'll keep shopping for the best deal and I'll stick with my BMO, RBC & TD shares.  After all, like I've mentioned before, the Canadian banks have outperformed the markets every years since 1967.

FEAR and GREED, my personal struggle

Regular readers know that I've been holding the Canadian Endeavour Fund for some time. It had been my largest single holding. Since the last big dip in March, 2009 this Canadian large cap fund has made significant gains and contributed greatly to my overall recovery.

One day last fall I realized that the unit price had risen to the highest level since I initially bought in. Whenever something reaches a new high (for me) there's always a temptation to take the money off the table for fear that it will soon drop and may take forever to come back. Such a decision can't be taken lightly with your largest single holding. Questions. Will I miss further upside if I cash out? Might I lock in the gains and avoid a huge loss if the bottom falls out?

The day it caught my attention the units were at a new high and I figured I'd be real happy to cash out at this level and put the money into a bond or money market fund to avoid further volatility. Remember, my exit strategy calls for me to be out of the markets in advance of my next retirement date as mentioned in Who Should(n't) Be In Funds?

Well, you know what happened to the Endeavour Fund units. They pretty much followed along with the TSX. Up, up and away! Each week the unit price reached a new high. After each new high the price would fall back a tick or two. Each week I'd tell myself that I should have bailed (FEAR). Each week I'd remind myself how much money I gained since that day last fall when I realized that this fund was smokin' (GREED).

As reported on May 5, I tried to cash in some chips...but when I finally made the decision I missed the boat as finance guy was away and didn't think to put an out-of-office notifier on his email account. I know full well that a mutual fund dealer is not like a stock broker in terms of always being able to make contact but I don't think it's too much to ask that finance guy make provision to let clients know when he's not available.

Over the next couple of days finance guy and I were in a bit of a p!$$!ng contest as I noted that I was out several thousand dollars because the fund switch was not completed on Monday, May 2 as requested. Little did I know that finance guy processed the switch on Wednesday, May 4 even though I think I'd made it clear that my window of opportunity had passed on Monday and I planned to wait until the Endeavour Fund units recovered to that same level. I only discovered this when I logged into my account with the fund company a few days later.

So, my fund switch was completed albeit a couple of days late and at great cost as the Endeavour Fund units had gone down and the Bond Fund units had gone up. So, even though it didn't go exactly as planned, I did indeed Sell in May and Go Away. I'll continue to monitor the markets as I'm keeping my trading account and watching for opportunities to make a few changes like getting out of Cisco (CSCO:NY) which is my worst dog at the moment.

We're settling into our new life in Carman, Manitoba and I'm enjoying Bloggin' By The Boyne.

Good Luck and Happy Investing!

TPCI turns two

Yup, the first post to TPCI was two years ago yesterday.

My Blogger profile says that I've been on Blogger since October, 2005. I don't recall blogging back then. Neither Blogger.com nor I have any memory of my activity prior to May 8, 2009. I have a vague memory of ranting on a certain subject way back when. Long before Facebook or Twitter I did consider starting a "Get Michael Kane Off ROBTV (now BNN)" group. That may have been the subject of my early blogging.

TPCI was triggered, I suppose, out of anger. Not the best emotion to harness when attempting to record rational thoughts on a given subject but it did get things going. Along the way, I've come to realize that I was as angry with myself as I was with finance guy. Hey, I'm an adult. I have to take responsibility for my decisions. Sure, it's okay to be PO'ed with the guy doling out the $#!tty advice but, at the end of the day we all went along without taking the trouble to learn what we were getting into.

By May of 2009, my stuff had hit an all time low on November 20, 2008 and nearly got there again on March 2, 2009. So, things were actually on the road to recovery when I first posted to TPCI. Since then it's been quite a ride as regular readers will know.

Last week, the Bin Laden effect gave us a bump up on Monday. The markets apparently responded to the suggestion that the world would be a safer place without Osama. By Tuesday, suggestions that Bin Laden's demise would result in retaliatory violence took the wind out of those sails. This, coupled with an across the board sale off of commodities, sent the markets into a tail spin. Even with a gain of 111 points on Friday, the TSX was off nearly 400 for the week.

For probably just as good a reason as commodities dropped off last week, they're recovering a tad today. Naturally, the TSX is responding in kind although not in a big way.

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

I tried to cash in some chips...but

As mentioned last Monday, I was giving serious consideration to taking some money off the table.  The markets were up on the Bin Laden effect and it was looking like a good day.  My plan was to pull out of my largest single holding, the Canadian Endeavour Fund.

Shortly after 1:00 PM 'Toba time I pulled the trigger and dashed off an email to finance guy in The 'Peg.  "Switch ALL of my Endeavour Fund # 1234 to the Bond Fund #2345" (fictional fund numbers).  I sent the email High Priority and requested a Read Receipt and confirmation by return email.  Naturally, I expected an email saying that he'd do it but would need a signed form for this size of transaction.  He'd never remember that he sent the required form at my request some months ago.  All that was left was me to sign it and date it.

I did not hear back.  Why?  Well, on Tuesday I learned that finance guy was out west, with his computer, but not checking email.  For his failure to put a simple out-of-office notifier on his email account, which would have caused me to contact someone up the ladder, my ship sailed without me aboard.

Monday was the perfect day to make the requested switch.  By Tuesday I was down thousands of dollars because of the market decline.  It was a double hit.  I lost on the units that I tried to get out of when they dropped and lost some more when the units I wanted to buy went up. Wednesday added insult to injury as the same thing happened again.  Ouch!  That hurts!

As for finance guy, he takes no blame and has offered to do not a thing.  I contacted what I thought was his head office in Toronto only to learn that finance guy is an independent broker licensed through them but not employed by them.  A similar call to the fund company in Toronto was to no avail...and no, had I contacted them directly on Monday, they would not have been able to make the switch.  They only act upon orders from licensed dealers.  So, there you have it.  If you're watching your portfolio and think that you may wish to make the occasional timely change, deal with an independent at your own risk.  Me, I'm seriously considering taking my business to the financial services department of one of the major banks.  From past experience I believe that banks tend to support their staff and make amends when someone drops the ball.