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.   

Is This The May To Go Away?

"Sell in May and go away".  This old adage is based on the theory that markets generally perform better from November 1 to April 30 than in the May 1 to October 31 period.  I've written about this before.  Last June to be precise, after taking a licking in May.

I've given up on trying to predict market trends.  Just too many variables which have little or nothing to do with corporate performance.  To name a few, earthquakes, hurricanes, floods, riots, civil unrest and civil war dramatically affect world markets and with electronic access to worldwide news, the effect can be instantaneous.  How many times have you turned on the TV first thing in the morning or checked overnight news on the Internet to discover that Asia, Europe and US futures are up along with the price of oil and gold?  Looking like a great day for the TSX....and then, one of these natural or man made events happens in mid-morning and by noon you've lost any gains that may have been accrued in the past few weeks.

2011 started out slowly.  January saw the TSX rise from 13,443 to 13,551 for a gain of less than 1%.  Things got going in February.  The TSX gained 4% for the month and closed at 14,136.  That, unfortunately is about as good as it gets.  Since the end of February the TSX dipped to 13,524 on March 16 and peaked at 14,270 on April 5.  The close Friday?  13,799.

So, what's causing this lack of direction?  On the plus side, earnings season was mostly positive.  Lead by the banks and energy companies, Canadian corporations reported some excellent numbers.  On the down side, civil unrest in the mid east contributes to holding the price of oil well above $100.00.  Good for energy companies, not so good for the struggling US economy.  If the world's largest economy doesn't gain some traction it's going to be a long time before we see markets back to normal...whatever the heck normal is?  If that wasn't enough, Japan's March earthquake threw the world's third largest economy into turmoil.  Not good!

As of Friday, my stuff is up 5% for the year, well ahead of the TSX which is up only 2%.  I'm interested by the fact that my Canadian Endeavour Fund units are at an all time high.  As I've mentioned many times, this is my largest single holding.  I'll be watching with interest today. If the TSX and the major holdings of the Endeavour Fund hold their own, this may be the day I take that money off the table. 

Hand Held Bloggin'

So, here I am sitting in a diner on Sherbrook Street in The 'Peg and I just had to try a post on the new Blackberry.  It wasn't easy getting here and if I didn't have Plus 2s there's no way I'd be able to see the screen.

Just read in the Globe & Mail that the Canadian dollar is up 27% in the past twenty-four months.  Shoot, I shoulda bought the Canadian dollar.  Wait a minute, I did.  All my stuff is in Canadian dollars.  Where's my 27% ??

Bloggin' By The Boyne

We've been passing through Carman, Manitoba, each summer weekend for the past seven years, on the way to our weekend place at the lake.  "The Lake", that's what Manitobans call any weekend get-away spot.  It can be a cottage, an RV or campground and it's always called the lake...whether or not there's actually a lake or any other body of water.

It was last August when we made the decision that the time had come get out of The 'Peg and make the move to small town Manitoba.  Over the winter our new bungalow in Carman was built and now, after moving on April 4, I'm sitting in the new den looking out at the Boyne River rushing by.  Even with the water's edge a mere fifty feet from our back door, we're assured that we won't be flooded out as the town is protected by a dike and diversion which were built after three floods in the '70s.  Many others in Southern Manitoba won't be so lucky in the next few weeks as flood forecasters are predicting near record water levels for the Red and Assiniboine rivers and their many tributaries.

With the move, I haven't been paying much attention to the markets.  Many days I had no idea what happened until I settled down to watch the evening news.  Just looking at a chart of the TSX and see that it reached 14,252 on March 4 only to sag to 13,524 on March 16.  After that, it was a fairly steady climb back to the 14,000 level by month end.  On April 5 the TSX reached a multi year high of 14,270 after which it sagged a tad but Friday's close of 14,208 was pretty nice.

My stuff actually peaked the day before the TSX and reached a new high on April 4.  The CHARTS are looking sweet.  Hopefully I'm going to be able to pay a bit more attention to the markets, analyze things and make a few changes.  Right now I'm loving my banks.  What's not to love?  I'm really loving Suncor (SU) which is up over 19% since my January 20 purchase.  I'm thinking it's time to say goodbye to COW, the agricultural ETF, which I've been holding for well over two years.  We'll see what happens in the next while.

As always, Good Luck and Happy Investing! 

It's A Puzzle???

The TSX closed out February at 14,136.  Here we are thirty days later and it's not quite back to that level.  The close today was 14,083.  What puzzles me is the fact that my stuff hit a new multi-year high today.  It's a beautiful world!  Guess I'm holding the good stuff at the moment. I won't brag too much because we all know how quickly the markets can turn.

One thing I know for sure is that I'm loving my Canadian banks.  My longest hold is TD.  I bought TD in February 2008 at $69.50.  They closed today at $86.40.  Plus, I've received some great dividends along the way.  Sweet!  My much more recent acquisitions of BMO and RBC are doing remarkably well in the short time I held them. When tempted to sell and take the profit I must remember what that guy said on BNN a while ago.  "Canadian banks have outperformed the markets every year since 1967".  Ya, I gotta remember that.

Tomorrow we close out the month of March and the the first quarter of 2011.  I'm not saying a thing that could be construed as a prediction.  Seems every time I do that the market swings in the opposite direction as though to prove once again that I'm not the sharpest knife in the drawer.

Good Luck and Happy Investing!

It's been a good week when...

Your stuff is worth more after the closing bell on Friday than it was the Friday before.  On that basis, this was a good week.  As the week bumped along it wasn't very exciting but in the end my stuff was up about 1%.  I'll take it.

The big news today was Apple's (AAPL) launch of iPad2 at 5:00 PM 'Peg time.  The local news showed the crowds at the Apple store.  Some had been there since 6:00 AM.  No other company hypes a product, in advance of the launch, like Apple.  The big story next week will be all about how many million units they sold this weekend.

As a proud Canadian I have to feel sorry for Research in Motion (RIM).  RIM introduced their first touch screen smart phone sixteen months after Apple came out with the iPhone.  Then, as though to lay permanent claim to this lag time, they revealed plans to bring out the PlayBook sixteen months after Apple launched the iPad.  Then they said the PlayBook wouldn't be out for another four or five months.  Jeez!  In the meantime Apple brings out iPad2 before RIM sells the first PlayBook which is now slated for launch on April 19.  I wonder how many millions of iPad2s Apple will have sold by then.

As I said a couple of weeks ago, I love my new Blackberry Style but I don't see RIM catching up to Apple in either the consumer smart phone field or the tablet computer market.  They're just too far behind.  As much as I missed some upside by bailing on my RIM shares last fall, I'm still way ahead with the trades I've made since then.  

A gold mine is a hole in the ground with a liar on top.

Mark Twain said that about 160 years ago.  That was a long time ago, before rules, regulations and security commissions were in place to protect investors.  Tell that to Bre-X investors. Back in 1997 Bre-X, a Canadian company, claimed to have a 200 Million once gold resource in Borneo.  Fortunes were made on the way up and wiped out when it was discovered that gold had been blasted onto the walls of the mine with a shotgun.  It was a big story in the late nineties.

I wasn't involved in Bre-X.  HudBay Minerals - My BIG Mistake tells the story of my first mining investment.  This wasn't a story involving fraud or deceit, rather it was about a very successful miner and an overheated commodities market.  When I bought into HudBay the company was debt free, had half a $Billion in the bank and was churning out free cash flow at the rate of a $Million a day.  When the bottom fell out of zinc prices I sold, took the lose and moved on.

Since HudBay I've enjoyed some success with mining stocks most of which I've written about on these pages.  A couple times it was all about timing.  I bought Fording Coal (FDG.UN) just days before a takeover offer from Teck Cominco, now Teck Resources (TCK-A).  I had similar dumb luck with my coal miners late last year.  I bought Western Coal (WTN) and Gande Cashe (GCE) just a few weeks before a takeover offer for Western dragged the whole sector up.  Of course, my biggest success with miners was Scorpio Mining which was my first ever and one and only double.

I've gotta fess up, they're not all winners.  Right now I'm holding a mining stock that's under water.  One day, while listening with one ear, the analyst du jour on BNN recommended Evolving Gold (EVG).  Without doing any research I logged onto my trading account and placed a buy order simply because I had a bit of money left after couple of recent trades.  What I later learned is that Evolving doesn't have a mine...just exploration sites in Wyoming and Nevada. I paid $1.28 that day and they've never there since.  I now have a rule, I don't buy a miner unless it actually has a mine.  I'm going to leave the junior exploration companies to the young guys who are prepared to take the chance that one in ten will actually turn into something.