Here are my posts for this week:
Canadian Snowbird Guide
Disagreement over investing in bonds
Here are my short takes for some weekend reading:
Freakonomics has an interesting list of old ads. If you don’t think societal attitudes about women (and other subjects) have changed much over the years, check out these ads.
Mr. Money Mustache asks whether we need to fire the entire financial advice industry. In this interesting essay, he makes the case that “that most of our modern assumptions about money are bullshit,” particularly when it comes to necessary spending.
Canadian Capitalist objects to a comparison of stock and real estate returns that ignores rental income. Of course, we also have to factor in upkeep costs such as a new roof, etc.
Million Dollar Journey looks at how new mortgage rules for HELOCs affect investors interested in using the Smith Manoeuvre.
The Blunt Bean Counter explains the importance of finding a compatible business partner.
Big Cajun Man objected to being told by Rogers’ customer service that they didn’t want to talk to him.
My Own Advisor explains his low-cost approach to a healthy lawn. My approach is a combination of neglect and low standards.
Friday, May 24, 2013
Thursday, May 23, 2013
Disagreement over Investing in Bonds
According to CNBC, Warren Buffet “said that bonds are a ‘terrible’ investment right now because they are ‘priced artificially’ high ... and could lose people a lot of money when inevitably interest rates start to rise.” Chartered Financial Analyst Steve Lowrie says he disagrees with Buffett, but I think the two are actually talking about different things.
Buffett says he believes that interest rates are set to rise at some point and this will hurt bond prices. This is a statement about expected bond returns over the next few years. Buffett makes no claims about the volatility of bonds, just that their expected returns are poor.
Lowrie objects that investors have a limited capacity for risk and cannot handle an all-stock portfolio. This is true of most investors. However, Lowrie is talking about the volatility of bonds (specifically that it is lower than the volatility of stocks); he is not talking about bonds’ expected returns as Buffett was.
Investors who believe both Buffett and Lowrie can use GICs (or very short-term bonds) for the fixed income part of their portfolios. This avoids the upcoming hit to bond prices that Buffett predicts and avoids increasing portfolio volatility that Lowrie says investors cannot handle.
Apparent disagreement resolved.
Buffett says he believes that interest rates are set to rise at some point and this will hurt bond prices. This is a statement about expected bond returns over the next few years. Buffett makes no claims about the volatility of bonds, just that their expected returns are poor.
Lowrie objects that investors have a limited capacity for risk and cannot handle an all-stock portfolio. This is true of most investors. However, Lowrie is talking about the volatility of bonds (specifically that it is lower than the volatility of stocks); he is not talking about bonds’ expected returns as Buffett was.
Investors who believe both Buffett and Lowrie can use GICs (or very short-term bonds) for the fixed income part of their portfolios. This avoids the upcoming hit to bond prices that Buffett predicts and avoids increasing portfolio volatility that Lowrie says investors cannot handle.
Apparent disagreement resolved.
Tuesday, May 21, 2013
Canadian Snowbird Guide
Having spent some time in the southern U.S. during Canadian winters, I understand the appeal of being a snowbird who lives in Canada during the warm months and travels south for the cold months. I respect those who choose to embrace Canadian winters with outdoor activities, but many of us, particularly as we age, prefer to avoid winter.
With this in mind, I read the fourth edition of Douglas Gray’s Canadian Snowbird Guide, revised in 2008. This book covers a wide range of topics including deciding whether you’re well-suited to snowbirding, home exchanges, financial planning, immigration, renting and buying real estate, insurance, taxes, estate planning, and permanent retirement outside Canada.
Expecting to cover all these topics in full detail is far too ambitious for a single book. For my money, the main value of this book is that it made me aware of a number of issues that had never occurred to me before. For example, supplemental health insurance won’t do you much good in a hospital that only takes cash if your policy doesn’t require the insurance company to provide a cash advance.
Few people will need all of the information in this book, but you can just read the sections that interest you to get a useful overview. Then you can do some further investigating.
It’s not too hard to criticize this book for being out of date. There are constant references to traveler’s cheques, government blue pages in the phone book, and other things that still exist but have largely been replaced by the internet and our modern financial system. But if you’re serious about wanting to avoid big mistakes in living in another country for part of each year, these references to old ways of doing things are easily ignored.
One amusing and (in my opinion) terrible piece of advice in this book is to leave your shoes on during a flight because your feet will swell “and you may have trouble getting your shoes back on if you take them off.” Taking my shoes off during a flight makes me far more comfortable. I make sure to buy shoes wide enough that I can just loosen the laces if my feet swell. Your mileage may vary.
In general, Gray uses calm language to describe problems you may encounter, but he uses slightly sharper words for timeshares: “Be wary of hard-sell marketing” and “Trying to get your money back if you suffer from buyer’s remorse is extremely difficult.” I would be more blunt: the majority of people who buy timeshares have made a terribly expensive mistake. Actually figuring out all the costs of a timeshare usually makes it clear that it is a horrible deal financially.
On the subject of supplementary health insurance while traveling in the U.S., Gray makes it clear that this is a minefield of potential gaps in coverage. One common theme is the importance of giving an accurate medical history. Failing to disclose health problems and tests either deliberately or accidentally can leave you without coverage.
On the subject of gambling, I always thought that the only reason to use a casinos gambling card is to accumulate loyalty points to get free rooms, meals, etc. However, professional poker players may use these cards to help track wins and losses for tax reasons.
Overall, this book isn’t exactly a page-turner, but it does cover a wide range of issues to consider before becoming a snowbird.
With this in mind, I read the fourth edition of Douglas Gray’s Canadian Snowbird Guide, revised in 2008. This book covers a wide range of topics including deciding whether you’re well-suited to snowbirding, home exchanges, financial planning, immigration, renting and buying real estate, insurance, taxes, estate planning, and permanent retirement outside Canada.
Expecting to cover all these topics in full detail is far too ambitious for a single book. For my money, the main value of this book is that it made me aware of a number of issues that had never occurred to me before. For example, supplemental health insurance won’t do you much good in a hospital that only takes cash if your policy doesn’t require the insurance company to provide a cash advance.
Few people will need all of the information in this book, but you can just read the sections that interest you to get a useful overview. Then you can do some further investigating.
It’s not too hard to criticize this book for being out of date. There are constant references to traveler’s cheques, government blue pages in the phone book, and other things that still exist but have largely been replaced by the internet and our modern financial system. But if you’re serious about wanting to avoid big mistakes in living in another country for part of each year, these references to old ways of doing things are easily ignored.
One amusing and (in my opinion) terrible piece of advice in this book is to leave your shoes on during a flight because your feet will swell “and you may have trouble getting your shoes back on if you take them off.” Taking my shoes off during a flight makes me far more comfortable. I make sure to buy shoes wide enough that I can just loosen the laces if my feet swell. Your mileage may vary.
In general, Gray uses calm language to describe problems you may encounter, but he uses slightly sharper words for timeshares: “Be wary of hard-sell marketing” and “Trying to get your money back if you suffer from buyer’s remorse is extremely difficult.” I would be more blunt: the majority of people who buy timeshares have made a terribly expensive mistake. Actually figuring out all the costs of a timeshare usually makes it clear that it is a horrible deal financially.
On the subject of supplementary health insurance while traveling in the U.S., Gray makes it clear that this is a minefield of potential gaps in coverage. One common theme is the importance of giving an accurate medical history. Failing to disclose health problems and tests either deliberately or accidentally can leave you without coverage.
On the subject of gambling, I always thought that the only reason to use a casinos gambling card is to accumulate loyalty points to get free rooms, meals, etc. However, professional poker players may use these cards to help track wins and losses for tax reasons.
Overall, this book isn’t exactly a page-turner, but it does cover a wide range of issues to consider before becoming a snowbird.
Friday, May 17, 2013
Short Takes: Market Timing, Salary Secrecy, and more
Being busy on a business trip, I only wrote one post this week:
Business Travel Personality
Here are my short takes for some weekend reading:
Tom Bradley at Steadyhand paints an accurate picture of the challenges involved in trying to get in and out of the market at the right times.
The Blunt Bean Counter answers the interesting question, “Should You Discuss Your Salary with Friends, Co-Workers or Family?”
Canadian Financial DIY reveals a simple test to see if you’re likely to manage your finances well into your retirement. Spoiler alert: it’s math-related.
Million Dollar Journey has some ideas for saving money on a Disney World vacation. Another idea might be to pass on Disney World and do something else.
Big Cajun Man has an interesting theory on how to avoid having his barbecue run out of propane in the middle of cooking dinner.
Business Travel Personality
Here are my short takes for some weekend reading:
Tom Bradley at Steadyhand paints an accurate picture of the challenges involved in trying to get in and out of the market at the right times.
The Blunt Bean Counter answers the interesting question, “Should You Discuss Your Salary with Friends, Co-Workers or Family?”
Canadian Financial DIY reveals a simple test to see if you’re likely to manage your finances well into your retirement. Spoiler alert: it’s math-related.
Million Dollar Journey has some ideas for saving money on a Disney World vacation. Another idea might be to pass on Disney World and do something else.
Big Cajun Man has an interesting theory on how to avoid having his barbecue run out of propane in the middle of cooking dinner.
Wednesday, May 15, 2013
Business Travel Personality
In the middle of another business trip, I’m once again struck by how the expenses are so much different from what they are in my personal life. My personality begins to change too: “The marble in the lobby isn’t shiny enough.”
I’m part-way though a trip with only 3 full days of meetings that will cost over $5000. Yet, I manage to play golf down south for 8 days for less than one-quarter of this amount. I’m not thrilled about the strange blue light in my current hotel bathroom, but I happily endure far worse during a vacation.
I think this is more than just a case of having a different attitude when someone else is paying. I actually tried to keep the costs of this trip down, but now that the money is spent, I find myself demanding that my treatment reflect the costs.
An amusing side note: there is a big sign at the entrance to to hotel stairway that reads “Stairway Trap”. A little googling revealed that “Trap” translates from Dutch more or less as “step”, but I found it funny the first time I saw it. You’re not likely to trap anyone if you tell them about the trap.
I’m part-way though a trip with only 3 full days of meetings that will cost over $5000. Yet, I manage to play golf down south for 8 days for less than one-quarter of this amount. I’m not thrilled about the strange blue light in my current hotel bathroom, but I happily endure far worse during a vacation.
I think this is more than just a case of having a different attitude when someone else is paying. I actually tried to keep the costs of this trip down, but now that the money is spent, I find myself demanding that my treatment reflect the costs.
An amusing side note: there is a big sign at the entrance to to hotel stairway that reads “Stairway Trap”. A little googling revealed that “Trap” translates from Dutch more or less as “step”, but I found it funny the first time I saw it. You’re not likely to trap anyone if you tell them about the trap.
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