Monday, March 23, 2009

Pure emotion

I get to work, read an investing newsletter from my uncle Gerry, log into my trading account and immediately make a blindly emotional buy in the first minute after the opening bell. How's that for not following my own advice? I broke the following rules:

1. Never invest on emotion
2. Never invest during beginner hour (the first hour after the market opens)

In a remarkable break with history, the markets went roaring up today, including my stock, a leveraged financial ETF called ProShares Ultra Financial, which went up 25% today. Do I feel like a star? Yes I do. Is it completely stupid to feel like a star when your short term success is due completely to blind luck? Of course, but it still feels good to be on the winning side of a trade for a change.

Actually, I consider this "gambling money" and since it was a small amount I was willing to take a risk. So I submit that this was a Monday morning trip to the online casino, likely brought on by the lack of excitement over the weekend (we were laying flooring in a rental unit).

Next thing to decide.....do I keep it or dump it for a profit at the end of the week?

Thursday, March 19, 2009

Sucker's rally or the bottom

I felt compelled to do a quick entry on the markets. I want to use this blog to develop my investing skills and part of that is learning how take your emotions out of the investment process.

The tsx has been on a tear, up almost 15% in the past ten days. Oil is up over $50 from $34 a couple weeks ago. With volatility like this, makes one feel like you're living in a casino!

At the last market bottom I invested about 20% of our "investable" money (in other words, the amount I put into Ana'a rsp this year which I've kept in cash awaiting good entry points). Now my emotions are telling me, "why didn't you invest more, dummy, what the hell were you thinking?" That's called the greed emotion - the feeling that I've lost out due to a bad decision. My emotions are also saying, "put more in the market now, if you don't it will just keep going higher and you'll miss out on more". Well, I'm trying to look at this objectively. The markets are leading indicators of an economic turnaround, normally (and I say "normally" with a clump of salt) six months ahead. I honestly think that you would be crazy to think there's any sort of economic recovery coming in six months. In fact, I think the pain is just now starting to be felt and the downstream multiplier effect hasn't even really kicked in yet. Let's say Chrysler pulls out of Canada putting all those uncompromising, union buttheads out of work. That massive job loss will be immediately tragic, but will also lead to all sorts of pain down the road. Most people can hang on for months on savings, liquidating investments, selling unnecessary toys, but once that runs out then we'll be seeing defaults on mortgate payments which, in turn, starts to effect the banks. But this takes a very, very long time.

The way I see it, I could be sitting here two months from now with my emotions telling me, "you idiot, you never should have invested that 20%, now the tsx is down to 6000 and you've lost even more money. Sell it now while it's still worth something! In fact, you should have shorted the market back in March when it went up to 8600, what a lost opportunity you bozo!"

Our emotions can be so insensitive.

For now, I'll just track my feelings, watch the markets, get in when I think the time is right, get out when it seems prudent, be happy with my good (lucky?) decisions and learn from the bad ones. If I can do that, then I'd say I'm doing an excellent job investing no matter what happens.

Saturday, March 14, 2009

Weekender in Saskatoon

Considering we normally visit Saskatoon every couple months this trip is a long time coming. We haven't been back to Saskatoon since last summer so it was definitely time. We left Thursday after work and arrived here around 8:30 pm, which gave my brother Curt and I plenty of time to get good and smashed - in fact the nightcap consisted of half a bottle of fine port, which was like a sledgehammer to the cranium the next morning. Well, like the tshirt says, "The liver is evil and must be punished".

It's always a busy trip visiting Saskatoon. This time we're staying at my brother Curtis' funky new Hay Loft (http://www.saskatoonhayloft.blogspot.com/) where the kids are having a most adventurous time exploring all the nooks and crannies of this exceptional house.

Well, time to blast - we're heading out to Mom's greenhouse to help them plant some tomatoes.

Tuesday, March 10, 2009

What's wrong with this apartment?

So we've got this apartment we've been trying to rent. This was the previous residence of our worst tenant, a loser-supremo who we inherited when we bought the building. He caused us more grief, stress and wasted money than all of our other tenants combined. We've been trying to get rid of him since we bought the building, and in the process learned a great deal about the Ontario Residential Tenancies Act which seems to have been custom designed to encourage and develop a strong population of deadbeat tenants at the expense of decent landlords and honest renters.

Through some unexplained miracle, he actually moved out of his own accord at the end of January, producing tears of joy and moments of unbelievable happiness in the Olson household. The first part of February was spent renovating and it was available for rent by mid month. Well, it's still empty. We've shown it at least ten times to over 20 or 30 potential tenants and have only received a single application, from a 17 boy with a 16 year old girlfriend, new baby, and no job. You have to realize that Brantford is a seriously blue collar town with a lot of transient people. A friend of mine who's been a landlord here for many years told me the quality of tenants used to be excellent but is now absolutely terrible, as anybody who had any inclination for owning their own house, has done so during the past decade, likely because of low interest rates and easy credit. He now faces the same problems finding good quality tenants.

This property, unfortunately, is not in the best area. Though it's close to downtown and in the middle of a commercial district with all sorts of shops, it's an area that is not look too well upon. It is far from the worst area in the city, but is definitely in the lower half.

Try as we may, we've not been able to rent it. So we're changing tactics. Step one was to shorten our application form and remove some of the more penetrating questions, so we're now down to two pages instead of four. Step two is to replace the carpets with laminate flooring. We didn't want to spend money on this, but we've had a couple comments from people about a lingering smoky odour in the apartment, which is surely coming from the old carpets. Mr. Wonderful, the previous tenant, and his roommate each smoked a couple packs of cigs a day and about a bale of marijuana per week between them. Seems that two bottles of Febreze was not nearly enough to eliminate the stink so removing the carpet is the only option.

Patience is the name of the game. We're not going to make the mistake of putting a bad tenant in there, that will only cause us problems down the road.

Just another day as a greedy landlord...

Monday, March 2, 2009

Family business planning

As I sit here at our home office desk, looking over a table full of stacks of invoices, I think to myself about the extremel level of organization it takes to keep yourself from drowning in a sea of administration. For example. we currently own two corporations (actually, just dissolved one so we down to one now thankfully), six properties, two vehicles, four mortgages and at least a dozen individual bank and investment accounts. I do all of our own corporate and individual taxes as well as tax returns for about eight other family members. This results in a great deal of time spent in opening mail, filing invoices, downloading banking and monitoring and reviewing investments. How much time? Probably about five to ten hours per week on average.

I think back to when Ana and I lived overseas and owned nothing besides one bank account and can't remember what life was like without all the administration - though I think it must have been pretty good! I've realized since then that the amount of administration in your life is directly proportional to the number of things you own. This accumulation of "things" for us has been very deliberate, though. Our overriding financial goal, as a family, is to direct our resources into owning things which generate income even while we are not there. We have been though a very steep learning curve since moving back to Canada and have learned an great deal about business, finance and taxes and it has been and continues to be a great ride.

Last night, I was here in the office, with bank and credit card statements spread over the floor (because the desk was full of receipts), attempting to sort and arrange them in chronological piles. Stella walked in and said, "Daddy, what are you doing?". I said, "Organizing our money". She said, "Why you organizing our money?". That's where I got stuck. One of the things I truly dislike having to do is balance my time between taking care of business and taking care of family. I would much rather be spending all my time with Ana and the kids instead of shuffling paper but at times like that I try to remember that we are doing this for a reason. We don't want to be like most people, who are utterly dependent on a paycheque from some employer who really doesn't give two hoots about them. We want to teach our kids the importance of being independent but to do that properly, we need to really learn it ourselves first. Independence means taking responsibility; for your finances, your job, your investments, your taxes and your business.

Though it's tough to devote this time to administration, I know that it is paying off now and will certainly pay off in the end.

(ps. after my discussion with Stella, I dropped what I was doing and went to play with her for a while...that was a lot more fun than piling invoices!)