Month: February 2010

Oil is a righteous investment

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A lot of religious people, especially environmentalists (but even some Christians), consider petroleum a sin.  By contrast, here are some reasons that oil is a righteous investment:

(1) Oil is a plentiful energy source which was created by a good God who made all things for our benefit (Genesis 1-2).

(2) Oil is the energy of choice which fuels production in world’s strongest economies and helps to provide for the general well-being of billions of people.

(3) Oil is was provided by our Creator as an extremely efficient fuel source, unlike ethanol and other biofuels which derive from grains and other foods, which God provides to us for food because he loves us.  The use of biofuels has led to an increase in global food prices which have greatly hurt the poor.  The consumption of oil and other petroleum products such as natural gas and coal have no such negative consequences for the world food market.

(4) Oil is proving to be a renewable resource and not a fossil fuel.  Therefore, it is not something that we will run out of; we will not see Armeggedon because we run out of oil, but perhaps if we are not allowed to exploit sources of oil that we know exist.

(5) Anthropogenic global warming is a hoax.  Therefore, there is no substance to the main argument against oil–the fear that the planet will turn into a ball of fire.

Leftist, anarchist Christians against the Winter Olympics in Vancouver

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My friend the Brooks pointed out a conversation at the blog of Nathan Colquhoun, in a blog post, “The Enchanting Economics of Death, Spectacular Resistance, and the Pursuit of New Life: a reflection from the streets of Vancouver“, in which Colquhoun repeats the anxious rant of an anonymous protestor at the games.  It has aroused a discussion in which Dan Oudshoorn, a.k.a. Poserorprophet, insults everyone who disagrees with him and basically condemns wealthy Christians.  Poser offered on his own blog another post by the same anonymous poster called “F— the police”.

Many of the institutions with which I do business, Royal Bank, oil sands, Latin American mining companies, TD Bank, were mentioned.  So I decided to write the following comment against Poser, against the anonymous Poster, and against the generally anarchist marxist tendencies among certain Christians today:

This conversation really baffles me. The other day on his blog Poser said that he needed to raise funds for his new job: amongst whom was he going raise this funding this except ordinary Christians who have money and jobs? He studies at Regent College which is richly endowed by wealthy Christians. He then condemns them all with a sweeping, Bourgeois Christians: “my friend is now being vilified by a bunch of bourgeois Christians who are far removed from the struggle for justice”.

I don’t have a particular ax to grind about the Olympics but the disconnect to me is related to the “economics of death”. Besides the poor Georgian luger, who has died? When Christians talk about the culture of death it is easy to see who has died, 100s of millions of babies. But “economics of death”? That is a play on the term “culture of death”, and yet it is hallow. Who is dying? Who did TD Bank kill that they deserve to have their windows smashed? And for that matter, just because RBC is behind the oil sands, why is that so bad? If it weren’t for oil, you poor folks would have to walk everywhere you go. That’s fine if you live in some African country where it is warm all the time, but some of them work 18 hours a day carrying firewood on small carts for $3 a day. I’d much rather burn oil sands in my Toyota than die at 38 of exhaustion in that kind of misery. But walking everywhere you go is not really an option for living in Canada, particularly in winter.

What are the protesters doing to create life. Anyone can smash a window. The thief comes to steal and kill and destroy. Vandalism is theft by destruction. That is not what Jesus did. He overturned the tables to prevent the moneychangers from stealing from the people of God and thus charging them to worship God which the moneychangers had no right to do.

Finally, the poster refers to destroying the structures of the economics of death, forewarned that others who have done this (communists around the world) have created misery. Yet Canada is one of the greatest countries in the world and the envy of many millions who long to have an opportunity to come here to live, to study and to raise their families. Yet all the protesters, the poster, and Poser can think about is how to destroy what other people envy. Is that not a sign of their own envy? There is something deeply wrong with that. TD Bank, by employing thousands of people, by extending mortgages to allow young couples to buy their first house, and by providing a safe place where people can put their investments, has done more to promote the welfare of the many than these sad anarchists. That is why I am a proud, bourgeois Christian stockholder of TD.

“In order to construct a society that is more just, less just ways of organizing life together must be destructed. This should be obvious.” This is an extremely scary prospect. When people who hold such views have succeeded only misery results. Please name one case where death was not the result of destruction of capitalism. 100,000,000 people were killed by communists in 20th century alone. Is that not enough?

Signed, an investor in oil sands and Latin American mines, shopper at the Bay, a proud-soon-to-be Canadian, Bourgeois Christian, who owns more than one pair of shoes.

Poser responded, and I replied:

  1. dan says:

    Shame on you, Peter. That’s my cue to exit this conversation.

  2. P. W. Dunn says:

    Poser, your response confirms what one of the professors at Regent told me a few months back: he said there is among the students a new generation of Pharisees. This reminds me of Matt 23.4: “They bind heavy burdens, hard to bear, and lay them on men’s shoulders; but they themselves will not move them with their finger.” You leave in a huff, telling me to be ashamed, but you fail even to explain for what things I should be ashamed or even to give a single counterargument. I can only suppose it is because I am a proud-soon-to-be Canadian. Or is it just because I am wealthy, owning two pairs of shoes?

Taxing stock transactions: the same weary story from Democrats.

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The Democrats have the same weary narrative that the growth of government and pressure on the private sector is how to solve the woes of the world.  Now they want to add a 0.125 % tax on each side of a stock purchase.  Dean Baker writes an opinion column at Forbes, “Make Speculators Pay“, promoting this stupid idea.  This would kill the day trading industry. Which means that TD Ameritrade and other discount brokerages would have far fewer commission and less revenue from this industry, resulting in less tax dollars for the US government.  It will dissuade the activity of day trading, but it is extremely unlikely to solve any problems.  It will just squeeze the private sector even more and lead to even more unemployment.

In my opinion day traders pay an important role in greasing the stock market.  They put added liquidity in the market and it helps to keep the machine flowing.  I don’t think day traders can be credibly blamed for any of the current economic conditions that we are experiencing.  The sudden credit crisis caused by the meltdown in the sub-prime mortgage market was caused by a combination of government regulation (Community Reinvestment Act) and the sale of bad loans as investment products by lenders.  It is also caused by too much leverage (Bear Sterns, Lehman Brothers, consumer debt).  Now, the pressure that the Obama government is putting on the private sector is exasperating the situation and leading to massive unemployment.  Taxing investors is clearly unnecessary and counter productive–it is unnecessary because they already pay income taxes on whatever they earn.  Instead, Congress should be seeking to encourage people to speculate in the US, not just day traders but speculative investors; the best way to encourage investment is by lowering taxes, but instead, they only want to penalize speculation.  Well, my money is not going into the US market any time soon.  So I guess the Dems have managed to get rid of one speculator right off the bat.

Fisking John Heinzl

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The problem with investing is that it is as much an art as it is a science.  There is no one formula which will lead to success.  Investing is more about a person’s temperament than it is about implementing rules of success. Nevertheless, financial columnists are always giving rules of investing.  John Heinzl of the Globe and Mail offers several today in his article “Thirty nine investing secrets revealed at last!“, and I list only the ones in italics that I wish to comment on:

1. Learn as much as you can about investing. Nobody (except maybe your heirs) cares more about protecting and building your wealth than you do.

This is probably not feasible for many people.  Sure if you have nothing to do except read about investing it fits.  But consider my father-in-law who was a successful entrepreneur who started two different prop-shops in his career in two different cities.  His greatest investment was his own business, and when it came to his retirement savings, he needed to rely on others.  My own father was a physician; during my entire childhood I don’t remember my dad ever watching an entire 1 hour television show without falling asleep.  People with successful careers must unfortunately rely on others.

2. As the ING guy says, “Save your money!” Without savings, you have nothing to invest.

3. If you’re having trouble saving, track your income and expenses to the nearest dime for a few months. It’s the only way to find out where your money is going and, hence, the only way to figure out where you can cut back to save more.

Being able to save many not be about tracking every dime so much as keeping in check one’s desires and cravings.  But sure, track your expenditures and see analyze how you are spending or even wasting your money.

5. Keep a percentage of your savings, roughly equivalent to your age, in low-risk bonds or GICs. This is your “sleep at night money.”

In periods of inflation, fixed income assets that pay low interest rates are as risky as any other asset class.  With governments actively seeking to create inflation, all investments are risky.  All of them.

7. Always be on the lookout for “black swans” – rare and destabilizing events that aren’t supposed to happen but do. (Credit meltdown, anyone?)

Well disasters can happen.  Even death.  That’s why it is important to have faith in God and trust in Jesus Christ for one’s eternal salvation.  But being on the look out is not the same as being prepared.  How would one have prepared for the last credit crisis?  I think by not being leveraged to the hilt and therefore having the cash or credit to be able to take advantage of the bargains that will be out there if there is another meltdown.  If it ends in your country being defeat or annihilated in a world war , it won’t matter what you invest in.

8. Invest a portion of your savings in a low-fee index mutual funds or exchange-traded funds.

This is advanced investment advice?  Fifteen years ago when I had a less than $2000 for my registered retirement account I used mutual funds.  But I eschew both ETFs and mutual funds today, because as a DIY investor I pay far less in commissions and management fees at $9.99 per trade for stocks.

9. When buying individual stocks, stick with those that pay dividends, preferably rising dividends.

My best performing stocks don’t pay dividends.  They are small, junior oil companies that are high risk but largely off the radar.  You usually pay premium for large companies that pay rising dividends.  In the long run, they perform very well, but neglected small companies can give multiple rates of return which greatly outperform the dividend payers.

10. Reinvest your dividends and interest payments to benefit from compounding.

11. Remember that investing isn’t a sprint but a marathon – a very, very long marathon. The longer you invest, the greater the benefits of compounding.

This is true.  Reinvesting the earnings from my stocks that pay monthly redistribution has really work out well for me.

12. Don’t listen to stock tips from your brother-in-law.

My father-in-law gave me a great tip:  tfl, which became mel.  It is my best performer thanks to my strategy of averaging down.

13. Avoid “story” stocks. They’re usually duds.

I don’t know what a “story” stock is.

14. Stay out of debt. If you’re in debt, get out.

In October 2008, my wife and I took a HELOC and bought numerous Canadian income trusts.  Thanks to trading, distributions and my day job, I’ve been able to pay it off completely.  Then I borrowed funds on my margin account in order to do carry trade against the US dollar.  I am making net profit from the distributions and am waiting for the investments to improve in value and the US dollar to depreciate.  So far I can’t complain.  Not all debt is equal.  Some debt is good debt.

15. Pay off your mortgage as quickly as possible.

This is too true.  Because we replaced our mortgage with a HELOC. The advantage is that the money that we now borrow against our house is used for investments for which the interest is deductible (in Canada, interest on the mortgage for a person primary dwelling is not deductable, only interest on investments which provide an income).

16. Take full advantage of RRSPs, TFSAs and RESPs.

This is advice for Canadians (like me soon to be) and residents of Canada.

17. Invest in Canadian banks. The same reasons we hate them as customers – too big, not enough competition – are why we love them as investors.

Ok.  Canadian banks however experience periods when they are over bought.  They are not a panacea investment.  I’ve lowered my exposure to banks recently in favor of higher yield oil companies.  I have profitably traded Royal Bank.

18. Invest in boring companies – pipelines, power producers, utilities.

I think Enron was a utility company, power production and pipelines.

21. Always question your adviser, and never pull the trigger on a trade until you get a second opinion from someone you trust.

When we had an advisor he would talk us out of our ideas.  At first he saved our asses because we didn’t know anything.  Later it became annoying; so I took over completely our portfolio and learned to rely on my own judgement.  I win some and lose some, but I now always save on commissions.

22. Read The Investment Zoo by Stephen Jarislowsky.

23. Visit the website, dividendgrowth.ca, run by Mr. Jarislowsky’s biggest fan, Tom Connolly.

24. Read The Single Best Investment: Creating Wealth with Dividend Growth , by Lowell Miller.

Thanks Mr. Heinzl!  I’ll have to check these out.

25. Keep your trading costs as low as possible.

27. Keep trading to a minimum to reduce commission costs.

I have had some success, and some failures, in well-timed trades.  My commission at $9.99 are a negligible cost.

28. Resist the urge to check your portfolio every five minutes. It encourages excessive trading.

I confess.  But I don’t trade excessively at all.

29. Consolidate your investments with one broker. It’s easier to track how you’re doing.

Once over 1 million in an account you aren’t insured anymore in  Canada.  Be careful not to exceed that limit.  Also beware of the Madoffs in the world.  The worst possible investment would be to be consolidated in pyramid scheme.

34. Don’t invest in anything you don’t understand.

Thirty-four is very true.  But you don’t have to understand absolutely everything, just the basics like P/E ratios, revenue, dividend yield, book value, market capitalization and net asset value (NAV).  Also, one should have a fundamental understanding of the business, why their products sell, and who are their competitors and their markets.

The New Berlin Wall: Heroes Earnings Assistance and Relief Tax Act 2008

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Yesterday I sent my application for Canadian citizenship via registered mail to the Sydney, Ontario, Processing Centre.  An American citizen from birth, I’ve lived outside the USA, first as a student then as a permanent resident of Canada, since 1986.  I’ve never really felt that I needed Canadian citizenship.  My reason for applying now is that it is inconvenient being an American living in Canada.  So before my citizenship ceremony in a year or so, I will be renouncing my US citizenship.  Likely, for a few days while awaiting the ceremony, I will be a stateless person. [actually, I became a Canadian on February 28, 2011, and informed the US Consulate in Toronto of my relinquishment on April 7, 2011]

The United States is the only country in the world that requires that all its residents and all its citizens, even if living abroad, pay tax, though there is an earned income exemption of $70,000 [over 90,000 today] and foreign tax, dollar per dollar, credit.  The threshold for filing is ridiculously low.  As a married person filing a separate return, I must file if I make more than $2000; this despite the knowledge that as a resident of Canada, it is difficult to imagine very many scenarios where I might be liable for tax, since the rate here is higher than in the USA, particularly for lower income earners.  But it is a hassle to file every year, and it creates a lot of anxiety for me.  Last year, my accountant forgot a certain form and he was sick when I was required to send the amendment, and so I had to do it myself and that created a huge headache.

So I am not going to renounce my citizenship because I owe tax.  I am liable to the IRS for nothing.  I am doing it first of all because I am tired of filing a frivolous return to the IRS each year; frivolous because I owe nothing, and cannot possibly owe anything living here in Canada.

But there is another even more important reason which I call the “New Berlin Wall”.  Since 2008, the US has placed particular restrictions on wealthy people who wish to expatriate.  If I were to own 2 million in assets or if my average net income tax liability over the last five years were $139,000 , I would be a “covered expatriate” upon renouncing my citizenship.  The law penalizes these individuals with exorbitant expatriation tax that boggles the mind.  Why?  To keep them in the USA.  So it is a Berlin Wall designed to keep people from leaving the US.

I am long way from being a covered expatriate.  But with the devaluation of the dollar due to hyperinflation, I foresee being there soon.  Therefore, I’ve decided to leave before the law applies to me; because it was much easier to leave East Berlin before the Wall was built.

Oh and by the way, Go Canada Go!!!

[corrections, 20 April 2011]