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Tuesday, December 11, 2018

That margin account is getting seriously paid down

I wasn't available to write anything on Sunday for the usual Sunday evening post. Its just didn't happen. I got a haircut and I actually just realize now, but I got a Marilyn Monroe kind of cutty look! If you want to know what my hair looks like, check the 7th pic of Marilyn on this page. My hairs are curly that way when I don't put any product on them and with something, the curls are more defined. So I guess I need to be flatter that my stylist came with a Marilyn Monroe iconic style on my pretty me. Next time, I will try to have it even a bit shorter. It's actually hard to style very natural curly hair. Such hair needs a really good defined cut. And my hair grows quite quickly too. I need a haircut every two and a half months. I try to extend over it, but it's just not possible. Crazy hair.

Other than my pretty haircut, a lot had happened! I finally got to happen to sell some investments this past Friday. Inside my TFSA, I sold the following: Parkland Fuel Corp (PKI), National Bank of Canada (NA), Canadian Imperial Bank Of Commerce (CM), Enbridge Inc. (ENB), The North West Company Inc. (NWC). The money got transferred from my TFSA to my margin account today. My margin account usage is now at $45 170.95. As soon as January 1th kick in, I plan to probably sell all of my Pembina Pipeline Corporation (PPL) stocks and probably also all of my TransCanada Corp (TRP) stocks, and I will try to invest in my TFSA account. Its been announced that for 2019, the contribution limit for the TFSA will be of $6 000. 

The amount I transferred from my TFSA portfolio to my margin will be eligible for a TFSA contribution in 2019. So I will have over 25k in contribution room for my TFSA in 2019. I already have spotted a few investments that I will like to transfer from my non-registered portfolio to my TFSA one:

Nutrien Ltd. (NTR)
ATCO Ltd. (ACO.Y) 
Canadian Imperial Bank Of Commerce (CM)
Goodfood Market Corp. (FOOD)
TFI International Inc. (TFII)

Aecon Group Inc. (ARE)
Aphria Inc. (APH)
BCE Inc. (BCE)
Emera Inc. (EMA)
Jamieson Wellness Inc. (JWEL)

Following those contributions in kind, I will still room for another close to 5k, but that contribution in cash for my TFSA will be made only once I get the 19k margin left (which is e amount left once I will sell PPL). So all this is finally getting exciting. Who knew that paying my margin could be interesting, but it is when the TSX is all upside down AND trading under the 15 000 points. It's chaos. I still believe that paying down my margin is the right thing to do. It will be my project for 2019.

If you notice, Aphria Inc. (APH) appears in the list of investments I plan to use for a contribution in kind for my TFSA. APH businesses are real, no matter what satanic son has to say about it. APH has always been volatile, it takes a hit on the news, but I think we can expect to see APH back in $20 value one day. I have all the time in the word, and I am certainly not in a hurry.

I cannot even believe that I am finally getting that margin paid off. And I am so pretty with my new hair cut. I look like a cute little innocent angel.


Anonymous said...

If you tranfer Aphria in kind to your TFSA, you will suffer a capital loss but won't be able to claim it on your income tax.

Anonymous said...

I know you think you understand "in kind" transfer, and wrote a blog about but, but there is no good reason to make a contribution in kind, it's a trap.

It's the equivalent of selling the stock and buying it back in TFSA, and you'll be paying taxes same as if you had sold them. And you don't get to pick the "purchase" price in TSFA, so you're now exposed to losing money if the stock goes down. (What's different from just continuing to hold onto the stock, is that you paid the tax on the gain. Therefore if it goes down you lose what you paid in taxes in addition to "paper loss". You need to deduct the taxes owed/paid from your paper profit)

The stock needs to not only continue to go up from the moment "in kind" transfer, but you're also only positive again on it if it goes up enough to cover the taxes you had to pay for the "in kind" transfer.

Even if you thought that the stocks still had a lot of upside from the current price (debatable since we're probably going to go in recession in 2019), In this volatile market, you could probably sell the stock and buy them at a lower price later in the TFSA a few days later.

If the stocks are at a lost, then you lose the ability to offset capital gains, so it doesn't makes sense there either. The capital loss is just money you abandon instead of getting it back from the government. Imagine if your commission at TD was 100$ to trade stocks, would you do it? Then why would you abandon 100$ or more on a transaction?

If you say "but I want to keep that stock in my portfolio and just move it", that's just emotions. The only thing that matters is making money, the shares do not care about you and don't mind if you dump them and buy new ones later. They are not people.

What you should do probably instead is move money into the TFSA -- even if it's from margin -- and buy new opportunities. Now, what kind of opportunities? Well, gold has been in a bear market for years and will probably turn around so it might be worth to get back into gold since the downside is minimal. Residential REITs will probably also fare well as the economy slows down, as they're considered flight-to-safety stocks. They've been beaten down due to interest rates going up, but the interest rates hikes are ending. The only thing that matters is making more money than the interest of margin costs.

The oil stocks are also down right now because of a record drop in oil price. It's probably a good time to buy, as it will go up in the future. The current oil price is not sustainable and is purely a geopolitical issue.

There is usually a rally the last week of December, btw, a good time to drop stocks.

Lynch Soary said...

Dear Anonymous, you look like a market timer, and you must be a multi millionaire (?).

Suggesting to own gold & oil? What a joke. Both are kind of dying industries.

Residential REITS didn’t take hit due to rising rate. Actually those REITS are now at all time high..

Having a diversify portfolio with high quality dividend growth stocks is the proven way to build wealth.

Market timers never make any money.

Anonymous said...

Lynch Soary, I'm the anonymous above.

What I'm talking about doing in my post isn't really market timing so much as value investing. i.e. buying things that are cheap and have little downside potential. Which as far as I can tell is what dividend girl often does, and she does own gold and oil already.

Value investing is not market timing. It's figuring out stocks that are temporarily beaten down. It should be something that's in your toolbox as an investor.

If you look around at the renown "the high-quality dividend growth", if they are not banks, many of them are energy-related stock and they're trading to natural gas and oil. RIght now you feel that oil is dumb because the price of oil is being pressured down, but it was the smartest dividend long-term play a year ago. And oil and gold have always been part of a diversified portfolio. If oil is a dying industry then you should probably sell all your Canadian stocks because we're doomed.

Facts are, we just don't know how long something remains "high quality". People who bought Nortel, or GE in the US, were just as sure as the people buying Bell today.

You'll find a lot of advice online about building a diversified dividend portfolio. IMHO, it's all peachy when we're in the longest bull market in history. Everyone feels like a finance genius. When the market starts to go down and the dividends get cut, you're screwed.

peczeksthoughts said...

Why would you sell stocks during a market downturn? Literally makes no sense.


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