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Debt




$86 807.33 at 4.25% = $3 689.31 in annual interest


[In date of April 24, 2017]




*For a complete update regarding my debt, click on the label "Debt situation" located at the right column of this blog.

28 comments:

John C said...

Hi,

I would advise to not invest with margin at all. There are many reasons for this. One of which is that margin will force you to sell at the bottom and buy more at tops. This has been my experience. I have over the years learned a few things. First is that margin is a fool's game. Second is that you don't need a lot of money to make a lot of money in the market. You need to be right more than you need to be big.

I too miss Jean Francois Tardif. I was one of his investors in his funds before he retired. I had a few occasions to talk with him one on one. I'll miss that. However he is human just like the rest of us. This is how I happened upon your blog.

I would invest with him in a heartbeat if he came back. I know that guy and he would have agreed with me about the use of margin. We talked about margin calls and stuff.

You see margin is like taking steroids in investing and when you lose it exacerbates the losses. You aren't the problem. There are others that are heavily margin sometimes many fold. This is Tardif's talk about deleveraging.

When you own a stock you also own it with a lot of people that are margined. If there is a major selling event then you will be affected even if you aren't margined too much. Their selling will be forced as the margin clerks hold the power and not the FED. So the first group of sellers are the most heavily margined. Then the next group of not so leveraged investors and so on sell. Until it gets to the lesser margined ones like you.

To make real money you need to time the market declines before they happen. You buy when others are scared and sell. Forced sales are what you look for and good companies that got taken out with the rest of the market are where you want to hang out. This is why you keep a certain percentage of your assets in cash.

Think of cash like gasoline. You need to keep some on hand for just such an occasion.

You too can pick like JF if you really really try.

I had lunch with him once during Sprott speaker series. He is very good guy to talk to and I was lucky enough to have one on one time after the talk.

Sunny said...

Hi John, thank you kindly for your comment. I first start margin - I was supposed to use the margin money to pay off debt at a higher interest rate. I did so, but among the way, I quickly began to use margin to invest. You are right about margin, it's also a way broker came with to make huge money on the back of retail investor. So far I am doing ok, my top perfomer equilibrate the whole thing. I am on top of everything yet, but its going fine. I am happy with my result and how it's been going on. Jean Francois Tardif is quite a man, I was and still totally fascinated by him. It's the type of individual who's probably still active on the market, but now he is quiet. He may come back, I mean now, his girl graduate from high school etc so yeah come back Jean Francois and make the minimum investment of 1000$ PLEASE. :) especially now that Eric Sprott will soon retired, we need someone like Tardif on the market. I am pretty sure is missing his TV appearances ;0)

John C. said...

Hi,

I have a question for you. How do you know so much about JF? He is a good guy to know.

Just keep an eye on that margin and if you sense this market is about to come apart at the seems then get rid of the maring immediately.

Just remember the cautious stance that JF had going on. He was net net zero in the market. Conditions haven't changed that much since JF left. We still have a lot of deleveraging going on and it will take years and years to clear the system. By zero exposure I mean JF had a lot of pairs trades going on where he was long one company and short another company in the same sector. This allowed him to get some company specific exposure while removing general market exposure.

I did have the pleasure of having money invested with JF. I pulled that money when JF left.

Try to stay along the same lines.

Regards,

John C.

Sunny said...

Hi John,

This is all very interesting and thank you for your contribution!

I read a lot about Jean Francois Tardif on the Web. I was fascinated by his talent to be able to beat the index at a time where everyone was loosing on the market, including me :) Tardif quickly became one of my financial guru.

I started investing in stocks in 2008, just before the crash. My first stock investment was Sprott Inc. (SII). So I am a big fan of everything related from far or away of Sprott!

You are right about the margin and I respect your opinion. Everyone out there is against margin, Derek Foster, Andrew Hallam. And they are absolutely right. But remember that at first, I open my margin in order to pay off debt at a higher interest. It wasn't made to invest... But... I did. I invest in TMX Group in February using margin money. I got great gain on the investment and a good dividend payout. Also CFX that had been very good etc.

I made great investment in CFX, X, EIF, but made bad ones in NFI.UN, GCL etc.. I am not perfect, my portfolio is not either, my margin was made to pay off debt but the temptation was too high to invest using margin and truly, I don't regret anything.

How it worked so far for me is that overall, my gains always exceeded my loses. Not that I want to say that I am better in any way, but because my portfolio is so diversified in different companies, different sectors, I am able to take almost whatever will be coming on from the market. If something happen that I get into a margin call, well, what will need to happen will happen.

A reason why I am still in is that i don't think the economy will totally collapse no matter what happen next. I think institutions and governments worldwide will do what they need to do to "save" the situation. I will be able to take a 30% loss in my portfolio. I took the hit in 2008, I was in, I know it can happen again. But i think pretty much like Warren Buffett, that the economy is not about to collapse. No matter what's about to come I am going to take it. Just like in 2008.

Getting into debt to invest is not the brightest idea, but when I was 29, I gave myself the challenge to hit the 100k. I did and exceed that using money from debt. And the 100k was not net worth. I invest on margin for my own satisfaction and while understanding all of the risk. I am responsible for it.

A bit like yourself, I sell my holding of Creststreet Alternative Energy Fund when Steve Martin left Creststreet. Steve Martin was just like Jean-François Tardif, beating all expectation. We no longer hear of JF and we no longer hear of Steve Martin - the exception will be on my blog of course.

In life, you need to know who are the bad and who the good ones and JF, Steve Martin, Derek Foster - all good. As for Andrew, I wait to read his book to fix myself on him - a guru or not.

At this time, I will be just very proud of myself if I can go through this time without a margin call. I don't plan to sell anything for now. If the market collapse, I will be in collapsing too.

Another reason why I appreciate JF as much as I do is that his perspective is totally different of Derek Foster one. For JF, nothing should be hold for a lifetime, its not about dividend investment, its more about management. So I like his perspective as it bring something else to the whole thing. Need to pay respect to genius.

John said...

Hi Sunny,

Your explanations make sense. It is too bad you didn't get the opportunity to invst in JF's fund when he was still there. Those that did had sometimes on occasion an opportunity to meet him in person at the speaker lunches.

He was by and far one of my favourite managers at Sprott and a good person to talk to.

I think you would have liked that.

Regards,

John C.

Sunny said...

Hi John,

I would like that of course!

You are very lucky to have met him while he was still with Sprott. Did he seem exhausted to you when you met him?

One reason for him leaving Sprott was exhaustion - from my understanding. But while looking at pictures or looking at TV interviews, its not the portrait of an exhausted man that I saw there. I am pretty sure he was not looking like exhausted at those meeting. Anyhow, maybe I misunderstood the reasons for him to leave Sprott. I would had live to invest under him, but he was managing a hedge fund right, and I think the minimum required was 100k. Or am I mistaking? I did not have 100k at the time he was there.... Nostalgic time isn't? But there's still hope in the sense that it's not over, there are chances he might come back one day, he had said that himself you know, but it will be under is own firm or management. Back in April I think I saw his name somewhere at a conference for super rich people... I saw that quickly somewhere. Anyhow, the man can do whatever he wants and on the Web, I am the girl who makes Tardif a superstar... :0) A man like that cannot stay away for very long.

It's just like Eric Sprott announcing his retirement. I don't really believe that men dealing on the stock market day after day can one day retired, just like that. One day Tardif will return and as for Eric Sprott retirement - that's kind of weird.

John C said...

Hi Sunny,

I believe you would have had about $150K and you would need to be an accredited investor. JF didn't agree or like that at all.

He did not seem exhausted. I think it may have been a few months before he announced his retirement so he may not have known at the time.

One of the reasons why I think he left was that he had enough money. I suspect he had about $20M on his departure. That was at a minimum since he had at least double his own seed money not counting salary or bonuses.

Hey when you have that kind of fire power and you want to trade for yourself it is easy to build up from there especially if you don't have to follow any rules.

I was able to get to know him as I had about an hour of one on one time with him after the meeting with the investors was over. He knew his stuff.

You may be right and someday he might just get bored of retirement and come back. I have been monitering internet traffic from time to time looking for the day he returns and I can put money with him.

In the meantime I have developed my own style of trading and it is working for me.

Sunny said...

Wow! 150k is quite some money!! An accredited investor? I don't even know what that mean lol..

He wasn't making the rules, at a point, he might have enough, made enough for himself for a lifetime and than bye bye boss! :0)

Good if you had been able to develop your own trading style. Mine is still under construction. Until Tardif returns, we'll have to rely on ourselves.

Thanks again for your so interesting contribution. Sure my readers will appreciate as much as myself.

Anonymous said...

Hi Sunny.

If you have 86K in debt and are paying that much interest a year, wouldn't it make more sense to pay it off, especially if you have so much in equity in stocks?

-Jeremy

Anonymous said...

Hello there, if you are living with your parents and have saved this much money, there's no way you should have 86,000 in debt.

Sunny said...

I moved in September to New Brunswick and while finding a job in my hometown, I moved back at my parent house, but it doesn't mean I am living there for free... I am giving away 500$ per month to them. Also, moving back in to my old bedroom was my way to stay away from any rental lease and be free to move and do whatever else if needed.

Also, I have car expenses now, which I didn't have before. No public transportation available here.

Overall, I am saving about 400$ more than what I was able to save while living in Montreal, not more than that.

Anonymous said...

Hi Sunny: Regarding your debtload - I understand that you have bills like everyone else...but if you have a 168K investment portfolio and have 86K in consumer debt, wouldn't it be best for your portfolio to pay off that debt first? Otherwise, you are paying interest that would otherwise go towards investing. I only speak respectfully as a person who had huge debt before and every month, I was paying thousands of dollars for consumer debt. In retrospect, I am irritated at the fact that I bought so much useless stuff on credit. I could have a huge investment portfolio now, by putting all that money I was paying credit card companies and banks, and use it to work for myself. I am doing that now and it gives me great joy knowing that I am not a slave to consumer debt. If you have 86K of consumer debt, I would strongly encourage you to just pay it off...it may make your investment portfolio shrink to half the size but you know that you won't have to be coughing up your money to pay a slimy credit card company or bank.

Anonymous said...

Listen to the advice! Act on it NOW!

Anonymous said...

why is your debt level so high? how much of the debt is consumer related? do you just pay interest only on all those debt? the debt level seems to go higher and higher and never downwards... at this rate you will never be debt free...

Anonymous said...

I don't really know, as of April 13th were experiencing a bit of a correction.

My personal bias is that the TSE will take a turn lower. Revisiting some lower levels that were touched last August or so, will you be comfortable with your net worth dropping by 10% - 20% but still having to make interest payments on your $89k debts?

Just a thought.

Sunny said...

I find that question quite strange, but maybe you are new to my blog.

I had been investing in stocks since 2008. When I began this blog, I already had some debt, not 90k, but some debt. I never wanted to pay them, I always preferred to invest in stocks and run after the chance to hit big rather than just paying debt. The whole paying debt deal is just very boring.

Also, since most of those debt (at the exception of the American Express) are for investment purposes, they are giving me a tax break, they are deductible. My student loan is also giving me a tax advantage. Explain to be now why I should be in a rush to pay off my debt?

Since 2008 and a bit before, I saw it all. I had been investing in mutual funds and GIC since 2005 and in stock alone - 2008. Its been 7 years of checking on the stock market every opening day.

A 10-20% loss is nothing. I had experimented much worst following the stock crash and I hold to my investment, and I totally recover without a scratch.

I am using leverage for the long term, an immediate crash or correction won't make me sell my asset. Its scary each single time it happen, but I know how to handle it.

It was my fun to get enroll in debt to hit 100k portfolio value in 2010 for my 30 birthday. My debt level significantly increase since that time.

I am not saying I am doing the right thing, but its my right to have debt if I want to.

It's my money, my debt, my investment.

Will see in 30 years from now how things will have progress :)

Anonymous said...

Yeah, recently found yea.

I might have phrased it wrong, I was merely saying that as a % compared to your net worth it hasn't moved up or down all that much. But as an absolute $ figure it has crept up quite steadily and that could potentially be leaving you open to a margin call. If the market goes down enough to trigger such a thing. It's just slightly concerning for a passerby.

I suppose 10% - 20% isn't all that much and you've ridden out far deeper troughs.

I am actually pro-margin so long as there are strict guidelines that the user follows.

30 years is a fairly long time frame! Perhaps the market will go up and will down during that time? Lol :P

Certainly a lot can happen in that time, I wish you all the best in all your endeavors :)

Sunny said...

When I will be 60, its when I will be evaluating if it had worth it or not to invest on leverage.

Its giving enough time for the market yo play in my favor and for my very own benefit.

Thanks for the luck, its always best to have some on the side.

In case of a margin call, I have a 12k reserved in cash that I can take from my credit line.

I also have my TFSA account that I could transferred to my non-registered margin. - About a 4k value.

I also have my US dollar investment in Sprott silver - About 2.5k.

I have 18k right there. My unemployment will bring in about 1k in extra cash for me to put on credit line payment - another 12k

It make 30k right there.

If I need more immediately, I will take the money out of my RRSP. About 39k right there, for a complete total of 69k.

See, there's many things I can do in case of an emergency. The situation is not completely desperate.

Not to forget the 7k in cash coming from my dividend (non-registered).

For a total of 76k.

I also have several thousands worth on credit card. About a 20k of unused credit card balance available.

For a total of 96k.

Margin call? Anytime, anywhere. I am ready. But I wouldn't like it to happen.

If it happen, I will need to get back to work like quick and fast. Such event will be sad.

Anonymous said...

You're leveraging at 50%. I must say that's very significant leverage to investing in stock market. Gain or loss is magnify by 100%.
Have you keep track of what's your annual return on the investment net worth?

Anonymous said...

It is good to see you are paying off your high interest debt first.
I am , however,taken aback by your comment "The whole paying debt deal is just very boring". This is a very unwise attitude.

Most, if not all financial advisors suggest getting rid of bad debt to increase cash flow which then allows you to invest more(I agree with the gentleman's comments about being a "slave to consumer debt" consumer debt is bad because it is not tax deductible.

If your margin/leveraging predeliction allows you to deduct the interest on the loan from your personal income tax... then I am only somewhat comforted.

By the way, I think the blog is great!!

Happy investing



Anonymous said...

have you calculated how much before tax money you have to make to pay for the interest ,it is around 5000 dollars which is about 80% of your whole year dividend.

your are basically make money for banks.

Anonymous said...

hello,

while reading your inspiring blog,
i noticed

"$4 900 at a low interest rate of 4% (credit line rates) = $196 in annual interest"

would you mind telling me how and where you get such a good deal which is usually only offered to home owners?(you have to have something as collateral to get rate as low as 4 percent!:)it is amazing

thank you in advance:)

Anonymous said...

Hi Sunny!!

I have not read your blog for a long time.

I just did a rough calculation of your debt to operating cashflow (D/CF). This ratio is often used to assess whether certain companies are carrying too much debt to their ability to pay it off in a reasonable time. I took your debt of 72500 and your projected 2014 dividend earnings of about 7000. The ratio is 10X.
Interestingly, a company like ENB which needs to issue allot of debt to finance its activities has a ratio of 7X. Now, we all invest in accompany like ENB because the cashflow is reliable and the cashflow grows at a rate of about 15% per year. If you were a business nobody should have any fears about your 10X ratio unless you are not able to grow your cashflow reliably. So make sure your cashflow from your dividends is reliable. If you were a business, I am not sure I would invest in you because I do not understand your business model to drive cashflow growth.
Just some musings :)

Max Thunder said...

You know you can get a tax deduction from your margin account if you use the borrowed money to buy stocks that pay dividends, right?

Max Thunder said...

Ignore my previous message, somehow I wasn't seeing all the comments!

Anonymous said...

hello,

i am wondering how you deduct credit card promotional fees for zero percent interest offers which last six months? or is it deductiable?

Sunny said...

Hi,

When it come to credit card promotional offers, they are the one who target you.

Once you have an have, you can do a credit card balance transfer. If you have an existing balance on a card, you can have it paid by using the promotional offer.

If you want to cash out some money, you need to withdraw money from your credit card, from the credit card you currently don't have any offer. Following the withdraw, you immediately pay off the balance using a cheque of the promotional offer or you call the credit card from who you have a promotional offer to have a credit card balance transfer.

Voilà. This is how to do it like a Dividend Girl :)

james said...

hello,

i have an question.

i recently transferred 8000 from a credit card via balance transfer to invest it in dividend stocks.

i was charged 80 (which is 1%)for promotion rate fee for it.

i am wondering if the promotion rate fee is tax deductible for investment?

or is the interest charged(which is 0.99% for six months) tax deductible?

thanks !

best regards!

 

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