January 31, 2009

January 2009 Net Worth Update (+7.66%)

Welcome to the recurring monthly net worth update - the January 2009 edition.

I made some changes towards my financial structure in this month.

First off, I deposit $5000 for my TFSA to take advantage of the tax-free interest, and the money is from my non-registered investment account. As I mentioned in the previous post about my financial goals for 2009, I will use my TFSA money for my first home purchase.

Second, instead of saving $300 per month towards my emergency fund as initially planned, I withdrew $3600 from my non-registered investment account, just because I'd like to be prepared for the worse economic downturn in future.

Last, I made about $3000 from trading stocks in this month! Not bad, eh?

Here are the assets/liabilities result for the first month of 2009:


Vehicles: $6500

Cash: $5600

Savings: $20000

TFSA: $5000

Registered Investment Account: $20600

Non-Registered Investment Account: $14000

Total Assets: 71700


Credit Card Debt: $1400

Total Debts: $1400

Total Net Worth: $70300 (+7.66%)

Started 2009 with Net Worth: $65300

Year-to-Date Gain/Loss: +7.66%

My net worth goal at the end of year 2009 is $90,000.

January 30, 2009

Weekly Trading Update - January 30, 2009

I took advantage of the market oversold condition in this week, and made $820.10 (6.83%) from one buy-sell transaction of RY. This is really nice addition towards my alternative income goal. Now, I am about $2000 short to make it to my trading income of $5000 for 2009.

Positions From last week,


Transactions this week,

Royal Bank of Canada, RY
Jan 27, Buy, 400 shares @ $30.00 + $9.95 commission
Total Cost: $12009.95

Jan 28, Sell, 400 shares @ $32.10 - $9.95 commission
Total Cost: $12891.95
Realized Gain: $12830.05 - $12009.95 = 820.10 (6.83%)

Trading Gain/Loss from this week: 820.10

Year-to-date Trading Profit: $3007.00

January 28, 2009

Federal Budget Review 2009

Personal Amounts and Income Tax Brackets
  • The federal basic personal amount (and the spousal, common-law partner and eligible dependant amounts) are scheduled to increase from $9,600 (in 2008) to $10,320.
  • The upper limit on the lowest federal personal income tax bracket (which taxes income at 15%) will increase from $37,885 (in 2008) to $40,726.
  • The upper limit on the second personal income tax bracket (which taxes income at 22%) will increase from $75,769 (in 2008) to $81,452.
Home Renovation Tax Credit
  • Effective after January 27, 2009, the government proposes to introduce a temporary non-refundable Home Renovation Tax Credit (HRTC) equal to 15% of eligible expenditures incurred in excess of $1,000 but not more than $10,000, resulting in a maximum credit of $1,350 ($9,000 x 15%).
  • The credit will only apply for the 2009 taxation year for work performed or goods acquired after January 27, 2009 and before February 1, 2010 but will not apply to expenditures made pursuant to agreements entered into before January 28, 2009.
  • Eligible expenditures qualify for the credit if they are incurred in relation to a renovation or alteration provided the work is of an enduring nature and is integral to an eligible dwelling.
  • Qualified expenditures include the cost of labour and professional services, building materials, fixtures, equipment rentals, and permits but would not include regular maintenance and repairs, appliances or financing costs, for example.
Home Buyer’s Plan and the First Time Home Buyers Credit
  • After January 27, 2009, the amount that an eligible first time home buyer will be able to withdraw tax-free from an RRSP to help finance the purchase of a home will increase from $20,000 to $25,000.
  • The budget also proposes a new non-refundable tax credit for first time home buyers who acquire a qualifying home after January 27, 2009. The credit is equal to $5,000 multiplied by the lowest personal income tax rate for the year (15% for a maximum of $750 in 2009) and is claimable for the taxation year in which the home is acquired.
The Working Income Tax Benefit (WITB)
  • The WITB originated in 2007 to provide tax relief for low income individuals and families who have earned income from employment or business. The budget proposes (after further consultations) to enhance the assistance provided by the Working Income Tax Benefit effectively doubling the amount of total tax relief provided. In addition, the budget proposes to increase the levels at which Child Tax Benefits for low income families are phased out.
Age Credit
  • The budget proposed to increase the Age credit (applicable to those aged 65 and over) by $1,000 to $6,408. The income level at which this credit is fully phased out will increase to $75,032 (from $68,365).

January 26, 2009

10 Most Important Economic Indicators

10 most important economic indicators that every investor should pay attention to for the big piture is listed in reverse order, and this post also explains how each of them has an impact on the stock market. As investors, we should all know about CPI, PPI, ECI, and GDP.

10. Durable Goods Orders
This is a government index that measures the dollar volume of orders, shipments, and unfilled orders of durable goods. Durable goods are new or used items generally with a normal life expectancy of three years or more.

This report gives us information on the strength of demand for US manufactured durable goods, from both domestic and foreign sources. When the index is decreasing (fell by -1% in December, 2008), it suggests demand is weakening, which will probably result in decresing production and employment.

9. Personal Income and Consumption
Also known as Personal Income and Outlays. Personal Income represents the income that households receive from all sources, including employment, self employment, investments, and transfer payments.

Income is the major determinant of spending (US consumers spend approximately 95 cents of each new dollar) and consumer spending accounts for two-thirds of economy. Greater spending spurs corporate profits and benefits. If more spending will help the economy recover, the US consumers have less than 5 cents of each new dollar more to help the economy to recover. Not too much room ahead compared to China and Japan which has 30% saving rate!

8. Employment Cost Index (ECI)
The ECI is designed to measure the change in the cost of labor, including wages and salaries as well as benefits.

It is useful in evaluating wage trends and the risk of wage inflation/deflation. If wage deflation threatens, it's likely that interest rate will go down, then bond and stock prices will rise. With Fed's rate at 0 - 0.25%, how much room do you think the Fed still has to help the stock market?

7. Producer Price Index (PPI)
The PPI measures the average price of a fixed basket of capital and consumer goods at the wholesale level. There are three primary publication structures for the PPI: industry, commodity, and stage-of-processing.

It's important to monitor the PPI excluding food and energy prices for its monthly stability. This is referred as the core PPI and gives a clearer picture of the underlying inflation trend. Inflationary Pressure is generated when the core PPI posts larger-than-expected gains. It's considered a precursor of consumer price inflation.

6. Consumer Price Index (CPI)
The CPI measures the change in price of a representative basket of goods and services such as food, energy, housing, clothing, transportation, medical care, entertainment and education. It's also known as the cost-of-living index.

The rate of change of the core CPI (CPI excluding food and energy prices) is one of the key measures of inflation/deflation for the economy. Same as PPI, deflationary pressure is generated when the core CPI posts larger-than-expected losses. Deflationary pressure is not generally good thing for the stock market.

5. Consumer Confidence Index
A survey of 5000 consumers about their attitudes concerning the present situation and expectations regarding economic conditions conducted.

This report can be helpful in predicting sudden shifts in consumption patterns. Since consumer spending accounts for two-thirds of the economy, it gives us insights about the direction of the economy. However, only index changes of at least five points should be considered significant. According to the latest Consumer Confidence Index report, it's near a record low.

4. Existing Home Sales
In normal circumstances, this indicator will not make it to the 4th spot, but due to the housing market crash caused this economy crisis, I think it's more important to take a closer look at this indicator.

This report measures the selling rate of pre-owned houses. It's considered a more important indicator of activity in the housing sector than the new home sales, as it accounts for around 84% of all houses sold and is released earlier in the month.

This provides a gauge of not only the demand for housing, but the economy momentum. People have to be financially confident in order to buy a house.

3. Retail Sales
This index measures the total sales of goods by all retail establishments in the US. These figures are in current dollar, that is, they are not adjusted for inflation. However, the data are adjusted for seasonal, holiday and trading-day differences between the months of the year.

This is the most timely indicator of broad consumer spending patterns. It gives you a sense of the trends among different types of retailers. These trends can help you spot specific investment opportunities.

2. Beige Book
Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its District through reports from bank and branch directors and interviews with key businessmen, economists, market experts, and other sources. It summarizes this information by District and sector.

The Fed uses this report, along with other indicators, to determine interest rate policy at FOMC meetings. If the Beige Book portrays deflationary pressure, the Fed may decrease interest rates. But, where can the interest rates go anymore?

1. Gross Domestic Products (GDP)
GDP measures the dollar value of all goods and services produced within the borders of the United States, regardless of who owns the assets or the nationality of the labor used in producing that output. Investor should monitor the real growth rates because they are adjusted to inflation.

This is the most comprehensive measure of the performance of the economy. Healthy GDP growth for US is between 2.0% - 2.5% when the unemployment rate is between 5.5% - 6.0%. As the unemployment rate might reach 12% by end of the year as indicated by some economists, GDP growth will take a while to get to the positive territory.

Almost all the economic inidicators currently reflect deflationary pressure, which means a decrease of interest rates becomes imminent. However, with the Fed's rate at 0 - 0.25%, Where is the room to cut the rate anymore? Where is the non-convensional method to help the economy right now? I just don't see it coming anytime soon.

January 23, 2009

Weekly Trading Update - January 23, 2009

I had a few really bad executions on trading up the HSU in this week, mainly because I lost my confidence in my own technical analysis after disturbing economy news one after one. As an amateur trader, I need to learn about how to stick with my own game plan but not the hypes flying around on the Internet.

Positions From last week,

Horizons BetaPro US Bond Bear+ ETF: 100 shares: total cost of $1,333.95

Horizons BetaPro S&P 500 Bull+ ETF: 2000 shares: total cost of $12949.95

Transactions this week,

Horizons BetaPro US Bond Bear+ ETF
Jan 19, sell, 100 shares @13.60 - 9.95 commission
Total Cost: 1333.95
Realized Gain: 1350.05 - 1333.95 = 16.1 (1.21%)

Horizons BetaPro S&P 500 Bull+ ETF
Jan 20, sell, 2000 shares @ $6.32 - $9.95 commission
Total Cost: $12949.95
Realized Loss: $12632.05 - $12949.95 = -$317.9 (-2.45%)

Jan 21, Buy, 2000 shares @ $5.96 + $9.95 commission
Total Cost: $11929.95

Jan 21, Sell, 2000 shares @ $5.71 - $9.95 commission
Total Cost: $11929.95
Realized Loss: $11410.05 - $11929.95 = -$519.9 (-4.36%)

Jan 21, Buy, 2000 shares @ $6.10 + $9.95 commission
Total Cost: $12209.95

Jan 21, Sell, 2000 shares @ $6.02 - $9.95 commission
Total Cost: $12209.95
Realized Loss: $12030.05 - $12209.95 = -$179.9 (-1.47%)

Horizons BetaPro S&P 500 Bear+ ETF
Jan 20, Buy, 380 shares @ $33.90 + $9.95 commission
Total Cost: $12891.95

Jan 20, Sell, 380 shares @ $34.90 - $9.95 commission
Total Cost: $12891.95
Realized Gain: $13252.05 - $12891.95 = 360.1 (2.80%)

Jan 22, Buy, 300 shares @ $34.66 + $9.95 commission
Total Cost: $10407.95

Jan 23, Sell, 380 shares @ $34.90 - $9.95 commission
Total Cost: $10407.95
Realized Gain: $10670.05 - $10407.95 = 262.10 (2.52%)

Trading Gain/Loss from this week: -$379.4

Year-to-date Trading Profit: $2186.90

S&P 500 Inside Day Pattern Trading

In the last two days, S&P 500 index formed two inside days formation that occurs when the entire daily price range for a given security falls within the price range of the previous day. This term often refers to all versions of the harami pattern and can be very useful for spotting changes in the direction of a trend. An inside day is often used to signal indecision because neither the bulls nor the bears are able to send the price beyond the range of the previous day.

Should today's S&P Index drop below Wednesday's low (804.47), we would see more downside drop on the index; If the index broke above Wednesday's high (849.94), that would typically mean a buy signal for a short-term trade.

January 19, 2009

The Carnival of Stock Trading and Investing

Welcome to the 1st edition of the Carnival of Stock Trading and Investing dedicated to posts that cover stocks, commodities, real estate or anything related to stock trading and investing. Please submit your blog article to the next edition of The Carnival of Stock Trading and Investing using our carnival submission form.

Here is a short list of ground rules:
  1. Strictly one submission per blog
  2. Submissions will be included in the order they are received
  3. The carnival will be posted on the blog on Monday, February 2nd
Thank you for participating!

January 18, 2009

Fibonacci Retracement on S&P 500

The Fibonacci retracement is very useful tool for stock traders to identify strategic places for transactions to be placed. Stocks will often pull back or retrace around a percentage of the previous move before reversing. Four levels of the Fibonacci retracements often occur, and they are usually at 23.6%, 38.2%, 50%, and 61.8%.

Let's first take a peek at the 2-year S&P 500 Chart below. From its high at 1576.09 points to the November low at 741.02 points,
1. The Fibonacci retracement of 23.6% is at 938.10 points
2. The Fibonacci retracement of 38.2% is at 1060.02 points
3. The Fibonacci retracement of 50% is at 1158.56 points

At 938.10 points or 23.6% retracement level, although the high on that day broke the level, S&P 500 closed below this level on January 6, 2009, and the short term bullish trend reversed.

At 1060.02 points or 38.2% retracement level, the S&P 500 failed to break through on Oct. 14, 2008, and the trend continued until it hit the low in November.

Let's then have a look at 3-month S&P 500 Chart below for the shorter term trends. From its November low at 741.02 points to the high on January 6 at 943.85 points,

1. The Fibonacci retracement of 38.2% is at 818.50 points
2. The Fibonacci retracement of 50% is at 842.44 points
3. The Fibonacci retracement of 61.8% is at 866.37 points

S&P 500 was not able to close below the 50% Fibonacci retracement level on the last two trading sessions. The Friday's close above might have confirmed the reversal of the down trend. Should it close below 50% retracement level, we would have to see the index re-test the 38.2% level where there were only 4 sessions closed below the level.

Generally speaking, the longer term retracement levels are more reliable compared to short term ones. Short-term Fibonacci retracement levels should be used with the oscillators and moving averages.

January 17, 2009

Financial Goals for 2009

1. TFSA - Open a Tax Free Saving Account (TFSA) - I've put $5000 in BMO's TFSA which provides 3.00% interest with no transfer fees attached. The main purpose of this saving account is for my first home purchase down payment in next two years when the real estate market settles down. Canadian Capitalist talks about some great ideas about how to use the TFSA.

2. Emergency Fund - Build myself an emergency fund of $3600 by end of the year 2009 - this is to prepare for potential job loss, medical expenses, and/or auto repairs. Basically, I would like to be prepared when emergencies happen. My goal is to save $300 to BMO Smart Saver Account with 2.75% interest rate at present. You can read about How and Why to Start an Emergency Fund on Get Rich Slowly

3. Charity - My goal is set to donate $500 and plus 10% of stock trading profits by end of year 2009

4. RRSP -
Maximize the reduction on my taxable income, and take advantage Home Buyers Plan when I decide to enter the real estate market in near future. You can find tons of RRSP Tips & Strategies on this website.

5. Saving - Save money aggressively, and take advantage of compound interest as early as possible. My goal is to put away $2000 per month including $300 monthly emergency fund contribution to my BMO Smart Saver Account which currently has 2.75% interest rate.

6. Alternative Income -
Build up alternative income streams so that I am less dependent on my salary from my job. My goal for each source is,
  • Part-time referee: $2000 (~ 40 games)
  • Online survey sites: $200 (~ 100 surveys)
  • Credit card arbitrage: $1600
  • Dividend Income: $900
  • Stock trading: $5000
Moolanomy had 40+ alternative income ideas and resources to share with us if you are currently looking for alternative income.

7. Net Worth - As I mentioned in my initial net worth update, my target for this year is net worth of $90000 by end of 2009.

January 16, 2009

Weekly Trading Update - January 16, 2009

Positions From last week,

Horizons BetaPro US Bond Bear+ ETF: 100 shares: total cost of $1,333.95

Horizons BetaPro S&P 500 Bear+ ETF: 250 shares: total cost of $6994.95

Transactions this week,

Horizons BetaPro S&P 500 Bear+ ETF

Jan 13, sell, 250 shares @ $31.37 - $9.95 commission
Total Cost: $6994.95
Realized Gain/Loss: $7832.55 - $6994.95 = $837.6 (11.97%)

Jan 13, Buy, 400 shares @ $31.90 + $9.95 commission
Total Cost: $12769.95

Jan 15, Sell, 400 shares @ $34.88 - $9.95 commission
Total Cost: $13942.05
Realized Gain/Loss: $13942.05 - $12769.95 = $1172.1 (9.1%)

Jan 16, Buy, 300 shares @ $33.66 + $9.95 commission
Total Cost: $10107.95

Jan 16, Sell, 300 shares @ $33.94 - $9.95 commission
Total Cost: $10172.05
Realized Gain/Loss: $10172.05 - $10107.95 = $64.1 (0.63%)

Horizons BetaPro S&P 500 Bull+ ETF
Jan 16, Buy, 2000 shares @ $6.47 + $9.95 commission
Total Cost: $12949.95
Market Value: $6.45 x 2000 = $12900
Unrealized Gain/Loss: -$49.95 (-0.39%)

Trading Gain/Loss from this week: $2073.8

Year-to-date Trading Profit: $2566.3

January 14, 2009

Passive/Active Index Investing

I just don't understand the attraction to passive or active index investing ever since index investing gets so popular. The idea is simple enough; use only broad-based index funds and always stay invested. The proponents of passive investing believe that active management cannot reliably beat the market and they always have plenty of data to back up the theory.

Stock indexes have always been an indicator of the broad market movements that affects all stocks simultaneously. Mutual fund managers traditionally compare their performance against that of a stock index. Hence the term "beating the market". Around forty years ago, some very intelligent people thought it will be easier to start a fund that mimics the performance of stock indexes instead of trying to beat it.

And this was how index funds came about.

Picture Source: www.dailyreckoning.com

However, the whole deal about "investing in the market" hinges on the crucial assumption that the stock market tend to go up over time. How can we be sure that this remains true in the future?

For centuries, Europeans believed that all swans were white until black swans were discovered in Australia. Likewise, we have always assumed that stock indexes tend to rise in the long run (and hence are great long term investments) until we saw data on the recent S&P 500 and that of the Nikkei index.

Given that many economists, including Nobel Prize winners, advocate a index fund approach to stock investing, I certainty wouldn't say it's a FALSE theory.

January 10, 2009

Weekly Trading Update - January 9, 2009

Horizons BetaPro US Bond Bear+ ETF

Jan 5, Buy, 100 shares @ $13.24 + $9.95 commission
Total Cost: $1,333.95
Market Value: $13.60 x 100 = $1,360.00
Unrealized Gain(Loss): $26.05 (1.95%)

Horizons BetaPro S&P 500 Bear+ ETF

Jan 6, Buy, 500 shares @ $27.94 + $9.95 commission
Total Cost: $13979.95

Jan 9, Sell, 250 shares @ $29.95 + $9.95 commission
Total Cost: $6994.95
Realized Gain(Loss): 7487.5 - $6994.95 = $492.55 (7.04%)

Jan 9, Consolidation
Total Cost: $6994.95
Market Value: $30.28 x 250 = $7570.00
Unrealized Gain(Loss): 575.05 (8.22%)

Year-to-date Trading Profit: $492.5

January 07, 2009

US Treasury Bonds & Stock Market Recap

Finally, the price of 30-year US Treasury Bond ($USB) has turned south. As you can see below, it remains in the overbought territory for almost one month before it went down a couple of days ago. The price drop is mainly caused by rising treasury yields as investors move to riskier securities, stocks especially.

The question is whether investors are moving back into riskier securities too early. The economic data remain dismal, and the Fed's report Tuesday of the minutes of its last meeting showed that some policymakers feared a "prolonged contraction" of the economy.

The government on Friday will report December employment numbers, and the general consensus forecast is that US lost 500K+ jobs last month. If we see a number worse than that, then we should see more downward pressure from the stock markets. Also, if tomorrow's S&P 500 index does not hold on to its 20 MA around 892 points, then sell signal will be triggered.

January 01, 2009

Initial Net Worth Update

Here is the grand opening for my monthly net worth update on this site on January 1st, 2009.

In future, the monthly net worth update will be posted at the end of every month.

Anyways, here it is as of the first day of 2009,


Vehicles: $6500

Cash: $6,200

Savings: $11,100

Registered Investment Account: 18,400

Non-Registered Investment Account: $25,400

Total Assets: $67,600


Credit Card Debt: $2,300

Total Debts: $2,300

Total Net Worth: $65300

Don’t worry, I pay off the balance of my credit cards every month.

If it's not because of the stock market downturn last year, the net worth could be much higher.

My net worth goal at the end of year 2009 is $90,000.