Archive for October, 2008

This and That # 116: Thank goodness October is over

October 31, 2008

  1. The S&P 500 was down 18% in October and the TSX Composite fell 16% in October. Other equity markets are down sharply as well. The bulls and the bears debate if stocks are the bargain we think.
  2. Bottom watching is a favourite sport on Wall Street these days. Jason Zweig writes in Wall Street Journal that it is impossible to get a positive ID on capitulation.
  3. Principal-protected notes have been roundly criticized and deservedly so. Now, not only are some of these products are going to return the principal back and nothing else but, to add insult to injury, they may also be subject to an adverse tax ruling by the CRA.
  4. One silver lining in falling stock prices is rising dividend yields, writes Dividend Growth Investor. The yield on the S&P 500 is now just over 3.2% (though the full effect of many dividend cuts will be felt over the next year). The yield on the TSX Composite is also over 3%.
  5. Ellen Roseman provides a guide to CDIC protection — which accounts are eligible and what is covered.
  6. Gail Vaz-Oxlade says that everyone really, really, needs a budget.
  7. Million Dollar Journey on how a lower loonie will affect Canadians.
  8. Preet presents a collection of famous quotes on investing.
  9. Michael James notes that seniors in Ontario can look forward to break on their property taxes next year.
  10. Dividend Guy shares his main investment objective: to generate a reliable, growing stream of income from stocks.

Thrift making a comeback?

October 28, 2008


The latest edition of Maclean’s magazine features a cover story on The Joy of Frugality. The story talks about a new mood of thrift sweeping the globe in the wake of the credit crisis:

There’s a growing sense that our lifestyles are about to be dramatically transformed. For the first time in as much as half a century, a new, “frugal future,” as some economists have come to call it, seems all but inevitable. “Frugality is now replacing frivolity,” declared Merrill Lynch economist David Rosenberg. Households are about to be put on a radical diet; debt is a dirty word again, and living within one’s means could soon be a fact of life.

The story says that the signs of transformation are everywhere — a Hummer dealership in Las Vegas is being replaced with one selling Smart cars, $50 “credit-crunch suits” are flying off the shelves of discount stores in the UK and many people in L.A. and New York are foregoing $1,600 Botox treatments — and notes the environmental (less Hummers means less pollution), social (lower divorce rates in lean economic times) and even health benefits of a pared-down lifestyle.

Call me a skeptic, but we’ve seen this movie before. The “voluntary simplicity” movement seemed to gain popularity in times of economic stress in the past only to fade away when the good times returned. Why should it be any different this time around? Grasshoppers do not turn into ants overnight.

Globe and Mail’s Discount Broker Rankings

October 27, 2008


Qtrade is once again (for the third straight year) the winner in the Globe and Mail ranking of the online discount brokers. BMO InvestorLine, E*Trade, TD Waterhouse and Credential Direct round out the top five, though RBC Direct Investing missed a spot by a mere whisker. Qtrade’s top ranking (reviews, comments and customer opinion on Qtrade and other discount brokers are available), especially in customer satisfaction, is hardly surprising — they staff their phone lines with knowledgeable operators offering stellar support and it shows in the results.

I’ve held accounts at TD Waterhouse, RBC Direct Investing, E*Trade and Questrade and I would rank them in that order. I wouldn’t read too much into a broker’s rank in the list because the one that is best for you depends on the features you are looking for. Last year, I was looking for a broker offering wash trading in a RRSP but now that all our foreign equities is in ETFs that I’m not planning on selling for a long time, it isn’t my top criterion any more.

It is surprising that Scotia McLeod and CIBC Investors Edge still do not offer lower commission plans for investors with larger accounts (as TD Waterhouse, BMO InvestorLine and RBC Direct Investing do). And the big bank brokerages still charge significantly higher commissions for investors with smaller accounts. With the list of independent brokers dwindling (TradeFreedom and now E*Trade are owned by Scotia Bank), there is going to be less competition in the future.